In connection with its quarterly earnings release and a related $8.8 billion write-down, Hewlett-Packard claimed that it was misled by hidden “serious accounting improprieties” involving its $11.1 billion purchase of formerly-public company Autonomy. The Autonomy acquisition closed October 2011, under the watch of former HP CEO Leo Apotheker. Apotheker’s reign was short-lived (11 months), and certainly will never be remembered fondly after this disaster.
HP states that it will pursue legal action against “certain parties”. Leaders on this list of defendants include:
- Former Autonomy chairman and founder, Mike Lynch, who has vehemently denied any wrongdoing.
- Autonomy’s former outside auditor, Deloitte, who denied any knowledge of fraud at is its former client, and claims that its work was done in compliance with all regulatory and professional requirements. HP stated that it relied on Autonomy’s audited financial statements in making the acquisition.
The HP case illustrates how accounting misstatements get “multiplied” when the financial statements serve as the basis for an acquisition. HP’s potential case will require both accounting and valuation experts.