back to article Ex-Autonomy boss Mike Lynch, finance VP Stephen Chamberlain charged with fraud in US

Former Autonomy CEO Michael Lynch and company beancounter Stephen Chamberlain have been formally charged with fraud in America, in what Lynch's lawyer has called a “travesty of justice.” In short, Lynch and Chamberlain are accused of inflating Autonomy's sales numbers to hit quarterly targets so as to pocket fat performance- …

  1. HmmmYes Silver badge

    Suign the wrong people.

    Need to have your auditors/due diligence team and the HP board in court.

    1. Anonymous Coward
      Anonymous Coward

      Due diligence failure or not - fraud is still fraud.

      1. Anonymous Coward
        Anonymous Coward

        What fraud?

        Everyone could tell Autonomy was "data mining" vaporware. It'd be a lot like HP buying one of the 100s of "blockchain" startups now. You can't complain if you buy into marketing hype...

    2. Pascal Monett Silver badge
      Thumb Down

      Exactly

      Zero pity.

      HP has enough lawyers and accountants on board. They paid top dollar for a lemon ? Their problem.

  2. Jay 2

    Caveat Emptor and buyer's remorse

    So much for all that due dilligence HP and PWC did then... It still looks to me like HP had a rather large bout of buyer's remorse.

  3. Insert sadsack pun here

    "The indictment also demands Lynch pay back $815m from the HP takeover, and $4m from Chamberlain"

    Just to be clear, the criminal complaint doesn't ask for them to pay that money back to HP. It wants them to forfeit that money ie it goes to the United States.

    The civil litigation will determine whether Lynch and Chamberlain need to pay anything back to HP.

    1. Spazturtle Silver badge

      " It wants them to forfeit that money ie it goes to the United States."

      Specifically it goes to the Crime Victims Fund which is used to compensate people who are the victim of crime.

    2. Anonymous Coward
      Anonymous Coward

      This was a UK company...

      ...why should this money go to the US?

  4. Potemkine! Silver badge

    PHONY WITCH HUNT!

    Just in case they do not know what to answer...it's trendy in those days

  5. The Nazz Silver badge

    Audits

    I thought the purpose of an audit was to dig deep into the businesses records, not just accounting, to determine the factuality of all matters? "Being lied to" is a) a matter that would soon be discovered and b) not an excuse in any event.

    if, and it's a big if, they were "backdating" contracts and revenues as per the charge sheet, then it seems to me their UK VAT invoices would be invalid, and unlawful, on the "point of supply" dating.

    Maybe, they did fully comply with the UK accounting standards at the time.

    Can never understand why it takes years, and months of actual trials, to determine relatively simple facts.

  6. Cavehomme_

    What’s the bloody point of internal and external audit???!!!

    1. Jellied Eel Silver badge

      External auditors earn fees. Then possibly more fees conducting due diligence for other parties.

      I'm suprised this has been dragging on so long when the charges seem relatively simple. So how and when deals were booked. To my simple mind, that should be when you've got a signed contract. I'm also a bit curious about the legality. Presumably if contract dates have been altered, that could void the contracts, but sales people often finesse closing deals to fit commission plans. I'm also curious about the hardware complaint, ie if that was just part of a solution/system sale.

      I'd also be curious about what due diligence HP did. I'd want to take a close look at the top-10 contracts to see how they were structured and the margin on them. If HP had done that, they should have seen if Autonomy was pushing tin or services.

    2. RoloH

      apparently to tell company directors whatever they want to hear.....

    3. elDog Silver badge

      Normally internal auditors make sure that the internal books are reconciled - that there are no gaps. This is just good business practice to show upper-level management and shareholders that the company is doing due diligence.

      External auditors are required when a company (at least in the US) are publicly held or are under some type of watch. They can be more or less stringent than the internal auditors but they may decide to visit some dark corners where spiders live.

      Auditors, internal or external, are not perfect and can be subject to pressures by companies and external interested parties (shareholders). Arthur Anderson.

  7. John Smith 19 Gold badge
    Unhappy

    All stuff that has been seen in *any* number of buyouts.

    Here's the thing.

    When the buyer has sight of the books and they are Here's the thing.

    When the buyer has sight of the books and they are allegedly deliberately falsified and the CEO allegedly lies to the Auditors (because otherwise the auditors would also be culpable, as the auditors of Enron were) that's not a civil matter anymore.

    That's actually criminal.

    1. HmmmYes Silver badge

      Re: All stuff that has been seen in *any* number of buyouts.

      But thats all well known, both by auditors and companies.

      Any basic due dilligence would be looking for cash and contracts.

      I doubt Autonomy had that many customers - a few 1000? Would nit take long to review a few years orders and costs.

      1. Jellied Eel Silver badge

        Re: All stuff that has been seen in *any* number of buyouts.

        And given HP had 11 billion reasons to be comfortable with their purchase, I'd have expected a lot more than some basic due diligence. Hiding something like $8bn in value, give or take tech valuations would seem to have required a more sophisticated fraud than the court filings appear to show.

  8. Vanir

    Audit

    An audit is the examination of an entity's accounting records, as well as the physical inspection of its assets. If performed by a certified public accountant (CPA), the CPA can express an opinion on the fairness of the entity's financial statements. - https://www.accountingtools.com/articles/2017/5/5/audit

    Certified public accountants - can they be trusted?

  9. PhilipN Silver badge

    "hit quarterly targets so as to pocket fat performance-linked bonuses"

    Uhhh yeah? Thought that's how all US executives operate?*

    So if sales are flat find another company to buy to hit the target by consolidating sales.

    Even better make it an overseas company so the executives can go off for a jolly occasionally.

    and again and again

    *On the other hand I was a pimply-faced newbie in the City of London when I first heard the expression "window-dressing" to (cough! cough!) "improve" the balance sheet ahead of results time.

  10. Barry Mahon

    Autonomy was a piece of software that was supposed to sort out information. Or, more precisely, analyse and organise data to become information.

    It required, depending on the raw material and it's format, significant pre-work and sampling, before being "installed" i.e. run with a full or partial data set.

    So, a sales invoice for the product was made of several parts. There was a down payment, not necessarily the "price" of the whole package, and a significant x time basis to do the analysis.

    Afaik, the charge is that the money element of newly signed contracts was inflated to a significant extent, to take account of the potential effort required to get the product to run properly. The other aspect is that there was a significant % of future income included in the sale announcement, without a dependable basis of the calculation

  11. Anonymous Coward
    Anonymous Coward

    Posted by an "industry insider", in 2012

    http://uneasyempires.blogspot.com/2012/11/autonomy-on-trial-what-i-saw-in.html

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