Hewlett-Packard has launched a $5bn (£3.4bn) claim in the high court against Cambridge software entrepreneur Mike Lynch and his former finance director Sushovan Hussain.
Lynch sold his British software company, Autonomy, to HP in 2011 for $11bn in one of the largest deals for a UK technology group. But the following year, HP wrote down Autonomy’s value by $5.5bn, after accusing its management team of fraudulently inflating the company’s value.
HP said it had filed a claim in the chancery division of the high court in London on Monday. Lynch immediately hit back by vowing to file a £100m claim in the UK against HP for loss and damaged caused by a “smear campaign”.
Although HP has been sued by its shareholders for wasting money on the Autonomy deal and has reported the UK firm’s management team to regulators on both sides of the Atlantic, its high court filing marks the first time the company has taken direct action against Lynch and Hussain.
HP said: “The lawsuit seeks damages from them of approximately $5.1bn. HP will not comment further until the proceedings have been served on the defendants.”
Lynch and Hussain, who went on to found a $1bn technology fund called Invoke Capital, deny any wrongdoing and say they have been used as scapegoats for HP’s failings.
A spokesperson for the pair said: “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.”
Britain’s Serious Fraud Office closed its investigation into Autonomy’s accounting in January without bringing charges owing to “insufficient evidence for a realistic prospect of conviction”. But the watchdog handed over jurisdiction for some of the allegations to the FBI and US Securities and Exchange Commission, which have been conducting parallel investigations.
It is understood that HP decided to file a claim to avoid any issues concerning possible statutes of limitations – the deadline by which a plaintiff must launch legal action or abandon a claim.
HP’s lawyers have described Lynch and Hussain as the “architects” of a “massive fraud”, accusing them of “accounting improprieties, misrepresentations and disclosure failures” that inflicted billions of dollars of harm on the US computing giant. The two men deny the claims. HP has provided 750,000 pages of confidential documents to investigators, drawn from Autonomy’s own auditors and accounts.
Autonomy and its sophisticated search engine, which can store and retrieve internal company documents from emails to voicemails, was acquired as part of a plan by previous HP chief executive Léo Apotheker to transform the personal computer manufacturer into a software-based company.
Apotheker’s plan was to spin off the hardware arm, but shareholders rebelled and the German was replaced by Meg Whitman, a month before his deal to acquire Autonomy had completed.
