HPE seeks $4B in damages from Autonomy boss Mike Lynch and his ex-CFO

Could have been worse – IT giant was asking for five

Lawyers for HPE are seeking $4 billion (£3.17 billion) in damages from former Autonomy boss Mike Lynch and his ex-CFO Sushovan Hussain, after a court in the UK found the pair inflated the software maker's value ahead of its merger with HP.

HPE successfully sued Autonomy's founder Mike Lynch in the High Court of England and Wales back in 2022, and the British tech tycoon was extradited the next year to the US to face charges of criminal fraud regarding that Autonomy takeover.

Lynch is right now under house arrest in San Francisco pending trial for those charges, while Hussain was sentenced to five years behind bars in the US in 2019.

This is all to do with HP's $11 billion acquisition of UK-based Autonomy in 2011, back before the super-corp split into HPE and HP Inc in 2015. After the merger with Autonomy, HP claimed it was misled over the true value of the enterprise search software maker – allegedly ripped off, in other words – and was forced to take an $8.8 billion writedown in 2012.

Mike Lynch's face next to HPE logo on a building

Awaiting trial ... Mike Lynch. Source: Shutterstock / The Royal Society

In the aftermath of that mess, HPE went after Lynch and Hussain, suing them in England in a civil case ahead of their extradition to the US to face criminal fraud charges. The High Court in London ruled Lynch and Hussain perpetuated an extensive fraud over a period of at least ten fiscal quarters during the run up to the acquisition. The cunning plan was to inflate Autonomy’s apparent software revenues and make the company appear to be a more valuable asset to acquire.

Although HPE "substantially succeeded" in proving its case at the High Court, the judge gave his opinion that the damages awarded would prove to be significantly lower than the $5 billion the venerable Silicon Valley biz was asking for. However, in the latest court hearing in London, HPE's lawyers presented documents that argue the org is entitled to $4 billion as a result of the losses incurred from the fraud.

Its valuation expert stated that, based on revised information, Autonomy would have been worth around $1 billion more than his estimates given at the trial, which therefore reduced his estimate of the loss to $4 billion.

Lynch is estimated to have a net worth of a billion quid. Among other pies he has his fingers in, his VC firm Invoke Capital invested in infosec biz Darktrace that he helped co-found.

The amount of damages HPE is likely to be awarded could depend on several factors. One is whether the court decides that HP would have walked away from the transaction had it known the true value of Autonomy, or whether it would have proceeded anyway but insisted on a lower price.

Léo Apotheker, HP’s CEO during the period of the merger, is quoted in the document as saying that he would have sought an explanation from Autonomy’s leadership if he had discovered the discrepancies in its books.

“If, as seems most likely, the explanation I heard was not satisfactory, I have no doubt that I would have recommended to HP’s Board that it should abandon the deal,” he stated.

HP’s former chief financial officer admitted during the trial, however, that she had not read a due diligence report on Autonomy by auditors KPMG before the acquisition went through, as reported by The Register at the time. ®

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