Make us your home page
Instagram

HP claims fraud prompted $5 billion overpayment for company

Hewlett-Packard CEO Meg Whitman says the accounting moves made by Autonomy were designed to bring an acquisition.

Getty Images (2010)

Hewlett-Packard CEO Meg Whitman says the accounting moves made by Autonomy were designed to bring an acquisition.

NEW YORK — Hewlett-Packard Co. said Tuesday that it's the victim of a multibillion-dollar fraud at the hands of a British company it bought last year that lied about its finances.

HP chief executive Meg Whitman said executives at Autonomy Corp. "willfully" boosted the company's figures through various accounting tricks, which persuaded HP to pay $9.7 billion for the company in October 2011.

Autonomy's former CEO, Mike Lynch, said HP's allegations are false.

HP is taking an $8.8 billion charge to align Autonomy's purchase price with what HP now says is its real value. More than $5 billion of that charge is due to false accounting, HP said.

The revelation is another blow for HP, which is struggling to reinvent itself as PC and printer sales shrink. HP's stock dipped $1.59, or 12 percent, to close at $11.71 in Tuesday's trading.

Among other things, Autonomy makes search engines that help companies find vital information stored across computer networks. Acquiring it was part of an attempt by HP to strengthen its portfolio of high-value products and services for corporations and government agencies. The deal was approved by Whitman's predecessor, Leo Apotheker, but closed three weeks into Whitman's tenure as chief executive.

Among the tricks used at Autonomy, Whitman said: The company had been booking the sale of computers as software revenue and claiming the cost of making the machines as a marketing expense. Revenue from long-term contracts was booked up front, instead of over time.

The allegations are serious, according to accounting experts.

"According to GAAP (generally accepted accounting principles), the overstatement of revenue under any tax code is illegal," said Mark Williams, a finance professor at Boston University and a former bank examiner for the Federal Reserve.

As a result of its alleged accounting practices, Autonomy appeared to be more profitable than it was and seemed to be growing its core software business faster than was actually the case. The moves were apparently designed to groom the company for an acquisition, Whitman said.

HP's net loss for the fiscal fourth quarter, which ended Oct. 31, amounted to $6.85 billion, compared with net income of $239 million in the same period last year.

HP claims fraud prompted $5 billion overpayment for company 11/20/12 [Last modified: Tuesday, November 20, 2012 8:26pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Apple Scales Back Its Ambitions for a Self-Driving Car

    Autos

    SAN FRANCISCO — As new employees were brought into Apple's secret effort to create a self-driving car a few years ago, managers told them that they were working on the company's next big thing: A product that would take on Detroit and disrupt the automobile industry.

     In this Monday, April 10, 2017 file photo, Luminar CEO Austin Russell monitors a 3D lidar map on a demonstration drive in San Francisco. Russell, now 22, was barely old enough to drive when he set out to create a safer navigation system for robot-controlled cars. His ambitions are about to be tested five years after he co-founded Luminar Technologies, a Silicon Valley startup trying to steer the rapidly expanding self-driving car industry in a new direction. Apple says it will scale back its amitions to build a self-driving car.  [AP Photo/Ben Margot]
  2. Groundbreaking today for complex on old Tampa Tribune site

    Real Estate

    TAMPA — A groundbreaking is slated for 10 a.m. today for a 400-unit apartment complex planned on the site of the former Tampa Tribune building in downtown Tampa.

    Renderings for a high-end apartment complex that will be built on the Tampa Tribune site in downtown Tampa. 
[Courtesy of Related Group]
  3. Walmart announces delivery partnership with Google

    Retail

    Walmart announced a new delivery partnership with Google to make online shopping easier for customers.

    People walk in and out of a Walmart store in Dallas. Walmart announced a new delivery partnership with Google.  [Associated Press]
  4. Insurance regulators fret over a spike in auto glass claims

    Banking

    TALLAHASSEE — Three months ago, state regulators weren't tracking a surge in broken auto glass claims, particularly in Tampa Bay.

    The issue has their attention now.

    The Office of Insurance Regulation is taking on assignment of benefits abuse in the 2018 legislative session. Pictured is Florida Insurance Commissioner David Altmaier. | [Times file photo]
  5. Proino Breakfast Club owner charged with not paying state taxes

    Crime

    LARGO — Just before noon on a recent Sunday at Proino Breakfast Club, the dining room was bustling as owner George Soulellis chatted with a customer.

    Proino Breakfast Club at 201 West Bay Drive in Largo. The owner was arrested last month on a theft of state funds charge, according to court records. JIM DAMASKE   |   Times