HP Continues to Pursue Ex-Autonomy Executives

Hewlett-Packard, just weeks after getting court approval on a deal to settle shareholder lawsuits around its controversial $11 billion acquisition of Autonomy Software almost four years ago, is now suiting Autonomy’s former CEO and CFO for more than $5 billion.

The move adds to the 2-year-old tangled legal history stemming from the Autonomy buy in 2011 that cost HP another $8.8 billion in charges a year later due in large part to questions around Autonomy’s accounting practices before the deal and led to lawsuits between HP, Autonomy and HP investors.

HP officials have said in a statement this week that the company “can confirm that, on March 30, a claim form was filed against [ex-Autonomy CEO] Michael Lynch and [ex-CFO] Sushovan Hussain alleging they engaged in fraudulent activities while executives at Autonomy.” The lawsuit was filed in London.

According to a Bloomberg report, Autonomy’s former management team said in a statement it would respond by suing HP for $148 million “for loss and damage caused by false and negligent statements made against them by HP on 20 November 2012 and in HP’s subsequent smear campaign.”

HP began pursuing the Autonomy deal in 2010 under then-CEO Mark Hurd, and the deal was closed a year later by Hurd’s successor, Leo Apotheker, whose 11-month tenure was marked by an effort to build up the company’s enterprise software capabilities. Autonomy’s software enables businesses to search and retrieve information in databases and other repositories across computer networks.

Problems with the deal began to arise a year later with the announcement of the $8.8 billion writedown. HP executives—including Meg Whitman, who was on the HP board of directors at the time of the deal and later that year replaced Apotheker as CEO—accused Lynch and other executives of falsely overstating the software maker’s value in the run-up to the deal and undertaking “serious accounting improprieties” while at Autonomy.

Lynch has repeatedly denied any wrongdoing, saying any problems HP had with Autonomy after the sale were the result of poor management by HP officials.

Even as HP and Autonomy threatened lawsuits against each other, HP shareholders began lining up to sue HP, claiming the company failed to do its due diligence on Autonomy before closing the deal.

In March, a U.S. District Court judge approved a settlement between HP and shareholders to settle litigation related to the Autonomy acquisition. According to a report by Reuters, the investors agreed to drop claims against HP and its executives—including Whitman—while the company agreed to governance reforms that will follow both companies when HP later this year splits in two.

One company, Hewlett-Packard Enterprise, will sell commercial IT solutions and services, while HP Inc. will focus on PCs and printers.

In addition, HP officials said that as part of the settlement, they would sue Lynch and other former Autonomy officials in hopes of recouping some of the money lost in the deal. Getting the shareholder lawsuits out of the way has freed HP up to pursue those claims against the ex-Autonomy executives with the $5.1 billion lawsuit.