Investors Sue HP Board, Auditors Over Autonomy Acquisition

As Hewlett-Packard prepares for a protracted legal battle with Autonomy, its investors have targeted both HP and several auditors over alleged misleading statements regarding the value of the $11.7 billion Autonomy acquisition in October 2011. In the wake of an $8.8 billion writedown, HP alleges that Autonomy misrepresented the benefits of the acquisition and engaged in accounting improprieties. 

Bloomberg reports that the lawsuit from investors was filed on November 27th in a California federal court, naming auditors Deloitte LLP, KMPG LLP, Barclays Plc, Parella Weinberg Partners UK LLP, and HP's board as defendants, including CEO Meg Whitman, former HP officers, and ex-CEO Leo Apotheker. 

Investors claim that HP "consistently misled the public with improper statements" reflecting Autonomy's value and the due diligence performed to assess Autonomy's worth. The auditors are alleged to have ignored numerous red flags about Autonomy, leading to an acquisition that inflated HP's stock and spurred wasteful spending, including massive stock repurchases. 

HP has so far declined to comment on the lawsuit, which seeks unspecified and damages and corporate governance reforms. KMPG has denied any auditing role related to HP's acquisition of Autonomy, while Deloitte has denied due diligence responsibility, claiming that it found no improprieties with Autonomy's accounting methods when it last reviewed its finances in 2010. 

Representatives from Barclays and Parella Weinberg have yet to provide any comment on the matter. 

Former Autonomy CEO Mike Lynch, dismissed by Whitman in May, adamantly denies any wrongdoing by Autonomy, petitioning HP for "immediate and specific explanations" of its allegations. HP contends it has extensive evidence of Autonomy's improper practices and will pursue civil litigation. In the meantime, the lawsuit filed by investors is a sign that HP's management is held in doubt over its failure to detect the alleged violations of Autonomy either prior to the acquisition or during the year following the merger.