Hewlett-Packard’s directors and auditors as well as Autonomy Corp. founder Mike Lynch were sued by investors over fraud regarding last year’s acquisition of the software company. The lawsuit was filed November 27 in a federal court in San Jose, California. Among the defendants are Deloitte LLP, KPMG LLP, Barclays Plc, and Perella Weinberg Partners UK LLP as well as Chief Executive Officer Meg Whitman and former HP officers and directors including former CEO Leo Apotheker.
HP said that $5 billion of the $8.8 billion write down was due to falsified practices at Autonomy that were disclosed by a senior executive of the company. HP said that it already forwarded the issue to US and UK securities regulators and will pursue civil litigation.
KPMG and Deloitte were accountants and auditors during the acquisition of Autonomy. Barclays and Perella Weinberg served as financial advisers of the deal. They disregarded various red flags that have alerted them to the company’s accounting improprieties that resulted to overvaluation.
The lawsuit seeks for damages as well as corporate governance reforms based on claims of financial misstatements, breaches of fiduciary duties, unjust enrichment, waste of corporate assets, and negligence. HP declined to comment about the lawsuit.
Deloitte said that it didn’t find any evidence of improper accounting methods or misrepresentations when it looked into Autonomy’s finances before HP’s acquisition of the software company. It last audited Autonomy’s finances for the year ended December 31, 2010. It also stated that it was not employed to do due diligence regarding the deal.
Lynch urged HP’s board to explain allegations that Autonomy falsified financial statements that lead to the $8.8 billion write down. HP rejected the request and said that it uncovered evidence of improper accounting at Autonomy as part of an intense internal investigation.
