HP's blockbuster $5.1 billion authorized battle in opposition to Autonomy's former CEO Mike Lynch is about to kick off

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Mike Lynch

  • Hewlett-Packard’s explosive $5.1 billion lawsuit in opposition to the previous executives at software program firm Autonomy kicks off on Monday in London’s Excessive Courtroom.
  • The Silicon Valley agency acquired Autonomy for $11 billion in 2011, however subsequently wrote $eight.eight billion off its worth.
  • HP has accused former Autonomy CEO Mike Lynch and former chief monetary officer Sushovan Hussain of fraud and overstating Autonomy’s worth.
  • Lynch and Hussain deny the claims, with Lynch countersuing for $150 million.
  • Lynch was individually hit with prison fees within the US, whereas Hussain has already been convicted of fraud.

After almost eight years of acrimony, HP and Autonomy founder Mike Lynch are lastly heading for his or her $5.1 billion authorized showdown on Monday. 

In a court docket battle that might final so long as 9 months, and embrace explosive testimony from key gamers who’ve mentioned little or nothing publicly in regards to the case, HP’s 2011 $11 billion acquisition of Lynch’s enterprise software program enterprise Autonomy will bear a forensic examination.

HP has accused Lynch and Autonomy’s former chief monetary officer, Sushovan Hussain, of fraud and overstating the corporate’s worth. Lynch and Sushovan deny the claims, with Lynch countersuing for $150 million.

Leo Apotheker

The unique Silicon Valley firm, HP was a large of enterprise and computing software program. However tech began to alter and, by 2011, software program was “consuming the world,” as enterprise capitalist Marc Andreessen put it on the time. 

SAP govt Leo Apotheker was appointed to run HP in late 2010, and the Autonomy acquisition was the centrepiece of his technique to show HP right into a software program large. It did not pan out, and Apotheker was fired even because the deal closed.

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Former eBay CEO Meg Whitman took excessive job in late 2011. A yr later, HP’s inventory hovered at round $15 and the agency wrote off $eight.eight billion price of the Autonomy acquisition.

In 2015, HP filed a declare within the London’s Excessive Courtroom in opposition to Lynch and Hussain. The trial begins on Monday.

HP alleges that Lynch and Hussain conspired to prepare dinner Autonomy’s books, leading to HP overpaying for the agency by $5 billion.  It claims the pair have been “engaged in fraudulent actions whereas executives at Autonomy” and have been chargeable for “critical accounting improprieties, disclosure failures, and outright misrepresentations.”

Lynch and Hussain each deny the allegations, and Lynch is countersuing for $150 million for reputational injury. They are saying any misplaced worth was purely right down to HP’s personal poor administration of Autonomy after it was acquired. 

Complicating the London proceedings is the truth that the US Division of Justice filed a prison indictment in opposition to Mike Lynch in November, charging the entrepreneur with fraud. Lynch has not travelled to the US for the proceedings, and should face extradition.

The US added new prison fees to its indictment on Friday, which carry a most jail time period of 25 years. Lynch didn’t instantly reply to the brand new fees, however the timing will solely intensify the stress on Monday.

Sushovan Hussain

The US has additionally already discovered Sushovan Hussain responsible of fraud, convicting him on 16 counts of wire and securities fraud. Hussain’s sentencing has been postponed, and his bail situations forestall him from leaving the US. Though a separate prison trial, the responsible verdict might bolster HP’s case because it heads to court docket.

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In response to court docket filings from HP seen by Enterprise Insider, Hussain intends to take part within the London trial. It is not clear whether or not he could take part by way of video hyperlink. HP has argued that Hussain ought to give proof sooner than deliberate, in case his sentence, when it comes, leads to his imprisonment.

One other complication has been Christopher “Stopher” Egan, the previous CEO of Autonomy’s US operations. Egan entered right into a “deferred prosecution settlement” with US prosecutors in 2017, which noticed him develop into a cooperating witness and admitting to some wrongdoing.

Egan was to be HP’s star witness within the London trial however, The Register reported, he was not eager to provide proof after his US authorized ordeal.

Enterprise Insider now understands, nonetheless, that Egan might give proof on the London trial. Lynch and different key personalities from HP’s historical past are additionally anticipated to be known as to provide proof. That features Leo Apotheker, the previous HP CEO who oversaw the deal, and his successor Meg Whitman.

A spokesman for HP mentioned: “HPE doesn’t want to touch upon an ongoing authorized matter right now.”

A spokesman for Mike Lynch mentioned: “Mike Lynch is happy to lastly have the chance to reply in court docket to HP’s accusations. There was no fraud at Autonomy. Slightly, it is a case that distils right down to a dispute over variations between UK and US accounting techniques and can deal with the suitable train of enterprise judgments made in a specific context and time with the complete information and approval of quite a few monetary and technical specialists and advisers.

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“The actual story is that HP, after a historical past of failed acquisitions, botched the acquisition of Autonomy and destroyed the corporate, in search of responsible others. Mike won’t be a scapegoat for his or her failures.”

SEE ALSO: Contained in the lifetime of Mike Lynch, who bought his search startup to HP for $11 billion and was charged with fraud

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