Hewlett-Packard (HP) is expected to move forward with its $4bn damages lawsuit against the estate of the late tech entrepreneur Mike Lynch, despite his recent death in a sailing accident off the coast of Italy in August 2024.
This ongoing legal battle stems from HP’s acquisition of Lynch’s company, Autonomy, for $11.1bn in 2011, which later resulted in an $8.8bn write-down by HP due to what it described as “accounting irregularities” at Autonomy.
HP has been locked in legal disputes with Mike Lynch for over a decade, alleging that he fraudulently inflated the value of Autonomy before its sale to HP. The accusations led to both civil and criminal cases against Lynch and Autonomy’s former chief financial officer, Sushovan Hussain.
Lynch’s legal battles
In 2022, a UK High Court ruled in favour of HP, finding Lynch liable for misleading accounting practices in the civil suit.
However, the court did not grant the full $4bn initially sought by HP, and the exact amount of damages is yet to be finalised, with a decision expected soon following a damages hearing in February 2024.
Earlier this year, Lynch was acquitted of related criminal charges in the US, where he had faced several charges, including wire fraud and conspiracy, related to the Autonomy sale.
Lynch had hoped the US ruling would strengthen his appeal against the UK civil judgment. However, his unexpected death in a storm off Sicily, which also claimed the life of his daughter, has sparked discussions about whether HP should continue pursuing his estate for damages.
Despite public and legal scrutiny, HP remains focused on its responsibility to shareholders and has not indicated any intention to drop the case.
Lynch’s widow, Angela Bacares, is now expected to inherit the legal battles surrounding her late husband.
In a separate legal context, US prosecutors had accused Lynch and Stephen Chamberlain, Autonomy’s former financial officer, of inflating Autonomy’s revenue through fraudulent transactions, primarily by disguising hardware sales as software.
Lynch contended that he focused on overseeing the technical side of the business while Hussain managed its accounting. Hussain, however, was convicted of wire fraud in 2018 in connection with the acquisition.
Lynch further argued that HP had not conducted adequate due diligence before the acquisition, a claim partly validated by the 2020 fine of £15m imposed on Deloitte, Autonomy’s auditor, for failing to detect irregularities in the deal.
He also claimed that he was not fully informed about the acquisition’s specifics, learning of the final agreement only after it was announced.
US prosecutors argued that Lynch was deeply involved in the company’s operations and presented him as a controlling CEO who maintained an eccentric work environment.
Lynch, however, defended his management style and decisions, stating that Autonomy, like any company, had complexities and issues that could appear problematic under scrutiny. “One thing to bear in mind is if you take [a] microscope into a spotless kitchen, you will always find bacteria,” he explained in his defence.
Although Lynch was cleared of criminal charges in the US, he lost the civil suit in the UK, where both he and Hussain were found liable for fraud. If the full damages sought by HP are awarded, the financial repercussions for Lynch’s estate and for Hussain could reach up to £3bn.
HP earnings
Recently, HP announced its third-quarter (Q3) results for fiscal 2024. In the reported quarter, the company posted GAAP net earnings of $600m, a decrease of 16% compared to $800m in the corresponding quarter of the prior fiscal year.
HP’s net revenues in Q3 FY24 stood at $13.5bn, a slight increase of 2.4% compared to its net revenues of $13.2bn in Q3 FY23.
Last week, HP signed a non-binding preliminary memorandum of terms (PMT) with the US Department of Commerce to secure up to $50m in funding for a microfluidics semiconductor fab in Oregon.
Written by Refna Tharayil
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