Thursday, May 31, 2018

Ex-Autonomy CFO and auditors Deloitte bitten by Brit corp watchdog | The Register

The UK's Financial Reporting Council has announced that it will investigate "the conduct of Sushovan Hussein", a month after a US court found the former Autonomy chief financial officer guilty of fraud.

In addition, the corporate governance watchdog is also going after Deloitte auditors Richard Knights and Nigel Mercer, along with in-house Autonomy beancounter Stephen Chamberlain.

Autonomy was the British software firm infamously bought out by Hewlett Packard (as was) in 2011 for a record $10.7bn – only to have to write down its value by $8.8bn after completing the buyout and getting an insider's view of the firm's accounts.

Hussein was found guilty by a US federal district court in San Francisco in April, prosecutors having successfully alleged that he and others conspired to cook Autonomy's books. In addition, as we reported at the time, Hussein was "also accused of lying to regulators, independent auditors, analysts, and HP's own due diligence staffers prior to the acquisition". The trial also heard from the head of the UK's Financial Reporting Review Panel, David Lindsell, that Autonomy had misled it.

Today the FRC said that Knights and Mercer, the auditors from Deloitte, are "alleged to have failed (i) adequately to challenge Autonomy’s accounting and disclosure of its purchases and sales of computer hardware, (ii) adequately to challenge Autonomy's accounting for transactions with value added resellers ("VARs") and (iii) to correct false or misleading communications made by Autonomy to the Financial Reporting Review Panel ("FRRP") of the FRC."

In addition, Knights is said to have "recklessly failed to correct a misleading statement made by Sushovan Hussain to the FRRP in a meeting in January 2010 and failed to act with objectivity during the period October 2009 – July 2010."

Hussein is said to have acted dishonestly and/or recklessly by fiddling Autonomy's books, while Stephen Chamberlain is accused of breaching "the fundamental principle of integrity by acting dishonestly and/or recklessly" when preparing the company's accounts and annual reports for 2009 and 2010, as well as not telling Deloitte "information... which he knew or should have known was relevant to their work".

The FRC first began sniffing around Autonomy in 2013, and its statement today said that investigation "has been carried out contemporaneously with parallel criminal and civil investigations and litigation both in the UK and in the USA".

A Deloitte spokesman told Sky News: "We are disappointed that these complaints have been brought and we will defend ourselves against them at tribunal."

The Register has asked reps of former Autonomy chief exec Mike Lynch for comment. HPE is currently suing him over the Autonomy fiasco, with a trial date set for next year.

No date has yet been set for the tribunal hearing. ®

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