Hewlett-Packard's legal battle with Autonomy heads to UK courts

Documents allege that Autonomy's founder and finance director “engaged in fraudulent activities” that inflated the value of Autonomy before its sale

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The Independent Online

The battle between Hewlett-Packard and the former management of Autonomy over the US giant’s botched $11.1bn (£7.4bn) purchase of the British software company has opened up a new front, with both parties taking legal action in the UK courts.

On Monday, the California-based HP filed papers at the Chancery Division of the High Court in London against Autonomy’s founder and former chief executive, Mike Lynch, and its former finance director, Sushovan Hussain.

The documents allege that the pair “engaged in fraudulent activities” that inflated the value of Autonomy before its sale. The allegations are understood to relate to breaches of fiduciary duty and the Misrepresentations Act. HP is seeking $5.1bn in damages from the pair.

Separately, representatives for Mr Lynch said he planned to launch a case against HP seeking more than £100m in damages, citing alleged “false and negligent” claims made about him since November 2012. Mr Hussain is also planning a similar case and HP is understood to have been told about their intentions to sue several weeks ago.

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The cases represents the first time the two parties have taken legal action against each other, but follow a bitter war of words that has raged for more than two years.

HP paid $11.1bn for the enterprise software business Autonomy in 2011, a deal that was seen as a watershed moment for the UK’s technology industry. Mr Lynch, who became a billionaire thanks to the sale, was hailed as Britain’s answer to Bill Gates.

But within a year of the takeover HP was forced to write down the value of the deal by $8.8bn. HP’s management claimed $5bn of this was as a result of “accounting improprieties, misrepresentations and disclosure failures” carried out by former management.

Mr Lynch and other accused parties denied the allegations and Mr Lynch subsequently claimed HP made “false representations to the market” about the writedowns. In December, he said he planned to ask US regulators to investigate his claims.

The Serious Fraud Office opened an investigation into the deal in 2013 but ended its inquiry without action in January. The SFO said there was “insufficient evidence for a realistic prospect of conviction”. It said some of the allegations put to it fell under the jurisdiction of US authorities which were also investigating the deal and as a result the SFO did not look into these claims.

In 2013, HP shareholders launched legal action against the company’s chief executive, Meg Whitman, and other board members over the Autonomy deal. The parties agreed to settle last year, with the law firm representing shareholders agreeing to join HP’s action against former Autonomy management.

Mr Hussain has been seeking to block this settlement, claiming it is “collusive and unfair” and will prevent key details of the deal being revealed. Three weeks ago HP won preliminary approval from a US judge to pursue the settlement.

An HP spokesman said: “HP can confirm that, on 30 March, a claim form was filed against Michael Lynch and Sushovan Hussain alleging they engaged in fraudulent activities while executives at Autonomy. The lawsuit seeks damages from them of approximately $5.1bn. HP will not comment further until the proceedings have been served on the defendants.”

Mr Lynch and Mr Hussain both declined to comment yesterday.