British tech magnate Mike Lynch loses HP fraud case and could be extradited to US in days

Disgraced entrepreneur will be appealing as he faces a potential prison sentence of up to 20 years

Mike Lynch was once lauded by academics and scientists, and was even asked to advise the government on technology and innovation. Reuters
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Mike Lynch, the British technology entrepreneur, lost a multi-billion-dollar court case against US conglomerate Hewlett-Packard after a London judge ruled he orchestrated an elaborate fraud to inflate the value of his company Autonomy before it was purchased by HP in 2011 for $11 billion.

Mr Lynch's woes were further compounded almost immediately following the long drawn-out legal battle after the British government's interior ministry ordered for him to be extradited to the United States, where he will be facing criminal charges, including wire and securities fraud, that carry a prison sentence of up to 20 years.

High Court Justice Robert Hildyard said HP "substantially succeeded in their claims" against Mr Lynch in a one-hour summary of his much longer judgment, following a nine-month trial and a two-year wait for his decision.

“I have found that both defendants knew that the accounts and the representations they made in this regard gave a misleading picture of Autonomy’s OEM [original equipment manufacturer] business," Judge Hildyard said, referring to both Mr Lynch and Sushovan Hussain, Mr Lynch's finance director who was convicted of fraud in the US and sentenced to five years in prison in 2019.

The duo had fraudulently concealed a "fire sale" of hardware and engaged in convoluted reselling schemes to mask a shortfall in sales of Autonomy's software, the business HP coveted, he added.

That had enabled Autonomy to meet quarterly financial forecasts and maintain its high share price before the HP acquisition.

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I have found that both defendants knew that the accounts and the representations they made in this regard gave a misleading picture of Autonomy’s OEM business
High Court Justice Robert Hildyard

The damages will be announced at a later date, although they are expected to be significantly smaller than the $5bn demanded by HP.

Mr Lynch will be appealing, said Kelwin Nicholls, one of his lawyers, who added that the court's ruling was "disappointing".

Another member of Mr Lynch's legal team, Chris Morvillo, said his client "firmly denies the charges brought against him in the US and will continue to fight to establish his innocence".

Mr Lynch was "a British citizen who ran a British company in Britain, subject to British laws and rules and that is where the matter should be resolved", Mr Morvillo added.

"This is not the end of the battle — far from it. Dr Lynch will now file an appeal to the High Court in London."

Fall from grace

The high-profile case surrounding one of the UK's biggest technology deals culminated in a spectacular fall from grace for Mr Lynch, who was considered Britain's most successful technology leader.

The 56-year-old turned ground-breaking research at Cambridge University into the foundation of Autonomy, which would eventually become Britain's biggest software company and a member of the blue-chip FTSE 100 index.

He was lauded by academics and scientists, and was even asked to advise the government on technology and innovation.

Autonomy's "almost magical" capability, as it was once described by HP, was to search and organise unstructured information for clients, a killer application in a world of unlimited data and artificial intelligence.

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This is not the end of the battle — far from it. Dr Lynch will now file an appeal to the High Court in London
Chris Morvillo, lawyer for Mike Lynch

It was then bought by HP, described by the judge as being in the doldrums at the time, in a move that was designed to transform the computer and printer maker into a more profitable business focused on software.

But the acquisition turned sour almost immediately. HP wrote down the value of Autonomy by $8.8bn within a year and sought damages from Mr Lynch and Mr Hussain.

Mr Lynch fired back, saying HP did not know what it was doing, and was out of its depth in understanding his technology.

"HPE is pleased that the judge has held them accountable," a spokesman for Hewlett-Packard Enterprise said after the London court ruling.

Mr Lynch was also central to the creation of cyber security firm DarkTrace, which listed on the stock market last year and has a market capitalisation of around $2.8bn today. Mr Lynch and his wife Angela Bacares own nearly 16 per cent of DarkTrace.

HP sold the remnants of Autonomy along with other assets to British company Micro Focus in 2016.

Updated: January 29, 2022, 10:19 AM
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