Company responds to open letter from Mike Lynch that demanded explanations over allegations
HP has issued a strongly-worded response to an open letter written by Autonomy founder Mike Lynch over allegations made by the Silicon Valley icon about accounting improprieties in the run up to the $11.1bn acquisition.
HP made the allegations last week, accusing senior management at Autonomy of "accounting improprieties, misrepresentations and disclosure failures" to inflate the value of the UK-based software house. The company wrote down $8.8bn of the deal, with $5bn of that related to the alleged accounting issues.
Mike Lynch wrote an open letter to HP’s board, flatly denying the allegations and asking them to explain the accusations.
"Having no details beyond the limited public information provided last week, and still with no further contact from you, I am writing today to ask you, the board of HP, for immediate and specific explanations for the allegations HP is making," Lynch wrote.
"HP should provide me with the interim report and any other documents which you say you have provided to the SEC and the SFO so that I can answer whatever is alleged, instead of the selective disclosure of non-material information via background discussions with the media," the letter added.
Lynch asked HP to explain how it arrived at the $5bn figure, pointing out that it must have involved a huge amount of revenue and that it would have been picked up by auditors.
"Please explain how such issues could possibly have gone undetected during the extensive acquisition due diligence process and HP’s financial oversight of Autonomy for a year from acquisition until October 2012 (a period during which all of the Autonomy finance reported to HP’s CFO Cathie Lesjak)," said part of the letter.
"Can HP really state that no part of the $5 billion write down was, or should be, attributed to HP’s operational and financial mismanagement of Autonomy since the acquisition?" Lynch added.
In response HP has released a short statement suggesting it will not be drawn into a war of words with Lynch now that the matter is being perused through legal channels.
Reiterating the claims against Lynch and Autonomy, HP added that it believes it has "extensive evidence" to back up its claims.
The statement said: "The matter is in the hands of the authorities, including the UK Serious Fraud Office, the US Securities and Exchange Commission’s Enforcement Division and the US Department of Justice, and we will defer to them as to how they wish to engage with Dr. Lynch."
"While Dr. Lynch is eager for a debate, we believe the legal process is the correct method in which to bring out the facts and take action on behalf of our shareholders. In that setting, we look forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury," the statement added.
HP is already facing a lawsuit from shareholders who are claiming the company knowingly made false statements about the deal and Autonomy’s finances.