Mike Lynch, in his heyday as the UK’s software supremo, was a prickly character whose run-ins with City analysts were legendary. That may help to explain why the UK business establishment does not seem interested in the cry from his lawyers that the US Department of Justice is engaged in territorial overreach in trying to haul the founder of Autonomy to the US to stand trial.
But the UK business world should be alarmed. The DoJ looks to be deploying strongarm tactics and Lynch’s lawyers are right to shout about the wider business implications. Here’s one central question: should the fallout from the takeover of a UK company, conducted under UK takeover rules, really end up in a US court?
Lynch was the founder of a UK company quoted on the London Stock Exchange. Allegations of improper accounting in the $11bn sale of Autonomy to Hewlett-Packard in 2011 were investigated by the UK Serious Fraud Office, which decided there was insufficient evidence to bring charges, and Lynch has always denied any wrongdoing. Yet the DoJ wants to bring charges of fraud and conspiracy against Lynch relating to the deal.
Lynch submitted to arrest in London on Wednesday as part of the US extradition proceedings but will fight the request under “forum bar” provisions, which allow a UK court to block an extradition if it deems the majority of alleged criminality took place in the UK.
That hearing lies ahead but, in the meantime, we are awaiting a big development: judgment in the £3.8bn civil fraud trial brought against Lynch in London by Hewlett-Packard, which claims Autonomy’s value was artificially inflated before the sale. The US company ended up writing down its purchase by $8.8bn.
The high court’s verdict is critical to the wider issues. It is conceivable that Hewlett-Packard could fail to win its civil case, where the balance of probabilities is the threshold, and yet Lynch could still be sent to the US to face criminal charges with a higher burden of proof. If that were to happen, the process would look grossly unfair.
David Davis, the former Brexit secretary and longstanding critic of UK-US extradition arrangements, has called the DoJ’s timing “extraordinarily inappropriate”. Fair comment: if the roles were reversed, does anyone seriously think the UK would able to summon a high-profile US executive in these circumstances?
Imperial Brands wheezing from next-gen push
Alison Cooper exited as chief executive of FTSE 100 tobacco group Imperial Brands on Monday but her profit warnings keep coming. The group is wheezing from its big push into so-called next-generation products and group earnings will be slightly lower this year, it says. The share price, which was £40 in 2016, is now £18.22.
Imperial is not unique in over-promising and under-delivering on the next-gen front. The whole industry has failed to live up to its hype, especially now that the US health authorities have reacted to a vaping “epidemic” among children by banning some of the flavoured capsules. But Imperial’s flop seem the worst of the lot.
The company was late to arrive in the e-cigarette market and then, having bought the Blu brand in 2015, splashed cash for little reward. The City diagnoses “execution” mistakes – poor products and ineffective marketing – which explains why the board joined shareholders in running out of patience with Cooper. In a business that is 96% tobacco (John Player, Lambert & Butler, Gauloises) it’s amazing how the 4% has been able to upset the whole company.
Stefan Bomhard, of the car dealer Inchape, is the new boss who will try to restore order and may start by cutting shareholders’ dividends – a theoretical dividend yield of 11% is a clue. When it happens, it will be time to remember Cooper once again: in her nine years in charge, the share price returned to where it started but she was paid an astonishing £30m.
M&S strategist’s four-day gig sends positive message
The role of chief strategy and transformation director at Marks & Spencer may sound like two jobs in one, but it will be a four-day-a-week gig for Katie Bickerstaffe, who has been summoned from the retailer’s non-executive bench.
This corporate readiness to accept that senior jobs do not have to consume every waking hour should be applauded. The workaholic tendency is a curse on productivity and, since M&S employs a large number of part-time workers, it’s helpful to send a message about a open approach to appointment. If Bickerstaffe insisted on the arrangement, well played.
