HP Autonomy's IDOL May Be Used by Fraud Investigators to Examine HP-Autonomy Deal

4 minute read
David Roe avatar

Prime-time television drama doesn’t get better than this. By December last it looked like there was little more to be said about the the HP-Autonomy dispute until the court hearings. But like an IT cornucopia, it just keeps giving. Late last night it was revealed that the Serious Fraud Office that is investigating the scandal in the UK is -- wait for it -- using Autonomy software.

SFO, Autonomy

This is not allegation, or spurious rumor, this is a fact. According to a statement that appeared on the Serious Fraud Office’s (SFO) website overnight, it has confirmed that some of the software it is using in the investigation was sold to it by Autonomy. The statement reads:

…It has also been reported that the SFO uses an Autonomy product, Introspect, as a document management tool. The SFO is keen to ensure that there is now no conflict of interest, or perception of such a conflict and it is obliged as a first step to make inquiries to ensure that it can continue as the investigating body. It is undertaking this work at present…”

It also says that it won’t be making any more comment on the case until it resolves this issue. This does not mean that it is stepping aside as some reports have suggested it may do, but simply that it is looking into whether it should or not.

What this raises is the possibility that the ultimate test for Autonomy’s IDOL contextual meaning software to date is investigating itself.

Or at least investigating the company that created it in the first place. Surely if ever in the IT industry there was a conflict of interest this must be it. But ultimately that is why the SFO has blown the whistle itself and we should find out soon enough what it decides to do.

Ifindeed it does decide to step aside, it really could put the entire investigation back by months as another body brought in will have to start from the very beginning.

Lynch, HP, Autonomy

Needless to say, Mike Lynch continues to deny that there was anything untoward in the sale of Autonomy to HP and insists that the problem lies with HP, whose corporate culture ensured that the value of Autonomy was going to drop once it was taken over.

In a statement released in response to SFO statement, and published in the Wall Street Journal Lynch says:

We confirm that we have recently been contacted by the SFO. We had written to them in December to request a meeting because we want to know the substance of HP’s vague allegations and want to have a chance to respond to them. We continue to have confidence that HP’s allegations are without merit and appreciate the director of the SFO’s comment that ‘the opening of a criminal investigation does not mean that individuals are guilty of a crime or indeed that a crime has been committed’.” We look forward to seeing the situation resolved as soon as possible.”

However, there’s a drop in value, and there there’s a US$ 5 billion write-down, which are two entirely different horses.

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Legal Battle Lines

Which probably explains why Lynch has hired one of the best-know corporate defense attorney’s on the planet. According to reports, he has hired Reid Weingarten, whose CV reads like a Who’s Who of major corporate hitters in financial difficulties.

Some, though, really did have dog-doo on their corporate soles and are currently now serving prison sentences. Among them are ex-WorldComChairman Bernard Ebbers, who was charged with fraud resulting in the loss of $100 billion to investors and currently serving 25 years, and of course Enron accountant Richard Causey, who is now serving 5 years in jail.

That is not in any sense to suggest that Lynch is in the same boat but simply to say that the case has really pulled in the big hitters and has all the potential of a superstar courtroom drama.

Not that it will really happen like that. Financial cases are long and painstaking with few people outside of forensic accountants understanding what’s going on.


Meanwhile, it's business as usual at HP. But it may not be so for very much longer. The annual meeting of HP shareholders takes place next week and already corporate investors who were stung in the Autonomy write-down are ganging up on HP Chairman Ray Lane and a number of other directors urging other investors to vote them off the board for failing to vet the purchase properly.

On top of this, the number of lawsuits against HP over the case is mounting over claims that shareholders had been misled over the acquisition. So while we will have to wait for months, if not years, to find out what happens around Autonomy, there should be some more choice moments in the saga later next week.