Investigation Launched by Serious Fraud Office Regarding Autonomy's Suspected Misconduct
In a series of events that began in 2011, tech giant HP acquired Autonomy, a Cambridge-based information management provider, for approximately £7.4 billion (~$10.2 billion). However, the acquisition would soon be mired in controversy.
HP, after reassessing the true value of Autonomy, wrote down the value of its software to the tune of £6.5 billion (~$8.8 billion) due to accounting improprieties. The company accused Autonomy's former executives, notably co-founder Mike Lynch and CFO Sushovan Hussain, of inflating Autonomy’s financials through improper accounting practices.
These practices included recognizing hardware sales as software revenue and booking questionable transactions to artificially boost numbers ahead of HP's 2011 acquisition. HP claimed this misrepresentation exaggerated Autonomy’s value, leading to an £8.8 billion goodwill impairment and significant losses for HP and its shareholders.
The UK’s Serious Fraud Office (SFO) launched an investigation into Autonomy's accounting practices in response to HP's accusations. The investigation was not initiated by HP's accusations alone, but also influenced by the information received from an anonymous source, believed to be an Autonomy insider.
The SFO's investigation is aimed at testing HP's allegations and ensuring due diligence in the tech industry. The investigation is not limited to the UK, as it also involves the US Department of Justice and the Securities and Exchange Commission.
The news of the SFO's investigation was first revealed in a regulatory filing by HP on February 6, 2013. Alan Pelz-Sharpe, an information management analyst, reported Autonomy to the SFO before HP's acquisition.
The SFO's investigation has been ongoing for several years. In 2015, the SFO closed its investigation, citing low chances of successful prosecution. However, the case remained active with U.S. authorities continuing their investigations.
In 2018, CFO Hussain was convicted and imprisoned. In 2022, the UK High Court ruled Lynch and Hussain civilly liable for fraud related to financial misstatements. However, Lynch was acquitted in a separate U.S. criminal trial while Hussain served five years in prison.
Tragically, Lynch died in August 2024 in a yacht accident. Despite his death, HPE has indicated it will continue legal action against his estate. In July 2025, a UK court awarded HPE about £730 million (~$940 million) from Lynch’s estate, less than the $5 billion HPE initially sought.
The SFO is currently inquiring to ensure it can continue as the investigating body. The SFO had not previously investigated Autonomy before receiving the dossier, emphasizing the importance of whistleblowers in uncovering financial misconduct.
The case remains a cautionary example of governance and due diligence failures in M&A, underscoring the need for thorough investigations and transparency in the tech industry.
The ongoing investigation by the UK's Serious Fraud Office (SFO) and other authorities, including the US Department of Justice and the Securities and Exchange Commission, focuses on testing HP's allegations against Autonomy's former executives, notably Mike Lynch and Sushovan Hussain, for improper accounting practices in the business sector that led to financial losses for HP and its shareholders. The SFO's investigation was initiated not only by HP's accusations but also by information from an anonymous source, believed to be an Autonomy insider, which highlights the significance of whistleblowers in uncovering financial misconduct in the general-news realm, especially within the crime-and-justice context.
