Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The estate of tech entrepreneur Mike Lynch, who died in a yacht accident last year, is set to be bankrupted after the High Court in London ruled it owes Hewlett Packard Enterprise hundreds of millions of pounds.
In a long-awaited ruling on Tuesday, Mr Justice Hildyard determined that HPE was owed about £740mn from Lynch’s estate and his former business partner Sushovan Hussain in connection with the disastrous 2011 acquisition of their software company Autonomy.
The judge had found in 2022 that the FTSE 100 company’s “true financial position and performance had not been properly and accurately disclosed” when it was sold to the then Hewlett-Packard 14 years ago for $11.7bn.
HPE had originally sought at least $4.55bn in damages, a figure that the judge described in Tuesday’s ruling as “substantially exaggerated”.
The Lynch family is considering whether to appeal against the ruling. The estate is estimated to be worth about £500mn and so would be bankrupted if the figure was upheld, according to a person familiar with the matter.
Lynch died aged 59 last year alongside his 18-year-old daughter and five others when his family’s Bayesian superyacht sank off the coast of Sicily. They had been celebrating his acquittal on US fraud charges related to the Autonomy sale. Fifteen people, including Lynch’s wife, Angela Bacares, survived.
HPE pressed ahead with a civil claim in England, with chief executive Antonio Neri describing it as a “difficult” decision but one that was “in the best interest of shareholders”.
HPE was formed out of the 2015 split of Hewlett-Packard, which sued Lynch after it took an $8.8bn writedown on Autonomy, accusing him of falsely inflating the company’s revenues.
Hildyard said Autonomy executives had engaged in “a fraudulent acceleration of revenue at the expense of future revenue flows”.
However, the judge said HP’s original claim was “always substantially exaggerated”, adding there was “more than a grain of truth” in Lynch’s argument that HP’s estimate of the cost of the alleged fraud “was not based on detailed analysis”.
A spokesperson for the Lynch family said that the ruling showed HPE’s original claim of damages was “a wild overstatement . . . misleading shareholders”. In a statement the family said that Lynch had prepared before his death, the late tech entrepreneur said: “This result exposes HP’s failure and makes clear that the immense damage to Autonomy was down to HP’s own errors and actions.”
Lynch also complained in the statement that the English civil case had “included hearsay evidence from the US, and we were never able to question or cross-examine those witnesses . . . When in the US criminal trial we were able to cross examine the relevant witnesses, a very different story emerged. Why is the English legal system so trusting?”
The ruling does not resolve how much interest should be paid, which is to be determined at a subsequent hearing.
HPE said in May that it had reached a settlement with Hussain for an undisclosed sum.
It said in a statement on Tuesday: “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.”
Read the full article here