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Accounting differences, not fraud

Member: Nifa

There have been further developments in the long-running legal battle between Autonomy, the UK firm that was bought by Hewlett-Packard (HP) in 2011, and its buyer, with Autonomy’s founder citing a document he says shows differences in accounting standards, not fraud.  Mike Lynch has said this week that allegations by HP of a £3bn fraud by former Autonomy directors, including himself, were unsupported by evidence and has now handed a newly discovered spreadsheet to the Securities and Exchanges Commission (SEC) in the US.

The SEC is already investigating Autonomy and HP along with the FBI and the UK’s Serious Fraud Office (SFO) after HP alleged that Dr Lynch and other directors inflated the worth of the company in the run-up to the acquisition.  Now, however Dr Lynch maintains that the spreadsheet, which was drawn up by HP in 2012 and which assesses which Autonomy software sales complied with international accounting standards and which needed further investigation, shows that the £3bn writedown was driven by accounting policy changes and differences, not fraud.

In a post on his personal website, Dr Lynch says that HP’s own paperwork shows that all Autonomy deals were recorded and accounted for with contracts and revenue entries. He adds that there is no missing money.  However, HP has countered that the “same fertile imagination that was behind a massive fraud is apparently still hard at work making up stories” and that it had already handed the document in question to the authorities.

Whenever there is alleged financial malpractice, intensive forensic investigation by experts is always required and it can be single documents or paper trails that alter the balance of a case.  Of course, the interpretation of the document and other evidence is also subjective, which is why forensic investigators are so crucial to a case, as their experience and expertise can help defence and prosecuting counsel make or lose their case.

Author: Roger Isaacs, 8 December 2014

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