A Suffolk software entrepreneur is being sued for more than £3.3bn by US computer giant Hewlett-Packard (HP).
A civil case in the high court brought by HP is due to begin on Monday, March 25, involving Mike Lynch, and the £8bn sale of Autonomy, a company he launched in Cambridge which was sold to HP.
In November 2018, fraud charges were made against Dr Lynch – who strenuously denies the charges – in the US, and that case remains live.
MORE – ‘A travesty of justice’ – Suffolk businessman charged with fraud hits out at allegations
In the UK civil case, Dr Lynch – the former chief executive – and the company’s ex finance chief, Sushovan Hussain, are defendants in a claim brought by arms of Hewlett-Packard and Autonomy. They both contest the claims.
The UK court battle will be first opportunity for Dr Lynch, who lives near Woodbridge with his family, to put his side of the story. The court case follows years of bitter legal wrangling over the sale.
The claimants’ case relates to alleged breaches of fiduciary and contractual duties which they claim resulted in losses, and to alleged misrepresentations made to HP in connection with the acquisition.
Dr Lynch, who had been employed by HP after the sale, was fired in mid-2012, and in November of the same year the value of Autonomy was written down in its books by around £6.6bn. It said £3.8bn of that was based on pre-acquisition “accounting improprieties, misrepresentations and disclosure failures”.
In turn, Dr Lynch’s side is counter-suing the claimants over their allegations. He claims the problems HP had with Autonomy was a result of its change of heart over the acquisition after the deal was agreed, and its subsequent mismanagement of it, after it reversed its overall business strategy and replaced the key figures, including chief executive Leo Apotheker, behind it.
The UK case
The case, which is likely to be complex and detailed, is expected to last at least nine months, with Dr Lynch expected to take the stand over a four week period.
It will be heard in the High Court of Justice Chancery Division in London. Law firm Travers Smith is representing the claimants and Clifford Chance is representing Dr Lynch. Mr Justic Hildyard is set to hear the case.
Before the sale, Autonomy, based in Cambridge and San Francisco, employed more 2,500 staff and was a member of the FTSE 100 top firms on the London Stock Exchange.
But a row over the sale has rumbled on for about seven years, with HP alleging the company’s performance between 2009 and 2011 was artificially inflated before it acquired it.
Dr Lynch has always strenuously denied the claims against him, which he has previously said are entirely false and the result of “one long disagreement” over accounting treatments in the US and the UK.
The US case
In parallel to the civil case in the UK, Dr Lynch was charged with fraud in the US back in November 2018.
The charges in the US case allege that between 2009 and 2011, Dr Lynch and former Autonomy finance executive Stephen Chamberlain issued statements which artificially inflated the company’s performance between 2009 and 2011 – a claim he has always denied. Sushovan Hussain was found guilty in the US in April 2018 of accounting fraud and is awaiting sentence.
Dr Lynch’s side has always maintained there was no wrong-doing and that the claims show “at best, a difference of opinion over accounting policies — a disagreement in which two Big Four firms, Deloitte (Autonomy’s auditor) and Ernst & Young (HP’s firm) agree that there is nothing wrong with the pre-acquisition financials”.
In January 2015, the Serious Fraud Office in the UK halted a two-year investigation into HP’s acquisition of Autonomy, two years after launching it in March 2013, saying there was insufficient evidence for a realistic prospect of conviction.
It added: “In respect of other aspects and on the application of well-established principles, jurisdiction over the investigation has been ceded to the US authorities, whose investigation is ongoing.”
Dr Lynch’s rise
Dr Lynch founded Autonomy, which was based on technology invented at Cambridge University, where he studied information sciences and gained a PhD. He gained a research fellowship in adaptive pattern recognition.
Autonomy was spun out from his previous company, Neurodynamics, in 1996.
He was chief executive of Autonomy for more than 15 years, helping it to become one of the UK’s most successful technology companies on the FTSE100.
He lives near Woodbridge with his family.
He has won numerous awards, and was awarded an OBE for services to enterprise in 2006.
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