Home Secretary Approves Autonomy Founder’s Extradition to US

Home Secretary Priti Patel has approved the extradition of a British tech tycoon to the United States to face criminal fraud charges.

It comes after Dr. Mike Lynch lost a multibillion-dollar fraud suit on Friday over the sale of his software company Autonomy to Hewlett Packard (HP) in 2011.

He is accused of deliberately overestimating the value of his company before it was taken over by the American technology giant.

HP, now Hewlett Packard Enterprise (HPE), has sued Dr Lynch and former Autonomy chief financial officer Sushovan Hussain for around five billion US dollars (£3.7 billion), over his purchase of the Cambridge-based company for US$11.1bn (£8.3bn) more than a decade ago.

Home Secretary Priti Patel has been asked to make a decision on Dr Lynch’s extradition to the US by the end of Friday (Victoria Jones/PA)

Announcing his decision on the case at the High Court in London on Friday, Judge Hildyard said HP had been “substantially successful” in its various claims against the two men – but was likely to receive “substantially less” than the amount claimed in damages.

Dr Lynch has denied all charges against him and signaled that he intends to appeal against the High Court judge’s decision.

This decision coincided with a deadline for the Home Secretary to decide whether Dr Lynch should be extradited to the United States.

A Home Office spokesman said: ‘Under the Extradition Act 2003 the Secretary of State must sign an extradition order if there are no grounds for barring the prescription. Extradition requests are only sent to the Home Secretary once a judge decides he can proceed after considering various aspects of the case.

“On January 28, after review by the courts, the extradition of Dr. Michael Lynch to the United States was ordered.”

On Wednesday, Ms Patel was given until midnight Friday to decide on her extradition after a High Court judge ruled against Dr Lynch’s legal challenge within a previously set deadline.

Ms Patel had wanted to consider Judge Hildyard’s decision on the High Court civil complaint before making an extradition decision.

US authorities say Dr Lynch deliberately overstated the value of his company, which specializes in software to sort through large data sets.

Mike Lynch
Dr Lynch has accused HP of trying to ‘scapegoat’ him for his ‘failures’ (PA)

Chris Morvillo, of Clifford Chance law firm – representing Dr Lynch, said in a statement after the Home Office announcement: “Dr Lynch strongly denies the charges against him in the United States and will continue to fight to establish his innocence.

“He is a British citizen who ran a British business in Britain subject to British laws and rules and that is where the matter should be resolved.

“It’s not the end of the battle, far from it.

“Dr Lynch will now appeal to the High Court in London.”

Earlier, Kelwin Nicholls, another Clifford Chance lawyer representing the contractor, said after the High Court judge’s decision: ‘Today’s result is disappointing and Dr Lynch intends to appeal .

“We will study the full judgment over the next few weeks. We note the judge’s concerns about the reliability of some of HP’s witnesses.

“We also note that the judge expects any loss suffered by HP to be significantly less than the five billion dollars (£3.8 billion) claimed.”

Judge Hildyard presented a summary of his findings in the case on Friday, more than two years after the start of what was believed to be the UK’s biggest civil fraud trial – which lasted nine months in 2019 .

He said Dr Lynch and Mr Hussain had given a “misleading image” of the company, including by “reselling” hardware to allow Autonomy to cover software shortfalls.

Judge said: “The purpose of the hardware sales strategy was to meet market expectations for revenue maintenance and growth, misleading the market as to Autonomy’s true position in the market.

“These loss-making transactions had no commercial justification.

“The justifications put forward by the defendants were only pretexts to increase the revenue declared in the accounts.

“The strategy was not intended to increase software sales. This rationale was a pretense, designed primarily for the audit committee and Deloitte, who would not have approved the accounting treatment without the pretense.

“The concealment of hardware sales and their true cost in Autonomy’s accounts and other published information was necessary because the exposure of Autonomy’s use of hardware sales and gross margin erosion would have negated their true goal.

“It would have revealed that Autonomy’s software business was not generating the revenue and profit acceleration that the market believed it was, and which strongly influenced its price.”

Judge said Autonomy was founded in 1996 by a company called Cambridge Neurodynamics, an early venture in using “machine learning” to develop software techniques that Dr Lynch explored in his doctoral dissertation at the University of Cambridge.

His full judgment in the case is expected to be released at a later date but remains under embargo until then.

During the civil lawsuit in 2019, HP said the writedown in Autonomy’s value was due to it discovering “serious accounting irregularities”.

Laurence Rabinowitz QC, representing HP, said Dr Lynch and Mr Hussain had knowingly caused Autonomy to “engage in a program of widespread and systematic fraudulent accounting practices” prior to the sale.

He said Autonomy had “achieved its revenue and revenue growth goals by simply buying and selling third-party hardware, without any connection to Autonomy software.”

Mr Rabinowitz added that the company had also used “a variety of other fraudulent devices” to accelerate revenue or to invent revenue that never existed in the first place.

Both men have denied the allegations and Dr Lynch has launched a counterclaim for at least US$125m (£95m) in damages against HP for “a series of false, misleading and unfair public statements regarding his alleged liability for the supposed accounting. irregularities and misrepresentations to Autonomy.

He accused HP of “making a series of outlandish allegations of fraud and scapegoating”, saying it had “destroyed one of the most successful and promising software companies of its time due to the incompetence of management, politics and infighting”.

Dr Lynch, from Suffolk, claimed the tech giant was trying to make him “a scapegoat for their failures”.

Mr. Hussain was convicted in April 2018 in the United States of wire fraud and other crimes related to the sale of Autonomy and was sentenced to five years in prison.

In separate criminal proceedings in the United States, Dr. Lynch faces charges of securities fraud, wire fraud and conspiracy in federal court relating to the sale of Autonomy.

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