HP blasts $5.1bn sueball at ex-Autonomy execs, Lynch preps return fire
Bitter bedfellows now in open war in UK courts
As it has long threatened to do, HP has sued two former Autonomy executives, accusing them of impropriety related to the two companies' financially disastrous 2011 merger.
The Palo Alto, California firm filed suit against Autonomy cofounder Mike Lynch and former CFO Sushovan Hussain at the High Court in the UK on Monday, over charges that the pair misrepresented the state of Autonomy's finances during merger negotiations.
"HP can confirm that, on March 30, a Claim Form was filed against Michael Lynch and Sushovan Hussain alleging they engaged in fraudulent activities while executives at Autonomy," an HP spokesperson told The Reg via email. "The lawsuit seeks damages from them of approximately $5.1 billion. HP will not comment further until the proceedings have been served on the defendants."
HP bought Autonomy for $11bn but eventually ended up writing down $8.8bn of that amount in non-cash charges related to impairment of goodwill and other intangible assets associated with the sale.
It didn't take long for HP execs to start pointing the finger, accusing Lynch, Hussain, and Autonomy of "serious accounting improprieties, disclosure failures, and outright misrepresentations" that they claim made it impossible for HP to correctly value the deal.
HP CEO Meg Whitman has alleged that these misrepresentations accounted for more than $5bn of the hit the company took – not coincidentally the same amount that HP is now seeking to reclaim from the former Autonomy bosses.
For their part, Lynch and Hussain have steadfastly denied the accusations, saying the failure of the merger was due to "HP's own recklessness." They allege that HP overestimated the amount of additional revenue the combined companies would bring in that they wouldn't have done if they remained separate, when in reality the so-called business synergies were much smaller than they predicted.
In January, the UK's Serious Fraud Office ended its criminal investigation into the HP-Autonomy affair, concluding that there was "insufficient evidence for a realistic prospect of a conviction." A separate investigation by the US Department of Justice is ongoing, but HP has opted to press ahead with its own civil suit rather than wait for the DoJ to report its findings.
Not surprisingly, Lynch, too, wasted no time in announcing his intent to launch a counterstrike in the courts in a Tuesday blog post:
The former management of Autonomy announces today they will file claims against HP for loss and damage caused by false and negligent statements made against them by HP on 20 November 2012 and in HP's subsequent smear campaign. Former Autonomy CEO Mike Lynch's claim, which is likely to be well in excess of £100 million, will be filed in the UK.
Lynch's post did not give any information on the timing of the countersuit. ®