UBS and Goldman Sachs, two of the banks that advised Autonomy on its disastrous sale to Hewlett-Packard, had access to research about the alleged accounting irregularities at Britain's largest software company before the deal was negotiated – a transaction that has wiped $8.8bn (£5.5m) from the US company's balance sheet over the last couple of days.
Paul Morland, a leading City analyst who started raising red flags about exaggerated performance claims at Autonomy as early as 2009 and has been one of the company's most vocal critics, said both banks had access to his research which was widely circulated at the time.
It is understood that both banks requested meetings with Morland, with Goldman Sachs seeking advice prior to winning a role as Autonomy's broker in June, a role which it held jointly with UBS and Citigroup.
"The banks must have concluded that my research findings were not negative enough not to take on the mandate," said Morland. "You can understand why they came to that conclusion when they had Mike Lynch [co-founder of Autonomy] telling them one thing and me telling them another."
None of the 15 different financial, legal and accounting firms involved on both sides of the transaction publicly raised concerns about Autonomy's books. The company's lead adviser was US firm Qatalyst Partners, while UBS and Goldman Sachs were brought in as second tier advisers days before HP's $10.3bn offer for Autonomy last year. Both UBS and Goldmans declined to comment.
Speaking out about Autonomy was a difficult stance to take. Analysts have described how Lynch and his senior managers were quick to hit back at those who questioned the numbers. They were barred from attending quarterly results meetings, blacklisted so that company staff were forbidden to talk to them and pressure was put on managers to silence their criticism.
But while Morland was one of a hard core asking awkward questions, many analysts at the large banks had buy recommendations on Autonomy.
A look back at the notes published in the 12 months leading up to the sale, compiled by brokerforecasts.com, shows Bank of America Merrill Lynch and Goldman Sachs, both of which advised Autonomy, were consistently positive.
UBS turned from neutral to positive in February 2011. Barclays Capital, who advised HP, Credit Suisse and RBC Capital Markets were also recommending their clients buy the stock.
"Our job, if we've got any moral good in us, is to ensure the efficient allocation of capital," said Morland.
"If the quality of analysis is worse you will get more misallocation of capital. That is a bad consequence and that might be what happened here."
Autonomy's chief operating officer, Andrew Kanter, wrote to Morland's bosses at Astaire Securities, where he worked at the time, insisting on corrections and retractions to his published research. One letter said: "Autonomy likes to encourage robust debate among analysts," but it went on to accuse Morland of "knowing dissemination of false information into the marketplace".
Morland described how he was one of three analysts – Daud Khan at JP Morgan Cazenove and Roger Phillips at Merchant Equity Partners were the others – who were not allowed to ask questions at a particularly fraught results presentation.
At one point Khan was banned from attending results announcements for a year. Pressure was also put on technology specialists. Khan did not respond to requests to comment.
Alan Pelz-Sharpe, of IT experts 451 Research, was banned from speaking to company staff. He said: "I was essentially blacklisted by them, so in theory nobody there could talk to me. If I wrote anything critical I would have a threatening note come back saying my report was riddled with inaccuracies and there was no way it could go to press."
Lynch said on Wednesday there was no sense in the claim by HP that more than $200m of improperly recorded revenue led to a writedown worth billions. "After being ambushed by all this yesterday, I've had a chance to look at some of the things that they're saying – it just doesn't add up," Lynch said in an interview with technology site All Things D. "HP is looking for scapegoats, and I'm afraid I'm not going to be one of those."
The 47-year-old, who left the combined company in May, said that he has no plans to hire a lawyer and has not been in contact with HP.
Deloitte, the top four accountancy firm thatthat signed off Autonomy's annual reports, earned £4.44m in non-audit fees from the technology firm during the last four years it was charged with scrutinising the accounts. The sum, paid for advice on tax, acquisitions and other services "pursuant to legislation", is close to the £5.422m Deloitte collected for auditing work.
Investor advisory service PIRC has in the past recommended Autonomy shareholders vote against the reappointment of Deloitte on the grounds that it was conflicted by taking extra commissions.
Definitions of auditing tasks vary, and PIRC rules put the fees earned by Deloitte that had nothing to do with auditing at 40% over the four year period.
Nigel Mercer, the Cambridge-based Deloitte partner who scrutinised Autonomy in 2010, was also Tottenham Hotspur's auditor. Autonomy signed a £20m sponsorship deal with the football club in 2010. A spokesman for Deloitte said there was no link between Mercer's involvement with both clients. The proportion of non-audit work Deloitte did for Autonomy had reduced over the years.
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