Former Autonomy CEO Lynch sues HP for $150 million

HP was 'simply incompetent' in its operation of Autonomy, he says

Making good on the promise he made earlier this year, former Autonomy CEO Mike Lynch on Thursday filed a $150 million lawsuit against HP over what he called a public smear campaign against him and other Autonomy executives.

“Over the past three years, HP has made many statements that were highly damaging to me and misleading to the stock market," Lynch said. "HP knew, or should have known, these statements were false."

HP's ill-fated 2011 acquisition of the British software maker for $11.7 billion -- which later resulted in an $8.8 billion impairment charge -- was "doomed from the very beginning," Lynch said. "HP’s own documents, which the court will see, make clear that HP was simply incompetent in its operation of Autonomy."

The tech giant was "in chaos" at the time of the acquisition, he charged. "Before going ahead with the acquisition they discussed firing their CEO. They then tried to abort the deal after closing, ultimately did fire the CEO, and generally fought amongst themselves like cats in a sack, causing Autonomy to disintegrate."

HP also didn't read its own due diligence report, he alleged.

"Every acquisition over a billion dollars that HP has made in the last five years has failed," Lynch concluded. "Meg Whitman can explain all this to a judge when we finish this in court once and for all.”

The lawsuit was filed in the UK High Court.

In late March, HP announced that it planned to sue Lynch and Sushovan Hussain, Autonomy's former CFO, for $5.1 billion, alleging that they had engaged in fraudulent activities to increase the company's value. Lynch responded at the time by promising to countersue.

“Mike Lynch’s lawsuit is a laughable and desperate attempt to divert attention from the $5 billion lawsuit HP has filed and the ongoing criminal investigation," HP said in a statement sent Thursday via email. "HP anxiously looks forward to the day Lynch and Hussain will be forced to answer for their actions in court.”

An investigation into Autonomy's accounting practices by the UK's Serious Fraud Office was dropped earlier this year, but an investigation by U.S. authorities is still under way.

To resolve a separate suit, HP announced in June that it would pay $100 million in a settlement agreement with PGGM Vermogensbeheer B.V., the lead plaintiff in a securities class action arising from the impairment charge associated with the Autonomy acquisition.

Lynch's new lawsuit comes just days after the emergence of new evidence suggesting that HP had serious concerns about the acquisition even before it was announced.

In fact, HP Chairman Ray Lane made a last-minute attempt to convince then-CEO Leo Apotheker to call off the deal, according to a Wall Street Journal report from last week that cited an analysis commissioned by HP and written by its legal firm in early 2014.

Lane reportedly called a special meeting of outside directors on Aug. 17, 2011, a day before the deal was announced, indicating that he had “new news this morning that I’m still trying to digest.”

Details of the news weren't provided.

Other documents, meanwhile -- including a recently revealed KPMG analysis of the deal -- suggest that HP executives overlooked numerous key pieces of information early on that could have served as warning, according to the WSJ.

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Katherine Noyes

IDG News Service
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