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‘Ambushed’ Autonomy founder rejects HP accounting claims

‘Ambushed’ Autonomy founder rejects HP accounting claims

Autonomy founder Mike Lynch has denied allegations of inappropriate accounting methods causing HP to suffer an $8.8 billion (£5.5 billion) loss.

The claims were made by HP chief executive Meg Whitman, who took control of the US tech giant shortly before it completed its $12 billion deal for Autonomy last October.

Whitman has accused Autonomy of ‘serious accounting improprieties, disclosure failures and outright misinterpretation’ and said she had referred the matter to the Serious Fraud Office and the US  Securities and Exchange Commission’s Enforcement Division for civil and criminal investigation.

Whitman described the deal as a ‘willful effort on behalf of certain former employees to inflate the underlying financial metrics…in order to mislead investors and potential buyers.’ She added that HP would ‘aggressively pursue various parties’ to make sure it recovers as much as it can for shareholders.

Lynch hits back

Lynch stood firm as he was grilled by the Wall Street Journal (WSJ) on the allegations.

In a Q&A session with the paper Lynch said he was not aware of the allegations and the first he heard of them was at 1pm UK time when HP issued a press release. ‘We were not made aware. We have been ambushed,’ he said.

Lynch said the allegations were ‘completely and utterly wrong’ and that he ‘rejected them completely’. He also pointed out the books were heavily scrutinised by Deloitte on a quarterly basis.

‘Deloitte who knew the company well,' Lynch told the WSJ.

‘We had 10 years as a listed company; during that time Deloitte would have had their work reviewed by the various boards. Of course HP did what its senior management called “a meticulous due diligence” involving hundreds of people that was highly intense, involving KPMG and Barclays as well. They threw everything at it.’

He added: ‘The figures are just mad. You are talking about handing them an asset worth $12 billion and they are saying $9 billion of that they are taking off. That would be such an obvious massive thing with 300 people and all these firms doing due diligence, how could you possibly not spot it?’

When asked how he thought HP arrived at this conclusion, Lynch said: ‘The only concept I have of it is that it does seem to be coincident with them releasing the worst set of results in their 70-year company history.

He added: 'There was a series of mismanagement steps. They lost hundreds of talented people at Autonomy. The whole management team basically went out of the door. Sadly they are left with the results of having destroyed all that value. Now they are trying to cover it up with this big write off.'

In an exclusive interview with Wealth Manager yesterday, Artemis UK Growth fund manager Tim Steer (pictured), who was shorting Autonomy at the time of the deal, also criticised HP saying Autonomy’s problems were ‘written all over the accounts’.

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