HPE to pursue $4B claim against estate of Mike Lynch over Autonomy acquisition HPE will pursue the widow of Mike Lynch for the $4 billion in damages it sought from him over the Autonomy merger following the Brit tech tycoon's recent death in a sailing tragedy off the coast of Sicily. Lynch was cleared in June of criminal fraud in the US over the 2011 sale of software company Autonomy to what was then …
> A spokesperson at HPE told us today: "In 2022, an English High Court judge ruled that HPE had substantially succeeded in its civil fraud claims against Dr Lynch and Mr Hussain.
If HP "substantially succeeded" in 2022 then why did they feel the need to continue with the criminal trial in the US last year, at which Mike Lynch was acquitted? Pure spite, I assume.
It's about time some HP investors started thinking about a lawsuit against HP's board members for not doing the necessary due diligence.
<<If HP "substantially succeeded" in 2022 then why did they feel the need to continue with the criminal trial in the US last year, at which Mike Lynch was acquitted? Pure spite, I assume.>>
The continuation of criminal cases is largely determined by the judicial authorities rather than those claiming to have been wronged by the defendant.
I followed the UK Civil trial and if my memory serves me will HP case was that there were a few million in Hardware sales that were improperly classified. Maybe 2-10 Million or so. It was a civil case because the UK authorities found nothing wrong with the accounting treatment that HO contended were fraudulent.
The judge found in their favor but it is insane to expect the damages to be in the billions of dollars. I disagreed with the judge on this point. A few million dollars on hardware sales cannot be viewed as significant fraud given the 11 Billion price tag of the company. HP sued for £5 Billion but only tried to prove a few million in fraud. That plus the evidence showed a lack of due diligence and that nobody inside HP apart from the CEO supported the takeover.
HP is buying itself a lot of bad publicity for what's likely to end up being a few million award due to poor accounting (those hardware purchases)
Mind you, HP have been on my "avoid" list for a while due to various misadventures where they washed their hands of what they'd sold and left us high and dry
That plus the evidence showed a lack of due diligence and that nobody inside HP apart from the CEO supported the takeover.
It's an especially scummy move from HP, but then it is HP. I also agree that the fundamental problem with this case was HP's lack of due diligence, so caveat emptor. I've done some consultancy on M&A deals and one of the first things usually crawled all over are the way deals were structured. Especially in a 'systems' deal where it would comprise both hardware & software. Autonomy wasn't a server maker, so would have to buy in tin and sell that through. So those costs and margins can (and were) pretty easily identified. And all the more odd given tin would have been one of the potential synergies given HP makes that stuff.
I am certainly not a fan of HP, and I agree that Apotheker and the board share much, if not most, of the blame for the whole debacle. But as the article points out, HP now needs to either pursue damages or make a business case to their shareholders for not doing so.
It'd be nice if the HP board and executive team had the balls to do the latter, but more than anyone ought to expect. The board in particular needs to continue to cover its ass if they want that sweet unearned compensation to continue.
It was hardware sales booked as software if I recall.
Something along the lines of "if you buy our software, we will throw in a server to run it on for free".
This was not the reason why I said at the time HP were paying too much for it, and knowing this now doesn't make me think they overvalued it by an even greater extent than what I calculated.
So an anonymous non-expert going from memory disagrees with the judge because "feelings"? Well, that is a strong argument, but I'm not entirely persuaded.
You appear to have a couple of dozen fellow-travelers, though, so take heart. There's never any shortage of "I don't understand this but I disagree vehmently!" sorts around.
If HP "substantially succeeded" in 2022 then why did they feel the need to continue with the criminal trial in the US last year, at which Mike Lynch was acquitted? Pure spite, I assume.
HP had Lynch extradited on federal fraud charges? All on their own? Criminal trial =!= Civil suit.
The Autonomy CFO was found guilty of fraud in 2018 and US Federal Prosecutors evidently felt they had enough on Lynch to have at him too. This is not a bad thing in principle. Although Lynch was found not guilty, there are far too many execs who get away with grievous conduct which is "settled" by the business, with the individuals facing no individual consequences whatsoever. It is long past time prosecutors on both sides of the Atlantic took a more proactive approach to individual conduct in cases of "corporate" misconduct. They can start with Post Office and Fujitsu execs.
Individual criminal culpability is an entirely different matter to whether HP are entitled to some financial redress (on balance of probabilities) in the civil courts. It's important in this case to separate the personal elements of this. If Autonomy had been a division of Microsoft which had been sold to HPE for too much, and then the CEO of Microsoft suffered a terrible accident, HPE wouldn't drop their civil suit against Microsoft. The fact the benefactor of the sale was a private - now-deceased - individual, does not change the case that HPE may have against their multi-billion pound estate (which is almost certainly bound up in various trusts & investments, and can fairly be considered a business of sorts in it's own right, in the same way that a tenant suing the Grosvenor estate is not in pitched personal battle with Hugh Grosvenor, nor would have dropped their case on the death of his father in 2016.
Well quite!
See also, various bankers c.2005-2008.
Mark Zuckerberg was also careless enough to put in writing that buying Instagram at a very punchy $/user rate was largely down to the fact that early on, more or less 100% of Insta users were ex-Facebook users who had fallen out of love with Zuck. He admitted in writing that is was basically an anti-competitve move to keep them (and their data) within the Facebook company even if they weren't on the Facebook platform.
Aside from the general need for a new round of trust-busting at a corporation level, prosecutors really ought to be gunning for individual, named execs when evidence shows that they were personally and wilfully acting in an unlawful manner.
The Feds were hoping that Mr Lynch would accept a plea deal. Unfortunately for them they did not understand the character who they were up against.
Yeah, probably, cheaper for them and the courts. Though I'm not sure how that relates to the topic of this thread (the idea that HP pursued federal charges out of spite, or are somehow capable of initiating extradition proceedings!).
The Feds have something like a >95% conviction rate for this sort of thing. I don't doubt that some of this is down to bullying tactics and pushing for a plea deal in lieu of pursuing insane millenia-long sentences. But it also tends to be because the feds don't rouse from their slumber unless they're pretty sure - especially if it involves lengthy and expensive extradition proceedings in a foreign jurisdiction where judges don't rubberstamp anything asked of them.
I'm not sure Lynch was found not-guilty based on his strength of character (or Americans must be a very weak lot, if they all habitually capitulate!), but more likely because he was actually not guilty (or the prosecution failed to prove the case - which is legally the same thing).
"where judges don't rubberstamp anything asked of them"
It is certainly the contention of the late Mr Lynch (and others more skilled in law) that this is pretty much exactly how the UK to US extradition treaty works. Yet try and get a US careless driver to turn up for her UK death-by-careless driving trial and suddenly you have the whole apparatus of US government up to the POTUS intervening to stop matters.
It is certainly the contention of the late Mr Lynch (and others more skilled in law) that this is pretty much exactly how the UK to US extradition treaty works.
People say a lot of things. Try arguing from actual evidence instead.
Yet try and get a US careless driver to turn up for her UK death-by-careless driving trial and suddenly you have the whole apparatus of US government up to the POTUS intervening to stop matters.
While the Sacoolas case is an outrageous miscarriage of justice, it has no bearing on Lynch's case and says nothing about whether defendants extradited to the US are treated unfairly — just that the extradition relationship itself is unfair.
> The Feds have something like a >95% conviction rate for this sort of thing
After listening to the BbC interview with Lynch: Being acquitted 'indescribable' where effectively he describes the US legal system as an extortion racket, I would treat that figure with suspicion. I can agree they may achieve a >95% conviction rate, but expect the vast majority to have been plea bargained and so (unreliable) evidence on trumped up offences never released to the courts for public scrutiny…
Lynch having very deep pockets was able to ride out the extortion and so force the manufactured evidence to be seen by the court…
Lynch was in no way an expert on US Federal criminal prosecution, so his opinion here carries no more weight than that of any other random commentator. More the fool you if you think his description is somehow persuasive.
I'm not arguing that there aren't grave problems with the US Federal justice system, but Lynch was not in any position to make any sort of learned comment on it.
The Feds were hoping that Mr Lynch would accept a plea deal.
Prosecutors hope everyone takes a plea deal. It's a certain result, unlike trial; it's far less work and time for the prosecutor; and it's far less expensive.
Unfortunately for them they did not understand the character who they were up against.
Oh, please. I expect Lynch operated on advice from his legal team. The main difference here is that rich white defendants 1) generally fare much better in jury trials than other defendants do, and 2) wealthy defendants can hire better legal teams. (And most do, aside from weirdo megalomaniacs who primarily choose lawyers based on sycophancy.)
Also, "whom they were up against" is preferable. Object of preposition "against", so objective case.
> Oh, please. I expect Lynch operated on advice from his legal team. The main difference here is that rich white defendants 1) generally fare much better in jury trials than other defendants do, and 2) wealthy defendants can hire better legal teams.
That might be so, however, as Lynch has demonstrated you need deep pockets and strength to survive the extortion, delays etc, just to get your team to court. Where unsurprisingly the charge sheet being used to try and leverage a plea bargain gets reduced to the few charges the prosecution actually have evidence they think will stand up to public scrutiny. As this case demonstrated, the procession were so certain of the outcome they included manufactured evidence…
Marine experts are understood to be puzzled by the sinking of the vessel, which was a modern boat that should have withstood the force of the storm.
Who are these "marine 'experts'"?
Accidents are the result of a chain of circumstances. Someone(s) being unable to determine the chain of those circumstances neither proves, nor rules out, foul play.
being unable to determine the chain of those circumstances neither proves, nor rules out, foul play.
It's not foul play they are trying to determine. The question is was it a design/construction fault in which case the builders and designers are in big trouble or was it negligence by the crew/passengers - wedging a bulkhead door open or maybe a hatch wasn't closed properly in which case the builders & designers are off the hook.
I'd assume this refers to the Greek equivalent of the UK's Marine Accident Investigation Branch - or possible the MAIB themselves as the Bayesian was UK registered and I'd assume marine accident investigations run along similar lines to air ones, so are undertaken by teams from where the accident occured, where the vessel was registered, and where the vessel was manufactured.
or possible the MAIB themselves as the Bayesian was UK registered
MAIB do indeed have an investigation open on the Bayesian.
As you say, this is going to be with assistance from local authorities and the builder will certainly be involved at some level (even if it's in the capacity of "assisting with inquiries"). Given that MAIB also have a list of "Investigations led by other countries", which the Bayesian is not on, I presume that makes the UK (as country of registration) the lead investigator.
And more importantly, an investigation can determine if there are things that can be done to prevent such tragedies in the future. For example are there design or manufacturing flaws that may be present on other vessels. There may also be cultural changes or reinforcement (for example did the employer/employee relationship and desires to deliver top customer service make the crew defer to the customer's about the need to have hatches open due to the hot weather.
I am not familiar with sailing, but in aviation pilots being employees of their passengers has been the cause of multiple accidents. Aviation law has been updated to be very clear that the captain is the ultimate authority on an aircraft, independent of factors such as employee/employer relationships, seniority, etc.
@An_Old_Dog
I don't think anyone is instantly assuming foul play, just surprise at the sinking & how fast it occurred... though the surprise is probably based on the assumption that best practice was being followed & that the weather conditions were not "freakish".
If weather conditions were "freakish" (i.e. in excess of what the boat had been designed to cope with) e.g. rogue waves occurred, or wind / waterspout forces sufficient to do major damage to important areas then all bets are off.
Similarly, if windows, hatches etc. had been left open then there will be major water ingress issues.
I do find it very irritating that there is so much speculation when there is not enough known (or at least publicly released) about the physical state of the boat & so no idea whether it was unexpected damage or incompetence (not even going down the foul play route when there's more likely causes to eliminate first).
It will need a full marine investigation to establish what happened but I believe that it's already known that the wreck shows that the keel had not been lowered, so anything above a "normal" strong wind would have caused a capsize. Then there are the issues of how an "unsinkable" boat went down and what was done, or not, to rescue the passengers known to be below.
Have to say that it's beginning to not look too good for the captain and crew. Wonder if there's such a thing as "Titanic Syndrome" when a ship is believed to be unsinkable.
Indeed, micro-weather events are common in many places. We have them here all the time — a downpour here and no rain at all a few meters away, or trees a few meters away whipping about in the wind while there's no more than a slight breeze at ground level here.
I don't know whether that's at all common in the area where the Bayesian sank, or whether it's plausible for that event. But in general it's certainly not unprecedented. And as others have pointed out, there could also have been mistakes made by the crew of the Bayesian, which might well not have been repeated on other nearby vessels.
In short, it's not particularly surprising if one ship sinks while nearby ones do not. Assuming those things should be correlated, and there's a hidden variable in play if they are not, is just apophenia at work.
The valuation of Autonomy was for HPE to have determined at the time. They decided on the valuation, and they would have run that through a lot of checks and due diligence. This is what failed.
You don't go on what the owner of the thing being valued suggests. Everything that is said, you check.
The decision to buy was entirely down to HPE.
I would laugh if the conclusion what that yes, there was civil fraud, but the damages are limited to £0.
HPE couldn't even leave it a month before trying to take advantage of the widow who will be in a vulnerable state.
I certainly won't be buying anything again from HPE, nor HP by association.
``If some street hustler challenges you to a game of three card monte you don't need to bother to play, just hand him the money, not because you're going to lose but because you owe him for the insight: he selected you.'' -- TLP.
It's not like hp has a history of poor leadership or anything.
I watched this happen on the street in NY, to someone who looked (sounded) like a local, and the power of the hustler's gift of the gab, made an indelible impression on me. Without seeing one in action you would never credit how powerful and effective it is. It has made me quite wary, to stay out of contact range of grifters ever since.
There was some idle talk in that direction in some quarters years ago, but I think her failed run for governor of California (where she blew $140M of her own money) pretty much quashed it.
It's OK, Biden made her the ambassador to Kenya, which is nearly as good.
@AC 14:09 GMT
You are over-extrapolating the OP's statement. It has nothing to do with crime and victimization in general.
The OP and others would laugh because they see the HP Board of Directors as lazy, incompetent gits, and would like to see them penalized for failing to carry out their fiduciary duty -- that thing which they are given insanely high compensation for doing, and which they clearly did not do.
"Hewlett-Packard carried out only six hours of due diligence on the finances of the British software company Autonomy before buying it for £8bn, in a deal that ended in disaster and a $5bn (£3.8bn) fraud case, according to court documents."
"The defence’s submission said: “The due diligence of Autonomy’s finances was limited and largely consisted of four conference calls lasting approximately 1 to 1 1⁄2 hours."
[ https://www.theguardian.com/business/2019/mar/28/hewlett-packard-six-hours-of-due-diligence-on-autonomy-court-told ]
HP set themselves up, they conned themselves...
At the time of the Autonomy deal I worked for HP (only in the lowest ranks, of course). When I read about the upcoming deal, and having the fabulous Compaq deal still in mind, I tried to find out, what and where's the value behind Autonomy. My conclusion? HP dramatically overpaid. By a factor of 10:1, at least.
But who am I to give advise to those high ranks..
I was there as a Director in CRM technology. The idiots never once consulted with us. Autonomy's offerings were garbage and I would have advised against taking them on even for free.
We had landed 3-4 customers that threw Autonomy out in favor of our hosted offerings. Meg Whitman and Leo Apotheker were completely clueless, but what really irked me was that I found out that Marc Andreessen was pushing them to do the deal in a hurry. I never discovered I'd be made anything out of the deal.
Larry Ellison and (UGH!) Mark Hurd caught Lynch's fraud and called HP & Lynch out on it by posting the PowerPoint that Lynch & cohorts presented to Oracle when they were trying to peddle Autonomy to them.
Lynch was scum, but who have I mentioned that isn't?
Thanks for the details.
One of the problems with many companies nowadays is the essentially monopsodic structure of investors who can and do pursue deals between companies in which they have interests: it's perfectly legal for Andreesen et al. to own share in one company and encourage another company, in which he also has shares, to launch a takeover bid. It could be to drive consolidation but it could also just be because he wants a payout.
HP agreed to buy without due diligence, which is essentially why the case in the US went nowhere. However, it was also determined that Autonomy's accounting was probably, er, a bit too flexible, which is why fraud and compensation cases in the UK succeeded.
Further action against the estate is going to go nowhere: by now the money will be wrapped in the same kind of trusts that they love in Delaware. And even if it isn't, UK courts don't award damages on that scales. But they need to go through the motions before inevitable write-off.
HPE to pursue $4B claim against estate of Mike Lynch over Autonomy acquisition ....... Dan Robinson/El Reg
Should that not be, Dan, to reflect the more very likely unsavoury truth, lawyers billing HPE to pursue $4B claim against estate of Mike Lynch over Autonomy acquisition? It’s certainly proving itself to be a nice little earner for them surely?
They're not attacking the widow - they're proceeding against the deceaseds estate. They have a limited window to submit any claims under these circumstances. You can't criticise a party for being finacially reckless, and then when they behave in a fiscally responsbile way also criticise them
You can when the two events are directly related, remember: Closing the stable door after the horse has bolted...
I would actually say HP aren't being financially responsible, but having a temper tantrum, blaming everyone else for their stupidity, remember HP thought they were in a race to buy, but there was no race just their imagination running wild.
Being financially responsible is not throwing yet more money at a lost cause and implementing procedures that will help to prevent it from happening again.
In this case, they have to pay a LOT of attention to the VERY REAL chance of a shareholder lawsuit--one will almost certainly cost the company MUCH more than walking this case out.
Drop it now? An entirely new lawsuit springs up, costing $$$$$. Go through the motions & let this one wind down? Not so much.
It all comes down to who is the administrator of the estate. Usually it’s next of kin by default unless farmed out to someone else in the will, and as a married couple, what’s his is equally hers. You can’t appeal a civil ruling on anything other than a point of law, so if the judge awards damages significantly less than the value of the assets. HP would be paid, and the family would move on. If the judge awards more than the assets, then she could literally lose the roof over her head. It’s all down to the awarding judge now, and both parties must accept it.
“ If the judge awards more than the assets, then she could literally lose the roof over her head.”
Although the likes of Mike Lynch et-al being what they are I’m sure it will turn out that there are assets placed beyond the reach of claimants, and that the former Mrs Lynch won’t find herself living out of a carrier bag and unsure of where her next Versace outfit is coming from.
Not that I’d actually criticise anyone for having made some sort of provision for their nearest and dearest in case of unforeseen circumstances…
It looks like in UK law the estate of the deceased can indeed be pursued. See the Civil Procedure Rules 19.8(2)(b), which outlines the appointment of a "Personal Representative" to take the place of the deceased. I think that, technically, the beneficiaries only become beneficiaries when the estate has been settled / totted up, and released to their control (probate is complete?), after which the estate ceases to be (and so cannot be purused further).
I think the real problem in pursuing an estate is that it's to some extent a one-sided pursuit. If you've got a something substantive to claim - say, an unpaid bill for a signed contract - it's pretty definitive. However, if it's a subjective or debatable issue, that sounds like it'd be difficult to say that all sides had a fair hearing; the pursued deceased has had no hearing at all, and a Personal Representative can probably rightly claim not to be able to fully represent the deceased in a complex matter, especially so if it comes down to a who-said-what argument.
In this case there has already been a damages hearing, with the result of that yet to be given. I suspect that the result of that could not be fairly appealed anymore, by either side. My guess is that, now, the future situation of the surviving dependents is also a factor the judge will assess, and that the courts will be keen to get this one settled ASAP without further appeals (especially if raised by the estate desparate to avoid financial oblivion for the dependents due to the level of damages awarded).
Having just been through this (nearly a year and a half to complete what should have been a very simple straightforward estate apart from a small shareholding for which the paperwork had been lost) the beneficiaries only get a payout once all the paperwork is finished, claims against the estate have been settled, taxman has taken his cut if that applies - beneficiaries get what's left.
Even for that small estate it was a surprisingly involved process with many, many bits of paper needing signed off by executors so don't underestimate the hassle.
It looks like in UK law the estate of the deceased can indeed be pursued.
Of course it can. You can't just (e.g.) borrow a million quid, leave it to your spouse and expect the creditors to be left hanging!
Of course HPE are not a creditor, but they have an existing claim and dispute with the Lynch estate. It's perfectly normal that this can continue, and will be settled before probate, inheritence, etc all gets sorted.
The weird bit here is describing HPE as "pursuing Lynch's widow".
They are doing nothing of the sort. They have a pre-existing claim against his holdings, they're free to pursue that. She doesn't need to have any involvement in that whatsoever (beyond it being mentioned during routine consults with her accountants). That's for the lawyers to handle. They have no claim against her, only against (part of) the estate which she is set to inherit.
I'm torn on this one...
One the one hand, HP and all of it's various companies and subsidiaries... are scummy, greedy and will screw over anyone they can given the chance.
On the other hand, they did get screwed over by another apparently scummy greedy company.
No... I'm not torn... fuck them all, the ones who got screwed over and the ones that are no longer laughing at getting away with it.
My only sympathies lie with the innocents who lost their lives.
As the supreme commander of the vessel, the one who takes responsibility for battening the hatches (even if not himself giving that command), Lynch was concerned with verifying the safety of the passengers and decided not to leave until all were accounted for. He died a noble death.
Any lingering questions about why Sushovan Hussain, the former Chief Financial Officer of Autonomy, is serving a 5 ys US prison term [www justice gov former-autonomy-cfo-sentenced-60-months-prison] have been erased by Lynch making the ultimate sacrifice on the Bayesian.
“ HPE could argue that pursuing Lynch's widow for what it is legally owed would negatively impact its reputation and share price, for example.”
At this point I’m not sure there’s anything HPE could do in relation to the Autonomy acquisition which could make either their reputation or market value any worse…
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