Autonomy co-founder and former CEO Mike Lynch has hit back hard against HP and its management team in a London court room.
Giving evidence for the first time in a High Court trial, Lynch denied HP’s allegations that he mislead markets and inflated his firm’s value before it was sold to Hewlett Packard (HP) for $11bn (£8.7 billion) way back in 2011.
In May 2018, the legal tussle between HP and British software firm Autonomy in the United States resulted in a victory for the American tech firm, after Autonomy’s former chief financial officer Sushovan Hussain was found guilty of artificially inflating the firm’s financial position before it was sold. Hussain is currently serving five years in prison in the US.
But 54 year old Lynch took to the stand to defend the firm he helped create, and hit out at HP and its management, in particular HP’s former CEO Meg Whitman (she is now CEO of HPE).
According to the Financial Times, Lynch said that Whitman was “out of her depth” and “could not cope with all the fires” at the company.
HP is seeking $5bn in damages in the UK court case against Lynch and his former associate Sushovan Hussain.
HP (now known as HPE) alleges the two men of masterminding fraudulent accounting at Autonomy. Lynch’s team has stated that the dispute stems from a misunderstanding of UK and US accounting rules.
Lynch has always denied misleading investors, auditors and the market.
The FT quoted him as telling the court that Autonomy was “one of the most successful companies England has ever produced.”
He reportedly said in a witness statement that he had been made a “scapegoat” when HP, under Whitman, failed to integrate Autonomy and blamed “managerial infighting, poor planning, lack of leadership. and, most critically, HP’s decision to push out the key people responsible.”
According to Lynch, HP in 2012 was riven with political infighting and Whitman was “out of her depth” because “HP was in total crisis and Whitman could not cope with all the fires.
Lynch also denied being involved in the disputed transactions identified by HPE, and said that the majority of the disputed transactions “generally occurred below my level” and as a FTSE 100 chief executive: “I was not aware of every transaction going on around the world in all of Autonomy’s various subsidiaries”.
The FT reported that Lynch had said he relied on accountants Deloitte and added that: “I do not believe that there was anything materially wrong with Autonomy’s accounts.”
Mike Lynch is of course is also legal trouble on the other side of the pond. He is face extradition to the US to stand trial in California over 17 criminal charges of securities and wire fraud over the Autonomy deal.
The UK court case continues continues.
HP’s acquisition of Autonomy in 2011 was the largest-ever buyout of a European technology firm. The deal was intended to spearhead HP’s move into software, but instead HP a year later wrote off three-quarters of what it had paid.
In September 2016 HPE sold its software business, including the Autonomy operation, to British IT firm Micro Focus for only $8.8 billion (£7bn).
In April 2015 HP had sued Hussain and Autonomy co-founder Mike Lynch for $5.1 billion in London’s High Court of Justice, making similar claims of fraud, in a case believed to be the largest-ever civil prosecution of British nationals.
On this side of the Atlantic, the Serious Fraud Office (SFO) in Britain closed its investigation into the sale of Autonomy to HP, claiming there was ‘insufficient evidence’ for a realistic prospect of conviction.
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.
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