[Info-vax] HPE going after Mike Lynch's estate
Arne Vajhøj
arne at vajhoej.dk
Tue Sep 17 22:46:11 EDT 2024
On 9/17/2024 9:58 PM, Chris Townley wrote:
> On 18/09/2024 02:12, Arne Vajhøj wrote:
>> And I am a little bit puzzled that you believe that
>> the company should try and claw back severance/bonus
>> of a an ex-CEO for negligence in an
>> acquisition, because it may deter other CEO's from
>> doing the same, but you don't believe that the
>> company should try and claw back the gain of
>> company sale based on fraudulent accounting practices
>> from the company's CEO? The CEO avoided jail because
>> the court did not find it proven that he knew about the
>> fraudulent accounting practices, but while not knowing
>> is not an criminal offense, then it is still
>> negligence and clawing back the gain may deter other
>> CEO's from doing the same.
>
> Over here in the UK, we have a legal principle of Caveat Emptor
That principle is not UK specific.
But I don't think it is relevant.
It means that buyer can not sue seller related to information
buyer did not ask for.
It does not mean that buyer can not sue seller related to
fraudulent information provided.
As https://en.wikipedia.org/wiki/Caveat_emptor state:
<quote>
Under the principle of caveat emptor, the buyer could not recover
damages from the seller for defects on the property that rendered the
property unfit for ordinary purposes. The only exception was if the
seller actively concealed latent defects or otherwise made material
misrepresentations amounting to fraud.
</quote>
And the UK high court has decided that it was fraud.
https://www.bbc.com/news/uk-england-cambridgeshire-60170510
<quote>
HP sued its founder and former chief financial officer, claiming they
"artificially inflated Autonomy's reported revenues, revenue growth and
gross margins".
Mr Justice Hildyard said HP had "substantially won" its case.
</quote>
https://www.theguardian.com/business/2022/jan/28/hewlett-packard-wins-civil-case-against-mike-lynch-over-autonomy-sale
<quote>
Hewlett-Packard has won its six-year civil fraud case against Mike
Lynch, the man once hailed as Britain’s answer to Bill Gates, after a
high court judge ruled that he duped the US firm into paying £8.2bn for
his software firm Autonomy.
Lynch, who was on Friday waiting to find out if he could be extradited
to the US to face a separate criminal trial, was found to have defrauded
HP by manipulating Autonomy’s accounts to inflate the value of the
company. He has always denied the accusation and said on Friday that he
would appeal.
“Claimants have substantially succeeded in their claims in this
proceeding,” said Mr Justice Hildyard, after a 93-day trial during which
28,000 documents were considered as evidence..
He said the damages were likely to be significantly less than the $5bn
claimed by Hewlett-Packard (HP) and successor companies, while he also
cast doubt on the reliability of some of the US firm’s witnesses.
However, he ruled that HP had been induced into overpaying for the
takeover, due to fraud perpetrated by Lynch and Autonomy’s former
finance director, Sushovan Hussain, who is in jail in the US after being
found guilty of fraud relating to the same deal .
</quote>
I assume that Mr Justice Hildyard has heard about caveat emptor. But
did not consider it a valid defense.
Arne
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