HP sues Autonomy founder Lynch for $5bn

Mike Lynch

Hewlett-Packard has accused Mike Lynch, the co-founder and former chief executive of Autonomy, of firing a key US employee who had raised concerns about the Cambridge company’s accounts prior to its acquisition by the American computing giant.

It alleges they masterminded a fraud through improper deals and accounting practices that led HP to overpay for the UK firm.

The Silicon Valley-based firm paid $11.7bn for Autonomy and claims Autonomy overstated revenue from software and related services activities by as much as 52 per cent in the final quarter of 2010, and by an average of 35.9 per cent in the two quarters before it agreed to be bought.

The court filing further alleged that a US employee was fired by Autonomy for raising questions about its accounts.

HP added that it believed it was acquiring a rapidly growing company that was gaining market share but a “dishonest concealment of material facts” meant Cambridge-based Autonomy’s value was inflated.

In an interview with Reuters, Mr Lynch described HP’s claim as “a simple rehash of previous leaks and insinuations that add up to one long disagreement over accounting treatment.

“That’s not fraud,” he added.

Both he and Mr Hussain, who has previously denied any wrongdoing, have accused HP in the past of casting personal smears and “breathless ranting.”

There has been a war of words across the Atlantic between Mr Lynch and HP since the company first raised concerns about the deal.

The Serious Fraud Office concluded there was “insufficient evidence for a realistic prospect of conviction” in relation to HP’s fraud allegations.

It handed jurisdiction to US authorities, whose investigation is ongoing.

Deloitte, which was Autonomy’s auditor ahead of the sale, has said it stands by its audits.