HP Says Justice Opened Autonomy Investigation

The DOJ is looking into HP's claims of accounting errors.

The U.S. Justice Department opened an investigation relating to Autonomy Corp. after Hewlett-Packard Co. accused the software company of misrepresenting its performance before being bought last year.

Justice Department representatives informed the company on Nov. 21 of the probe, Hewlett-Packard said last week in its annual 10-K regulatory filing. The computer maker booked an $8.8 billion write-down related to Autonomy last month after finding that some revenue had been recorded prematurely or improperly.

Hewlett-Packard is cooperating with authorities while Chief Executive Officer Meg Whitman works to turn around the company after years of botched deals, management tumult and strategic missteps. Palo Alto, California-based Hewlett-Packard also said it’s providing information to the Serious Fraud Office in the U.K. and the U.S. Securities and Exchange Commission.

Former Autonomy CEO Mike Lynch, who left Hewlett-Packard in May and refutes the company’s allegations, struck a $10.3 billion deal last year with Whitman’s predecessor, Leo Apotheker, to sell the company he co-founded.

The filing didn’t include any additional details behind Hewlett-Packard’s claims of accounting errors, which made up $5 billion of the write-down.

Michael Thacker, a spokesman for Hewlett-Packard, declined to comment beyond details in the filing.

“We will co-operate with any investigation and look forward to the opportunity to explain our position,” Lynch wrote in a statement. “We continue to reject these allegations in the strongest possible terms.”

In a subsequent statement, Lynch said Hewlett-Packard is “backtracking” by not publishing more specific details about its write-down.

“It is time for Meg Whitman to stop making allegations and start offering explanations,” he said.

Hewlett-Packard shares fell 2.6 percent to $13.68 at the close in New York. The stock has declined 47 percent this year.

The Federal Bureau of Investigation is looking into Hewlett-Packard’s allegations of accounting improprieties at Autonomy, a person familiar with the matter said on Nov. 21. The company brought its claims about Autonomy to the SEC, which asked the FBI for assistance, said the person, who asked not to be identified because the matter wasn’t public.

The FBI can’t confirm or deny any investigation, said Julie Sohn, a spokeswoman for the agency in San Francisco.

Hewlett-Packard also said in the filing that it’s facing several shareholder lawsuits related to the Autonomy purchase.

Apotheker, who was ousted as CEO in September 2011, viewed Autonomy as Hewlett-Packard’s ticket into the high-margin software market, which constituted less than 3 percent of Hewlett-Packard’s sales at the time. Autonomy’s software is used to organize the reams of data flooding corporate computer networks.

Whitman, who was on the board at the time and approved the acquisition, has tried to distance herself and other directors from the decision, telling analysts on a Nov. 20 conference call that the blame lies with Apotheker and former mergers and acquisitions head Shane Robison, who was also the company’s chief technology officer and departed last year.


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