Key Takeaways:
British tech entrepreneur Mike Lynch has been cleared of all charges he faced in the United States over the $11.1 billion sale of his software company Autonomy to Hewlett-Packard (HP) in 2011.
Lynch was accused by HP of inflating the value of Autonomy, misleading regulators, and duping its eventual buyer. He was first charged in 2018 and following a lengthy battle over his extradition from England to the US, the trial began in March in San Fransisco.
Tech Billionaire Mike Lynch Found Not Guilty in Fraud Trial Involving the Sale of His Company to HP
The tycoon was facing 20 years behind bars if convicted. He denied all charges and took the stand to defend himself. The jury in court found him not guilty on all three counts after he had testified that his focus was purely on developing technology and not accounting. He even distanced himself from other Autonomy executives, such as its former chief financial officer, who was prosecuted for fraud.
Lynch co-founded Autonomy in 1996, which quickly grew to become one of the UK’s biggest tech companies. This won the billionaire many accolades and placed him on the same mantle as then-Microsoft CEO Bill Gates and Apple’s Steve Jobs.
Autonomy developed software that could extract useful information from “unstructured” sources such as phone calls, emails, or videos. In 2011, the startup was sold to HP in a deal worth $11.1 billion, which at the time was the largest-ever takeover of a tech business in Britain.
Lynch reportedly took home 500 million pounds from the sale, propelling him to billionaire status.
HP Wrote Down Autonomy’s Value by Billions After Discovering Accounting Irregularities
However, it did not take long for things to go south. Just a year after closing the deal, HP wrote the entire value of Autonomy down by $8.8 billion, alleging that they discovered major accounting improprieties.
Considering HP’s complaints, US prosecutors brought charges against Lynch, accusing him of inflating the value of his company by using backdated agreements to mislead about its sales, concealing its loss-making business of reselling hardware, and intimidating or paying off people who raised concerns about Autonomy’s operations.
Lynch was extradited to the US after a UK judge ruled in favor of HP in a civil fraud case in 2022. HP is seeking a reported $4 billion compensation in that case. Lynch, a former advisor to the UK government who sat on the boards of BBC and the British Library, was charged with 16 counts of wire fraud, securities fraud, and conspiracy.
He was placed under house arrest in the US while preparing for trial, which began in March.
Lynch Claimed Innocence by Arguing that he had no part in Autonomy’s Business Operations
In court, the former CEO of Autonomy claimed that he had little knowledge of the company’s day-to-day business operations or its accounting practices. Lynch claimed innocence by arguing that his background was more technical and foisted blame for Autonomy’s accounting irregularities on other executives and employees. He said that he often delegated tasks to others.
HP called Lynch the “driving force” behind the fraud, laying the blame squarely on him because he was the CEO. One major claim made by the US government against Autonomy involved the alleged concealment of its sale of hardware. Prosecutors allege that Autonomy marketed itself as a software company but sold both hardware and software products as a package to artificially boost sales figures.
Lynch was accused of paying customers to buy Autonomy’s software as a means of ginning up millions in fraudulent revenue. However, all of the prosecution’s arguments fell short after Lynch’s team said that HP had failed to properly vet the deal and mismanaged the takeover. All the while, the attorneys maintained that Lynch was not involved with the business transactions described.
The prosecution called more than 30 individuals to stand witness against Lynch, and many had difficulty recalling specific conversations and discussions that were made over a decade ago.
Judge Dismisses Fraud Charge Against Lynch for Lack of Evidence
Judge Charles Breyer of the US District Court for the Northern District of California had already dismissed one count of securities fraud on Lynch during the trial for a lack of evidence to support the case.
Lynch’s attorneys Christopher Morvillo and Brian Heberlig declared their client as innocent. On Thursday, following the “not guilty” verdict, both attorneys said the jury had delivered a “resounding rejection” of the US government’s “profound overreach” and HP’s 13-year effort to pin its “well-documented ineptitude” on Mike Lynch.
The verdict brings to an end a relentless decade-long legal fight between two tech giants who blame each other for their mistakes. Lynch thanked his legal team for their tireless work on his behalf and said that he is looking forward to returning to the UK, getting back to his family, and working on innovations in the field he loves the most.
Mike Lynch’s contributions to the tech industry earned him an Order of the British Empire in 2006. He was also elected as a fellow to the Royal Academy of Engineering in 2008 and the Royal Society in 2014.
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