U.S. Reseller Implicated in Autonomy Allegations

Two U.S. partners may be barred from government deals in the wake of the investigation into possible fraud surrounding Hewlett-Packard Co.'s purchase of U.K. ISV Autonomy.

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Two U.S. partners may be barred from government deals in the wake of the investigation into possible fraud surrounding Hewlett-Packard Co.'s purchase of U.K. ISV Autonomy.

U.S. Air Force documents obtained by the Washington Post allege Virginia VAR MicroTechnologies helped artificially boost the posted earnings of Autonomy before its $10.2 billion sale to HP in 2011.

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Another U.S. firm, New Jersey consultancy Capax Global, which is also an HP reseller, and six executives were also implicated in the Air Force documents, it said.

HP has claimed that the alleged fraud cost it $8.8 billion.

The U.S. Air Force deputy general counsel's office documents said MicroTech had been questioned by the government, and they went on to raise "the possibility" of barring all the parties from future federal deals.

As reported on ChannelWeb, HP in 2012 -- a year after the Autonomy purchase -- went to the Securities and Exchange Commission (SEC) in the U.S. and the Serious Fraud Office in the U.K., claiming that Autonomy had overvalued itself.

HP has claimed it was duped into paying too much for Autonomy, after having reviewed the accounts ahead of the acquisition and unearthed various "serious accounting improprieties, misrepresentation and disclosure failures" to the tune of at least $5 billion.

HP said in a statement at the time, "As a result of that investigation, HP now believes that Autonomy was substantially overvalued at the time of its acquisition due to the misstatement of Autonomy's financial performance, including its revenue, core growth rate and gross margins, and the misrepresentation of its business mix."

The other $3.3 billion is based on the resultant devaluation of HP shares and what it called "headwinds against anticipated synergies and marketplace performance."

Autonomy has publicly denied the allegations, noting that prior to the purchase HP had all the appropriate access to its accounts it needed to accurately value the purchase.

MicroTech resold Autonomy software to the government and private sector organisations, and the Air Force is one of new parent firm HP's largest U.S. government customers.

According to the Post, the Air Force letter and memo, sent to the reseller Sept. 6, 2013, said MicroTech and Autonomy implied they had concluded software deals worth millions of dollars "when no transaction closed at all."

It did not say what MicroTech was paid for working with Autonomy. MicroTech, according to legal counsel speaking to the Post, "has responded fully and completely" to the Air Force's allegations and has followed "all applicable laws and regulations."

However, on Dec. 20, the U.S. Small Business Administration suspended MicroTech from its federal deals as a result of separate allegations. The government body, according to the Post, acted because it believed it had received "false and misleading statements" about MicroTech's ownership and operations. MicroTech has 30 days to respond to this, according to the Post.

This is not the first time that channel partners have been implicated in the HP-Autonomy stoush.

As reported on ChannelWeb in November, HP had already alleged that Autonomy had been busy channel-stuffing, booking orders before the monies were received to meet its sales targets, and that are then never sold.

At the time of the HP purchase in 2011, Autonomy turned over about $1.1 billion.

For more UK channel coverage from CRN, visit www.channelweb.co.uk.

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