A High Court judge has ruled that the estate of Autonomy founder Dr Mike Lynch will not have to pay the billions of dollars sought in damages by HPE following its ill-fated acquisition of Autonomy in 2011.
The ruling follows the UK civil trial in 2022, which found in favor of HPE’s claim that Lynch and ex-CFO Sushovan Hussain had inflated the apparent value of Autonomy during the acquisition process, leading the US megacorp to sue for $4.5 billion in damages, later amended to $4 billion.
In a lengthy court ruling published today, judge Mr Justice Hildyard laid out his reasoning, saying that HP (now HPE) had exaggerated its claims of how much it had overpaid for Autonomy, and instead put forward his own calculation over the cost of the Brit enterprise software biz.
Justice Hildyard estimated how much an “appropriate” valuation of Autonomy would have added up to if its accounts had been properly stated, and judged that the difference between that figure and the actual price paid was £697 million (about $941 million at current conversion rates).
Since the claim under the UK’s Financial Services and Markets Act (FSMA) relates only to 92.6 percent of Autonomy’s share capital, the loss is therefore deemed to be £646 million (about $871 million at current conversion rates).
However, the judge also ruled that HP was entitled to damages under deceit and misrepresentation claims, amounting to £50.7 million ($68 million) against Dr Lynch, plus other direct loss claims that bring the total to somewhere north of £700 million (about $943 million).
Lynch died almost a year ago along with his daughter and four others in a freak storm that caused the billionaire’s yacht, the Bayesian, to sink off the coast of Sicily. He was understood to be celebrating with family and friends following the outcome of the US criminal trial over the Autonomy sale, in which he was cleared of all charges.
Antonio Neri, CEO of HP’s successor company HPE, last year defended the firm’s decision to continue its $4 billion claim against Lynch’s estate because it was “in the best interest of shareholders.”
The IT giant had been seeking legal redress and damages ever since HP announced it was taking an $8.8 billion hit to its finances in 2012, the year after the Autonomy deal closed, with $5 billion of that blamed on the UK biz allegedly misrepresenting its own value.
However, in his ruling, Justice Hildyard stated that “HP’s claim was always substantially exaggerated: and I have concluded that there is more than a grain of truth in Dr Lynch’s submission, in his written closing at the Main Trial that when HP announced that it was writing down the value of Autonomy by $8.8 billion and attributed some $5 billion to alleged fraud, the figure was not based on detailed analysis.”
He continued: “Rather, it was predominantly calibrated by reference to the perceived need to reduce the carrying value of some of HP’s assets in order to take account of the diminution of HP’s market capitalisation following a fall in HP’s share price; and (to quote Dr Lynch’s written closing) Autonomy was lined up to take a disproportionate hit.”
Dr Lynch’s legal team today released a statement written by him last year, as the damages judgment was expected in September 2024 but was then postponed by the tragic yacht incident. The statement reads:
In response to today’s damages judgement, HPE told The Register: “We are pleased that this decision brings us a step closer to the resolution of this dispute. We look forward to the further hearing at which the final amount of HPE’s damages will be determined.” ®