SFO halts HP/Autonomy probe

THE Serious Fraud Office (SFO) has closed its two year investigation into Hewlett-Packard’s botched acquisition of Autonomy, after it concluded there was insufficient evidence to prove wrongdoing in the 2011 deal.

The probe was launched in January 2011 following a complaint by HP that it was duped by Autonomy as to the firm’s true value. HP originally stumped up $11.1bn (£6.7bn) for Autonomy, but a year later said it was worth $8.8bn less.

In a statement the SFO said that, in respect of certain aspects of the allegations, “there is insufficient evidence for a realistic prospect of conviction,” but that in respect of other aspects “jurisdiction over the investigation has been ceded to the US authorities whose investigation is ongoing”.

The US Department of Justice and the Securities and Exchange Commission are both conducting investigations into the deal.

The SFO announcement marks the latest twist in the unfolding battle between the US technology giant and the former management team of Autonomy. Within a year of the deal being signed, HP wrote down the value of its purchase by $8.8bn, the majority of which it claimed was caused by “serious accounting improprieties” that largely accounted for $5bn of impairment costs.

Last year, HP slashed Autonomy’s previously published profit and revenue figures. In restated accounts published on Companies House, it drastically revised the 2010 performance of Autonomy Systems Ltd, the UK group’s main operating subsidiary, and claimed to have uncovered “extensive errors (including misstatements)” in the previously issued financial statements.

In the original accounts, audited by Deloitte, Autonomy Systems reported profit of £105.7m and sales of £175.6m. In the restated version, turnover was revised down to £81.3m and profit was slashed to £19.6m.

According to the accounts, many of the errors relate to recognition of revenue and costs, as well as to the accounting for investments, and to correct the balance sheet for balances denominated in foreign currencies not re-valued at the year end.

Deloitte has categorically denied that it had any knowledge of any accounting improprieties or misrepresentations in Autonomy’s financial statements.

“As we have always said, HP’s allegations are false, and we are pleased that after a two-year review of the material presented by HP, the SFO has concluded that there is not a case to pursue,” said Mike Lynch, co-founder and former chief executive of Autonomy.

“Let’s remember, HP made allegations of a $5bn fraud, and presented the case in public as a slam dunk. HP now faces serious questions of its own about its conduct in this case and the false statements it has made.” Lynch made no comment as to the ongoing investigations.

HP has maintained its complaint against Autonomy’s former management. “As the SFO made clear, the US authorities are continuing their investigation and we continue to cooperate with that investigation. HP remains committed to holding the architects of the Autonomy fraud accountable.”

UK accountancy and audit watchdog the Financial Reporting Council (FRC) is continuing its own investigation into Autonomy over its accounts for the period between January 2009 and June 2011.