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Autonomy Founder 'Shocked' by HP Allegations of Fraud

Tuesday, 20 Nov 2012 | 5:30 PM ET

Autonomy founder and former CEO Mike Lynch told CNBC Tuesday that he was "shocked" by allegations of accounting fraud and blamed Hewlett-Packard, which acquired his company last year, for "mismanagement" that led to an $8.8 billion charge and sent HP's stock reeling.

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"We've been pretty ambushed by this today," Lynch said in an interview from London. "I think there's been significant mismanagement of the company."

Lynch's comments came after HP said earlier Tuesday that it was forced to take an $8.8 billion one-time charge because of "serious accounting improprieties" at Autonomy, which HP acquired for $11.1 billion in 2011.

The news surprised investors and sent HP's stock plunging.

Autonomy Founder: HP Allegations 'Absolutely Factually Incorrect'
Autonomy founder Mike Lynch responds to Hewlett-Packard's allegation that certain members of Autonomy's management willfully misled shareholders and potential buyers. Lynch says the allegations are "absolutely factually incorrect."

In a separate interview with CNBC on Tuesday, HP CEO Meg Whitman, who fired Lynch shortly after the Autonomy acquisition, said the company engaged in a "willful effort to mislead" HP shareholders and management.

For his part, Lynch said the mismanagement came after HP took over the company.

The due diligence—or checking the books—on Autonomy "was what Hewlett-Packard described as meticulous," said Lynch. " And then they actually ran the company, including doing all of the books, for the last four quarters."

"We'd be talking about a massive elephant in the room that wasn't spotted," he added. "And the reason it wasn't spotted is very simple — it wasn't there."

Before HP's acquisition of Autonomy, Lynch said Autonomy's quarterly audits were handled by the accounting firm Deloitte using IFSR accounting rules, which are different from U.S. GAAP rules.

"There are differences in exactly how things are accounted for, but, no, there's no basis here for saying there's an $8.8 billion difference," he said. "You know, that is a massive amount."

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