Autonomy's Lynch hits back at US Air Force's allegations
The co-founder and former head of Autonomy, the software company accused of massive accounting fraud by Hewlett-Packard (HP), has defended his old company against claims of alleged accounting irregularities by the U.S. Air Force.
The letter from the U.S. Air Force accuses Autonomy founder Mike Lynch and five other former executives of booking revenues on uncompleted transactions to meet sales targets, according to the Financial Times. One of the three transactions outlined in the document fell through, the letter said according to the report, while another was completed for less than Autonomy originally recorded.
The document, which was first reported on in the Washington Post, appears to outline the first details of the alleged fraud at Autonomy, which was sold to HP for £7.1 billion ($11.3 billion) in 2011 and has been embroiled in controversy after HP launched an investigation into "serious accounting improprieties" at the company. HP took an $8.8 billion write-down on the Autonomy acquisition and accused the company of misleading shareholders.
(Read more: Autonomy's Lynch slams HP concerns, launches fund)
But in a statement on his website published Sunday, former Autonomy CEO Mike Lynch insisted that Autonomy was fully transparent with its auditors and correctly represented its accounts.
"We strongly reject HP's allegations. The few examples seen to date in support of its allegations, such as those cited in the USAF (U.S. Air Force) letter, show that HP appears to have had a fundamental misunderstanding of IFRS (International Financial Reporting Standards) accounting practices, and we vehemently deny anything improper," the statement said.
Lynch added that in the context of HP's write-down, the deals cited in the USAF letter "constitute a tiny number of deals of low materiality in the context of Autonomy's size."
"Even if these deals had in some way been questionable, they would have had no effect to justify the write-down," the statement said.
(Read more: Another Investigation Into HP's Autonomy Allegations)
HP said in a statement that it was, "cooperating with the ongoing investigations by the U.K. Serious Fraud Office, the U.S. Department of Justice and the SEC related to the accounting improprieties, disclosure failures and misrepresentations at Autonomy that occurred prior to its acquisition by HP."
The letter from the U.S. Air Force laid out a case for banning the former senior management of Autonomy, and U.S. government contractors MicroTech and Capax Global, from undertaking work for any part of the federal government, the Financial Times reported.
MircoTech and Capax Global resold Autonomy's software and were involved in the deals outlined in the U.S. Air Force document. Neither company nor the U.S. Air Force was immediately available for comment when contacted by CNBC.
According to Lynch's statement, under IFRS, the reseller is the customer of Autonomy – not any potential end user who might buy the software from the reseller.
"There is no IFRS revenue recognition requirement that, following the sale to a VAR (value added reseller), there be a subsequent sale from the VAR to an end user, or even that an end user be identified at the time of a sale to a VAR. The VAR assumes the risk of resale, which may occur at any time in the future," the statement said.
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