Autonomy is a software company that Lynch founded in 1996. The company’s value rose rapidly in the 15 years after its founding, leading to its acquisition by California-based Hewlett-Packard for $11.7 billion in 2011. Assets reported. Within a year of the acquisition, HP said it had uncovered “accounting irregularities” and “obvious misrepresentations” that occurred before the acquisition of Autonomy. HP wrote down Autonomy’s value by $8.8 billion. (Hewlett Packard split into HP Inc. and Hewlett-Packard Enterprises in 2015, “both of which have become more agile, focused and successful companies,” Assets‘s Diane Brady writes in CEO Daily.)

In litigation, HP argued that Lynch and his allies — Stephen Keith Chamberlain, Autonomy’s former vice president of finance, and CFO Sushovan Hussain — used accounting tricks to inflate Autonomy’s value before the sale.

After years of litigation, Hussain was found guilty in 2018 of 16 counts of fraud. According to the U.S. Attorney’s Office for the Northern District of California, from 2009 to 2011 he used “backdated contracts, round trips, channel stuffing and other forms of accounting fraud to inflate Autonomy’s publicly reported revenues.” He was also found to have promoted Autonomy’s false and misleading financial reports to senior executives at HP.

Last month, the Financial Reporting Council, a UK regulator of corporate governance, reporting and auditing, banned Hussain from practicing as an accountant until November 2038.

During the trial, Lynch said he was unaware of some of the wrongdoings he was accused of. He said important decisions were delegated to subordinates, and denied other allegations. In June, a San Francisco court acquitted Lynch and Chamberlain of the criminal charges. Both were charged with the same 15 counts, one count of conspiracy and 14 counts of wire fraud.

Lynch’s legal troubles were not over yet, however – there was still the civil suit and possible British investigation. Last week, Chamberlain died after being hit by a car while jogging in Stretham, Cambridgeshire, the same week Lynch died. (You can read Assets‘s coverage of the yacht tragedy can be found here.)

The decision to bar Hussain from being an accountant reminds me of an earlier conversation I had with Dan Lefler, a partner emeritus at the Los Angeles law firm Irell & Manella LLP, about fraud risk management processes. The responsibility seems to fall on the CFO. “Ultimately, it’s the CFO, the controller and the people who actually manage the company’s accounts that you rely on to make sure they’re doing everything right,” he said.

“I think most CFOs try to do things right,” Lefler told me. “There are a lot of penalties for people who do things wrong.” The Autonomy case makes this particularly clear.

Sheryl Estrada
[email protected]

The following sections of CFO Daily were curated by Greg McKenna

Leaderboard

Todd SmithCFO of charter airline Wheels Up (NYSE: UP), announces his resignation and is leaving the company to pursue a new opportunity, Wheels Up announced. Chief Accounting Officer Eric Cabezas will serve as interim CFO beginning Sept. 9 while a search is conducted for a successor to Smith. Cabezas joined the company in 2019 and previously served as interim CFO.

Thomas Liguori has been named CFO of Valmont Industries (NYSE: VMI), a manufacturer in the infrastructure and agricultural sectors. He will succeed Timothy P. Francis, who has served as interim CFO since July 2023 and will remain with the company as chief accounting officer. Liguori was most recently CFO of Fortna, an e-commerce distribution company, and held the same role at Fortune 200 semiconductor company Avnet.

Big deal

The Federal Reserve is ready to cut interest rates from their 23-year high, Chairman Jerome Powell said during his keynote speech at the central bank’s annual symposium on Friday in Jackson Hole, Wyoming. Powell said he was confident inflation was moving toward the Fed’s 2% target, all but confirming a rate cut at their mid-September meeting.

“It is time to adjust policy,” Powell said. “The direction is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the allocation of risks.”

Brian Coulton, chief economist at Fitch Ratings, said Assets by email that the Fed would likely pursue a gradual course of monetary easing.

“There does not appear to be serious concern about the risk of an imminent recession and a wave of job losses – the kind of concern that might justify rapid rate cuts,” he wrote. “It is rather about the diminishing risk that too much wage growth will keep inflation too high.”

Further information

Hybrid working from home improves retention without compromising performance is a new article by three authors, including Stanford economist Nicholas Bloom, in the journal Nature. Based on more than 1,600 employees at a Chinese online travel agency, Bloom found that employees who work from home two days a week are just as productive and just as likely to be promoted as their colleagues who work exclusively in the office. Hybrid working reduced the quit rate by a third, with the effect being particularly strong among non-managerial employees, female employees and employees with long commutes.

Overheard

“There is one company in the world that is laying the foundation for the AI ​​revolution. And that is Nvidia, with the Godfather of AI (CEO) Jensen (Huang) having the best seat and vantage point to discuss overall enterprise AI demand and future appetite for Nvidia’s AI chips.”

— Dan Ives, managing director and senior equity analyst at Wedbush Securities, explained in a note to investors why he believes Nvidia’s Aug. 28 quarterly results were the “most important tech results in years.” Assets reported.