Hewlett-Packard took an $8.8 billion accounting charge after the claimed to have discovered some substantial instances of financial fraud at Autonomy, a company they purchased last year, HP said on Tuesday.
As the Wall Street Journal reports, the Palo-Alto, Calif.-based H-P said it was writing down a giant chunk of Autonomy, a software company H.P. purchased for north of $10 billion, after they found "serious accounting improprieties, disclosure failures and outright misrepresentations" at Autonomy that occurred prior to H-P's acquisition of the firm.
H-P further stated on their web site that those alleged misrepresentations by Autonomy were intended to inflate their financial figures prior to Autonomy's acquisition by H-P.
"These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management's ability to fairly value Autonomy at the time of the deal," the statement reads. "We remain 100 percent committed to Autonomy and its industry-leading technology."
The non-cash write down amounted to $8.8 billion, H-P said, including recent drops in their stock; the majority of this impairment charge, more than $5 billion, is linked to Autonomy's account improprieties.
H-P said that they began investigating Autonomy after a senior member of Autonomy's leadership team came forward after the departure of Autonomy founder Mike Lynch.
This senior member told H-P that there had been "a series of questionable accounting and business practices at Autonomy" prior to H-P acquiring the company. This individual also "provided numerous details about which HP previously had no knowledge or visibility."
Meg Whitman, H-P's current chief executive, told the Wall Street Journal that the company has informed the Securities and Exchange Commission, as well as the U.K.'s Serious Fraud Office.
"We have requested both agencies open criminal and civil investigations into this matter," she said. "H-P intends to seek regress against various parties in the appropriate civil courts to recoup what we can for our shareholders.
According to the New York Times, H-P bought Autonomy in the summer of 2011 hoping to boost its presence in the enterprise software market and close the gap between themselves and rivals like I.B.M. The takeover, the Times reports, was the orchestrated by Léo Apotheker, H.P.'s chief executive at the time, and was criticized within Silicon Valley as "a hugely expensive blunder."
Mr. Apotheker resigned a month later, one year after former head of H-P Mark Hurd was forced to step down due to sexual harassment accusations.
The New York Times attempted to reach a spokesman for Mike Lynch, former chief executive of Autonomy, but did not receive an immediate comment.