Probe Expected

The probe was expected, given that HP announced last month it had proof that it had been conned in last year's $10.3 billion acquisition-turned-fiasco. At the time, HP said it had turned over the evidence to the Justice Department, the SEC and the U.K. Serious Fraud Office. "On November 21, 2012, representatives of the U.S. Department of Justice advised HP that they had opened an investigation relating to Autonomy," the company reported to the SEC Thursday.

HP claims Autonomy executives inflated the company's value by reporting some revenue prematurely or improperly. The alleged bogus reporting accounts for almost 60%  of the $8.8 billion write down HP booked last month on the Autonomy deal.

Ex-Autonomy Chief Executive Lynch responded to the investigation Friday by continuing to deny any wrongdoing. On a website Lynch set up to counter HP's allegations, he reiterated his complaint that HP has yet to release any details of the alleged scam. "Simply put, these allegations are false, and in the absence of further detail we cannot understand what HP believes to be the basis for them," Lynch wrote.

Details Still Hidden

HP is still keeping the details of the allegations confidential among itself, prosecutors and regulators. Thursday's filing did not provide any new details. Nevertheless, Lynch is ready to tell his side of the story. "We will co-operate with any investigation and look forward to the opportunity to explain our position," he wrote.

Throughout the claims and counterclaims, HP stock continues to get hammered. From the beginning of 2012 to Thursday, the price has fallen 45%.

Officially, the Federal Bureau of Investigation won't discuss whether or not it is involved in the case. However, an unidentified source told Bloomberg that the agency is assisting the SEC in its investigation.

While Autonomy execs are under the investigatory microscope, shareholders are blaming HP for the deal that ended up wasting billions of dollars. In the SEC filing, HP lists 10 lawsuits, including four class-action suits.

Apotheker Still Blamed

HP CEO Leo Apotheker, who was fired in September 2011, led the Autonomy deal as part of a plan to get HP deeper into the high-margin enterprise software business, while reducing its dependence on selling low-margin PCs. Autonomy software searches, organizes and manages data within large companies.

Apotheker sealed the end of his short career with HP when he announced he was considering the sale of its PC business. Because he had no buyer, Apotheker's disclosure sent Wall Street analysts into a tizzy. To them, Apotheker appeared to lack a clear vision or roadmap for saving HP from its years of bad deals, management turmoil and strategic blunders.

Current HP CEO Meg Whitman was on the company's board when it signed off on the Autonomy deal. Nevertheless, she has distanced herself and other board members from the debacle by laying the blame on Apotheker and then mergers and acquisitions head Shane Robinson, who also left the company in 2011.

History aside, now that federal prosecutors are officially involved, the repetitive claims and counterclaims being tossed back and forth between HP and Lynch won't matter much. The companies, their customers and shareholders now have to hope for clarity in the courts, especially if charges are filed.

Image courtesy of drserg / Shutterstock.

On Friday, Federal investigators arrested Paul Ceglia, 39, of Wellsville, N.Y. on charges that included fabricating and destroying evidence. The charges were included in a 13-page complaint filed in federal district court in Manhattan.

The arrest appears to signal that federal investigators support Zuckerberg’s account of his work-for-hire agreement with Ceglia and seemingly ends the bizarre legal sideshow that has dogged Facebook during its meteoric rise.

Facebook Seems Pleased

"We commend the United States Attorney for charging Ceglia with federal crimes in connection with his fraudulent lawsuit against Facebook,” said Orin Snyder a partner Gibson Dunn and the attorney representing Facebook and Zuckerberg in the lawsuit. “Ceglia used the federal court system to perpetuate his fraud and will now be held accountable for his criminal scheme."

If convicted, Ceglia could face up to 40 years in prison. 

Doctored Documents

Ceglia "doctored, fabricated, and destroyed evidence to support his false claim," according to a statement from the U.S. attorney's office in New York City. Investigators also found a copy of the original contract between Zuckerberg and Ceglia which makes no reference to Facebook, according to the complaint.

Ceglia did contract Zuckerberg to programming work for the website StreetFax.com in 2003. In an April 2011 lawsuit Ceglia claimed Zuckerberg promised him a 50% stake in what would eventually become Facebook. Now, however, Ceglia’s claims are unraveling: federal investigators said Zuckerberg did not come up with the idea for Facebook until months after he worked for Ceglia and that he never received the bogus emails Ceglia cited in his lawsuit as proof of Zuckerberg’s promise.

U.S. Postal Inspectors verified Zuckerberg’s account that he had not received the emails by checking email servers at Harvard University, where Zuckerberg was a student and would take on work-for-hire programming jobs like the one he did for Ceglia.

An attorney for Ceglia could not be reached for comment Friday evening.

We’ll update this post when we hear back from Ceglia or his lawyer.