Hewlett Packard executives, including CEO Meg Whitman, knew about certain Autonomy sales practices months before a whistleblower came forward to highlight them, which led to the $8.8 billion dollar write-down of the company.
HP acquired the British software company, which was founded by Mike Lynch, in late 2011 for $11.1 billion. However, following accusations from HP that Autonomy had concealed accounting improprieties, investigations were launched by authorities in the US and the UK, and HP took the multi-billion dollar charge on the company.
Now an investigation carried out by the Financial Times, claims Autonomy’s auditor Deloitte had recorded Autonomy’s practice of selling hardware at a loss and a report was provided to HP after it bought the British software maker.
The newspaper cited several emails, including one in October 2011 that HP chief executive Meg Whitman was copied in on – several months before the whitleblower came forward – where Autonomy noted that it was having problems in selling HP hardware.
HP’s knowledge of the sales practices and problems with hardware sales could undermine its position that Autonomy was concealing information.
Deloitte has said that it “categorically denies any knowledge of any accounting improprieties or misrepresentations in Autonomy’s financial statements.” Ex-Autonomy CEO Mike Lynch has added that the revelations “prove we were open and transparent with our auditors who continue stand by the accounts”.
HP denies that it knew of any problems with the accounts until the whistleblower came forward.
"Our investigation has shown that Autonomy often resold generic hardware at a loss in the last few days of the quarter with the sole purpose of masking its real financial performance," said HP.
"In addition, Autonomy engaged in improper transactions with certain value-added resellers to create the appearance of software licensing revenue at the end of each quarter. In some instances, these transactions were used to accelerate revenue, and on numerous occasions, these were fabricated transactions with no real end-user."