Mike Lynch, the former chief executive officer of Autonomy Corp., challenged Hewlett-Packard Co.’s board to explain allegations that Autonomy falsified financial statements, leading to an $8.8 billion write-down.
Hewlett-Packard rejected the request, saying it has uncovered extensive evidence of improper accounting at Autonomy as part of an “intense” internal investigation and that the matter is now in the hands of authorities.
By appealing directly to HP’s board, Lynch is ratcheting up pressure on CEO Meg Whitman to show how the alleged wrongdoing justified so big a write-down. Accountants questioned whether Hewlett-Packard used the announcement to deflect attention away from a botched acquisition, and investors said the failure to detect falsified financials earlier undermined confidence in management.
“Autonomy’s finances, during its years as a public company and including the time period in question, were handled in accordance with applicable regulations and accounting practices,” Lynch wrote. “I utterly reject all allegations of impropriety.”
Hewlett-Packard said last week that Autonomy managers misreported finances to make the company appear more successful than it was. Whitman was on the board when Hewlett-Packard agreed to buy Autonomy for $10.3 billion last year.
Last week, Hewlett-Packard said $5 billion of the writedown was related to “accounting improprieties,” including booking hardware revenue to appear as more profitable software. The company said it found $200 million in wrongly categorized or falsified sales.
Lynch, in a letter sent to news organizations, asked Hewlett-Packard’s board for “immediate and specific explanations” of its claims, along with supporting documents. He asked Hewlett-Packard to publish the calculations behind the $5 billion figure and provide him with a copy of the report it’s turned over to U.S. and U.K. regulators.