Brit tech tycoon Mike Lynch cleared of all charges in US Autonomy fraud trial
- Reference: 1717703908
- News link: https://www.theregister.co.uk/2024/06/06/mike_lynch_cleared/
- Source link:
On Thursday, a federal court jury in San Francisco cleared Lynch of all 15 charges – 14 counts of wire fraud and one count of conspiracy. Co-defendant Stephen Chamberlain, formerly VP of finance at Autonomy, was also acquitted. A charge of securities fraud was tossed during the trial by the judge.
In 2018, the US Justice Department [1]alleged that Lynch and Chamberlain unlawfully ballooned Autonomy's value prior to its acquisition.
[2]
The Feds claimed the pair "artificially inflated Autonomy’s revenues by backdating written agreements to record revenue in prior periods" and made false statements to auditors and regulators, all leading to HP allegedly vastly overpaying for Autonomy.
[3]
[4]
Meanwhile, the now-former chief exec argued during his trial that he was just the tech and marketing guy, a smart and savvy entrepreneur rather than a master manipulator of finances, and that if there were any problems with Autonomy's numbers, the IT titan should have spotted and pulled those up during the takeover bid.
I am elated with today's verdict and grateful to the jury for their attention to the facts over the last ten weeks
Lynch, who was [5]extradited from the UK to the US last year after length legal resistance, has for years maintained his innocence, claiming that he was being made a scapegoat for the failed acquisition. Chamberlain also denied any wrongdoing.
In a statement to The Register , Dr Lynch said, "I am elated with today's verdict and grateful to the jury for their attention to the facts over the last ten 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."
HP paid $11 billion for Autonomy, an enterprise search firm, but within a year wrote down the deal [6]by $8.8 billion . Meg Whitman, CEO of HP at the time, [7]said a senior executive on Lynch's team had made claims about accounting irregularities and that the American IT giant had referred the matter to the US Securities and Exchange Commission and the UK Serious Fraud Office.
[8]
Years of legal wrangling followed. HP shareholders [9]sued in 2012. In 2015, [10]HP sued Lynch and Sushovan Hussain, former Autonomy CFO, in the High Court of England and Wales. Lynch responded by filing a $150 million countersuit for defamation.
[11]HP-Autonomy: Attorneys wrap up arguments in Mike Lynch's stateside criminal fraud trial
[12]UK tech titan Mike Lynch's US fraud trial begins today
[13]HPE seeks $4B in damages from Autonomy boss Mike Lynch and his ex-CFO
[14]US prosecutors slam Autonomy tycoon's attempt to get charges tossed
In 2022, HPE – which inherited the civil litigation after HP split into HPE and HP Inc – prevailed in that British civil case and is presently [15]seeking $4 billion in damages.
The UK's Serious Fraud Office opened an inquiry in 2013, and [16]dropped it in 2015 to allow US authorities take over the case.
The Feds in 2017 indicted Hussain on fraud charges and secured a [17]conviction in 2018 . He was [18]sentenced to five years in prison the following year and was released in January, 2024 having served his time.
The evidence presented at trial demonstrated conclusively that Mike Lynch is innocent
Christopher Morvillo and Brian Heberlig, attorneys for Lynch, celebrated the jury's verdict in a statement.
"We are thrilled with the jury's verdict, which reflects a resounding rejection of the government's profound overreach in this case," said Morvillo and Heberlig.
"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."
[19]
“We’re grateful to the jury for carefully paying attention to the evidence and allowing Mr. Chamberlain to return home to his family,” added Gary Lincenberg, an attorney with Bird, Marella, Rhow, Lincenberg, Drooks & Nessim, LLP, who represented Chamberlain, in an email to The Register .
The US Justice Department did not immediately respond to a request for comment. ®
Get our [20]Tech Resources
[1] https://www.justice.gov/usao-ndca/pr/former-autonomy-ceo-charged-wire-fraud
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZmIxfkdRZdOUwTsrbFtsbgAAAEM&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZmIxfkdRZdOUwTsrbFtsbgAAAEM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZmIxfkdRZdOUwTsrbFtsbgAAAEM&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://www.justice.gov/usao-ndca/pr/michael-richard-lynch-former-ceo-autonomy-corporation-makes-appearance-federal-court
[6] https://money.cnn.com/2012/11/20/technology/enterprise/hp-earnings/index.html
[7] https://www.cnbc.com/2012/11/20/first-on-cnbc-cnbc-transcript-meg-whitman-hewlettpackard-president-ceo-speaks-oneonone-with-david-faber-today-on-cnbc.html
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZmIxfkdRZdOUwTsrbFtsbgAAAEM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2012/11/27/hp_sued_by_investor/
[10] https://www.theregister.com/2015/03/31/hp_autonomy_lawsuits/
[11] https://www.theregister.com/2024/06/03/lynch_autonomy_trial/
[12] https://www.theregister.com/2024/03/18/autonomy_mike_lynch_us_trial/
[13] https://www.theregister.com/2024/02/12/hpe_autonomy_damages/
[14] https://www.theregister.com/2023/10/18/autonomy_case_updates/
[15] https://www.theregister.com/2024/02/12/hpe_autonomy_damages/
[16] https://www.sfo.gov.uk/2015/01/19/hp-autonomy/
[17] https://www.justice.gov/usao-ndca/pr/former-autonomy-cfo-convicted-wire-fraud
[18] https://www.justice.gov/usao-ndca/pr/former-autonomy-cfo-sentenced-60-months-prison
[19] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZmIxfkdRZdOUwTsrbFtsbgAAAEM&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[20] https://whitepapers.theregister.com/
Re: No kidding?
I'm sure he is a t*** but it's always nice to see HP lose
WOW
that was unexpected
(call off the lynch mob)
Re: WOW
:(
-- former employee
Re: WOW
@AC: former employee of Autonomy? So you were hoping he'd be convicted? Do tell us more ...
Re: WOW
I am too - utterly grim place to work. The worst in my long and overly varied career!
Re: WOW
“Lynch” mob?
ISWYDT.
Does indeed seem to be true, other news sites are reporting it in more detail like https://www.bbc.co.uk/news/articles/cneel8ed2vvo
More info coming
Yeah it's true and we've got a full story coming. We were in the process of writing two versions, one for guilty and one for not guilty, but the jury beat us to it. Edit: Now updated,.
C.
Re: More info coming
Interesting to see how this saga wraps up. Glad to hear there is a follow up post coming. I'd suggest a review of ye olde Reg's own coverage of the case in the period before the merger was finalized to the point HP had a basket of kittens.
The coverage of Mike Lynch has really changed over the years, and not just here at the Reg. It wasn't really clear back then he was the bad guy in this story, and it would be a great contrast to wrap that up with the current evidence to show what we didn't know at the time of the merger, compared to now.
There has always been a through line where HP just made a colossally dumb business deal and desperately wanted re-frame the narrative in a way it was somebody else's fault.
To be clear, Lynch and the rest of the leadership team may still bear some responsibility, even if he's not doing decades behind bars, but HP face planted from the get go, rushing the acquisition and due diligence to close the deal at a price no sane person could rationalize. Now that Lynch is not the center of the story for a moment, it might be worth revisiting the other players, and their roles, and where they are now. (though that might be a hard read for the old HP crowd, the people that fired those people(or let them pursue other opportunities/time with their families), and the remains of both companies.
It has slightly restored my faith in the US justice system.
Oracle knew it was overpriced, random commentards on here knew at the time it was overpriced. He had a duty to his shareholders to get the best price for their investment, and he did a good job there.
Oracle?
Oracle considered bidding for Autonomy, but walked away when it was clear HP were going to pay way over the odds.
Yes, they looked at buying it and decided to walk away.
https://www.theguardian.com/business/2011/sep/29/oracle-autonomy-mike-lynch
Also, some of the documents linked in the Guardian article can be found on the Wayback Machine:
https://web.archive.org/web/20110930140048/https://www.oracle.com/us/corporate/features/please-buy-autonomy-503330.html
Hilarious
I don't know whether Lynch is guilty, but I recall all the histrionic wailing about Lynch being extradited and the doom fortold about how he would never see justice in America and instead spend the rest of his life unjustly imprisoned in a grim federal Supermax trading blowjobs for cigarettes. How are we feeling now, fellas?
Re: Hilarious
Well I feel pleased he was found not guilty.
I still can't comprehend how a company the size of HP could have completed a purchase like that with performing due diligence. The blame all lay in the HP boards decisions.
Re: Hilarious
The judge did his best to scupper the defence by disallowing any discussion of HP's actions post the takeover, but it looks like the jury saw what a lot of us who have followed this case for years saw. HP overpaid for Autonomy having not done their due diligence and despite reservations from some senior figures. As someone points out above, Lynch had a duty to the shareholders to get the best price, and he certainly succeeded.
Re: Hilarious
There were 2 schools of thought after the English trial (I specifically say English here as there's different legal systems in the UK), one was that Lynch would get away with it as the overwhelming tone of the coverage was that everyone at HP, with the possible exception of Cathie Lesjak who said don't buy them (and she was the CFO, but was ignored), was an idiot desperate to expand via acquisitions, and the other was that HP's markdown of Autonomy, being sued by their own shareholders and the general air of utter incompetence meant that they'd be desperate to find a scapegoat.
IANAL but I won't deny I'm shocked that the legal cases have ended with the results the way they have.
Amazed it got this far given a jury reached a not guilty verdict so quickly.
Almost like US prosecutors were acting as an arm of a big US tech company.
The US prosecutors missed out on a really cushy job
HP pays their lawyers a lot better than the Feds do - although why HP even employ lawyers is weird, inasmuch as they never listen to them.
Good decision
It was always 'buyer beware' in situations like these. HP should never have begun this travesty.
Time for --------->
It had the whiff of corporate arse covering from the start
And I'm guessing a case like this has a high bar for conviction.
For those saying we should have had more faith in the US justice system… The way prosecutors behave there makes the system incompatible* with ours. I will always treat extradition requests with scepticism.
* Strong arming confessions of guilt through a system of plea bargaining? FFS!
In a few years' time...
...this will be repeated by whatever AI company HP is about to waste a tonne of money on...
Definitely the right decision
Attempting to paint Mike Lynch as "Dr Evil", which is what the prosecution tried to do, backfired completely. When I heard that he was going to take the stand himself (opening himself up to cross-examination, hence a risky tactic), I knew he'd have a chance of being found not guilty. Having met him myself on many occasions, the worst you can say about him, is that he's blunt. My impression of him is just what he says he is, a visionary technologist with a very good business instinct.
Caveat Emptor...
... the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.
Someone should have clued HP up on that.
Also...
Surely HP should have sent their own auditors into Autonomy to delve into its financials before writing the cheque?
Perhaps it's them they should be sueing.
Re: Also...
They did
And they paid up. cant remember the name of the auditers HP employed , but I guess when you're the CEO of HP and determined to pay whatever for a company, you're not going to listen anyone who nay says..... then you get fired.....
Does Mike Lynch get compensation ...
for having wasted 13 years of his life being chased, and having his liberty infringed, by HP ?
Auto-know-better
I worked for his horrible company for a while, in the Cambridge HQ. Honestly the worst place I've ever worked. The classic "burn you out like matchsticks" corporate culture. I've never felt happier than when I escaped. Lynch and his henchmen never bothered meeting junior employees. Far too conceited and up themselves. Watching this very, very long case has been incredibly cathartic, whatever the final outcome!
Surprise of the Year !!!
Don't know Mike Lynch or have any connection with HP/Autonomy *but* this IMO is the right result.
HP did not perform 'Due Diligence' due to greed and desire to gain Autonomy before anyone else.
Autonomy gained the best price it could get !!!
HP had 'buyers remorse' and tried via every means possible to blame someone else.
So surprised that a US of A court was able to find in favour of the *not* US of A company !!!
HP need to give up the fight at this point before it costs yet more money ... but I expect an appeal which always seems to be possible *if* you have enough money .... See Trump for this in action !!!
:)
No kidding?
Saw the headline in a sidebar flash and thought you were having me on. I do so hope it's true and the dimwits at HP have to eat an $11bn slice of humble pie.