British tech entrepreneur Mike Lynch, the founder of software firm Autonomy, today begins the second day of his fight against his extradition to the US.
Yesterday, the court heard opening arguments from Lynch’s defence team and lawyers representing the US.
Lynch is facing charges of securities fraud, wire fraud and conspiracy in the US related to the 2011 acquisition of software firm Autonomy by tech giant Hewlett Packard (HP).
Following the sale, HP wrote down Autonomy’s value by $8.8bn and claimed Lynch, and the firm’s ex-finance chief Sushovan Hussain, had falsely inflated its revenue prior to the acquisition.
Alongside the US attempts for Lynch to face criminal charges, the tech entrepreneur is also waiting for the judgement in a separate civil fraud trial in the UK.
HP sued Lynch and Hussain for $5.1bn (£3.96bn) for allegedly falsely inflating Autonomy’s revenue prior to the 2011 sale.
Lynch denies all of the allegations.
That’s it for our coverage today. Check back tomorrow for updates from day three of the extradition hearing
Chris Morvillo, another Clifford Chance lawyer representing Lynch, is giving evidence via video link from the US.
He was asked by the defence lawyers to predict how long it would take to bring Lynch to trial if he is unsuccessful in challenging the extradition bid.
He estimated that – if Lynch arrived in the US on 1 December this year – he would not be put on trial until mid-2023.
“Could anyone else have apart from Bidco [the European special purpose vehicle used by HP to buy Autonomy] recovered, under English law, any losses in relation to the acquisition,” Bailin asked.
“I can’t think of any other claimants”, Nicholls said.
“Bidco had to bring it [the claim] under English law,” Bailin said.
Nicholls was asked by Bailin, for Lynch, for his response to “any suggestion that you are gilding your evidence because of the fees you are paid by Dr Lynch”.
“I do not accept that at all,” Nicholls said.
Summers is questioning Nicholls over the defence’s argument that HP suffered the alleged loss in the UK rather than the US.
Nicholls agreed with Summers’ assertion that “the only companies that were approached by Autonomy in relation to the sale were US companies”.
He added: “Autonomy was readying itself for an approach. From where that might come…most of them were in the US but…Autonomy had no idea who might approach it.
“I don’t think Autonomy were particularly focussed on the US, they were just readying themselves for an approach,” Nicholls said.
“Money provided by HP – at least $3.2bn – came directly from New York, the remainder may have come from offshore cash owned by HP,” Summers said.
Summers added that 79 per cent of HP shareholders were US-based.
“How do you take that and end up with loss falling in the UK?,” he said.
“Autonomy was a UK company and it was bought by a Dutch company [the special purpose company used by HP for the acquisition]. There is no dispute about that, those two facts are clear,” Nicholls said in response.
Nicholls is now being questioned by Mark Summers QC, for the US Government.
Summers asked whether Nicholls has a “litigation interest” in the case, as Clifford Chance is acting for Lynch in the civil case and the extradition proceedings.
“Do you accept that you have overstepped the line in your evidence and engaged in advocacy of Dr Lynch?” Summers said.
“No, I don’t accept that,” Nicholls said.
Nicholls was presented with a line from his evidence that said “this is not the action of a man trying to cover up an alleged fraud”.
“I think that particular sentence could be accused of advocacy,” Nicholls said.
Nicholls said the home secretary Priti Patel was not aware of the extradition request when it was certified by the Home Office in November 2019.
He said when his law firm contacted the Home Office “to ask a few questions about the certification process” that “the home secretary was not aware of the certification”.
Kelwin Nicholls, a Clifford Chance lawyer who was part of Lynch’s legal team in the UK civil trial, is giving evidence this morning.
He told Westminster Magistrates’ Court that an offshore company and offshore money was used by HP to acquire Autonomy.
Lynch’s defence team in the extradition case is arguing that the alleged loss did not occur in the US
In total, $7.9bn of the acquisition was paid for using offshore cash, while the remaining $3.2bn was paid for using HP funds in the US.
“The use of offshore cash to buy Autonomy had significance for HP Group…that is why they bought it using offshore cash and an offshore vehicle,” he said.
When asked by Alex Bailin QC, for Lynch, whether the acquisition would have been paid for in US dollars or sterling, Nicholls said: “It would have been in sterling. Autonomy was listed on the London Stock Exchange and the offer price was listed in sterling”.