HP Sues Ex-Autonomy Executives For $5.1b
The autonomy said the false accounting practices HP is accusing of are simply the difference between accounting standards of U.K, U.S. Some of these practices though barred in U.S are allowed in U.K. Mr. Mike said the issue was in the knowledge of HP when it was buying the company.
Hewlett Packard Company (NYSE: HPQ) has sued the former executives of autonomy with a massive $5.1 billion claim on the purchase of a British software company back in 2011 for $11.1 billion, whose written down value after a year was only $8.8 billion.
The executives charged in this case include the former co-founder and CEO Mike Lynch and CFO Sushovan Hussain. The case is filed in the Chancery Division of London’s High Court. At the time of deal it was extensively criticized and the general opinion was that HP was paying a very high price.
HP claims the two executives provided false representation of the tech company’s financial performance and misled them into believing the software enterprise is worth much more than its original value. HP said autonomy had used several business deals as a way to increase its value, while in reality these deals had never actually taken place.
The service provider company gave the example of Vatican Library deal, which was charged with $11.5 million for assisting them in converting some of their documents into digital form. However, the library later claimed they had never used their software so it is not going to pay for it. However, autonomy included the sum as a business transaction and counted the imagined revenues from the deal into their balance sheet. HP claims it is just one of the many deals the autonomy had conducted.
The tech company claims the autonomy was engaged in false accounting practices.
On the other side, Mr. Mike and Mr. Sushovan have refused the accusations saying that the complaints are false. They said the false accounting practices, of which HP is accusing, are simply the difference between accounting standards of U.K and U.S. Some of these practices though barred in U.S are allowed in U.K. Mr. Mike said the issue was in the knowledge of HP when it was buying the company.
As far as the loss is concerned in the company’s value, he said it was solely HP’s fault as they have not been able to properly manage the company. Autonomy’s former management team said in a statement that they would also be suing HP for loss and damages which have resulted from these claims. They will be seeking $148 million in damages.
The issue was investigated by U.K.’s Serious Fraud Office SFO for two years, but it did not manage to find sufficient proof that any fraudulent activity has been conducted. However, a parallel investigation by Financial Reporting Council is still going on.