Tech big hailed as Britain’s Steve Jobs masterminded $11B ‘fraud’: prosecutors
Mike Lynch, the wealthy tech founder once hailed as Britain’s answer to Steve Jobs, oversaw a “multiyear, multilayered fraud” that lured Hewlett-Packard into paying $11 billion for his software company Autonomy, prosecutors told a US jury in California on Monday at the beginning of his criminal trial.
Lynch “spun a fabulous tale” about the company’s finances, prosecutor Adam Reeves said in federal court in San Francisco.
“HP ate it up – they thought this kind of software company is exactly what they needed,” Reeves said.
Autonomy co-founder Lynch and former finance executive Stephen Chamberlain are accused of scheming to inflate the company’s revenue starting in 2009 and ending with HP’s disastrous acquisition of the company in 2011.
After the deal, HP wrote down the value of the British company by $8.8 billion a year, saying it had uncovered serious accounting improprieties.
Prosecutors accuse Lynch and Chamberlain of padding Autonomy’s finances through backdated agreements and “roundtrip” deals that fronted cash to customers through fake contracts. Part of the purpose was to entice buyers like HP, prosecutors said.
At the trial scheduled to run into late May, jurors may hear from dozens of witnesses, including Leo Apotheker, the former HP chief executive who was fired weeks after the Autonomy deal was announced.
Lynch’s attorneys have said in court that he is considering testifying in his own defense at the trial, where he faces 16 counts of fraud and conspiracy. Chamberlain faces 15 counts.
Both men are presumed innocent. The 12-person jury must reach a unanimous verdict to find either of them guilty.
Autonomy’s implosion launched more than a decade of legal battles for Lynch.
HP substantially won a civil lawsuit against him and Sushovan Hussain, Autonomy’s former chief financial officer, in London in 2022, and it is seeking $4 billion in damages.
Hussain was separately convicted on US charges in 2018. Months later, prosecutors brought charges against Lynch and Chamberlain.
Lynch fought his extradition, but was ultimately brought to the US to face the charges after Britain’s High Court refused him permission to appeal last year.
US District Judge Charles Breyer, who is overseeing the trial, granted Lynch bail secured by a $100 million bond, but restricted him to a home in San Francisco under 24 hour guard.
Lynch’s attorney has said in court that his net worth is around $450 million.
Hussain was convicted on 16 counts at a jury trial before Breyer in 2018. He was released from prison in January after serving a five-year sentence.
In the civil lawsuit, a British judge ruled in January 2022 that Lynch had masterminded an elaborate fraud to inflate the value of Autonomy, meaning the Silicon Valley company substantially succeeded in its civil case.
Lynch had said HP did not know what it was doing with Autonomy, and was out of its depth in understanding his technology.
