4 ms·

Mike Lynch cleared in Autonomy fraud trial

49 points by edent 2y ago

throwaway_20357 2y ago
The original KPMG due diligence is still online: https://regmedia.co.uk/2019/06/14/kpmg_due_diligence_report_autonomy_hp.pdf https://regmedia.co.uk/2019/06/14/kpmg_due_diligence_report_...
tiffanyh 2y ago
NOT to be confused with the founder of TinyPilot (Michael Lynch), who sold his company last week. https://news.ycombinator.com/item?id=40512500 https://news.ycombinator.com/item?id=40512500
- xanderlewis 2y ago
  There’s also the trade unionist Mick Lynch who, also appearing frequently in the UK news recently and being fairly similar in appearance, has caused me some brief moments of confusion.
- mtlynch 2y ago
  Haha, I was surprised to see my name pop up on HN in this context when I saw the headline.
runnr_az 2y ago
That's a weird end to a crazy story. 2.5 month trial, completely acquitted. What's the takeaway here? Did HP make some horrible mistake and totally mismanage the acquisition as alleged?
- tempusalaria 2y ago
  HP did limited due diligence due to their incompetence but there was definitely significant fraud at Autonomy.
  - hilux 2y ago
    I'm amazed that Lynch got off. Legal technicality? Would love to see an analysis and explanation.
  - seanhunter 2y ago
    Yup. For example at the time I was IT director of a doc com in the UK. Autonomy came to me and pitched their product, which was basically an enterprise-wide indexer thing which you could point at a file share and it would index all the documents, including looking inside MS Office files and then you could search it all. So quite far ahead of its time for what must have been like 1999 or so. I told them their product didn't really meet any pressing need we had and was a bit expensive so thanks but no thanks. They came back with the proposal that instead of buying the software I could buy (from them) a really expensive NAS and they would throw the indexer in for free and the advantage for me would be that because it was hardware the expenditure could be written off against tax over time as depreciation. It sounded sketchy so I didn't bite, but in essence they pitched me on the exact fraudulent thing that he was acquitted of.
    - mike_hearn 2y ago
      Wait, how is bundling hardware and software sketchy or illegal? That's the entire business model of many of the world's most successful companies.
      - foldr 2y ago
        Presumably based on intent. In the extreme case, you'd be selling someone a lettuce for a lot of money with "free" bundled software (so that they can then get some kind of tax write-off when the lettuce goes rotten).
      - seanhunter 2y ago
        Nothing sketchy about that per se, but the fraud element of the case centred around the allegation that autonomy didn't correctly account for the distinction between hardware and software sales when giving numbers to HP leading to an inflated (software based) multiple being used for the valuation at acquisition. They were (allegedly) selling expensive disk drives for cost plus and telling investors they were making a software sale which obviously have very different growth characteristics as businesses.
- 0xADADA 2y ago
  yes, Meg Whitman
  - ChuckMcM 2y ago
    Exactly, the takeaway here is that Meg Whitman had no business running HP. That said I admit I am biased against her because of the really really ill informed way she decided important technical issues.
    - x0x0 2y ago
      Just in case people don't know how stupid Meg is, she (1) acquired Skype; (2) did not acquire Skype's p2p tech; (3) fucked the Skype founders on an earn out; (4) was apparently shocked when said founders declined to renew the licensing deal for the p2p tech. What business ebay, an auctions company, had owning Skype was never explained. Discussion has mostly disappeared from the internet, but you can still find traces eg https://techcrunch.com/2009/07/31/ebay-in-litigation-with-skype-founders-over-key-technology/ https://techcrunch.com/2009/07/31/ebay-in-litigation-with-sk...
  - ZiiS 2y ago
    Apotheker had already agreed the deal.
    - jgalt212 2y ago
      It was her Bay of Pigs. Literally
  - jldugger 2y ago
    Did Meg Whitman make that purchase, or was it the CEO at the time, Léo Apotheker?
- throwaway_20357 2y ago
  Here is the timeline: https://www.cio.com/article/304397/the-hp-autonomy-lawsuit-timeline-of-an-ma-disaster.html https://www.cio.com/article/304397/the-hp-autonomy-lawsuit-t... Lynch was convicted in a civil case in the UK in 2022 but the damages have still not been announced yet.
rimeice 2y ago
Definitely a win for the UK tech scene and US/UK tech collaboration/M&A in general. Having met Mike and pitched to him on several occasions, it’s clear he’s a huge asset to the AI startup ecosystem here in the UK. Certainly feels like justice has been done in one of the worlds most epic cases of buyer remorse.
- WheatMillington 2y ago
  I mean.... I'm not sure how/why he was "cleared" considering it's well established the Autonomy engaged in significant accounting fraud to inflate its revenues. The CFO is still in prison over this.
  - nmstoker 2y ago
    Not according to the article which says Hussain was released in January, 2024
    - WheatMillington 2y ago
      I stand corrected.
rimeice 2y ago
Definitely a win for the UK tech scene and US/UK tech collaboration/M&A in general. Having met Mike on several occasions, it’s clear he’s a huge asset to the AI startup ecosystem here in the UK. Certainly feels like justice has been served in one of the world’s most epic cases of buyer remorse. HP have managed to appear spectacularly hapless from this whole decade+ episode and simultaneously trash their reputation as a buyer. Who on earth would want to risk selling their business to HP now.
- ChrisMarshallNY 2y ago
  Possibly the Humane folks? I hear they want to sell for the bargain price of $1Bn.
throwup238 2y ago
> Years of legal wrangling followed. HP shareholders sued in 2012. In 2015, HP sued Lynch and Sushovan Hussain, former Autonomy CFO, in the High Court of England and Wales. Lynch responded by filing a $150 million countersuit for defamation. Now that he's been found not guilty, does that strengthen his defamation claim? Between an extradition and how much his name has been dragged through the mud, that's quite a lot of damage.
- suid 2y ago
  Depends on where he filed. If he had filed in the US, he would have no chance at all. In the UK, he has a much stronger chance, but then, in the UK, HP did win a civil lawsuit against him and the CFO, so Lynch can't argue that HP showed a reckless disregard for the truth. As always, it'll probably come down to some sort of quiet monetary settlement.
deleted 2y ago
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Simulacra 2y ago
It still feels like he grossly inflated the price, but the laws are different in the UK. Still feels crooked to me.
autonomy_ta 2y ago
I worked at Autonomy in the 90's, back when there were a handful of engineers crammed in one room in St John's Innovation Center. It was a lot of fun and a very interesting learning experience. But I quit, because they wanted me to lie to customers all the time and I wasn't comfortable with that. A typical day in the life: fly to a dotcom with more money than sense, install software. Discover sales guy advertised it to have functionality it absolutely doesn't have. Claim I must have done something wrong and I needed to check with "more senior" engineers. Go back to hotel and overnight hack together some approximation of what had been sold. I can't say whether particular allegations of accounting fraud are true, and startups are not exactly famous for truth in advertising, but that was the culture from the very earliest days.
- compsciphd 2y ago
  that's my experience with multiple silicon valley startups in general. Sell what they believe they can have in the future against what a competitor sells today. I questioned it, but to an extent its somewhat how even larger companies behave (i.e. not uncommon fo them to do a fundamentally non functional demo of a feature that they hope to have out at some point in the future)

49 points by edent 2y ago

throwaway_20357 2y ago

The original KPMG due diligence is still online: https://regmedia.co.uk/2019/06/14/kpmg_due_diligence_report_autonomy_hp.pdf https://regmedia.co.uk/2019/06/14/kpmg_due_diligence_report_...

tiffanyh 2y ago

NOT to be confused with the founder of TinyPilot (Michael Lynch), who sold his company last week. https://news.ycombinator.com/item?id=40512500 https://news.ycombinator.com/item?id=40512500

xanderlewis 2y ago
There’s also the trade unionist Mick Lynch who, also appearing frequently in the UK news recently and being fairly similar in appearance, has caused me some brief moments of confusion.
mtlynch 2y ago
Haha, I was surprised to see my name pop up on HN in this context when I saw the headline.

runnr_az 2y ago

That's a weird end to a crazy story. 2.5 month trial, completely acquitted. What's the takeaway here? Did HP make some horrible mistake and totally mismanage the acquisition as alleged?

tempusalaria 2y ago
HP did limited due diligence due to their incompetence but there was definitely significant fraud at Autonomy.
- hilux 2y ago
  I'm amazed that Lynch got off. Legal technicality? Would love to see an analysis and explanation.
- seanhunter 2y ago
  Yup. For example at the time I was IT director of a doc com in the UK. Autonomy came to me and pitched their product, which was basically an enterprise-wide indexer thing which you could point at a file share and it would index all the documents, including looking inside MS Office files and then you could search it all. So quite far ahead of its time for what must have been like 1999 or so. I told them their product didn't really meet any pressing need we had and was a bit expensive so thanks but no thanks. They came back with the proposal that instead of buying the software I could buy (from them) a really expensive NAS and they would throw the indexer in for free and the advantage for me would be that because it was hardware the expenditure could be written off against tax over time as depreciation. It sounded sketchy so I didn't bite, but in essence they pitched me on the exact fraudulent thing that he was acquitted of.
  - mike_hearn 2y ago
    Wait, how is bundling hardware and software sketchy or illegal? That's the entire business model of many of the world's most successful companies.
    - foldr 2y ago
      Presumably based on intent. In the extreme case, you'd be selling someone a lettuce for a lot of money with "free" bundled software (so that they can then get some kind of tax write-off when the lettuce goes rotten).
    - seanhunter 2y ago
      Nothing sketchy about that per se, but the fraud element of the case centred around the allegation that autonomy didn't correctly account for the distinction between hardware and software sales when giving numbers to HP leading to an inflated (software based) multiple being used for the valuation at acquisition. They were (allegedly) selling expensive disk drives for cost plus and telling investors they were making a software sale which obviously have very different growth characteristics as businesses.
0xADADA 2y ago
yes, Meg Whitman
- ChuckMcM 2y ago
  Exactly, the takeaway here is that Meg Whitman had no business running HP. That said I admit I am biased against her because of the really really ill informed way she decided important technical issues.
  - x0x0 2y ago
    Just in case people don't know how stupid Meg is, she (1) acquired Skype; (2) did not acquire Skype's p2p tech; (3) fucked the Skype founders on an earn out; (4) was apparently shocked when said founders declined to renew the licensing deal for the p2p tech. What business ebay, an auctions company, had owning Skype was never explained. Discussion has mostly disappeared from the internet, but you can still find traces eg https://techcrunch.com/2009/07/31/ebay-in-litigation-with-skype-founders-over-key-technology/ https://techcrunch.com/2009/07/31/ebay-in-litigation-with-sk...
- ZiiS 2y ago
  Apotheker had already agreed the deal.
  - jgalt212 2y ago
    It was her Bay of Pigs. Literally
- jldugger 2y ago
  Did Meg Whitman make that purchase, or was it the CEO at the time, Léo Apotheker?
throwaway_20357 2y ago
Here is the timeline: https://www.cio.com/article/304397/the-hp-autonomy-lawsuit-timeline-of-an-ma-disaster.html https://www.cio.com/article/304397/the-hp-autonomy-lawsuit-t... Lynch was convicted in a civil case in the UK in 2022 but the damages have still not been announced yet.

rimeice 2y ago

Definitely a win for the UK tech scene and US/UK tech collaboration/M&A in general. Having met Mike and pitched to him on several occasions, it’s clear he’s a huge asset to the AI startup ecosystem here in the UK. Certainly feels like justice has been done in one of the worlds most epic cases of buyer remorse.

WheatMillington 2y ago
I mean.... I'm not sure how/why he was "cleared" considering it's well established the Autonomy engaged in significant accounting fraud to inflate its revenues. The CFO is still in prison over this.
- nmstoker 2y ago
  Not according to the article which says Hussain was released in January, 2024
  - WheatMillington 2y ago
    I stand corrected.

rimeice 2y ago

Definitely a win for the UK tech scene and US/UK tech collaboration/M&A in general. Having met Mike on several occasions, it’s clear he’s a huge asset to the AI startup ecosystem here in the UK. Certainly feels like justice has been served in one of the world’s most epic cases of buyer remorse. HP have managed to appear spectacularly hapless from this whole decade+ episode and simultaneously trash their reputation as a buyer. Who on earth would want to risk selling their business to HP now.

ChrisMarshallNY 2y ago
Possibly the Humane folks? I hear they want to sell for the bargain price of $1Bn.

throwup238 2y ago

> Years of legal wrangling followed. HP shareholders sued in 2012. In 2015, HP sued Lynch and Sushovan Hussain, former Autonomy CFO, in the High Court of England and Wales. Lynch responded by filing a $150 million countersuit for defamation. Now that he's been found not guilty, does that strengthen his defamation claim? Between an extradition and how much his name has been dragged through the mud, that's quite a lot of damage.

suid 2y ago
Depends on where he filed. If he had filed in the US, he would have no chance at all. In the UK, he has a much stronger chance, but then, in the UK, HP did win a civil lawsuit against him and the CFO, so Lynch can't argue that HP showed a reckless disregard for the truth. As always, it'll probably come down to some sort of quiet monetary settlement.

deleted 2y ago

[deleted]

deleted 2y ago

[deleted]

Simulacra 2y ago

It still feels like he grossly inflated the price, but the laws are different in the UK. Still feels crooked to me.

autonomy_ta 2y ago

I worked at Autonomy in the 90's, back when there were a handful of engineers crammed in one room in St John's Innovation Center. It was a lot of fun and a very interesting learning experience. But I quit, because they wanted me to lie to customers all the time and I wasn't comfortable with that. A typical day in the life: fly to a dotcom with more money than sense, install software. Discover sales guy advertised it to have functionality it absolutely doesn't have. Claim I must have done something wrong and I needed to check with "more senior" engineers. Go back to hotel and overnight hack together some approximation of what had been sold. I can't say whether particular allegations of accounting fraud are true, and startups are not exactly famous for truth in advertising, but that was the culture from the very earliest days.

compsciphd 2y ago
that's my experience with multiple silicon valley startups in general. Sell what they believe they can have in the future against what a competitor sells today. I questioned it, but to an extent its somewhat how even larger companies behave (i.e. not uncommon fo them to do a fundamentally non functional demo of a feature that they hope to have out at some point in the future)