Hewlett-Packard wins fraud case against UK tech tycoon

(Reuters) — A British judge said Friday that U.K. tech tycoon Mike Lynch masterminded an elaborate fraud to inflate the value of his company Autonomy before it was bought by Hewlett-Packard for $11 billion in 2011.

Finding in HP’s favor following a near decade-long battle, Justice Robert Hildyard said the Silicon Valley company had won the majority of its case although the damages, while substantial, would be significantly smaller than the $5 billion demanded by the U.S. company.

The court’s decision came before a Friday deadline for Britain to decide whether or not to extradite Mr. Lynch to the United States to face criminal charges over the deal that carry a maximum term of 20 years.

“The claimants have substantially succeeded in their claims in these proceedings,” Hildyard told the High Court, in a summary of his much longer judgment, following a nine-month trial and a two-year wait for his decision.

HP had sued Mr. Lynch, arguing that he had fraudulently inflated the value of Autonomy before he sold it to the U.S. tech giant. Mr. Lynch had argued that HP mismanaged the acquisition.

Judge Hildyard said Mr. Lynch and his finance director Sushovan Hussain had fraudulently concealed the sale of hardware and engaged in convoluted reselling schemes to mask a shortfall in sales of Autonomy’s software, the business HP coveted.

That enabled Autonomy to meet quarterly financial forecasts and maintain its high share price.

Mr. Lynch faces separate criminal charges in the U.S., including wire fraud and securities fraud, over the Autonomy sale.

A year after acquiring Autonomy, HP threw out its CEO who was the architect of the deal that was supposed to help transform the computer and printer maker, one of Silicon Valley’s oldest companies, into a more profitable business software and services group.

It wrote down the value of Autonomy by $8.8 billion and sought damages from Mr. Lynch and his colleague Mr. Hussain. Mr. Hussain was convicted of fraud and handed a five-year prison sentence in the United States in 2019.

HP said in a statement that Mr. Lynch and Mr. Hussain had deliberately misled the market and Hewlett-Packard Enterprise. “HPE is pleased that the judge has held them accountable,” a spokesman said after the London court ruling.

Mr. Lynch has denied all the allegations. He was not immediately available to comment via his representatives.

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