A Question for HP: Who Reviewed Autonomy's Books?

Eventually, the set of lawsuits and government investigations of the Hewlett-Packard Co.’s (NYSE: HPQ) debacle of its purchase of Autonomy probably will sort out who examined Autonomy’s books and why discrepancies in its financial statements were not discovered. In the meantime, no one will admit missing problems with the numbers, according to those who were supposed to analyze them. So, maybe they were never reviewed at all.

Hewlett-Packard has been accused of applying less than complete due diligence, which is at the base of some lawsuits by shareholders. The defense by current management and the board is that former CEO Leo Apotheker and his team should have seen the problems. It was Apotheker’s decision to buy Automony, so reviews should have been completed on his watch. People who were members of HP’s board then say they relied on management. That is a thin explanation, given the size of the deal.

Current CEO Meg Whitman says that she and her management team cannot be blamed, although they would have had time to review evaluations the deal before it finally closed. Directors who sat on the board after Whitman’s appointment also assumed that their new chief executive knew what she was doing. So, past and present management, as well as past and present board members, all wash their hands of any responsibility.

The next target of suits, and perhaps the government’s review of the buyout, are accounting firms Deloitte and KPMG, each of which, according to HP management and the plaintiffs, had a look at Autonomy’s books. Each firm has denied it played a role in the review, which means no accounting firm reviewed the details of the deal. That is unlikely, unless HP management was shockingly negligent.

And, of course, Autonomy CEO Mike Lynch says his company’s books were clean and that HP had months to review them. That implies that, if anything was amiss, HP should have told him before the deal was completed.

No one looked at Autonomy’s books? Impossible. So someone is culpable. It just is not clear yet who that is.

Douglas A. McIntyre