U.K. Regulator Closes Fraud Investigation Into HP-Autonomy Deal

The United Kingdom’s Serious Fraud Office said it has closed its investigation into the circumstances surrounding Hewlett-Packard’s $11 billion acquisition of the British software firm Autonomy.

The SFO, the U.K.’s primary body for investigating financial crimes, said it found “insufficient evidence for a realistic prospect of conviction.” It also said it has ceded jurisdiction of the matter to the U.S. Department of Justice, and that investigation is still active.

The decision is a victory for Mike Lynch, Autonomy’s founder and CEO and Sushovan Hussain, its former CFO, who have been singled out in allegations by HP that they overstated Autonomy’s valuation in order to trick HP into overpaying for it. HP acquired Autonomy in 2011 under then-CEO Léo Apotheker.

An HP spokeswoman said in a statement that the company is still working with U.S. regulators on the matter.

“HP remains committed to holding the architects of the Autonomy fraud accountable. As the SFO made clear, the U.S. authorities are continuing their investigation and we continue to cooperate with that investigation,” the company said in a statement.

A statement posted to AutonomyAccounts, a Web site set up by Lynch and other former Autonomy executives to respond to HP’s allegations, welcomes the closure of the SFO case. “As we have always said, HP’s allegations are false, and we are pleased that after a two-year review of the material presented by HP, the SFO has concluded that there is not a case to pursue.”

Lynch has argued that the case that HP is making — that it overpaid for Autonomy by about $5 billion — doesn’t make sense, and that the evidence it has so far documented doesn’t account for that amount of alleged fraud. He has also argued that many of the problems that HP has found can be attributed to differences in the accounting standards in the U.S. and the U.K. Software sales are treated differently under GAAP, the accounting standards in force in the U.S. than they are under IFRS, the standard to which U.K. companies adhere. And even so there were numerous red flags that HP might have seen had it been looking.

“Let’s remember, HP made allegations of a $5 billion dollar fraud, and presented the case in public as a slam dunk,” the statement goes on. “HP now faces serious questions of its own about its conduct in this case and the false statements it has made.”

HP has laid out a fairly detailed case in a series of court filings in a derivative lawsuit brought by its shareholders in California. In the filings it alleged that prior to its acquisition by HP, Autonomy inflated its reported revenue by about 21 percent in 2009, nearly 30 percent in 2010 and by more than 26 percent in the first half of 2011, and that its reported profit margin on an operating basis was “significantly overstated.”

HP blamed Autonomy for about $5 billion worth of an $8.8 billion writedown it took in 2012.

This article originally appeared on Recode.net.