HP claim against Autonomy among biggest in Britain

Hewlett-Packard's fraud complaint against Autonomy founder Mike Lynch will be laid out in public for the first time within weeks, but the case is unlikely to be concluded for years.

For two and a half years, the US technology conglomerate and the British entrepreneur have been fighting via press release over HP's disastrous $11.1bn acquisition of the UK software group.

Now the war of words will make way for a court battle that will be one of the largest civil cases ever brought in the UK against a British national.

Last week, HP said it will sue Mr Lynch, and Sushovan Hussain, Autonomy's former chief financial officer, in London's High Court. The company is seeking damages of $5.1bn over an alleged fraud that occurred during the pair's tenure.

At issue is HP's decision in November 2012 to take an $8.8bn writedown of its purchase of Autonomy. HP says that $5.5bn of the reduction was due to alleged "accounting misrepresentations" at the UK company.

In December last year, HP, which is being represented by city law firm Travers Smith, sent a private 200-page letter to legal representatives for Mr Lynch and Mr Hussain, according to people familiar with the matter.

The document sets out, in detail, the $5.1bn claim HP intends to make against the two former Autonomy executives, built upon the contention that the group concocted deals to fraudulently attempt to inflate its value before the acquisition. Both men have consistently denied the allegations.

Julie Killip, a litigation lawyer at Gordon Dadds, said the damages claim is one of the largest seen in the UK court. "I can't think of many that have been as big as this," she said. "Tactically the amount is maybe a scare tactic. It could just be finger in the air, think of a figure that could include any damages we come up with."

Legal experts say the claim is the second-largest in Britain against an individual, behind the suit filed by the late oligarch Boris Berezovsky against Roman Abramovich in 2011, which sought $6.5bn. Mr Berezovsky lost the case in 2012 and had to pay £35m of legal costs to Mr Abramovich and about £50m for his own costs.

HP and representatives for Autonomy's former management declined to comment for this article.

In March, Mr Lynch, who is being represented by Clifford Chance, provided HP's lawyers with a response setting out his proposed defence. Last week, Mr Hussain, who is being represented by Simmons & Simmons, also responded to HP.

US investigators are still probing the fraud claims, but the UK's Serious Fraud Office announced in January it was closing its own investigation. The SFO said that on the basis of information available to it "there is insufficient evidence for a realistic prospect of conviction".

The US Securities and Exchange Commission and the Department of Justice may decide whether to bring civil or criminal charges within a few months, according to a person familiar with the matter. The SEC and DoJ declined to comment.

HP fired the starting gun on the public case on March 30, when it lodged a claim form in London's High Court. According to people familiar with the matter, the US company was seeking to avoid any issues concerning statutes of limitation - the deadline by which a legal action must be launched.

Another person with knowledge of the case said HP had been hamstrung for at least two years by the criminal probes and a California civil case between HP and its own shareholders over the acquisition. In March, a US District judge gave preliminary approval for HP to settle with the shareholders, clearing the way for HP to sue Mr Lynch and Mr Hussain in the UK.

People familiar with the matter said that HP opted to sue in the UK rather than the US because of "proximity" - many of the alleged activities took place at Autonomy's UK entity, headquartered in Cambridge, and most of the key players and possible witnesses are also still based in the country.

Under procedural rules, HP's claim against the Autonomy pair must be laid out in court documents by the middle of August. Legal experts said it would take several months, if not years, before the parties appeared in court. A trial is unlikely to begin before January 2016.

Ms Killip said the case could also be halted if the DoJ decides to seek an indictment of Mr Lynch and then attempts to extradite him for a US trial.

Ms Killip forecast that the UK case would be most likely to settle in a year's time or more - after each party sees the arguments put forward by the other side.

But reaching a deal may yet prove impossible. A person close to Mr Lynch said he was not inclined to "let them get away with their smokescreen of lies", while a person familiar with HP's thinking said: "There are 5.1bn reasons people [at the company] can't let that happen."

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