Hewlett-Packard has claimed it paid $5bn over the odds for UK software company Autonomy accusing its then chief executive Mike Lynch of having inflated the software firm’s financial performance.
In documents submitted to the High Court of Justice in London, HP accused Lynch and his former chief financial officer Sushovan Hussain of encouraging "improper transactions and accounting practices" at Autonomy before its sale.
The effect of this, according to HP, was to "artificially inflate" the revenues of Autonomy whilst understating the costs of goods and misrepresenting growth, which lead to a false assessment of the company’s profits.
Referring to Lynch and Hussain’s conduct, HP said: "Its purpose was to ensure that the Autonomy group’s financial performance, as reported in Autonomy’s published information, appeared to be that of a rapidly growing pure software company whose performance was consistently in line with market expectations.
"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."
In a statement responding to the filings, Lynch said: "HP’s claim is finally laid bare for what it is — a desperate search for a scapegoat for its own errors and incompetence.
"The contents of the claim are a simple rehash of previous leaks and insinuations that add up to one long disagreement over accounting treatments, and have nothing to do with fraud."
HP alleges that the "improper transactions" can be divided into three categories: undisclosed loss-making hardware sales, inaccurate recording of revenue , and misrepresented relationships with original equipment manufacturers (OEMs).
HP claims that among the tricks Autonomy is alleged to have used to inflate its financial performacne was through the use of resellers to make deals appear within certain financial quarters when such transactions could not be completed quick enough.
The case follows years of wrangling between HP and Autonomy’s executives after the tech giant wrote down $8.8bn off the value of its 2012 acquisition.
Earlier this year the Serious Fraud Office decided to close its probe into Autonomy as it concluded there was probably not enough evidence to secure a conviction.
Since then both Lynch and HP have launched suits against each other, with the tech entrepreneur denouncing his opponents for what he terms a "smear campaign".
