Sometimes, you write about a story that just won’t quit, even years later. The HP Autonomy scandal is one of those stories and it serves as a cautionary tale today for “irrational exuberance” in eDiscovery investment. And, hey, at least it gives me an opportunity to bring back my Dr. Evil graphic from nearly ten years ago!
Autonomy was a company that was built over 15 years and built itself up through several acquisitions over that time, including acquisitions of Verity, Zantaz and Interwoven, among others. Autonomy itself was then acquired by Hewlett-Packard (HP) in October 2011. The deal valued Autonomy at $11.7 billion and the combined company became known as HP Autonomy. Great news, right?
Not so much. Within a year, HP had written off $8.8 billion of Autonomy’s value (hence the Dr. Evil graphic above), alleging that Autonomy falsified its financial statements. Whoops. At the time, Mike Lynch, the founder of Autonomy, fiercely denied the allegations and the HP Autonomy scandal was born. Was he right? Well, the linked article above from The Guardian noted a “red flag” that Autonomy and its CEO Lynch, were, on occasion, “combative” towards the analysts that covered it.
Then, in 2018, Autonomy’s former chief financial officer Sushovan Hussain was found guilty of 16 counts of wire and securities fraud by a San Francisco court (yeah, that’s a big bright red flag) in advance of a $5.1 billion civil suit brought by HP in the UK against Hussain and Lynch. Hussain was fined $4 million, and asked to forfeit $6.1 million more. Lynch had counter-sued for $160m, claiming lost investment opportunities due to reputational damage and the HP Autonomy scandal lived on.
I covered all those HP Autonomy scandal developments in my old blog.
Two days ago, Ars Technica, covering a story from Wired.com, reported that “after years of wrangling, HP has won its civil fraud case against Autonomy founder and chief executive Mike Lynch. The ruling, the biggest civil fraud trial in UK history, came just hours before the UK home secretary approved Lynch’s extradition to the United States, where he faces further fraud charges.”
The UK’s High Court found that HP had “substantially succeeded” in proving that Autonomy executives had fraudulently boosted the firm’s reported revenue, earnings, and value. HP paid $11 billion for the firm back in 2011 and later announced a $8.8 billion write-down of its value. In court, HP claimed damages of $5 billion, but the judge said the total amount due would be “considerably less” and announced at a later date. Kelwin Nicholls, Lynch’s lawyer and a partner at law firm Clifford Chance, said his client intends to appeal the High Court ruling. In a later statement, Nicholls said his client would also appeal the extradition order in the UK’s High Court.
Of course he did.
It sounds as though I will have more to write about the HP Autonomy scandal in this blog too! Groovy, baby! 😉 Check out the linked posts above for more info and stay tuned!
So, what do you think? Are you familiar with the HP Autonomy scandal? If not, check out the links above! And please share any comments you might have or if you’d like to know more about a particular topic.
Image Copyright © New Line Cinema
Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by my employer, my partners or my clients. eDiscovery Today is made available solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Today should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.