Autonomy Made 'Willful Effort to Mislead' HP: CEO Whitman

Hewlett-Packard EO Meg Whitman strongly defended the company's response to a brewing accounting scandal in a recently acquired software unit, saying that Autonomy's executives engaged in a "willful effort" to mislead HP's shareholders and management.

Autonomy Made 'Willful Effort to Mislead' HP: CEO Whitman
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Early on Tuesday, HP reported earnings but booked a massive accounting charge related to the acquisition of Autonomy, a British software maker it purchased for an $11.5 billion price tag last year.

HP said in a release that during the course of a months long investigation, it had uncovered a host of "serious accounting improprieties" and other governance failures at the search engine maker.

In an interview with CNBC, Whitman said she regretted voting to approve the deal with Autonomy, which she charged with trying to divert attention away from the true state of its financials.

"We believed there is a willful effort on the part of certain members of Autonomy management to mislead shareholders when Autonomy was a publicly traded company, and to mislead potential buyers including HP, Whitman said. "We stand by the forensic review that we've seen," she added.

Whitman added that while she was disappointed by the turn of events, she was convinced Autonomy could be salvaged and still add value to HP's bottom line.

"Now what we need to do is turn this over to the authorities, seek redress on behalf of HP shareholders to recoup what we can," the CEO said. "Then we want to take the Autonomy business and grow it because it does solve a real need in the market place on the behalf of customers."

Although HP stopped short of calling it outright fraud, the development recalled the accounting scandals of the early 2000s that befell a clutch of corporate giants, and transformed bankrupted companies like Enron nd WorldCom nto household names.

When HP purchased Autonomy in 2011, the company was roundly criticized for overpaying for the unit — complaints that have now come back to haunt the technology giant with a vengeance. (Read more: A Short Seller Saw Autonomy's Problems.)

"After we announced the acquisition there were a number of blogs that came to the fore about potential accounting problems at Autonomy," Whitman told CNBC. "The former management team ran that to ground and came to the conclusion that nothing was there… Obviously we know different now."

The Autonomy bombshell comes at a precarious time for Hewlett Packard. Whitman is trying to steer the company through a multi-year effort to reinvent itself in a changing marketplace.

"Running a big high-tech company is not an easy job, even in the best of times," said former Apple CEO John Sculley, as he endorsed Whitman's stewardship of the battered technology company, even as he acknowledged that she has "a big catch up job to do."

Whitman, Sculley said, is "doing the smart short-term things she has to do, she's managing cash and doing that well…but anyone who's been in the high-tech world for a long time knows that the real long-term success of a technology company is the leadership of its products."

"There is no reason HP can't find its innovation roots again and surprise people, but it's going to take several years," Sculley said.

In reaction to the news, Hewlett-Packard shares plunged by more than 11 percent to its lowest levels in nearly a decade on the New York Stock Exchange. (Click here to get the latest quotes for Hewlett-Packard.)