HP wins huge fraud case against Autonomy founder and CEO Mike Lynch

After years of wrangling, HP has gained its civil fraud case towards Autonomy founder and chief govt Mike Lynch. The ruling, the most important civil fraud trial in UK historical past, got here simply hours earlier than the UK residence secretary authorized Lynch’s extradition to the US, the place he faces additional fraud costs.

The UK’s Excessive Court docket discovered that HP had “considerably succeeded” in proving that Autonomy executives had fraudulently boosted the agency’s reported income, earnings, and worth. HP paid $11 billion for the agency again in 2011 and later introduced a $8.8 billion write-down of its worth. In courtroom, HP claimed damages of $5 billion, however the decide mentioned the whole quantity due could be “significantly much less” and introduced at a later date. Kelwin Nicholls, Lynch’s lawyer and a accomplice at legislation agency Clifford Probability, mentioned his consumer intends to enchantment the Excessive Court docket ruling. In a later assertion, Nicholls mentioned his consumer would additionally enchantment the extradition order within the UK’s Excessive Court docket.

This week’s occasions are the newest twist in an extradition course of that started in November 2019, when the US Embassy in London submitted a request for Lynch to face trial in the US on 17 counts, together with wire fraud, conspiracy, and securities fraud. Lynch denies all costs towards him. Nicholas Ryder, professor in monetary crime on the College of the West of England describes it because the “Colt .45 for the US Division of Justice”—an all-pervasive and highly effective transfer. “That’s their go-to cost. The ramifications for Mr. Lynch are vital.”

On the time of the Autonomy acquisition, HP’s then-chairman mentioned he had “critical chilly ft” concerning the deal, in line with claims subsequently made in courtroom. The corporate claimed some former members of Autonomy’s administration staff “used accounting improprieties, misrepresentations, and disclosure failures to inflate the underlying monetary metrics of [Autonomy].” Amongst them was Lynch, then CEO of the agency.

In 2015, HP filed a lawsuit within the UK towards Lynch, alleging he was concerned within the publication of false accounts that overstated how helpful Autonomy’s enterprise was. Now, greater than a decade after the ink dried on the deal, and almost seven years after Lynch was taken to courtroom, the civil case within the UK is sophisticated by a parallel case involving the US’ Division of Justice—the ramifications of which might be enormous for Lynch. In a associated trial, his former colleague at Autonomy, chief monetary officer Sushovan Hussain, was discovered responsible of fraud in a US courtroom in Could 2019, imprisoned for 5 years, and fined $4 million, in addition to requested to forfeit $6.1 million extra.

In July 2021, a London courtroom dominated that Lynch might be extradited, with the decide saying that the UK civil case’s findings could be “of very restricted relevance” to the US case. Since then, Patel has delayed signing an extradition request for somebody at present being tried within the UK for largely comparable crimes. However now that case is drawing to an in depth—and Lynch is perhaps operating out of choices. “He might be going through a major period of time in jail if convicted of the 17 counts of fraud,” Ryder says of the US legal costs towards Lynch.

The case highlights a curiosity in parallel, twin-track authorized proceedings. “We’ve a scenario the place a UK citizen, based mostly within the UK, is accused of fraud towards an American firm,” says Thomas Cattee, a solicitor at UK immigration legislation agency Gherson, which has been monitoring the Lynch authorized case. That American firm used the UK courts to pursue civil motion. But the US Division of Justice subsequently needs to pursue legal costs towards Lynch in the US. “There are an terrible lot of things at play right here,” says Cattee, who at a earlier legislation agency labored on the case of Scottish hacker Gary McKinnon, who efficiently held off extradition to the US due to the intervention of then-Dwelling Secretary Theresa Could.

Lynch finds himself caught in a transatlantic tiff that authorized consultants have referred to as unprecedented. Patel has been put in a sophisticated place: having signed the extradition doc, she has seemingly affirmed that US authorized proceedings take priority over a UK case. Her resolution can also be one other reminder of the perceived imbalance within the extradition settlement between the UK and the US. In the end, US prosecutors might use the phrases of the 2003 extradition treaty signed between the US and UK, which permits the US to extradite British residents for alleged offenses below US legislation, even when these offenses are alleged to have occurred within the UK—however not the opposite method spherical. Nonetheless, not everybody agrees with that viewpoint. “The narrative in relation to the perceived imbalance typically is one exterior the courtroom,” says Richard Cannon, accomplice at Stokoe Partnership Solicitors, who focus on legal protection and civil litigation. “It’s very not often, in my expertise, one thing the courts can or would take into account.”

Regardless of this, the case is being watched fastidiously due to the eye-watering numbers concerned and its implications for the UK tech and enterprise group. The concern is that the Lynch case might create a precedent across the primacy of 1 authorized system over the opposite. “I feel that the US has extra aggressive powers by way of pursuing these sorts of instances towards people who aren’t within the UK,” says Cattee. “I feel there’s only a normal sense of unfairness,” he provides.

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This story initially appeared on wired.com.