* HP wins most of civil case against Lynch
* Damages to be considerably less than $5 billion demanded
* Lynch fraudulently inflated the value of his company
* Britain orders Lynch's extradition to the United States
* Lynch to appeal civil judgement and extradition -lawyers
(Adds extradition order)
By Paul Sandle and Kate Holton
LONDON, Jan 28 (Reuters) - A British judge found on Friday
that tech tycoon Mike Lynch had masterminded an elaborate fraud
to inflate the value of his company Autonomy before it was
bought by Hewlett-Packard for $11 billion in 2011 in one
of the UK's biggest tech deals.
Lynch received a further blow later on Friday when Britain's
interior ministry ordered his extradition to the United States
to face criminal charges over the deal that carry a maximum
prison term of 20 years.
Lynch intends to appeal both the judge's finding and the
extradition order, his lawyers said.
Finding in HP's favour following a near decade-long battle,
Justice Robert Hildyard said the Silicon Valley company had won
the majority of its civil case against Lynch although the
damages to be announced at a later date would be significantly
smaller than the $5 billion demanded.
"The claimants have substantially succeeded in their
claims," Hildyard told the High Court, in a one hour summary of
his much longer judgment, following a nine-month trial and a
two-year wait for his decision.
The judge said Lynch was aware that practices Autonomy
engaged in were dishonest, its revenue recognition was improper
and its accounts were false.
The court's decision coincided with a Friday deadline for
Britain to decide whether or not to extradite Lynch.
Britain's interior ministry said that it had to sign the
extradition order if there were no grounds to prohibit the order
being made. The criminal charges in the United States include
wire fraud and securities fraud.
"On 28 January, following consideration by the courts, the
extradition of Dr Michael Lynch to the US was ordered," a Home
Office spokesperson said.
Lynch's lawyers said that as he is a British citizen who ran
a British company, the case should not be resolved in the United
States.
"Dr Lynch firmly denies the charges brought against him in
the U.S. and will continue to fight to establish his innocence,"
lawyer Chris Morvillo said.
"This is not the end of the battle — far from it. Dr Lynch
will now file an appeal to the High Court in London."
FALL FROM GRACE
It is a dramatic fall from grace for Britain's most
successful tech leader.
The 56-year-old turned ground-breaking research at Cambridge
University into the foundation of Autonomy, which became
Britain's biggest software company and a member of the blue-chip
FTSE 100 index.
He was lauded by academics and scientists, and asked to
advise the government on technology and innovation.
Autonomy's "almost magical" capability, as it was once
described by HP, was to search and organise unstructured
information for clients, a killer application in a world of
unlimited data and artificial intelligence.
It was bought by HP, described by the judge as being in the
doldrums at the time, in a move that was designed to transform
the computer and printer maker into a more profitable business
focused on software.
The acquisition turned sour almost immediately.
HP wrote down the value of Autonomy by $8.8 billion within a
year and sought damages from Lynch and his finance director
Sushovan Hussain. Hussain was convicted of fraud in the United
States and sentenced to five years in prison in 2019.
Lynch said HP did not know what it was doing, and was out of
its depth in understanding his technology.
He spent 20 days on the stand during the case.
Giving his verdict on Friday, Judge Hildyard found that
Lynch and Hussain had fraudulently concealed a "fire sale" of
hardware and engaged in convoluted reselling schemes to mask a
shortfall in sales of Autonomy's software, the business HP
coveted.
That had enabled Autonomy to meet quarterly financial
forecasts and maintain its high share price before the
acquisition.
"HPE is pleased that the judge has held them accountable," a
spokesman for Hewlett-Packard Enterprise (HPE) said after the
London court ruling.
Lynch was also central to the creation of DarkTrace
, a cyber security firm that listed on the stock market
last year with a current value around $3.6 billion. Lynch and
his wife Angela Bacares own nearly 16% of DarkTrace, according
to Refinitiv data.
HP sold the remnants of Autonomy along with other assets to
British company Micro Focus in 2016.
(Additional reporting by Alistair Smout
Editing by Guy Faulconbridge, Elaine Hardcastle and Grant
McCool)
