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Hewlett-Packard Wins Civil Fraud Case Against Mike Lynch Over Autonomy Sale | Hewlett-Packard

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Hewlett-Packard has won its six-year civil fraud case against Mike Lynch, the man once hailed as Britain’s answer to Bill Gates, after a High Court judge ruled he tricked the American company into making him pay £8.2billion for his software company Autonomy.

Lynch, who was waiting to hear on Friday whether he could be extradited to the United States to face a separate criminal trial, was found guilty of defrauding HP by manipulating Autonomy accounts to inflate the value of the business. He has always denied the charge and said on Friday he would appeal.

“The plaintiffs have largely prevailed in this proceeding,” Judge Hildyard said, after a 93-day trial in which 28,000 documents were considered evidence.


Who is Mike Lynch?

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Mike Lynch, 56, is the Essex-born son of a nurse and a firefighter who won a scholarship to a private school aged 11 and went on to pursue his undergraduate studies undergraduate and doctoral studies at Cambridge. His doctoral thesis is among the most consulted at the university and he is considered a world leader in the field of signal processing, which is essential for processing data.

A series of tech startups followed in the 80s and 90s, culminating in the 1996 formation of Autonomy. This company aimed to analyze and sort out “unstructured” information from sources such as phone calls – a potential data goldmine for large corporations.

His success earned him great prestige. He was named entrepreneur of the year by the Confederation of British Industry in 1999, received an OBE in 2006 and became a councilor at 10 Downing Street in 2011. Lynch was also a trustee of the Royal Botanic Gardens, Kew and sits on the Board of the BBC and the British Library.

In 2011, he made around $800m from selling Autonomy to US tech firm Hewlett Packard in a deal worth $11bn (£8bn). However, the case quickly turned sour. Lynch was fired from Autonomy in 2012.

Hewlett Packard’s successor companies sued Lynch in a civil case in London, alleging he had fraudulently inflated the value of the range. In 2018, US authorities filed criminal charges against him and other former Autonomy executives, alleging they “engaged in a fraudulent scheme to deceive buyers and sellers of Autonomy securities.” They began extradition proceedings in 2019.

Yet Lynch remains influential in the UK tech scene. He was an early backer of cybersecurity firm Darktrace and had a stake worth £220million in July 2021 after it floated on the London Stock Exchange. Darktrace said its connection to Lynch posed a reputational risk when it filed its initial public offering.

Married with two daughters, his hobbies are listed in Who’s Who as jazz saxophone and keeping rare breeds, including red-headed cattle kept at his Suffolk home.

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He said damages would likely be significantly less than the $5 billion claimed by Hewlett-Packard (HP) and its successor companies, while questioning the reliability of some of the company’s US witnesses.

However, he ruled that HP was induced to pay too much for the takeover, due to a fraud perpetrated by former Lynch and Autonomy chief financial officer Sushovan Hussain, who is in prison in the United States after being convicted of fraud related to the same agreement.

As of Friday night, Lynch was still awaiting a decision from the Interior Department on whether he could be extradited to the United States to stand trial over allegations he defrauded HP investors.

The US company bought Autonomy for $11 billion in 2011, targeting its software that helps companies store and search “unstructured data” such as voicemail and email. Lynch made £500m from the sale and was hailed as one of Britain’s few global tech champions.

Within a year, HP had written off its own value by $9bn (£6.7bn), blaming “serious accounting irregularities” linked to the deal. Lynch and his team, according to HP, had falsely boosted the company’s attractiveness through accounting tricks.

In a lengthy summary of its findings, Hildyard concluded that Lynch and Hussain had been “disingenuous,” deploying several strategies that had the effect of artificially inflating and advancing revenue.

This included using hardware sales to “hide” shortfalls in software revenue, concealing costs, and entering into deals with “friendly” companies to advance sales revenue, some of which never materialized, in order to meet market expectations.

However, he said that HP would most likely still have bought Autonomy, even if its financial performance had not been artificially boosted, due to the quality of its IDOL data structuring product, described by former HP boss Meg Whitman as “almost magic”. .

It also found that the extent of damages, to be determined later, was likely to be “significantly less” than the $5 billion claimed by HP. He said that while determining damages would take some time, he did not want to delay his verdict on Lynch’s liability because it could impact whether or not he is extradited.

A London court ruled last July that Lynch, who denies any wrongdoing, should be extradited, but the final decision rests with Home Secretary Priti Patel with a deadline of midnight Friday, the day of the High Court verdict. Court.

A US trial would cover much of the same ground as the London civil case.

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Speaking after the High Court verdict, a spokesperson for Hewlett-Packard Enterprise (HPE) said: “Dr Lynch and Mr Hussain have defrauded and deliberately misled the market and Hewlett Packard. HPE is pleased the judge held them accountable.

Kelwin Nicholls of Clifford Chance, Lynch’s solicitor, said: “Today’s result is disappointing and Dr Lynch intends to appeal. We will be reviewing the full judgment over the next few weeks.

“We note the judge’s concerns about the reliability of some of HP’s witnesses. We also note that the judge expects any loss to HP to be significantly less than the $5 billion claimed.

Hewlett-Packard Wins Civil Fraud Case Against Mike Lynch Over Autonomy Sale | Hewlett-Packard

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