Why the odds were against Mike Lynch and what can be learned from his extradition and unsuccessful prosecution in the US | Business News

It is impossible to overstate the importance of the acquittal of British technology entrepreneur Mike Lynch by a San Francisco jury.

Dr Lynch, the founder and former chief executive of Autonomy, was released on Thursday night of criminal charges that he fraudulently inflated the revenues of the FTSE-100 software company before its $11 billion acquisition in 2011 by Hewlett-Packard.

Odds against him

Very few people in the position of Dr. Lynch – a British extradited businessman for the U.S to face a federal trial – would have been brave enough to face a trial and plead not guilty.

The vast majority of defendants on criminal charges in the US tend to reach a plea deal, pleading guilty in exchange for a more lenient sentence, as the punishment for being found guilty in a trial in the US is very fierce. Dr. Lynch could have faced 20 years in prison if he had been found guilty.

As a mathematician specializing in probabilities, Dr. Lynch would know better than anyone how much the odds were stacked against him.

Pew Research Center analysis suggests that in 2022, only 0.4% of defendants in US federal criminal cases went to trial and were acquitted.

Making Dr. Lynch’s decision even bolder was the fact that his former colleague Sushovan Hussain, former chief financial officer of Autonomy, was found guilty in 2018 in the same case – before the same judge – and jailed for five years.

Still, he was determined to spend the day in court and tell his story to jurors.

The winning argument

At the heart of Dr Lynch’s defense was the fact that he was a technology expert and start-up expert, and not someone who would be deeply involved in the accounting practices of Cambridge-based Autonomy.

Reid Weingarten, Dr. Lynch’s lawyer, told jurors: “He’s a beginner guy who liked to eat cold pizza at two in the morning while he was inventing something.”

This would have worked well in a city where tech start-ups thrive.

Witnesses called by Dr. Lynch also reinforced the message that he was not involved in accounting matters.

Jonathan Bloomer, who chaired Autonomy’s audit committee, testified: “He wasn’t particularly interested in the financial side. Mike was primarily interested in strategy, new products, new areas to watch.

“He didn’t come to the audit committee.”

Dr. Lynch himself sought to make this clear when he took the stand, telling jurors about his bewilderment at some of the witnesses presented by federal prosecutors: “I sat and watched a parade of witnesses I had never met and some I may have just squeezed their hand and have heard of a series of transactions in which I have no involvement.”

Who is Mike Lynch?

Ilford-born Lynch – whose firefighter father came from County Cork and whose mother was a nurse from County Tipperary – also spoke of his experiences growing up in Essex in the 1970s as the son of Irish immigrants, at a time when the IRA was bombing England. cities, telling them, “You had to learn to run fast.”

He also engaged jurors with recollections of other experiences, including mopping his mother’s hospital floors – “I’m still a demon mop,” he said – and of his passion for raising rare breed pigs and cattle on his farm in Suffolk. .

Dr. Lynch’s acquittal will revive the debate over whether he should stand trial.

The UK’s reaction

Politicians and business leaders vehemently protested his extradition to the US to face charges arguing that if there was a case to be heard it should be heard in the UK as Autonomy was a UK listed, regulated and audited company in the UK.

The Serious Fraud Office investigated the acquisition but dropped the investigation in 2015.

Extradition contradiction

There was also deep dissatisfaction with the way the case highlighted, once again, the unilaterality of the extradition treaty signed with the US by the Tony Blairgovernment in 2003.

Dr Lynch was the latest in a long line of British businessmen brought before US courts – most of whom ended up behind bars – but the UK was unable, for example, to secure the extradition of the US diplomat’s wife. USA, Anne Sacoolas, for causing the death of British teenager Harry Dunn for careless driving in 2019.

Thus, Dr. Lynch gained cross-party support when trying to avoid extradition, with the first Brexit secretary David Davissecurity minister Tom Tugendhat and former Liberal Democrat sir leaders Vicente Cabo and Sir Menzies Campbell, among those who rallied to his cause. They highlighted that, under the terms of the extradition treaty, three times as many people were sent from the UK to face trial in the US than those who went the other way.

Davis posted on X last night: “The Mike Lynch case is a fantastic correction of a miscarriage of justice that we have been fighting for several years.”

In the event, Priti Patelthe then Home Secretary, signed Dr Lynch’s extradition order in January 2022 – a decision approved by the UK courts in May last year.

His friends and supporters were shocked when, days later, he was picked up by Metropolitan Police officers and taken to Heathrow Airport and turned over to the US Marshals.

Lynch later told friends in a letter: “While I cannot fault the politeness of the people involved, they were helpful and understanding, the reality of the situation is that from that moment on, my phone and laptop were taken from me and I was handcuffed during the flight and transferred to the courtroom.”

Charged a toll

He spent a night in custody and was ordered to pay £80 million bail, surrender his passport and was placed under self-paid 24-hour armed guard in San Francisco. While his wife, Angela Bacares, attended the trial, his daughters were unable to do so as they were taking university and A-level exams.

The trial didn’t just affect Dr. Lynch and his family.

Caught in the crossfire is another former FTSE-100 company – cybersecurity firm Darktrace.

Dr. Lynch’s investment firm, Invoke Capital, was the first to back Darktrace and remained its largest shareholder for many years, while Dr. Lynch was on its board until 2018.

Its ties to Darktrace undoubtedly cast a shadow – something that Dr. Lynch himself highlighted in August 2022, when he said that US authorities’ “vindictive pursuit” had “depressed its stock price” and left -it is vulnerable to acquisition by a US private equity firm.

That warning proved duly correct when, in April this year, Darktrace agreed to a £4.2 billion takeover by US private equity firm Thoma Bravo – depriving the UK of a company poised to become a global leader in AI-based cybersecurity.

A shame

The acquittal won’t just be embarrassing for U.S. prosecutors. It serves once again to remind how Hewlett Packard, which reduced the value of Autonomy by $8.8 billion per year after the acquisition, overpaid for the business.

Autonomy has always been a company that divided opinion in the city and HP, if it had reached out to them during the due diligence process, would have found no shortage of analysts who questioned Autonomy’s accounting.

The subsequent persecution of Dr. Lynch was, at best, a face-covering attempt and, at worst, a severe case of sour grapes.