HP shares are down more than 10% this morning after revealing in their fiscal fourth quarter earnings report that a British company it bought for $11.1 billion last year lied about its finances. CEO Meg Whitman avoided calling it a fraud, but said the “serious accounting improprieties” at Autonomy cost them a $8.8 billion write-down, and promised legal action to recoup what they can for shareholders.

Autonomy is dedicated to the development of enterprise search, content management and knowledge management applications. The deal was green-lighted by Whitman's predecessor, Leo Apotheker, who sought to steer the company away from low-margin hardware products and into more enterprise products and services -- there was even talk about dumping the consumer PC business before Apotheker was fired.

Autonomy’s acquisition was ultimately approved by the current board three months into Whitman’s tenure, however, and it did go through two separate audit processes by Deloitte and KPMG. Apparently, no one was able to spot the financial inconsistencies until a senior executive at Autonomy blew the whistle. HP says the case has been referred to U.S. and U.K. securities regulators and it will also pursue civil litigation.

Apotheker issued his own statement after the news came to light, noting that the acquisition’s due diligence process was meticulous and thorough, and that he will make himself available to the investigation.

The charge is another blow for Hewlett-Packard, which has been suffering from management turmoil the last few years and is struggling to reinvent itself as PC and printer sales shrink. Earlier this year the company took another $8 billion charge related to its 2008 acquisition of EDS for $13.9 billion.

All in all HP’s net loss for their fiscal fourth quarter was $6.85 billion on revenue of $29.96 billion, down from net income of $239 million on revenue of $32.12 billion a year earlier. Revenue from all of its main business units fell, with the personal computer division recording the steepest drop at 16%. HP's printing unit fell by 5% while services business sales declined by 6% and server revenues dropped by 9%. Only software was up by 14%.