SFO’s Autonomy inquiry thrown into doubt

A criminal investigation into Autonomy by the Serious Fraud Office has been thrown into confusion just as it began after the UK agency admitted that its £4.6m contract with the software-maker could present too much of a conflict of interest for it to continue pursuing the probe.

The SFO, under scrutiny for the way it tenders contracts and how it handles digital evidence, said on Tuesday that it was assessing whether a conflict or a “perception of such a conflict” meant it could not continue its formal investigation -- which was only confirmed by Autonomy’s parent company, Hewlett Packard, in a regulatory filing on Monday night.

Introspect, an Autonomy product, is used by the SFO to trawl through massive files of electronic data mined in complex economic-crime cases.

Oliver Heald, the solicitor general, stated in January that the SFO awarded Autonomy a five-year contract worth £4.6m in 2009, extending the contract in 2011.

The agency’s admission of a potential conflict comes a week after the Financial Times revealed that a whistleblower alleged in 2012 that SFO convictions were potentially unsafe because the agency’s digital forensic unit could not be trusted. An internal review into the allegations did not conclude that convictions were unsafe, however.

The SFO said Introspect was “just one part of the systems and processes in our digital forensics”.

The SFO’s potential conflict is the latest twist in HP’s 2011 takeover of Autonomy, which the US company now blames for a $5bn hole in its accounts. HP passed information to the SFO and US authorities in November, and the SFO said on Tuesday that it had decided to open a formal investigation into “the circumstances of the sale.”

The SFO is particularly sensitive to accusations of mishandling investigations as it prepares to fight a £300m damages claim by the Tchenguiz brothers. The SFO conceded a string of mis-steps in their botched case against the brothers, which it had to drop last year.

A parliamentary committee also heard last week that a Whitehall investigation probed separate whistleblower allegations into bribery by consultancies formerly used by the agency. The investigation found no impropriety.

“The SFO needs to be very careful. Following the Tchenguiz debacle, its battered reputation could not withstand another major mis-step,” said Emily Thornberry, Labour’s shadow attorney general.

If the SFO were to make the unprecedented conclusion that it is conflicted, other investigators such as the City of London Police’s economic crime unit would have to step in.

Legal experts assessed that the SFO was being overly cautious given recent experiences.

“It would be surprising if the SFO would allow itself to be unduly influenced by some secondary interest when investigating a major corporate,” said Jonathan Fisher QC, a barrister not involved in the probe. “If so, some global entities would become untouchable and that cannot be correct”.

The US Department of Justice opened its investigation in November after HP wrote down $8.8bn on the value of the deal, attributing more than $5bn of the writedown to “serious accounting improprieties, disclosure failures and outright misrepresentations”. The SFO’s probe runs parallel to the DoJ’s.

Mike Lynch, former Autonomy chief executive, declined to comment on the SFO investigation. He has denied all allegations of wrongdoing and accused HP of mismanaging the software company he co-founded.

HP also declined to comment beyond its filing.