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Autonomy founder Mike Lynch to report Hewlett-Packard to SEC

Autonomy founder Mike Lynch plans to ask US regulators to investigate evidence that he believes shows Hewlett-Packard made "false representations to the market" over its massive writedown on its acquisition of the UK software maker.

The British entrepreneur told the Financial Times that he would go to the Securities and Exchange Commission over a document, also seen by the FT, that he said sheds new light on HP's reasoning for its $8.8bn writedown in November 2012, $5.5bn of which was stated to be due to "accounting misrepresentations" at the company.

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The Hewlett-Packard logo is displayed on a sign at the company's headquarters in Palo Alto, Calif.
Tony Avelar | Bloomberg | Getty Images
The Hewlett-Packard logo is displayed on a sign at the company's headquarters in Palo Alto, Calif.

HP said it welcomed any intervention from the authorities. "The same fertile imagination that was behind a massive fraud is apparently still hard at work making up stories. We would encourage Mr Lynch to spend as much time as possible with the authorities," it said.

Mr Lynch said the document suggests the US company had not yet determined whether hundreds of millions of transactions were improperly booked at the time it took its huge charge on Autonomy.

It showed "unambiguously that the writedown was driven by accounting policy changes and differences, not fraud", he said.

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The document, which was being worked on at the time of the writedown, reveals HP calculated that Autonomy had improperly booked $350m worth of revenue generated through contracts with customers between 2010 and the first three quarters of 2011.

Separately, in November 2012, John Schultz, HP's general counsel, said about $200m of Autonomy deals had been "created" over a two-year period beginning in 2009.

According to the document, whole categories of deals were considered illegitimate. Transactions were placed under labels ranging from "not IFRS compliant confirmed", where HP believed the numbers did not meet UK accounting standards, to "management judgment/US GAAP difference", where HP believed they did not meet the requirements set by US GAAP accounting standards.

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More than $250m worth of revenues with which HP took issue were labelled "Not IFRS compliant probable", suggesting that, though the US company considered these Autonomy deals suspicious, it had not yet decided conclusively that they failed UK accounting standards.

One person familiar with HP's thinking stressed the document was not the "final arbiter" in its decision to write down Autonomy but was one of many considerations that fed into the outcome.

Mr Lynch said the evidence meant that Meg Whitman, HP chief executive, needed to "explain the exact calculation of the writedown to her shareholders".

"We have now seen this rebasing document and it appears to show that HP has made false representations to the market," he said. "We will be forwarding our knowledge of this matter to the relevant regulators."

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