Tycoon faces criminal charges over $11bn deal to sell Autonomy to Hewlett Packard

This article was published in The Times on Saturday 29 January 2022. Ben Keith comments on the Mike Lynch case below.

Mike Lynch has lost a multimillion-pound civil fraud claim brought by Hewlett Packard over the American company’s 2011 deal to buy the British tycoon’s software business.

In a damning judgment at the High Court in London, Mr Justice Hildyard said that Lynch and his chief financial officer had fraudently inflated Autonomy’s revenue “to meet market expectations”.

The decision cleared the way for Lynch’s extradition to the United States to face criminal charges including securities fraud related to the $11 billion deal to sell Autonomy to Hewlett Packard. Just hours after the judgment was delivered Priti Patel, the home secretary, ordered his extradition.

A Home Office spokesman said that “following consideration by the courts, the extradition of Dr Michael Lynch to the US was ordered”.

Chris Morvillo, of Clifford Chance, Lynch’s lawyer, said that his client denied the charges that had been levelled against him in the US and would appeal against the extradition decision.

He added: “He is 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.”

The judge said that Lynch’s actions had resulted in “misleading the market as to the true market position of Autonomy” and that “loss-making transactions” arranged by Lynch “were not commercially justified on any basis”.

While the judge said that he reached the “clear conclusion” that Lynch was liable for civil fraud, he added that damages awarded to Hewlett Packard would ultimately be considerably less than the $5 billion claimed.

After the ruling, Hewlett Packard said that Lynch and Sushovan Hussain, the former chief financial officer at Autonomy, had “defrauded and deliberately misled the market and Hewlett-Packard”. The company added that it was “pleased that the judge has held them accountable”.

A spokesman for Lynch described the High Court ruling as “disappointing” and said that he “intends to appeal”.

The spokesman added: “We will study the full judgment over the coming weeks. We note the judge’s concerns over the reliability of some of Hewlett Packard’s witnesses. We also note the judge’s expectation that any loss suffered by HP will be substantially less than the $5 billion claimed.”

The ruling came as Priti Patel, the home secretary, was set to decide by midnight today whether to grant a request brought by the US authorities to extradite Lynch so that he can face fraud charges there.

On Wednesday, another High Court judge rejected attempts to allow Patel more time to decide whether the 56-year-old should be extradited to the US.

Specialist extradition lawyers predicted that today’s High Court ruling would move Lynch a step closer to being sent to stand trial in the US.

“Mike Lynch has gambled and lost,” Ben Keith, a barrister at 5 St Andrew’s Hill Chambers in London, said.

Keith added that Lynch “fought the UK civil case in part to show the criminal case in the US was wrongly brought in the hope the UK court might take a different view to the US prosecutors. That has not happened so the impact on the extradition proceedings is likely to be minimal”.

Thomas Garner, a partner at the City law firm Fladgate, described the ruling as a “double blow” for Lynch “given the weight he has sought to place on those proceedings in his extradition defence”.

Garner said that even if the home secretary authorises extradition, her move “would just mark the start of the next phase of his struggle to stay in the UK”.

Lynch’s legal team has been clear that he will seek to appeal, a process that would take several months to resolve.

“Meanwhile, [Lynch’s lawyers] will be combing through the judgment for any findings that might assist their cause notwithstanding the overall verdict,” Garner added.

Lynch faces charges in the US of wire and securities fraud and if convicted could be sentenced to a maximum prison term of 20 years.

In 2019, Hussain was convicted of fraud in the US and sentenced to a five-year prison sentence. A year later his appeal of the conviction was rejected.

Lawyers for the home secretary had argued that Patel wanted further time to consider the issues before deciding on whether to grant the US extradition request.

In a ruling at Westminster Magistrates’ Court last July, Judge Michael Snow rejected “various challenges” Lynch made to extradition and said Patel could decide whether he should be extradited.

She later asked Judge Snow if she could have until March to make the decision. But the judge said if more time were required the home secretary would have to set out her reasons more clearly, something he said “has not been done in sufficient detail for my purposes. I am not prepared to grant the application”.

On Wednesday in the High Court, Mr Justice Swift upheld that ruling, saying that the district judge “came nowhere near usurping any function of the secretary of state”.

In his ruling in the civil case today, Mr Justice Hildyard said that Hewlett-Packard had “substantially won” its case as he read out a summary of his decision. The judge added that the amount of damages would be determined at a later court hearing.

The ruling is the latest stage in a ten-year legal battle over who was to blame for the failure of the $11 billion acquisition, which cost shareholders in the US company billions of dollars.

A year after acquiring Autonomy, Hewlett-Packard sacked Lynch even though he was the architect of the deal that was designed to transform one of the original Silicon Valley stalwarts into a more profitable group centred on business software and services.

After the sale, Hewlett Packard was forced to write down the value of Autonomy by $8.8 billion and sought damages of $5 billion from Lynch and Hussain.

Lynch has denied all the allegations and said the failure of the acquisition resulted from Hewlett-Packard’s mismanagement.

Ben Keith is a leading barrister specialising in Extradition and International Crime, as well as dealing with Immigration, Serious Fraud, and Public law. He has extensive experience of appellate proceedings before the Administrative and Divisional Courts, Criminal and Civil Court of Appeal as well as applications and appeals to the European Court of Human Rights (ECHR) and United Nations. 

He won the International Pro Bono Barrister of the Year in November 2021. Ranked in Chambers and Partners as a band 1 leader in the field of extradition at the London Bar and in the Legal 500 as a Tier 1 leading individual in international crime and extradition.