WSJ: HP might have missed warning sign prior to Autonomy deal
The Wall Street Journal reported this week that in the days leading up to HP's purchase of Autonomy for $11 billion in August, 2011, a group of Hewlett Packard (NYSE: HPQ) officials was warned of possible impropriety at Autonomy, but never passed the information on to the CEO or the board--a move I'm sure they may regret at this point in light of the way the deal has gone down since.
The story is part of the ongoing drama surrounding this sale. According to The WSJ, during a phone call with HP representatives just prior to the sale, an outside auditor for Autonomy mentioned that an Autonomy executive had raised an allegation of improper accounting. What's interesting is that the auditor didn't believe it and it was pretty much forgotten, and the sale went on as scheduled.
Then last fall, HP dropped the bombshell that Autonomy had grossly misled them prior to the sale. You have to wonder if the allegation prior to the sale turned out to be true, and as the article suggests, that the information was not passed on to the CEO or the board, what the implications would be in light of the current situation.
It's also interesting when you look at it in the light of another story we published recently in which 451 Research analyst Alan Pelz-Sharpe told FierceContentManagement that he had received papers from an anonymous source just before the sale, which also suggested allegations of fraud at Autonomy. He said he forwarded the papers to the British Serious Fraud Office.
There's no way of knowing if the two sets of accusations were related, but it does seem like quite a coincidence that two parties contended there was impropriety at Autonomy just prior to the sale.
At the end of last year, HP wrote off $5.5 billion of the sale and in their most recent corporate report in December indicated that the Justice Department is investigating the deal. Former Autonomy CEO Mike Lynch has vehemently denied any wrong-doing on his or his company's part and insisted in a December blog post that neither he nor any of his former executives had been contacted by DOJ investigators.
As we reported last year, Lynch started a blog to answer the allegations. He has not written a post, however since he wrote two on December 28 in response to the release of HP's 10-K report filing with the Securities and Exchange Commission.
For more information:
- see the WSJ article