Mike Lynch, the former chief executive officer of Autonomy Corp., said Hewlett-Packard Co.’s $5.1 billion U.K. lawsuit accusing his team of accounting fraud is nothing more than a “desperate search for a scapegoat.”
“The contents of the claim are a simple re-hash of previous leaks and insinuations that add up to one long disagreement over accounting treatments, and have nothing to do with fraud,” Lynch said on his blog Tuesday.
Tuesday’s statements are the latest exchange in a dispute between the 50-year-old Lynch and Palo Alto, California-based Hewlett-Packard that has been going on for more than two years. Hewlett-Packard acquired Cambridge, England-based Autonomy in 2011 in a deal valued at more than $10 billion and wrote down $8.8 billion on its value the following year.
The company is suing Autonomy’s former management, including Lynch and Chief Financial Officer Sushovan Hussain, alleging the company’s accounts were fraudulent.
“Lynch and Hussain caused Autonomy group companies to engage in improper transactions and accounting practices that artificially inflated and accelerated Autonomy’s reported revenues,” Hewlett-Packard said in an e-mailed statement Tuesday. The pair “breached fiduciary duties that they owed as directors.”
Lynch has said that the instances of alleged fraud that Hewlett-Packard listed don’t come close to causing $5.1 billion in damage that the U.K. lawsuit asserts, and that many of the accounting issues can be attributed to differences between U.S. and international accounting standards.
Hewlett-Packard hasn’t had much luck pursuing its claims so far. The U.K.’s Serious Fraud Office closed its investigation into the company’s initial complaint in January after two years, finding “insufficient evidence for a realistic prospect of conviction.” The U.S. Justice Department and Securities and Exchange Commission are still investigating.
The company sued Lynch and Hussain in London on March 30, according to court documents.
The allegations center on undisclosed, loss-making hardware sales, and improper revenue recognition, according to a summary of Hewlett-Packard’s claim.
“This conduct by Lynch and Hussain was systematic and was sustained for more than two years prior to the acquisition of Autonomy,” the company said in a statement. “The reality was that the group was experiencing little or no growth, it was losing market share, and its true financial performance consistently fell far short of market expectations.”
Lynch said he’s planning to file a counter-suit in the next few weeks.
“I’m stunned at the lack of evidence,” Lynch said in an interview with Bloomberg Tuesday. “This is all about trying to create a personalized PR document” for HP.
Hewlett-Packard is also wrapping up a settlement to a shareholder lawsuit after receiving preliminary approval for the deal in March. Two previous settlements were rejected. In the underlying suit, shareholders claimed that Hewlett-Packard executives ignored warnings about Autonomy’s accounting and didn’t thoroughly vet the company’s finances.
The U.K. case is Autonomy Corp. & Ors v. Michael Richard Lynch & Anr, HC-2015-001324, High Court of Justice, Chancery Division.