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Mike Lynch Loses $5 Billion Court Fight With HP Over Autonomy

·4-min read

(Bloomberg) -- After being criticized by a London judge for being dishonest, one of Britain’s most prominent tech tycoons now awaits a final decision by the U.K. government over his extradition to the U.S. to face criminal fraud charges.

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Mike Lynch dressed-up his software company Autonomy Corp. for sale, and “induced” Hewlett Packard Enterprise Co. to acquire the firm for $11 billion, Judge Robert Hildyard said, reading a summary of his judgment on Friday. While HP was seeking $5 billion in damages from Lynch, the judge said the final amount is likely to be “substantially” less. The tech entrepreneur plans to appeal the decision.

All attention will now turn to the U.K. Home Secretary Priti Patel, who has until the end of the day to decide whether to extradite Lynch to the U.S. It’s the critical political moment in Lynch’s case, which is otherwise a matter solely for the courts. The extradition is a test of Britain’s treaty with the U.S., which critics call highly unequal. Patel and the Conservative Party have regularly fought the courts over recent rulings and are considering ways to curtail the powers of judges.

Lynch, who personally made $850 million from the sale of the firm he built into the U.K.’s second largest software company, was sued for $5 billion by HP in 2015. The Silicon Valley company alleged that Lynch and his chief financial officer Sushovan Hussain illegally bolstered revenue wherever they could, including by disguising hardware sales and booking fake transactions, to dress Autonomy up for a sale.

It was an argument that the judge largely agreed with.

“Dr. Lynch and Mr. Hussain kept a very careful watch over revenues, especially toward the end of a quarter when Autonomy would have to post its results,” Judge Hildyard said. “I have reached clear conclusions in these proceedings on the civil liability of Dr. Lynch and Mr. Hussain for fraud.”

The judgment is the latest in a hard-fought battle for Lynch stemming from the sale of his software company Autonomy to Hewlett Packard in 2011. The Silicon Valley hardware giant wrote down the value of the company by $8.8 billion a year later.


The judge highlighted how the sale of hardware by an ostensibly software-focused company was “dishonest.”

“The hardware reselling program was conceived, expanded and implemented in order to enable Autonomy to cover shortfalls in software,” the judge said. “The purpose of the hardware reselling strategy/program was dishonest.

“The defendants were well aware of this,” he said.

Such findings of fraud will have an impact on any extradition appeal, Ed Grange, a lawyer at Corker Binning, said.

“It will impact on the extradition case where they had argued that the proper jurisdiction in which this case would be tried would be the U.K.,” he said.

The nine-month, 40 million-pound ($53.6 million) civil trial was among the longest and most expensive in modern British history. Lynch used the platform to argue that HP had simply run his firm into the ground, painting a picture of an American corporation riven with infighting that he documented with emails shown for the first time.

“Dr. Lynch and Mr. Hussain defrauded and deliberately misled the market and Hewlett Packard,” a spokesman for HPE said in a statement. “HPE is pleased that the judge has held them accountable.”

Lynch, one of the U.K.’s most prominent businesspeople and adviser to former Prime Minister David Cameron, lost his first attempt at preventing extradition when a judge said in July he should be sent to the U.S. He’d insisted from the outset that the case should not be heard in the U.S., asserting that none of the alleged misconduct took place overseas.

HP didn’t fully escape the judge’s criticisms. The judge said he was concerned about some of HP’s witnesses “which bore signs of having been fashioned, rehearsed and repeated.”

“Today’s outcome is disappointing and Dr Lynch intends to appeal,” said Kelwin Nicholls, a lawyer for Lynch. “We will study the full judgment over the coming weeks. We note the judge’s concerns over the reliability of some of HP’s witnesses. We also note the judge’s expectation that any loss suffered by HP will be substantially less than the $5 billion claimed.”

(Updates with details from ruling summary throughout)

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