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British court rules in HP’s favour in Mike Lynch fraud case

What next for Mike Lynch as judge rules that HP has ‘substantially succeeded’ in its complaint against him

HP has won a multibillion-pound lawsuit against entrepreneur Mike Lynch. According to Reuters, Justice Robert Hildyard said in the High Court that claimants at HP had “substantially succeeded in their claims in these proceedings”.

HP argued that Lynch, founder and CEO of Autonomy, had inflated the value of the company, which meant that HP paid over the odds when it acquired Autonomy for $7bn in 2011.

At the time, HP paid a 64% premium on the software firm’s share price. The sale of the data discovery company that he founded meant that Lynch would earn up to £500m from the sale, as HP reinvented its business around software. The intellectual property that Autonomy developed included Idol, a software system that ran on dedicated hardware, for polling structured and unstructured data.

Prior to the run-in with HP, Lynch was seen as Britain’s answer to Bill Gates. In an interview with Computer Weekly in 2011, Lynch described a world of data integration that many organisations were only starting to fully appreciate. By combining structured and unstructured data analysis, Lynch said businesses would be able to automatically process, understand and act on 100% of their data in real time. 

Organisations at the cutting edge of artificial intelligence are only now beginning to see the benefits of real-time data integration across structured and unstructured data sources. Yet this was the concept HP bought into when it acquired Autonomy in 2011.

In 2012, HP announced it would write down $5bn amid allegations that it had been defrauded by Autonomy during the acquisition of the software company. In 2014, HP sued Lynch and former Autonomy CFO Sushovan Hussain for the $5bn write-down it had incurred. 

HP then found itself in hot water after shareholders filed a complaint that the computer giant had not undertaken a thorough due diligence of Autonomy looking at how it accounted for sales of hardware and software. In 2015, it agreed to pay $100m to a settlement fund to compensate shareholders who purchased HP shares during the period from 19 August 2011 to 20 November 2012. 

Lynch also faces separate criminal charges and extradition to the US, where he is being charged with wire fraud and securities fraud. Last January, former UK Tory ministers Andrew Mitchell, David Davis, Lord Maude of Horsham and Lord Deben, along with former Liberal Democrat business secretary Vince Cable, wrote a letter to The Times describing how the extradition would be akin to the UK surrendering its sovereignty.

However, following Friday's ruling, the Financial Times reported that the Home Secretary, Priti Patel, has ordered the extradition of Mike Lynch.

Kelwin Nicholls of Clifford Chance, lawyer for Lynch, said: “Today’s outcome is disappointing and Dr Lynch intends to appeal. 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 $5billion claimed.”

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