Hewlett-Packard in talks to reach legal settlement over alleged fraud

Money On Hook

Hewlett-Packard is in talks to reach a legal settlement with the British accounting firm Deloitte for its part in an alleged $5bn ($3.37bn) fraud at British accounting firm Autonomy.

Deloitte audited Autonomy’s books in the years when HP claims the company’s management manipulated the accounts. On Monday, HP filed a claim for $5.1bn in damages in the UK high court against Autonomy founder Michael Lynch and the firm’s former finance director, Sushovan Hussain.

Lawyers for the Californian computing company initiated legal proceedings against Deloitte before Christmas, in pre-action letters setting out detailed claims against the UK accountancy firm. It is understood that the two parties are now in talks to agree a settlement before the case reaches court.

A spokeswoman confirmed HP was engaged in a pre-action process with Deloitte UK.

HP bought Autonomy in 2011 for $11bn but wrote down its value by half a year later after claiming Lynch and his management team had misrepresented revenues in order to make the company appear more valuable than it was.

Lynch and Hussain deny the claims and blame HP for mismanaging their company. On Wednesday they announced their intention to sue the Californian computing company for £100m in damages.

The agreement being discussed with Deloitte preserves HP’s right to long after the normal statute of limitations expires.

Last August, HP signalled its intention to take action against not only Lynch and Hussain, but their auditor. A spokesperson vowed the company would “hold the former executives of Autonomy as well as Autonomy’s auditor, Deloitte UK, responsible for the wrongdoing that occurred.”.

Deloitte did not immediately respond to a request for comment. Last year, the auditor said “any possible claim would be utterly without merit”, adding: “Deloitte UK conducted its audit work in full compliance with regulation and professional standards.”

Powered by Guardian.co.ukThis article was written by Juliette Garside, for theguardian.com on Wednesday 1st April 2015 20.42 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010