Mike Lynch loses US extradition delay bid: Flight across the Atlantic looks closer than ever Former Autonomy CEO Mike Lynch has lost a bid to delay his extradition to the US after a High Court judge ruled there was no reason to impose a months-long delay on the case. Mr Justice Swift dismissed Lynch's application for judicial review this morning, saying the entrepreneur failed to successfully argue that Home Secretary …
Yes, in this case, a foreigner is accused of defrauding one of Americas "darlings" and he's had the audacity to challenge the extradition using every possible avenue. The prosecution are going to be out for blood! Not least because the big pay day of a high profile complex trial has been delayed time and again and the prices of private yachts is going up every year!
Whether he's guilty or not, I don't fancy his chances.
To be fair here... a federal appellate court reversed some of the LIBOR rate trial decisions. One of the men extradited had his overturned, so... it's not all crap. According to the judge part of the prosecution's crucial argument was not necessarily illegal, and as such couldn't be used to prosecute them. Now the question is... will that go to the US Supreme Court (unlikely), and if not, who pays their compensation, if they were to sue for it.
What kind of a person Lynch isn't under discussion, I'm sure the same could be said for a heap of "captains of industry", especially in IT. What is under discussion if whether he and others committed fraud despite the apparent due diligence by HP and its auditors and whether they should be extradited to the US to stand trial despite an ongoing civil case in the US.
If you look at the history of mergers and acquisitions you will see that the majority of the big ones are written down at some point afterwards, because apparently not all the facts were disclosed. In reality, this is just usually some shareholders profiting at the expense of others. I mean, is this deal substantially different to Microsoft's purchase of Nokia Phones sans IP?
It's all very strange.
Due diligence should have detected fraud, especially given the notional value of the deal. But such is politics. It seems odd though that there are multiple bites of the cherry. So as I understand it, civil trials have a lower burden of proof. So if Lynch is cleared in the civil case, and the charges & evidence is much the same in the criminal, why might that succeed, where the civil case may have failed?
OK, so the US is different to the UK, but it would seem fair to delay extradition until the verdict is in on the civil. Seems to me that would have big implications for both prosecution and defence. So judge rules not guilty & reminds HP about caveat emptor. The US might then decide to trim charges, or not prosecute. Or maybe it's guilty, and time to work on a plea.
I guess it's not that uncommon to end up with civil & criminal trying the same thing, but the process doesn't seem entirely fair.
Fraud is strange. Fraud in a public company is stranger still. Hopefully it is also rare. Sadly due diligence is very unlikely to detect fraud in a public company with audited accounts and quarterly reports. The Auditors have been found guilty and given a record fine. So that is three forums trying the same thing. Strange indeed.
I don't think it should be that hard to detect. I've assisted with due diligence a couple of times. I'm not an accountant or auditor, but my bit was pretty straightforward, namely to sample supplier and customer contracts to see how healthy those looked.
HP or it's advisers could / should have done the same thing, which should have showed irregularities with stuff like revenue recognition.
"The US might then decide to trim charges, or not prosecute."
LOL. That ain't how this works. The outcome is predetermined, the only question is how they'll get there.
Whether Lynch deserves to get off or not, I don't really know. But the idea he's going to face a fair trial is absurd, and the extradition request should have been flatly turned down on that ground.
I think this has the ethics backwards: criminal trials (in both the UK and the US) are supposed to be about weighing offenses against society as a whole (i.e. "crimes"). A civil trial is about weight a dispute between two (or more) individuals.
So obviously, IMHO, a criminal trial is a higher priority than a civil one.
And while Lynch and HPE are squabbling over, effectively, money, the whole point of a criminal trial for fraud is that you can be guilty of wire fraud even if the sums are negligible (not that anyone would prosecute a wire fraud for $1, but the principle remains).
So to me this is fundamentally Lynch trying to say something like he shouldn't be extradited because he's locked into a dispute with the milkman over unpaid bills for a couple of pints of gold top! And actually it's worse: the HPE/Lynch suit is practically done, except the judgment hasn't been handed down. There's no reason why Lynch shouldn't wait for the results in the USA instead of the UK!
(As to the issues of the US Justice system, etc... those are real, but effectively unchangeable on a case-by-case basis).
"So obviously, IMHO, a criminal trial is a higher priority than a civil one."
If they were both in the same jurisdiction, that should very well be the case. But in this instance, it's a matter of jurisdiction sovereignty. The UK gets first bite of the cherry with the civil case. The USA has to wait until that's over because the extradition is a request which the UK can refuse. Although there are treaty-based rules, it''s still pretty much a "gentleman's agreement". And as others have mentioned, the outcome of the civil trial likely will have huge ramifications for both prosecution and defence in the US criminal trial, possibly to the extant of the UK turning around and refusing the extradition if the civil case, with it's lower bar, finds no guilty.
@John Brown (no body) “If they were both in the same jurisdiction, that should very well be the case. But in this instance, it's a matter of jurisdiction sovereignty. The UK gets first bite of the cherry with the civil case.”
That first bite would also apply to a criminal case. But it seems that the SFO declined to prosecute for the reason below from an earlier Reg article.
“Despite suggestions that Britain's Serious Fraud Office (SFO) could prosecute Lynch in the UK if they felt like it, the SFO declined to to do and handed the case over to the US. Based on testimony from SFO solicitor Ronan Duff, Judge Snow said the SFO's witness evidence would "not have constituted admissible evidence in the English courts" and that it might be difficult to obtain the co-operation of US-based witnesses in a UK prosecution.”*
So, there is insufficient admissible evidence for a prosecution in the English courts, so Lynch is going to be extradited to the US where not only are the rules of evidence different, but also the accountancy laws. One example is the inclusion of sales in the accounts that have been agreed but payment has not yet been received.
The sale of Autonomy comes under UK jurisdiction, the company is a UK company, the accounts must adhere to UK financial rules. If there is no case to answer in the UK, then Lynch should not be extradited to the US because the rules are different to the rules Lynch was operating under.
That's why waiting for the civil case before deciding on extradition is what should have happened as it would show if there would have been a case to answer in the UK
*US-based witnesses did not seem a problem for the UK civil case plenty appeared so why would at not be the case for a UK criminal trial.
@Yougottalaugh The FRC investigation was only into the actions of the auditors, not Autonomy or Lynch. So, while FRC found in their words “The Tribunal found that Deloitte, Mr Knights and to a lesser extent Mr Mercer, were culpable of serious and serial failures in discharge of this public interest duty.”, those findings apply solely to the actions of the auditors.
The FCR findings aren’t evidence that Autonomy or Lynch did or did not adhere to UK financial rules. Which if I remember correctly is probably why the Judge in the civil case did not allow the FCR findings into evidence. Probably another reason why the SFO did not have the evidence to prosecute a criminal case against Lynch.
So, I will reiterate “The sale of Autonomy comes under UK jurisdiction, the company is a UK company, the accounts must adhere to UK financial rules. If there is no case to answer in the UK, then Lynch should not be extradited to the US because the rules are different to the rules Lynch was operating under.”
"Which they clearly did not. According to the FRC who gave the auditors a record breaking fine."
The accounts did, the auditors didn't. Have a look at the FRC report. The auditors were stating they'd checked things they hadn't, lying, etc. That doesn't imply anything about those areas except that they were unchecked.
As reported previously “Deloitte has been fined £15m by the Financial Reporting Council (FRC) for “serious and serial failures” in its auditing of British software company Autonomy prior to the latter’s acquisition by HP for $11bn”. The outcome of the civil case is unlikely to have any ramifications for the criminal case which is highly likely to cover the same evidence the FRC considered.
https://www.theregister.com/2020/09/17/autonomy_deloitte_auditors_fined_15m/
@Malcolm.
Not a bad analogy but missing one point. The US wants to try Lynch for stealing milk. Whilst HPE (the milkman) is also chasing him for the bill for that stolen milk.
The allegation that he stole milk is being first tested in the UK. If this is rejected it fundamentally calls into question whether there was any milk stolen in the first place in which case the US prosecution is uncalled for and the extradition unsafe.
Whilst they may legally be quite separate it raises a valid question for the Home Secretary as to whether trying Lynch for essentially the same crime in 2 jurisdictions is a good use of the Extradition treaty.
(As an aside I do love the concept of the Extradition Judge trying to get Patel to hurry up. - It begs the question as to whether he can compel her to sign the extradition in his timescale rather than hers.)
In England, you can have a civil and a criminal case on the same event.
For example, if you are involved in a car crash, there will be be a civil case to establish who was to blame, and to claim the costs of repairing / replacing the cars etc. Usually this will be settled out of court by the insurance companies, but sometimes it can go to court.
There might also be a criminal prosecution for dangerous driving, drunk driving, or similar.
Being found guilty in one does not mean you would be found guilty in the other. For example, you might have been drunk, but the crash wasn't actually your fault. The crash might be your fault, but you didn't drive dangerously.
It may be legal to drink some alcohol in country X but is not in country Y.
Would extradition from country X to country Y, to face charges of drink driving in country X under the law of country Y, be a reasonable action under law?
As far as I can tell, the "offences" took place in the UK. HP came to the UK to do a deal and (they claim) were ripped off. Going to court, filing complaints or whatever lawful actions can be taken in the UK is fine and the correct approach. Taking the case to court to another juristiction is approaching "choosing laws to suit the plaintiff".
... whether he and others committed fraud despite the apparent due diligence by HP and its auditors ...
Of course ...
Sleazy Mike managed to pull a fast one, not only on HP but also on their lawyers, banks, auditors, etc.
... judgment still hasn't been handed down, two years after the last hearing in the case.
That this is still so is nothing short of a very embarrasing judicial scandal.
And a very large, greasy stain on both Mr Justice Hildyard's robe and powdery wig.
O.
"That this is still so is nothing short of a very embarrasing judicial scandal."
Whut? Why? That's a typical timescale for this sort of case. It takes bloody forever to re-read and analyse all the evidence, and write a judgment on it. There are immense piles of statements to be gone through, expert evidence to assess, and so-on.
> is this deal substantially different to Microsoft's purchase of Nokia Phones sans IP?
Yes. Microsoft was trying to bail-out a known-failing Nokia, because the survival of their Windows Mobile OS was on the line.
HP didn't intend anything like that. They just saw big profits from a massively successful company.
I spent a good deal of my working life dealing with the results of suggestions on how to get good information on which to make decisions, starting with science and technology, which was fairly well supplied with publishers and database suppliers who actually checked their material and had good tools to improve the quality of searches.
Of course that was when the quantity of information available was relatively limited and was well organised.
Then came the computer, long before my time I must say, but it's application to information retrieval was generally well invested and genuinely improved quality.
Then came the claims that the computer could solve everything..... we know that wasn't and isn't true, but it didn't stop the claims.
The came Autonomy, out of the brains of Oxbridge, no less, based on the brains of a vicar from the 18th century, or was it the 17th?
The claims were outrageous, unless the datasets were simple stuff, such as names and addresses, and even there there were hiccups. All grist to the Autonomy mill, as long as you paid money to have your dataset massaged to fit the software. Even more outrageous claims were the result.
The funniest part of the story is that HP, the darling of the garage sales, or was it the garage size? paid seriously outrageous money in $ which were worth something at the time, to add Autonomy to their stable. Problem was the horse couldn't run....
In the M$/Nokia case I think the fault lies with the buyer. Not checking carefully *what* you are buying is a tad foolish. They knew Nokia had given up on actually making and selling phones, after being creamed by Apple. There are other examples: BMW and VW vied to buy Rolls Royce/Bentley. In the end BMW got Rolls and VW got the rest. Then BMW found that what they had bought was the *brand*, not the designs, copyrights and, most crucially, the fully-staffed operational factory in Crewe. Which is why Rolls now has a new factory near Goodwood, costing BMW a significant sum. No use owning a brand if you thought you bought a car factory.
In 2000-2002 I worked for a company (Inktomi) that had bought a competitor to Autonomy's then flagship product. We observed that the Autonomy product was tailor made to maximise implementation consultancy fees and delay the customer from actually trying to *use* the product for as long as possible, presumably in the hope that they'd give up and walk away after having enriched Autonomy to the maximum extent possible. Mind you there are other examples that used this strategy, but none so blatant as far as I know. Can someone find us a nice friendly snake oil salesman? He would be far more honest.
There are entire novel series' that barely hit that kind of page count after several books in a row, so having it all in a single document just makes one wonder how the hell *anyone* is supposed to read it all in anything under several months.
I know he wants to delay the extradition, but "until the heat death of the universe" seems a rather lofty goal.
Given the time required to give it a proper read, absorb all the details, go back over it with a legal-fine-tooth-comb to untangle it, consider & research & review all the case law that might apply, and collate all the notes together to allow the creation of a proper reply, I envision such a task taking *YEARS* to do a proper job thereof.
I can't see any judge accepting such a delay on anything but the most dire of legal issues set before them, and a simple case such as this doesn't even come close. =-/
Why should anyone be being pressured? Why is two years a long time to do the work in question?
I mean, it just isn't reasonable to expect anyone to rule on such extensive and complicated evidence in a short time. It all has to be assessed and weighed up. Simply reading all the evidence with appropriate levels of attention would take many months.
What are you taking about? You don't need humans for that
"The Autonomy Intelligent Data Operating Layer (IDOL) platform allows you to automate the way you analyze and understand unstructured data, which makes up over 90% of enterprise data. Autonomy’s IDOL Knowledge Management solution provides industry-leading search and analysis of data, with integrated retrieval and interaction capabilities."
Yours for 50p.
Still, I'm struggling to understand how he can be extradited while the UK fraud case is unresolved.
Because the USA government wants to give a USA company its money back. Money that it lost as it did not do due diligence before it bought Autonomy. Once he is in the USA he will be found guilty no matter what is the outcome of the UK fraud case. He will prolly be offered a plea bargain: admit guilt or risk 200 years in prison.
Because the USA government wants to give a USA company its money back.
Hmmm ...
Because the some parties within the USA government wants to give a few high stake shareholders of a USA company corporation with deep money connections to the last party in power its their money back.
Reads better now?
Remember that HP shareholders who sued HP over the absurd 8.8B write-down settled for a pittance, so this is not an issue related to them.
No one is asking the most important question:
Just whose money did HP flush down the corporate toilet?
O.
its going to be interesting, is Patel a true Brexiteer or just a sheep?
A true Brexiteer would take back control and stick two fingers up at the US.
However, I suspect just like Boris, Farage, et al, being a lapdog to US interests is more important - just wrapper it in some weasel words blaming the EU...
This is correct. It's exactly what we used to do. They can't admit that their business leader's been outmanoeuvred because of their business by join the dots, and they want the money back.
She was reading business management from a book on the way to work in my opinion. Pure greed.
We used to do it when we were a superpower, they're doing it now they are.
It's about creating such unbelievable threats that he backs down and gives the money back.
imho, In reality the woman in charge of HP shouldn't be allowed to work in business again, but the US won't see it that way, because she's an American and female. Her incompetence and greed caused it, and they want the money back.
It's the equivalent of Peter Cook in Monte Carlo or Bust announcing to the French Police, "I'm British you know" in the hope that Britain would conquer the country (like we used to,) if they screwed with our citizens.
Superpowers do this sort of thing. Different rules apply. Contrast the difference between Union Carbide and Deepwater Horizon. It's exact what we did, so it's hypocritical to criticise. They'll threaten him with life in a super max, he'll do a deal with the Department of Justice. Fairness has absolutely nothing to do with it. If it did, the lady at the top of HP would be serving time for incompetence imho.
> In reality the woman in charge of HP shouldn't be allowed to work in business again, but the US won't see it that way, because she's an American and female. Her incompetence and greed caused it, and they want the money back.
Pretty sure this started on Léo Apotheker's watch who is male as far as I am aware…
If the outcome of an extradition is irrespective life in prison surely this would lead to potential suicide and so no possibility of extradition.
Foot-Gun conjunction of the unbalanced* US-UK extradition treaty.
*one side has to provide evidence and cause, the other merely an allegation, I leave it to the learned reader to postulate which is which.
I'm quite sympathetic to Lynch. However, there are some things that go against him:
1) he seems to have inflated 'pure' 'software' sales figures by recategorising hardware sales. This must have been done because software sales appear to be more profitable than hardware sales. Why else would he have done it.
2) him or HP will surely appeal the civil case. Does the US prosecution need to wait until the appeals are complete before he is extradited? This could be a long time. And Lynch seems to be benefitting from this delaying tactic. Whether extradition is right or wrong, Lynch is avoiding the case in the US with this tactic. I can see why the US are getting pissed about that.
3) The UK case is just a civil case. Presumably Lynch's offence in the US on wire charges are relatively separate grounds. In that they'll be he gave misleading statements that facilitated his gain. Per 1), it seems probable that he's done enough to have done that. As a result, whether or not the civil case works out in favour of Lynch (which could still be years and years away given appeals etc), he probably still has separate legal issues to face in the US on wire charges. I.e. he might avoid paying out in the civil case on some technicality, but still have done enough to commission the wire fraud.
I'm as sympathetic to Lynch as most given that HP have been terribly managed and probably just have huge buyers remorse that they overpaid.
No-one comes out of this looking good. I suspect Lynch knows if he goes to the US his turkey is probably stuffed.
All I can say is best of luck to Lynch in the US. If I were him I'd probably take the plea bargain. I wouldn't want the US to throw away the key. How grim.
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