Mike Lynch's Estate and Business Partner Owe HP $944M, Court Rules

The estate of Mike Lynch, who died a year ago when his superyacht sank off the coast of Sicily, and his business partner owe Hewlett-Packard more than $944 million, a court has ruled. From a report: The US technology company has been seeking damages of up to $4.55 billion from the estate of the late tycoon, once hailed as the UK's answer to Microsoft founder Bill Gates, over its disastrous takeover of his British software company Autonomy.

Lynch's estate has been estimated to be worth about $674 million and paying its share of the $944 million damages could leave it bankrupt. He and six others, including his 18-year-old daughter Hannah, died last August on a trip celebrating his acquittal on US fraud charges relating to HP's $11 billion takeover of Autonomy in 2011. However, HP won a separate six-year civil fraud case against Lynch and his former finance director Sushovan Hussain in the English high court in 2022, with Mr Justice Hildyard ruling that the US company had been induced into overpaying for the business.

Hm...

[Mr. Dollar Ton]

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.

So, you do due diligence, you fire the guy who set up the deal, but you pay nevertheless, then it turns out there was more diligence due or perhaps you didn't manage to manage it so well, and then you sue, so that your failure becomes someone else's problem? Neat.

Re:Hm...

[omnichad]

HP has made a lot of dumb decisions. Remember the huge fire sale on their WebOS tablets? The OS was actually pretty good but they just didn't know how to sell it. WebOS still runs LG TVs to this day.

Re:

[hambone142]

The tablet was "designed in a vacuum" by employees from acquired Palm. They paid no attention to manufacturing and material cost. In the end, the cost would be close to an iPad and no one would pay that much for a new tablet with a different OS. They sold them on a fire sale to employees at $100 each but their landed cost was closer to $300. Best Buy forced HP to buy back a load of the HP tablets because they wouldn't sell.

They made up the deal in quantity :-)

Re:

[registrations_suck]

Yeah. WebOS sucks, and it is precisely why I will never buy another LG TV.

Re: Hm...

[omnichad]

You sure it's a problem with webOS? LG puts some fairly underpowered CPUs in their TVs (like most other brands). It's why I use a full size Roku box with any smart TV I buy. But I think the OS itself is decent and fairly stable.

Re:

[UnknowingFool]

So, you do due diligence, you fire the guy who set up the deal, but you pay nevertheless, then it turns out there was more diligence due or perhaps you didn't manage to manage it so well, and then you sue, so that your failure becomes someone else's problem? Neat

But you seem to ignore if fraud was involved. While Mike Lynch was cleared of criminal fraud, it appears HP won on civil fraud cases in a UK civil case [yahoo.com]: "He [Justice Hildyard] said that Autonomy had not accurately portrayed its financial position during the purchase, but even if it had, HPE would still have bought the company, but at a reduced price."

Re:

[Marful]

I don't know the details, but I do it's easy to win cases when the defendant is dead and there are no opposition witnesses...

Re:

[Mr. Dollar Ton]

Yeah, thanks for confirming what the article above said - that the company did not perform proper due diligence. This is how you pay more than you later think you should. Incidentally, the HP has not yet won. As your link mentions, the case will be appealed. Who knows the outcome?

Re:

[Retired Chemist]

A proper due diligence might well have found the misrepresentations. Six hours of due diligence is not due diligence. Warren Buffet is famous for spending weeks researching any acquisition. The members of the board who approved this should all be held accountable. The defendants in the civil case should appeal on the grounds that no fraud was committed because HP clearly did not care about the financials.

Re:

[topham]

You're effectively saying that they didn't find fraud up front so even if there was fraud it's not the companies fault that perpetuated the fraud.

Now, I do agree the board of directors at HP needs to take some financial responsibility for it too; they were obviously rushing it through, but unless they were specifically a party to the fraud in question that responsibility is not equivalent.

Re:

[Retired Chemist]

I just find it hard to believe that an adequate due diligence process would not have found the fraud. Presumably the company being acquired had an outside auditor, who should have signed off on the books. If they were no consulted or did not find the fraud, then they should also be culpable.

Re:

[evil_aaronm]

No, he's saying they slapped the top of the car and said, "There's no fraud in this baby," and that was it. 6 hours of research for an £8bn deal is simply pathetic, if not criminally negligent.

Re:

[thegarbz]

there was more diligence due

You're assuming due diligence will uncover fraud. That's false. You can't just keep looking into something until you uncover fraud. That is highly dependent on the actual coverup. The courts already ruled there was a complete misrepresentation. If they cooked the books no amount of diligence will uncover the problem. There are many companies that have gone through countless hours of scruitany only to be in the same situation so saying "there was more diligence due" is really just peanut gallery speak on the

Re:

[Mr. Dollar Ton]

You're assuming due diligence will uncover fraud. That's false.

LOL. 6 hours to check out a company that HP was prepared to dump 8 billion 2012 dollars means only one thing - that HP didn't care.

Too alarming, now, to talk about.

[Pseudonymous Powers]

Forget this dead fraudster. What I want to see is consequences for the people at HP who put this deal together.

Re:

[Luthair]

That's an interesting point - isn't the board responsible for overseeing both risk & finances? The acquisition is big enough that it must have needed board approval and diligence would have been part of that oversighte.

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[hambone142]

HP's Board has been incompetent since the hiring of Fiorina.

Re:

[thegarbz]

In what way? Was it their fault for the way they dressed? If they were victims of fraud (as the civil case found) why punish the victims.

Re:

[Pseudonymous Powers]

Yes, in that they were probably dressed as finance dudes, and finance dudes are supposed to do due diligence before completing a billion-dollar sale, instead of just taking every megayachtster at his word. That is their whole job. It seems that they did not do it.

And now he's Ken Lay's neighbor

[SomePoorSchmuck]

Just like Ken Lay, when ruling class assets are being seized and you face potential criminal/financial troubles for the rest of your life, you fish through your couch cushions and cobble together 10-15 million dollars to "die" and spend the rest of your days watching the sun rise from your beachside mansion on an unmarked island.

Did anyone at HP actually try Autonomy?

[DeplorableCodeMonkey]

Anyone who had the questionable experience of deploying it could have told HP's leadership that Autonomy was super sus.

One of the gotchas, and it was a serious known issue, was that the configuration system was like "university case study in bad software design that fails silently" tier bad.

No kidding. One single screw up, I believe as little as one extra space at the end of a configuration line, could cause it to not handle the config file correctly.

And it didn't help that IIRC most or all of the data engi