Mike Lynch, the decorated British technology entrepreneur, has died in a tragic yacht accident off the coast of Sicily. Now his family is embroiled in a $4bn legal battle with Hewlett Packard Enterprise over a fraud case that has rumbled on for years. Despite charges being dismissed against him in a US criminal case, a civil lawsuit brought by HPE and initially targeting him is now likely to be brought against his estate, leaving his family in a difficult position.
Mystery swathes the legacy of renowned British technology entrepreneur Mike Lynch following his demise in a yacht accident off Sicily’s coast. He has left behind a $4 billion legal case against Hewlett Packard Enterprise, the looming remains of which will unfortunately have to be borne by his family. The case dates back to 2011, when Hewlett Packard Enterprise acquired Lynch’s software company, Autonomy, and has over the years seen strings of allegations of fraud levelled against the company’s founder.
News of his death was confirmed on Thursday, just three days after his luxury yacht, the Bayesian, had sunk earlier in the Mediterranean Sea. Six people, including Lynch and his 18-year-old daughter, Hannah, died in the tragedy. The sinking shocked the tech community, although it was only the beginning for legal ramifications stemming from Lynch’s passing.
In 2011, Lynch sold Autonomy to HPE for a staggering £7 billion, effectively labeling him as one of Britain’s most successful tech entrepreneurs at the time. That all came crashing down when HPE accused Lynch and his former chief financial officer, Sushovan Hussain, of inflating the company’s value through illegal accounting malpractice. The trial that’s now unfolded has been long and caustic, with HPE alleging a massive fraud had occurred.
It was a major win for HPE two years ago when the High Court ruled against Lynch and Hussain and in favor of the accusations by the tech giant. The judge, Mr. Justice Hildyard, who led the case, went as far as saying that Lynch and Hussain entered into “contrived” deals, which were bereft of “commercial substance” and their activities were “dishonest.” The decision had gone in favor of HPE, but the quantum of damages that Lynch was going to have to pay had yet to be determined. HPE had originally been seeking $5 billion in damages but later modified its claim for damages to $4 billion. Lynch’s lawyers, however, have insisted that the damages should be zero.
Although he was cleared of all US criminal charges at the start of this year, a civil case had yet to be heard in the UK at the time of his death. The legal fight is now set to be carried on against his estate since he is no longer around to defend himself.
Legal experts in the UK reportedly said that the claim of HPE should be transferred to the administrators of the Lynch estate. That means Lynch’s family could be left with the burden of fighting the case. Keith Oliver, head of international at law firm Peters & Peters, said that the judgment against Lynch is binding on his estate. “If the person has passed, the claim continues,” he said. Oliver added that Lynch’s personal representatives have a right to appeal against the ruling on behalf of the estate.
Another solicitor agreed that probably would be the case to go forward against Lynch’s estate, and HPE would have to move to amend the name of the defendant from Mike Lynch to read the estate of Mike Lynch. So there would be some legal procedures involved with that, but it wouldn’t be complex.
It puts Lynch’s family in a very precarious situation, for if HPE does pursue its claim against his estate, his family could ultimately inherit far less, as they will have to guard against the potentially massive financial penalty that is very formidable and unique in law.
HPE has stayed mum on matters of litigation after the passing of Lynch. The company’s spokeswoman only expressed condolences, stating, “We do not think it appropriate to comment on legal matters in these tragic circumstances. We’re saddened by this tragic event and our thoughts are with the families and friends of all the victims.”
Others, however, are optimistic that HPE will find it in itself to drop the case against Lynch on account of his death. One of Lynch’s defense attorneys, Brian Heberlig—who helped Lynch defeat the US criminal charges—said he hopes the company would drop the case out of respect for what Lynch’s family has been through. “Given what his family went through on a personal level, I hope they choose to do that,” said Heberlig.
The greatest legal hurdles will be for the estate of Lynch. That $4 billion claim dwarfs HPE, a company worth about $25 billion. Being a public company with an open arrangement, HPE owes a fiduciary duty to act effectively on behalf of its shareholders, which is exactly what they intend to do to continue the fight on this front.
While it is unclear how this case will ultimately turn out, what is certain is that this Autonomy sale lawsuit is far from over. Lynch’s family has now been plunged into a legal storm that could have far-reaching financial implications for years to come.