Hewlett-Packard Co. filed a suit in London’s High Court against Michael Lynch and a former colleague for about $5.1 billion for damages in connection with their management of Autonomy, the software company Lynch co-founded.
The suit, which HP filed yesterday but only confirmed today, also names Autonomy’s former Chief Financial Officer Sushovan Hussain. Both are accused of fraud in relation to the HP acquisition of Autonomy in 2011 for $ 10.1 billion.
Lynch and Hussain, in a statement issued through a PR agency, told Re/Code today they will countersue HP seeking at least $148 million in damages.
HP, in a statement to the media, said it sued Lynch and Hussain over allegations of "fraudulent activities" while they were executives at Autonomy. "HP will not comment further until the proceedings have been served on the defendants," the statement added.
The filing comes two months after Britain's Serious Fraud Office (SFO) office dropped an investigation into the deal, citing “insufficient evidence for a realistic prospect of conviction.”
The dispute revolves around the price HP paid for Autonomy. A little over a year after the acquisition, HP announced that it was investigating accounting practices at Autonomy, alleging that someone had been cooking the books.
HP took a massive write-down on the final deal of $8.8 billion, which was one of the major factors former CEO Leo Apotheker's resignation.
In a statement issued at the time, attributed to CEO Meg Whitman, HP outlined some of the issues. The statement cited accounting improprieties and misrepresentations including:
The mischaracterization of revenue from negative-margin, low-end hardware sales with little or no associated software content as “IDOL product,” and the improper inclusion of such revenue as “license revenue” for purposes of the organic and IDOL growth calculations.
This negative-margin, low-end hardware is estimated to have comprised 10-15% of Autonomy’s revenue licensing transactions with value-added resellers to inappropriately accelerate revenue recognition, or worse, create revenue where no end-user customer existed at the time of sale.”
Since then Lynch and HP have been trading insults, accusation and counter accusations like a prime time soap opera, with just as many twists and turns in the plot.
Lynch, back in 2012, painted a picture of a company of factions, of power-plays, where business decisions were made on the basis of who-was-in-and-who-was-out.
The case is unlikely to draw attention away from HP’s ailing fortunes. Over the past year it has upped the pace of releases while Whitman has insisted that its troubles are a thing of the past and that HP is now focused on innovation.
Clearly, though, there are some things that are not yet in the past and the Autonomy acquisition is one of them.