Mike Lynch's estate faces bankruptcy over £700m fraud ruling

Telegraph

5 days ago

Mike Lynch 's estate has been effectively bankrupted after being ordered to pay £700m in a fraud case over the late British tycoon's business dealings.
A High Court judge ruled that Lynch should compensate Hewlett Packard (HP) over the fraudulent sale of his software business Autonomy in 2011.
The ruling comes 11 months after Lynch and his daughter Hannah died in a freak storm that sank his Bayesian superyacht.
The decision means the software boss would be expected to pass nothing to his widow and surviving daughter, unless the ruling is appealed. His wife, Angela Bacares, has her own assets that are legally separate from her late husband's estate and will not be affected by the ruling. Ms Bacares's stake in technology company Darktrace was worth more than £300m before the business's sale last year.
Lynch sold Autonomy to HP for £7bn in what was the biggest ever acquisition of a British technology company, but the Silicon Valley giant later accused him of fraud and sued him in the High Court.
He was found liable in 2022 but the long-running case was thrown into limbo by his death off the coast of Sicily in August last year. Lynch, 59, and his daughter were among seven who died when the Bayesian capsized.
The software entrepreneur had been on holiday to celebrate his acquittal in a criminal trial linked to the disastrous sale of Autonomy.
US prosecutors had accused Lynch of masterminding a criminal scheme to defraud investors by artificially boosting Autonomy's revenues using accounting tricks and 'round-trip' transactions, but a jury cleared the entrepreneur after an 11-week trial. Lynch, who had faced a long spell in prison if convicted, said he had been granted a 'second life' after the verdict.
Lynch's net worth had been estimated at $450m (£333m) in the separate US legal proceedings.
On Tuesday, Mr Justice Hildyard said HP suffered a loss of around £646.2m related to misleading accounting and a further £51.7m related to Lynch's representation, in addition to further costs.
However, the damages are far less than HP had been seeking, and substantially less than the $8.8bn that the company wrote off Autonomy's value when it accused Lynch of improper accounting.
In a posthumous statement written before his death, Lynch said: 'Today's High Court ruling reflects that HP's original $5bn damages claim was not just a wild overstatement – misleading shareholders – but it was off the mark by 80pc.
'HP acquired Autonomy for $11.6bn and today's judgment is a view that Autonomy's actual value was not even 10pc below the price HP paid. This result exposes HP's failure and makes clear that the immense damage to Autonomy was down to HP's own errors and actions.
'An appeal process will be considered later this year. The English civil case included hearsay evidence from the US, and we were never able to question or cross-examine those witnesses.
'This is in direct contrast to the rights of defendants in the US legal system. 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?'
HP sued Lynch and Autonomy's chief financial officer Sushovan Hussain in 2015 seeking $5bn. In 2022, Mr Justice Hildyard sided with the company, saying the pair had been 'dishonest' and 'obsessed' with propping up Autonomy's share price.
Mr Hussain settled privately with the company, now known as HPE, earlier this year.
HPE had pressed ahead with the lawsuit after Lynch's death, saying it was 'in the best interest of shareholders'.
Jeremy Sandelson, a lawyer who is managing Lynch's estate, said he would consider whether to appeal.
'This detailed judgment awards substantial damages to HP. As administrator it is now my duty to consider the interests of all parties with a stake in Dr Lynch's estate, including HP and Dr Lynch's widow,' he said.
'I will now be examining the judgment carefully and assessing the appropriate next steps, including whether to appeal both the original 2022 finding of civil liability against the late Dr Lynch and the damages awarded today.'
A further hearing will follow in November to determine details of the settlement and a potential appeal.
An HPE spokesman said: '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.'