HP sues Autonomy founder Mike Lynch over alleged fraud

Dispute over circumstances of HP’s $11.1bn purchase of UK software group

Mike Lynch: said he intended to launch legal action against HP for “false and negligent statements” made by the US company. Photograph: Chris Ratcliffe/Bloomberg

Mike Lynch: said he intended to launch legal action against HP for “false and negligent statements” made by the US company. Photograph: Chris Ratcliffe/Bloomberg

 

Hewlett-Packard (HP) is suing Autonomy’s co-founder Mike Lynch, seeking damages of $5.1 billion (€4.7 billion), over an alleged fraud that occurred during his leadership of the UK software group, as the warring parties moved towards a showdown in the UK courts.

The US technology conglomerate revealed yesterday that it had filed a lawsuit in London’s High Court against Mr Lynch and Sushovan Hussain, the UK group’s former chief financial officer, alleging that “they engaged in fraudulent activities while executives at Autonomy”.

It is the first time HP has launched legal action directly against the pair, whom the US company has previously accused of masterminding a “multibillion-dollar fraud” at Autonomy.

Disastrous purchase

In November 2012, HP announced that it was taking an $8.8bn writedown of its purchase of Autonomy, $5.5bn of which was due to alleged “accounting misrepresentations” at the company.

In response to HP’s move, representatives for Mr Lynch said he intended to launch legal action against HP for “false and negligent statements” made by the US company.

They said he will seek damages “in excess of £100 million” and bring his case in the UK. One person familiar with the matter said Mr Lynch was unlikely to file any counter-lawsuit before the Easter break.

Mr Hussain has also consistently denied the allegations made against him.

For more than two years, HP, led by chief executive Meg Whitman, and Autonomy’s former management have been embroiled in a bitter war of words that has spilled over into legal and regulatory probes on both sides of the Atlantic.

In California, a US judge is hearing arguments in a separate case relating to a settlement that HP has reached with its shareholders over the acquisition.

In this case, lawyers for the company have alleged that Autonomy concocted deals and improperly booked revenues in efforts to inflate the UK group’s value before its acquisition.

Ceding jurisdiction

In December last year, Mr Lynch met representatives from the US Securities and Exchange Commission, following the emergence of a document which, he alleges, shows that HP made “false representations to the market” over the write-down.

At the time, HP responded by saying: “The same fertile imagination that was behind a massive fraud is apparently still hard at work making up stories.” – Copyright: The Financial Times Limited 2015