Hewlett-Packard and its auditors disputed whether a $5bn (£4bn), write-down in the value of software firm Autonomy, could be attributed to fraud engineered allegedly by tech entrepreneur Mike Lynch. Documents filed with a US Court show that Hewlett-Packard disagreed.
Lynch, the billionaire founder who was once described as the UK’s Bill Gates, has been extradited in May, to the US to face criminal charges of fraud over allegations that he defrauded HP into paying more than it should have when HP struck an $11bn Autonomy deal in 2011.
HP then took a $8.8bn write-down of the firm’s worth after discovering “serious” accounting irregularities at Autonomy. Lynch was blamed for committing a $5bn fraudulent, which he denies.
In 2022, Lynch was found to be guilty of a six year civil fraud case by the UK. The high court judge ruled that HP overpaid for the takeover due to fraud committed by Lynch and Autonomy’s former finance director Sushovan Hassain.
Legal documents filed by Lynch’s lawyers in California to a California court and made public Wednesday seem to show a disagreement between HP and EY over whether or not a $5bn number could be attributed as fraud.
The filing contains dozens exhibits that Lynch’s lawyers legally obtained to build a defence case. These were not available during Hussain’s trial.
Email communications were exchanged between HP, EY and Autonomy’s former auditor Deloitte, as well as PwC which conducted an internal investigation on behalf of HP.
EY’s communications show it did not agree with HP’s claim the “majority of the writedown” was due to fraud. The accountancy firm also did not endorse the use of this language in the annual report of the software company in 2012.
In December of that year, one of HP’s accountants also said in an email that “it would be extremely difficult to calculate the portion of the impairment that relates to accounting improprieties/misrepresentations”.
Documents also show the US Securities and Exchange Commission investigated HP’s claim of more than $5bn in Autonomy writedowns being due to fraud.
In the court filing, Lynch is accused of being caught in a “blame-game” regarding Autonomy’s poor performance and integration under HP ownership.
The lawyers stated that “this dispute between HP, its auditor and HP’s statements regarding the writedown are directly relevant to Dr Lynch’s defence against the government’s claim that he lied to the public after HP’s accusations,”
In a court filing, Lynch’s lawyers seek a court order subpoenaing further communications and evidence to HP, EY PwC, and Deloitte.
After landing in the US, Lynch was confined to a San Francisco address with a 24-hour guard detail that he must pay. This is after a US court ruled that defendants with “such vast wealth” present a significant risk of fleeing.
The British cybersecurity company Darktrace was founded and invested in by the entrepreneur who received an OBE as a result of his services to business and served as an advisor to David Cameron during his time as prime minister.
If Lynch is found guilty in the US, he may face up to twenty years in prison.
HP and EY have been contacted to comment.