eDiscovery Daily Blog

Hewlett-Packard/Autonomy Deal Results in More Indictments: eDiscovery Trends

There continues to be more legal fallout from the Hewlett-Packard (HP) 2011 acquisition of Autonomy (which we covered here) and HP’s allegations that there were “serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy” before the acquisition (which forced HP to take an $8.8 billion charge in 2012.  Then, earlier this year, former Autonomy CFO Sushovan Hussain was convicted of 16 counts of wire and securities fraud related to the $10.3 billion transaction.  Now, more indictments have been handed down.

According to Bloomberg (Ex-Autonomy CEO Michael Lynch Indicated for Fraud Tied to 2011 HP Deal, written by Joel Rosenblatt), Michael Lynch, the former CEO of Autonomy, stepped down Friday as an adviser to U.K. Prime Minister Theresa May after he was charged with fraud in the U.S.  Prosecutors had long identified Lynch, 53, as a co-conspirator with Hussain.  The indictment, filed in San Francisco federal court, also names 46-year-old Stephen Keith Chamberlain, who was Autonomy’s vice president for finance, as a defendant. Lynch and Hussain also face a $5.1 billion civil case filed by HP in London.  Autonomy was the U.K.’s second-largest software business at the time.

Lynch used false and misleading statements from 2009, 2010 and early 2011 “to make Autonomy more attractive to a potential purchaser like HP,” according to the indictment, which says Lynch made $815 million when HP acquired his Autonomy shares.

Lynch’s lawyers called the indictment a travesty, saying it shouldn’t have been brought in the U.S. as it “targets a British citizen with rehashed allegations about a British company regarding events that occurred in Britain a decade ago.” They said the U.S. is making Lynch a “scapegoat” for HP’s “long history of failed acquisitions.”  But, Hewlett Packard Enterprise Co. (which was formed in the breakup of HP’s corporate computing divisions from its printer and PC business in 2015) praised the indictment.  “HPE believes that the facts uncovered during the course of this matter will further demonstrate the harm that was caused by Dr. Lynch, Mr. Chamberlain, Mr. Hussain and others to HP,” spokesman Emmanuel Fyle said in an email.

The charges were filed as lawyers representing Invoke Capital, a London-based venture capital firm founded by Lynch, are resisting a court order requiring Hussain to disclose details about his financial dealings with Lynch that prosecutors said raise concerns about “potential hush money.” Hussain, whose sentencing date was postponed, was required to disclose his stake, with Lynch, in Invoke and startup company Darktrace Ltd.

The government has argued that Lynch’s reassembling of his Autonomy inner circle at the new firm, including Hussain, isn’t illegal by itself but may have created financial relationships that prevented some of those people from coming forward as witnesses.

It certainly appears that the fallout from this 2011 acquisition will continue for some time to come.

So, what do you think?  Will we see an eDiscovery deal like that again?  As always, please share any comments you might have or if you’d like to know more about a particular topic.

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