Autonomy’s Mike Lynch Fights US Extradition Attempt

The co-founder and former CEO of Autonomy, Dr Mike Lynch, continues his legal fight against US authorities this week.

Reuters reported that Dr Lynch asked a London court to block his extradition to the United States to face criminal charges over Hewlett Packard’s $11 billion acquisition of Autonomy, arguing he should be prosecuted in Britain.

This latest courtroom appearance marks a very long campaign by HP and its then CEO Meg Whitman to pursue the senior management of Autonomy after the HP acquisition went south.

Court case

The legal case all centres around an acquisition made 12 years ago.

HP’s acquisition of Autonomy in 2011 was the largest-ever buyout of a European technology firm at the time.

The $11bn (£8.7 billion) acquisition was intended to spearhead HP’s move into software, but it quickly became an accounting nightmare, and a year later HP took a whopping $8.8 billion (£6.6bn) “intangible asset impairment” charge over the acquisition.

HP alleged at the time that the majority of that charge, more than $5 billion, resulted from a number of practices used by former members of Autonomy’s management team to inflate the value of the company and mislead investors and potential buyers at the time of the acquisition.

The remainder of that write-off charge was related to other factors such as the trading value of HP stock and marketplace performance.

Legal battles soon followed, and in April 2015 HP sued Lynch, alongside former Autonomy CFO Sushovan Hussain at the High Court in London, seeking $5bn in damages.

Dr Mike Lynch countersued HP for $160m in 2015, saying at the time the company had ruined his reputation and that it was “incompetent in its operation of Autonomy”, leading to the acquisition’s failure.

In the UK the Serious Fraud Office (SFO) in 2015 closed its investigation into the sale of Autonomy to HP, claiming there was ‘insufficient evidence’ for a realistic prospect of conviction.

Eventually in September 2016 HPE sold its software business, including the Autonomy division, to British IT firm Micro Focus for only $8.8 billion.

British justice

In late 2019 US officials angered British MPs and indeed normal protocol (where local legal cases should be settled first) when they sought to pre-empt the High Court’s verdict, and take Dr Lynch to stand trial in San Francisco before a decision was reached in the British trial.

Dr Lynch is facing 17 counts of US charges, including wire fraud, conspiracy and securities fraud, which carries a maximum term of 20 years in prison.

Lynch denies all charges, and has previously stated that the dispute stems from a misunderstanding of UK and US accounting rules.

Dr Lynch on the witness stand in 2019 also denied HP’s allegations that he had mislead markets and inflated his firm’s value before it was sold to Hewlett Packard.

During his lengthy testimony on the stand, the 54 year old hit out at HP and its management, in particular HP’s former CEO Meg Whitman (she is now the US Ambassador to Kenya).

Dr Lynch said that Whitman was “out of her depth” and “could not cope with all the fires” at the company.

Autonomy’s former chief financial officer Sushovan Hussain was found guilty in 2018 in the US of artificially inflating the firm’s financial position before it was sold.

In August 2020 Hussain lost his appeal against his conviction (his sentence was delayed during his appeal), and he is currently serving five years in prison in the US.

He was also fined $10.1m.

In January 2020 a British judge ruled that HP “substantially succeeded” in its lawsuit, although the judge ruled any damages would be “considerably less” than the $5 billion sought by HP.

After that verdict, then Home Secretary Priti Patel approved the extradition to US of Mike Lynch – a decision slammed by fellow Tory MP Tom Tugendhat, chairman of the Commons Foreign Affairs Committee.

Extradition fight

Now Reuters has reported that lawyers for Mike Lynch told London’s High Court on Wednesday that Lynch should be prosecuted in Britain, where the Serious Fraud Office (SFO) has reserved the right to prosecute him if he is not extradited.

Alex Bailin, representing Lynch, who sat at the back of the court, said Autonomy was a British company which was listed in London and that the “overwhelming majority” of the events on which the US had based criminal charges took place in Britain.

Lawyers representing the US government argued in court filings there was no reason to block Lynch’s extradition, saying the SFO has ceded jurisdiction to US prosecutors.

Bailin also gave updated details of HP’s civil lawsuit against Lynch and Hussain, who was jailed in a San Francisco court for five years.

Lynch intends to apply for permission to appeal against the ruling on HP’s lawsuit, Bailin was quoted by Reuters as saying in court filings.

Bailin reportedly added that the issue of any appeal has been delayed until after the amount of damages to be paid to HP has been determined, which he said “remains completely unresolved”.