US Prosecutors Accuse British Tech Founder Mike Lynch of Being ‘Driving Force’ Behind Fraud

The HP-Autonomy case has entered trial proceedings, with prosecutors alleging that Mike Lynch, the tech entrepreneur compared to Steve Jobs, orchestrated a “multiyear, multilayered fraud” that deceived Hewlett-Packard into acquiring his software company Autonomy for $11 billion.

Prosecutor Adam Reeves stated in federal court in San Francisco that Lynch “spun a fabulous tale” regarding Autonomy’s finances, which Hewlett-Packard believed to be exactly what they needed, leading to their acquisition of the company.Autonomy co-founder Mike Lynch and former finance executive Stephen Chamberlain are accused of conspiring to inflate the company’s revenue from 2009 until Hewlett-Packard’s acquisition of Autonomy in 2011. Following the acquisition, HP recorded an $8.8 billion write-down of Autonomy’s value, citing serious accounting improprieties that had been uncovered.

Prosecutors allege that Lynch and Chamberlain inflated Autonomy’s financials by engaging in deceptive practices such as backdating agreements and conducting “roundtrip” deals, which involved providing cash to customers through fraudulent contracts. These tactics were aimed at attracting buyers like HP, according to the prosecutors.

During the trial, which is expected to continue until late May, jurors may hear testimony from numerous witnesses, including Leo Apotheker, the former HP chief executive who was dismissed shortly after the Autonomy acquisition was announced.Lynch’s legal team has indicated that he is contemplating testifying in his own defense during the trial. He is facing 16 counts of fraud and conspiracy, while Chamberlain is facing 15 counts.

Both individuals are presumed innocent until proven guilty. The jury, consisting of 12 individuals, must reach a unanimous verdict to find either of them guilty. Autonomy’s collapse initiated over a decade of legal disputes for Lynch.

In a legal saga spanning years, HP emerged victorious in a civil lawsuit filed in London in 2022 against both Lynch and Sushovan Hussain, who served as Autonomy’s former chief financial officer. The lawsuit resulted in HP seeking a substantial US$4 billion in damages. Concurrently, Hussain faced independent convictions on US charges in 2018, laying the groundwork for subsequent legal actions against Lynch and Chamberlain. Despite Lynch’s efforts to contest extradition, his appeals were ultimately denied by Britain’s High Court last year, leading to his eventual arrival in the US to face the charges leveled against him.

US District Judge Charles Breyer, presiding over the trial, approved Lynch’s release on bail, which was secured by a substantial US$100 million bond. However, Lynch’s freedom is restricted to a residence in San Francisco, where he is under constant surveillance. Lynch’s legal representation disclosed in court that his net worth is estimated to be approximately US$450 million.

Hussain, on the other hand, faced his own legal proceedings and was found guilty on 16 counts in a jury trial before Judge Breyer back in 2018. Following his conviction, Hussain served a five-year sentence and was released from prison in January of this year.

In the civil lawsuit, a British judge ruled in January 2022 that Lynch had orchestrated an elaborate fraud aimed at inflating the value of Autonomy. This ruling indicated a significant victory for the Silicon Valley company in its legal battle against Lynch. Throughout the proceedings, Lynch maintained that Hewlett-Packard (HP) was inadequately equipped to comprehend the intricacies of Autonomy’s technology and was therefore ill-prepared to effectively manage the company. Despite Lynch’s assertions, the court’s decision underscored the severity of the allegations against him and reinforced HP’s claims of misconduct.