Some new developments today in the slow-burn subplot of the Hewlett-Packard-Autonomy accounting fraud maybe-scandal. And, like yesterday, they concern a proposed “debarment” action by the U.S. Air Force against a government tech contractor and a few former executives of the British software firm that HP acquired in 2011.
Sources familiar with the matter tell Re/code that the Air Force has informed the former Autonomy executives, including former CEO Mike Lynch, that it won’t be pursuing — for now — a debarment action that would prevent him and the other executives named from doing business with the U.S. government again.
I just got a statement from a spokesman for Lynch: “The U.S. Air Force has informed former members of the Autonomy management team that, following our response to their request for further information, there is no plan to debar them in the foreseeable future.”
HP has alleged a lot of accounting fraud against Lynch and several other former Autonomy executives, charges that Lynch and company have steadfastly denied. They’ve said that any problems HP has with what it paid for Autonomy — it took an $8.8 billion writedown last year, of which more than $5 billion was attributed to the Autonomy deal — can be attributed to differences between accounting rules used in the U.S. and the U.K.
As a bit of a preface to the news above, earlier today I obtained a copy of the cover letter that accompanied the Air Force memorandum that I published yesterday. As you can read below, it sets a less severe tone, essentially asking Lynch and cohorts for their version of the events described in HP’s complaints. “I invite you to address the allegations,” wrote the Air Force’s deputy general counsel handling the case.
By no means does this mean that Lynch and anyone else involved with the alleged improprieties at Autonomy are off the hook. There are still investigations pending in the U.S. at the Securities and Exchange Commission and the Department of Justice, and from the Serious Fraud Office in the U.K. Still, it has been about 16 months since HP first went public with all this, and nothing has happened yet.
The Air Force’s main allegation stems from efforts by Autonomy before it was acquired by HP to win a $106 million contract with a government agency. In going after the deal, MicroTech, a Virginia company that had been a reseller of Autonomy software, executed a deal to sell $11 million worth of Autonomy software to that agency. Autonomy was said to have recognized the revenue in a way that would have arguably been improper under the GAAP accounting rules in force in the U.S., but maybe not so under the IFRS accounting rules that hold sway in the U.K. There were also other claims about Autonomy selling hardware at a loss in order to boost its revenue at the end of the various quarters.
The allegations by the Air Force closely mirror the claims brought to light by HP last fall. HP paid about $11 billion to acquire Autonomy in 2011, then went on to say a year later that it overpaid by about $5 billion and change, in part, it said, because the British company had been cooking its books. The deal also cost HP’s then-CEO Léo Apotheker his job.
Update: I just heard from HP on this. A spokesman there referred me to a prior statement: “As HP has said previously, it referred the matter to appropriate criminal and civil regulators in both the U.S. and the U.K., and is cooperating fully in investigations under way in both countries.”
USAF to Autonomy prelim letter. redacted by Arik Hesseldahl
This article originally appeared on Recode.net.