HP loses in US fraud case against Autonomy's Mike Lynch

Autonomy founder cleared of fraud in US trial, following on from HP's $5bn write-down after tts acquisition of the data discovery firm

British tech entrepreneur and founder of Autonomy, Mike Lynch, has been acquitted of all charges, following a 12-week trial in San Francisco. The jury cleared Lynch of 15 counts of fraud and conspiracy that had been brought against him in relation to the 2011 Hewlett-Packard acquisition of Autonomy.

HP has previously alleged that Lynch inflated the value of the information discovery company, which meant that HP paid over the odds when it acquired Autonomy for $7bn in 2011.

At the time, HP paid a 64% premium on the software firm’s share price. The sale of the data discovery company that he founded meant that Lynch would earn up to £500m from the sale, as HP reinvented its business around software. The intellectual property that Autonomy developed included Idol, a software system that ran on dedicated hardware, for polling structured and unstructured data.

In 2012, HP announced it would write down $5bn amid allegations that it had been defrauded by Autonomy during the acquisition of the software company. In 2014, HP sued Lynch and former Autonomy CFO Sushovan Hussain for the $5bn write-down it had incurred.

According to Lynch’s legal team, the acquittal follows on from a protracted and unfair extradition process, coloured by the asymmetrical extradition treaty and relationship between the United States and the United Kingdom.

In 2021, MPs wrote a letter to The Times newspaper describing how the extradition of Lynch would be akin to the UK surrendering its sovereignty.

The legal team said that there was a considerable imbalance in witness testimonies, with the prosecution calling 35 witnesses compared with just six by the defence.

Lynch’s legal team pointed to “inappropriate conduct” by the prosecution, including what it said was the posing of “egregious” and ‘’highly improper” questions to defence witness Hillary Slack, a senior associate at Clifford Chance, that were “infected with deliberate misconduct highly prejudicial to Lynch”, that were ultimately stricken by US District Judge Charles Breyer.

The defence lawyers said that the trial was also marred by the exclusion of key post-acquisition evidence containing communications contemporaneous to the period following the acquisition that reveal HP’s auditor. EY and HP finance executives disagreed with HP’s public statements about the cause of the write down of Autonomy, which they said exposes a lie in HP’s claim that the Autonomy write-down was caused by a $5bn fraud.

Commenting on the acquittal, Lynch said: “I am elated with today’s verdict and grateful to the jury for their attention to the facts over the last 10 weeks. My deepest thanks go to my legal team for their tireless work on my behalf. I am looking forward to returning to the UK and getting back to what I love most: my family and innovating in my field.”
Christopher Morvillo and Brian Heberlig, legal counsel for Lynch, said: “We are thrilled with the jury’s verdict, which reflects a resounding rejection of the government’s profound overreach in this case. The evidence presented at trial demonstrated conclusively that Mike Lynch is innocent.

“This verdict closes the book on a relentless 13-year effort to pin HP’s well-documented ineptitude on Dr Lynch. Thankfully, the truth has finally prevailed. We thank Dr Lynch for his trust throughout this ordeal and hope that he can now return home to England to resume his life and continue innovating.”
Former vice-president of finance for Autonomy, Stephen Chamberlain, who faced the same charges at trial alongside Lynch, was also acquitted on all counts.

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