HPE lawyers claim Autonomy chief Lynch knew all about 'revenue-pumping' carousel

Biz founder also told CFO to 'do what the f*ck you like', court hears


Autonomy Trial Former Autonomy chief exec Mike Lynch was "most certainly aware" that his British software company had fraudulently hyped up its performance using a carousel of "revenue-pumping" fake sales, HPE's lawyers told London's High Court on Monday.

Lynch had Autonomy buy software and other products from its value-added resellers (VARs) to artificially pump up the company's revenues in the two years before Hewlett Packard bought the firm for $11bn in 2011, barrister Laurence Rabinowitz QC told Mr Justice Hildyard.

As he took the judge through an overview of HPE's case against Lynch on what he described as "reciprocal transactions", Rabinowitz highlighted six transactions that Autonomy made between Q2 2009 and Q2 2011. The deals were struck with companies including Capax Discovery, VMS Inc, FileTek, Vidient Systems, EMC, and MicroTech.

HPE alleges that around $20m was wrongly added to Autonomy's revenues through these placeholder transactions over the two-year period. The IT giant is suing Lynch and Autonomy's former CFO Sushovan Hussain in the High Court over that $11bn acquisition, claiming the Brit biz tricked it into the merger by over-inflating its financial performance, and is trying to claim $5bn in damages total.

MicroTech was at the heart of a related controversy between Autonomy and HPE over millions of dollars paid for software that it said was never delivered, as we reported at the time.

Pouring scorn in court this afternoon over what he described as the "contrived nature of these", Rabinowitz said the reciprocal transactions were broadly similar to the dubious VAR deals he described earlier today: Autonomy, he said, would agree to buy something from a reseller in exchange for that reseller buying a similar value of Autonomy software, with Autonomy adding a sweetener on top so the whole deal went through at a net loss for Autonomy.

Although this increased the British software company's losses, it artificially inflated the revenues – one of the key financial metrics that analysts were monitoring.

HPE's barrister scoffed at how Autonomy had, in HPE's view, "almost coincidentally [had] an interest in buying a product from one of its customers at the same time as that customer was buying".

The Rolls Building, home of the High Court's Chancery Division

The tech lawsuit of the year: HPE v Mike Lynch and Sushovan Hussain

READ MORE

"The only issue is," Rabinowitz told the court, "were [the goods] acquired as the legitimate exercise of commercial judgment? The reality, my lord, is that at least as far as concerns this case, it really doesn't matter because... the reason these products and services were acquired had nothing to do with legitimate commercial judgment. The purchases were made, and only made, in order to persuade a counterparty to acquire goods from Autonomy in return."

Some of Lynch's less temperate emails were quoted by HPE in its written submissions to the court, with Lynch having told Hussain in a row over vacation allowances: "Sushovan I am sick of dealing with this shit from people... do what the fuck you like."

Lynch himself was present in court today wearing a dark suit. After the lunch break he moved out of the courtroom corner where he had been cocooned behind a large number of PR advisers and instead sat next to his legal team, following the legal documents through his solicitor's laptop.

Tomorrow sees the end of HPE's opening arguments, followed by Lynch and Hussain's opening to their defence case. Both men deny any wrongdoing. The case continues. ®


Other stories you might like

  • North Korea pulled in $400m in cryptocurrency heists last year – report

    Plus: FIFA 22 players lose their identity and Texas gets phony QR codes

    In brief Thieves operating for the North Korean government made off with almost $400m in digicash last year in a concerted attack to steal and launder as much currency as they could.

    A report from blockchain biz Chainalysis found that attackers were going after investment houses and currency exchanges in a bid to purloin funds and send them back to the Glorious Leader's coffers. They then use mixing software to make masses of micropayments to new wallets, before consolidating them all again into a new account and moving the funds.

    Bitcoin used to be a top target but Ether is now the most stolen currency, say the researchers, accounting for 58 per cent of the funds filched. Bitcoin accounted for just 20 per cent, a fall of more than 50 per cent since 2019 - although part of the reason might be that they are now so valuable people are taking more care with them.

    Continue reading
  • Tesla Full Self-Driving videos prompt California's DMV to rethink policy on accidents

    Plus: AI systems can identify different chess players by their moves and more

    In brief California’s Department of Motor Vehicles said it’s “revisiting” its opinion of whether Tesla’s so-called Full Self-Driving feature needs more oversight after a series of videos demonstrate how the technology can be dangerous.

    “Recent software updates, videos showing dangerous use of that technology, open investigations by the National Highway Traffic Safety Administration, and the opinions of other experts in this space,” have made the DMV think twice about Tesla, according to a letter sent to California’s Senator Lena Gonzalez (D-Long Beach), chair of the Senate’s transportation committee, and first reported by the LA Times.

    Tesla isn’t required to report the number of crashes to California’s DMV unlike other self-driving car companies like Waymo or Cruise because it operates at lower levels of autonomy and requires human supervision. But that may change after videos like drivers having to take over to avoid accidentally swerving into pedestrians crossing the road or failing to detect a truck in the middle of the road continue circulating.

    Continue reading
  • Alien life on Super-Earth can survive longer than us due to long-lasting protection from cosmic rays

    Laser experiments show their magnetic fields shielding their surfaces from radiation last longer

    Life on Super-Earths may have more time to develop and evolve, thanks to their long-lasting magnetic fields protecting them against harmful cosmic rays, according to new research published in Science.

    Space is a hazardous environment. Streams of charged particles traveling at very close to the speed of light, ejected from stars and distant galaxies, bombard planets. The intense radiation can strip atmospheres and cause oceans on planetary surfaces to dry up over time, leaving them arid and incapable of supporting habitable life. Cosmic rays, however, are deflected away from Earth, however, since it’s shielded by its magnetic field.

    Now, a team of researchers led by the Lawrence Livermore National Laboratory (LLNL) believe that Super-Earths - planets that are more massive than Earth but less than Neptune - may have magnetic fields too. Their defensive bubbles, in fact, are estimated to stay intact for longer than the one around Earth, meaning life on their surfaces will have more time to develop and survive.

    Continue reading

Biting the hand that feeds IT © 1998–2022