Mike Lynch hits back at HP after documents accuse him of accounting fraud

'HP's patchwork tale of alleged misconduct rests on a faulty foundation of false facts, unsupported inferences, and a misunderstanding of the law and accounting standards'

Mike Lynch, the founder and former CEO of Autonomy, the software company acquired by systems giant HP for $10.9bn in October 2011, has rejected the allegations made by HP contained in the legal documents it published earlier this week.

Writing on the website he set up to defend himself against allegations of accounting fraud by HP, he said: "We utterly refute the allegations made against us. HP has waged a three-year smear campaign riddled with half-truths and obfuscation. They have intentionally made the claims as complex and convoluted as possible."

Lynch also published on open letter from his law firm containing a more detailed rebuttal to HP's allegations.

"HP's patchwork tale of alleged misconduct rests on a faulty foundation of false facts, unsupported inferences, and a misunderstanding and misapplication of the relevant legal and accounting standards. Nearly two and a half years after HP announced its write-down, it is clearer than ever before that HP's claims are merely a tactic to obscure the true source of HP's and Autonomy's losses: the wrongdoing and ineptitude of HP's own directors and officers," claims the letter.

The letter contains a point-by-point rebuttal to HP's claims:

• "Autonomy was in full compliance with the law and applicable accounting standards;
• Autonomy employed a professional and experienced finance team that paid careful attention to ensuring that its accounts were properly stated;
• Autonomy was transparent with its deeply experienced and careful professional auditors team from Deloitte, who audited the precise issues HP appears to contest, and who, to this day, stand by the accounts;
• Autonomy had a dedicated, active, and experienced Audit Committee who met regularly with Deloitte to review Autonomy's accounts and relevant policies; and,
• Dr. Lynch, who is not an accountant, had little involvement in sales and in making the corresponding accounting decisions related thereto."

The letter continues: "There is not one shred of actual evidence establishing any pre-acquisition misconduct by anyone at Autonomy, let alone evidence of fraud. There are no documents or witnesses - and HP has pointed to none - that demonstrate that any former member of Autonomy's management acted with anything but honest intentions, good faith, and reliance on the professionals described above."

Lynch accuses HP directors of manufacturing the claims of fraud in order to protect themselves from claims that they grossly overpaid for Autonomy. The company had reportedly been an acquisition target of Oracle's before HP swooped, but Oracle CEO Larry Ellison believed that the asking price of $5bn - half the price paid by HP - was too much.

Lynch argues that if there were some kind of fraud being perpetrated by himself and Autonomy's CFO Sushovan Hussain, there ought to be some hard evidence in the form of missing cash - which there isn't, he says.

"HP's claims are purportedly based on the very books and records HP controlled the day the acquisition closed. And, regarding those books and records, HP conveniently fails to mention that despite the claimed $5bn fraud, no cash is missing at Autonomy: indeed, once all of the supposedly manufactured revenue is removed, Autonomy's financials show over $450m cash surplus. How is this fraud?"