UK tech mogul Lynch wins HP fraud case in stunning US loss

(Bloomberg) — In a stunning loss for U.S. prosecutors, a jury found British technology mogul Mike Lynch not guilty of criminal charges that he committed the biggest fraud ever in Silicon Valley 13 years ago by scam Hewlett Packard Co. for $11 billion.

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Lynch’s victory in San Francisco federal court came after he lost a civil trial in London in 2022 over allegations that he and the former chief financial officer of Autonomy Corp. used accounting tricks to inflate the company’s revenue before its sale in 2011. Hewlett Packard is asking for $4 billion in damages, although the UK judge said he would likely award “substantially less.”

Thursday’s result represents a remarkable redemption for Lynch, who has argued for years that he was the scapegoat for the ill-fated acquisition of Autonomy by one of the oldest U.S. technology companies.

Lynch hugged his lawyer and wiped his eyes after the verdict was read, as some people in the courtroom audibly cried. U.S. District Judge Charles Breyer said he will issue an order saying Lynch is free to leave the San Francisco residence, where he is under 24-hour supervision by hired security guards, after he was extradited from the United Kingdom last year. .

‘I love more’

“I’m looking forward to returning to the UK and getting back to what I love most: my family and innovating in my field,” Lynch said in a statement.

The verdict, after two days of deliberations, comes after a nearly three-month trial in which dozens of witnesses, including Lynch himself, testified about the settlement. He was accused of conspiring with Stephen Keith Chamberlain, Autonomy’s former vice president of finance, who was also tried and acquitted by a jury.

“We respect the verdict and thank the jury for their attention to the evidence presented by the government in this case,” said spokesman Abraham Simmons on behalf of the U.S. attorney’s office in San Francisco.

Prosecutors alleged that Autonomy used a series of manipulations to make its revenue growth appear better than it was, such as retroactive contracts, pretending to ship goods, and overpaying for unnecessary services to get suppliers to buy Autonomy’s products. company.

Lynch, who served as an adviser to two U.K. prime ministers, was accused in a 2018 indictment of pocketing more than $800 million when Hewlett Packard bought Autonomy, then the U.K.’s second-largest technology company.

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Delegated Decisions

In his testimony, Lynch claimed ignorance of some of the irregularities attributed to him, saying that he delegated important decisions to subordinates and denied other accusations. He stated that the US$8.8 billion writedown that Hewlett Packard suffered in the year following the acquisition was, in fact, the fault of the Silicon Valley giant itself.

Breyer last week dismissed the most serious charge against Lynch, securities fraud, which carries a maximum prison sentence of 25 years. He could have faced up to 20 years for wire fraud if he had been convicted. Chamberlain faced the same charges and possible punishment.

“Ten years ago they stole my life and now I’ve got it back,” Chamberlain said outside the courtroom.

After the verdict, jurors told Lynch’s lawyers that they were not convinced of the credibility of the testimony of Autonomy’s former U.S. finance chief, Brent Hogenson, who presented himself as a whistleblower who referred accounting concerns to Lynch and was fired.

Jury questions

Jury members also had questions about the government’s proof that Lynch was involved in questionable hardware sales at Autonomy.

Sushovan Hussain, Autonomy’s former chief financial officer, was sentenced to five years in prison after being convicted in 2018 of accounting fraud by a San Francisco jury.

Hewlett Packard split in 2015 into two companies. Hewlett Packard Enterprise Co. took over the corporate computing and software divisions, while HP Inc. runs the printer and PC businesses. HPE, which was not involved in the criminal case, declined to comment on the verdict.

The case is US v. Lynch, 18-cr-00577, U.S. District Court, Northern District of California (San Francisco).

–With assistance from Brody Ford.

(Updates with judge allowing Lynch to leave San Francisco residence)

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