MicroTech Fights Back In HP Autonomy Dispute With Breach Of Contract Suit

MicroTech, a federal systems integrator that has been accused of engaging in "contrived VAR transactions" in the Hewlett-Packard Autonomy controversy, Monday filed a federal lawsuit in the Northern District of California alleging breach of contract against HP's Autonomy unit.

MicroTech, a longtime Autonomy reseller that bills itself as a service-disabled, veteran-owned small business, wants HP Autonomy to either return the $16.5 million MicroTech paid for the Autonomy software or deliver the software itself.

"You can't keep both the $16.5 million paid and the software that was never delivered -- what's fair is fair," said Lanny Davis, an attorney representing Vienna, Va.-based MicroTech,

[Related: MicroTech Denies Involvement In Autonomy Founders' Alleged Fraud]

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Davis, who alleged that MicroTech never received a key to activate the disputed software, said the case is as "simple as when you pay for something," you should either receive it or get your money back.

"Don't take it out on us because you are having an argument with Autonomy," said Davis during a conference call with journalists detailing MicroTech's complaint against HP Autonomy. "You have our money, and you still have our license key. What is fair is fair."

An HP spokesperson said the company "has not seen the complaint and therefore cannot comment at this time."

The MicroTech lawsuit against HP Autonomy is based on two instances in which MicroTech claims it paid for Autonomy software that was never delivered. Those two instances are a June 30, 2011, $7 million sale of Autonomy software to HP itself and a $11 million March 31, 2010, sale of Autonomy software to the Vatican Library. Those transactions are just two of nine involving MicroTech that HP has singled out as "contrived VAR transactions" in a $5 billion lawsuit that HP has filed in the High Court in London against Autonomy founder Mike Lynch and former CFO Sushovan Hussain.

The HP lawsuit -- filed April 17, 2015 -- alleges that Lynch and Hussain caused Autonomy to engage in "improper transactions and accounting practices." Those transactions "misrepresented [Autonomy's] rate of organic growth and the nature and quality of its revenues, and overstated its gross and net profits," HP alleged in the London lawsuit.

HP acquired Autonomy in October 2011 in a controversial deal valued at more than $10 billion. The disputed transactions occurred before HP closed the acquisition.

In the case of the $7 million HP software sale, HP alleges that Autonomy paid MicroTech a sum of $8.2 million on Aug. 16, 2011, for the development of a "U.S. Government Federal Cloud Platform for Autonomy Solution." But, HP alleges, the "relevant platform was never delivered to Autonomy and Autonomy never requested such delivery. Autonomy Inc. therefore paid MicroTech for software which it did not need (and which had no discernible value to it)."

HP alleges that the $8.2 million payment to MicroTech was "initially capitalized" on the Autonomy balance sheet and then written off in October and December 2011.

In the case of the Vatican Library $11 million transaction, HP alleged that on Dec. 31, 2010, a payment of $9.6 million was made to MicroTech in relation to a license for three years for the Vatican Library deal. On the same day, HP alleges, a payment of $6.3 million was received by Autonomy from MicroTech.

HP alleges that Autonomy received "no discernible value" in relation to the payment of the $9.6 million for the Vatican deal.

HP says that in the second and third quarter of 2011, a further $4.4 million was paid to Autonomy by MicroTech in relation to the Vatican deal.

Finally, HP says that on Oct. 11, 2011, an outstanding balance of $2.32 million that MicroTech owed to Autonomy was written off.

"We deny categorically the word 'contrived,' " said Davis. "If somebody accuses us of that, prove it, because it is false."

Davis said all of the MicroTech transactions highlighted in the HP lawsuit "were in good faith and consistent with our position as a reseller" over the years.

As evidence of that good faith, Davis pointed to the successful sale of Autonomy software by the end of December 2009 to blue chip clients like Honeywell, Morgan Stanley and others. "Each of these 2009 commercial reseller transactions was fully performed," he said.

Davis said if HP is willing to re-license the software to MicroTech, then no lawsuit would be necessary and the complaint would be withdrawn.

PUBLISHED MAY 18, 2015