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After years of wrangling, HP won a civil fraud case against Autonomy founder and CEO Mike Lynch. V managerThe largest civil fraud trial in UK history began just hours before the UK Home Secretary approved Lynch’s extradition to the United States, where he faces new fraud charges.
The UK High Court ruled that HP was “significantly successful” in proving that Autonomy executives fraudulently increased the firm’s reported earnings, profits and value. Back in 2011, HP paid $11 billion for the company and later announced an $8.8 billion writedown. In court, HP sought $5 billion in damages, but the judge said the total amount due would be “significantly less” and would be announced at a later date. Kelvin Nicholls, Lynch’s attorney and partner at Clifford Chance law firm, said his client intends to appeal the High Court’s decision. In a later statement, Nicholls said his client is also appealing the extradition order to the UK High Court.
This week’s events are the latest twist in an extradition process that began in November 2019 when the US Embassy in London filed a request that Lynch be tried in the United States on 17 counts, including wire fraud, conspiracy and securities fraud. Lynch denies all charges against him. Nicholas Ryder, a professor of financial crime at the University of the West of England, describes it as “a .45 Colt for the US Department of Justice” – a comprehensive and powerful move. “This is their main charge. The implications for Mr. Lynch are significant.”
At the time of the Autonomy acquisition, the then HP chairman said he was “seriously chickened out” about the deal, according to statements subsequently filed in court. The company said that some former members of Autonomy’s management team “used accounting irregularities, misrepresentations, and disclosure denials to inflate the company’s fundamental financials.” [Autonomy]”. Among them was Lynch, then CEO of the firm.
In 2015, HP filed a UK lawsuit against Lynch, alleging that he was involved in publishing false reports that exaggerated the value of Autonomy’s business. Now, more than a decade after the ink on the deal has dried and nearly seven years since Lynch went to trial, the UK civil case is being complicated by a parallel case involving the US Department of Justice, the consequences of which could be huge for Lynch. In a related lawsuit, his former Autonomy colleague, Chief Financial Officer Sushowan Hussain, was found guilty of fraud in a US court in May 2019, sentenced to five years in prison and fined $4 million, and was also asked to forfeit another $6.1 million.
In July 2021, a London court ruled that Lynch could be extradited, with the judge saying that the findings of the UK civil case would have “very limited relevance” to the US case. Patel has since put off signing an extradition request for a man currently on trial in the UK for similar crimes. But now the case is drawing to a close, and Lynch may run out of options. “He could face a significant prison sentence if found guilty of 17 counts of fraud,” Ryder says of the US criminal charges against Lynch.
The case highlights the curiosity of parallel, bidirectional litigation. “We have a situation where a British citizen who is in the UK is accused of fraud against a US company,” says Thomas Cathey, a solicitor at British immigration law firm Gherson, who followed the Lynch case. This American company used the British courts to file a civil suit. However, the US Department of Justice subsequently wants to bring criminal charges against Lynch in the United States. “There are a lot of factors at play here,” says Cathy, who worked for a previous law firm on the case of Scottish hacker Gary McKinnon, who successfully delayed extradition to the United States thanks to the intervention of the then Home Secretary. Theresa May.
Lynch finds himself embroiled in a transatlantic spat that lawyers have described as unprecedented. Patel found herself in a difficult position: by signing the extradition document, she seemed to confirm that legal proceedings in the US take precedence over the case in the UK. Her decision is also another reminder of the perceived imbalance in the UK-US extradition deal. Ultimately, US prosecutors could use the terms of the 2003 extradition treaty signed between the US and the UK, which allows the US to extradite British citizens for alleged crimes under US law, even if those crimes were allegedly committed in the UK, but not vice versa. . However, not everyone agrees with this point of view. “The story of perceived imbalance often comes from outside the courtroom,” says Richard Cannon, partner at Stokoe Partnership Solicitors, who specializes in criminal and civil defense. “In my experience, courts very rarely can or will consider this.”
Despite this, the case is being closely watched due to the astonishing numbers and its implications for the UK tech and business community. The concern is that the Lynch case could set a precedent for the primacy of one legal system over another. “I think the US has more aggressive powers to take cases like this against people who are not in the UK,” Cathy says. “I think it’s just a general sense of injustice,” he adds.
This story originally appeared on wired.com.
