TECH BOSSES are used to being feted by the British institution. A heat welcome at 11 Downing Avenue, as soon as reserved for Metropolis grandees, is more and more provided to fintech upstarts. Budgets are tailor-made to their lobbyists’ buying lists. MI6’s chief spy has pledged that spooks will work with them on new applied sciences.
However there's a massive exception: Mike Lynch, aka “Britain’s Invoice Gates”. In 1996 he based Autonomy, a software program agency that he bought in 2011 to an American tech big, Hewlett-Packard (HP), for $10.3bn (then £6.2bn). It stays the biggest-ever sale of a British software program firm. However on January twenty eighth, after a decade of authorized warfare, a high-court choose dominated that Mr Lynch had fraudulently inflated the agency’s worth by deceptive HP about its efficiency. Hours later Priti Patel, the house secretary, accepted Mr Lynch’s extradition to America on prison costs for a similar fraud allegations.
Mr Lynch will enchantment in opposition to each choices. They however mark the shut of Britain’s greatest fraud trial. HP sued for $5.1bn (the choose expects to award “considerably much less”), having written $8.8bn off Autonomy’s worth the yr after shopping for it. The trial lasted 93 days, 20 of which Mr Lynch spent being cross-examined. He then needed to wait two years for the ruling.
Nobody has come out trying good. The choose dominated that Mr Lynch and his former chief monetary officer, Sushovan Hussain, had dishonestly padded revenues. Below their course, Autonomy met income targets by promoting hardware at a loss in transactions that served no industrial goal and weren't disclosed to the market. They bought software program to pleasant resellers whom they reimbursed by shopping for merchandise from them that Autonomy had “little or no recognized want or use” for, creating phantom income. Mr Lynch’s arguments that he knew nothing about any fraudulent transactions, and that the variations they made to Autonomy’s valuation have been in any case immaterial, have been dismissed.
Deloitte, Autonomy’s auditor, emerged tarnished, too. In September 2020 the nationwide accounting watchdog fined it a record-breaking £15m ($20m) for “severe and serial failures” in its audit. Amongst them was accepting Autonomy’s description of $28m in prices for hardware it bought as a gross sales and advertising and marketing expense. Two of the audit agency’s then-partners, Richard Knights and Nigel Mercer, have been handed private fines of £500,000 and £250,000.
Regardless of its victory, HP hardly emerged smelling of roses. Through the trial Léo Apotheker, its chief govt on the time of the acquisition, admitted to not having learn Autonomy’s most up-to-date monetary experiences earlier than shopping for it. Nor had he learn the due-diligence report ready by KPMG, HP’s advisers; not being a chartered accountant, he mentioned, he “wouldn't have been in a position so as to add any worth”. (His chief monetary officer had not learn it both.) Quickly after the acquisition, Mr Apotheker was sacked.
The case shines a highlight on Britain’s extradition treaty with America. Signed in 2003 within the aftermath of the terrorist assaults of September 2001, it has since come beneath hearth for being overly beneficial to American prosecutors. Mr Lynch is interesting in opposition to his extradition, arguing that as a British citizen whose firm was headquartered in Cambridge and listed on the London Inventory Alternate (LSE), he ought to be tried for any prison costs in Britain. MPs are disquieted, too. Tom Tugendhat, a Tory management hopeful, has known as for the treaty to be “rebalanced”.
The end result casts a pall over Britain’s tech scene, the place Mr Lynch is just not solely probably the most profitable latest exponent but additionally a key investor. Invoke Capital, the venture-capital fund he arrange after promoting Autonomy, is the one one in Europe to have its personal in-house R&D division, which it has used to spice up early-stage companies engaged on artificial-intelligence and machine-learning applied sciences. The primary such funding, Darktrace, a cyber-security agency, floated on the LSE in April final yr. None of this excuses fraud, which Britain’s courts have determined Mr Lynch is responsible of. However others moreover him shall be sorry about that. ■
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