How Mike Lynch scored a stunning victory over the US after 12-year fraud saga (original) (raw)

British tech entrepreneur’s acquittal is vindication after a long fight to clear his name

On Thursday morning in California, after less than two days of deliberations, jurors in a San Francisco courtroom told the judge they had a unanimous verdict.

21 minutes later, the British tech entrepreneur Mike Lynch was ready to learn his fate.

As jurors read out their decision, it became clear that Lynch – once feted as one of Britain’s most successful technology entrepreneurs – had scored a stunning victory.

The founder of the software company Autonomy and his co-defendant Stephen Chamberlain were found not guilty on 15 charges of wire fraud and conspiracy over the £7bn sale of the company to Hewlett Packard in 2011.

The victory vindicates Lynch’s decision to fight the charges. The 58-year-old made £500m from selling Autonomy, and was better equipped to challenge the US justice machine than most defendants, hiring some of America’s leading lawyers.

But even so, his victory was seen as unlikely.

Only 0.4pc of US federal defendants are acquitted at trial and the vast majority – 90pc – plead guilty. Such is the force of the American justice system.

For Lynch, however, fighting was the only option. The 58-year-old Cambridge PhD graduate had spent 12 years attempting to clear his name, and six challenging the US justice system.

When he sold Autonomy, a software company that specialised in analysing data, it was one of the largest-ever deals involving a British tech company.

Lynch – dubbed the UK’s Bill Gates – called it a “momentous day”.

But a year later, HP – under new management – wrote down almost the entire value of its investment, alleging “serious accounting improprieties” and “outright misrepresentations” from Autonomy’s former executives.

The claims prompted an angry denial from Lynch, who said HP had ruined a “world leader”.

A few months later, the Serious Fraud Office opened an investigation into the claims, while HP prepared a $5bn lawsuit against Lynch in the English courts.

Yet, things initially appeared to move on. The SFO dropped its investigation in 2015, and Lynch became a founding investor in Darktrace, one of Britain’s rising tech stars. He subsequently served on the Prime Minister’s Science and Technology Council under both David Cameron and Theresa May.

Worse was to come, however. In 2018, Sushovan Hussain, Lynch’s chief financial officer at Autonomy, was found guilty of fraud in the US for his role in the sale. And months later, Lynch himself was indicted, accused of inflating the company’s revenues to trick HP into overpaying.

The charges upended Lynch’s status as a leading entrepreneur, transforming him from a successful businessman into an alleged criminal. He was forced to resign from Darktrace’s board, the Government’s science council and from committees at the Royal Society.

Lynch reacted furiously to what he considered to be none of America’s business. His lawyers called the indictment a “travesty of justice” that “had no place in a US court”, claiming HP had alleged fraud to make up for its own “crippling errors”.

From then on, Lynch was effectively fighting two battles. In addition to trying to clear his name against the fraud allegations, he became a vocal critic of the US justice machine. He argued that as a British company listed in London, any allegations against him should be made in the UK.

Unlike Hussain, who had voluntarily travelled to the US to fight the charges, Lynch dug in. He refused to travel to San Francisco to attend hearings, forcing the US government to lodge extradition proceedings in 2019.

However, questions over Autonomy’s sale were heard by a UK judge in 2019, forming part of HP’s civil trial.

Lynch spent 93 days in the High Court, including a marathon 20 days in the witness box as he batted away questions. But three years later, Mr Justice Hildyard found Lynch and Hussain liable for fraud (damages are yet to be awarded).

The Autonomy founder was also unsuccessful in fighting extradition, culminating in then Home Secretary Priti Patel ordering his transfer to the US in 2022.

Campaigners considered the decision just another example of the US government abusing a Transatlantic treaty drawn up after 9/11, one which handed the American Government powers to extradite alleged criminals.

It followed the case of the NatWest Three, a group of bankers accused of fraud over the Enron scandal who lost a long extradition battle before pleading guilty to limit their jail sentences in 2007; and Christopher Tappin, the British businessman accused of selling batteries for Iranian weapons. He said he had only pleaded guilty 12 years ago to avoid spending the rest of his life in prison.

Mr Lynch eventually arrived on US soil last May. He was forced to wear an ankle tag and was followed by armed security on the rare occasions he was allowed to leave his San Francisco apartment. He was also forced to put up a $50m bail.

In the run-up to the trial, Lynch faced a string of legal setbacks. District Judge Charles Breyer refused to allow evidence covering the months after the acquisition, which would have cast light on HP’s turbulent ownership of Autonomy. He was also unsuccessful in a late bid to throw out the case on jurisdictional grounds, in which he argued the charges were “impermissibly extraterritorial”.

When the trial started in March, US prosecutors accused Lynch of masterminding a “multiyear, multilayered fraud”, interviewing a series of Autonomy customers and former employees to support claims that the company cooked its books. Witnesses included former Autonomy executive Christopher Egan, who had struck a plea bargain with the US government in 2017.

During the trial, Lynch’s lawyers accused US prosecutors of “egregious” and “highly improper” questions that amounted to “deliberate misconduct”.

They said that a US government lawyer had asked a witness a series of questions designed to imply that Mr Lynch had been extradited, despite the fact it was excluded from admissible evidence. Judge Breyer subsequently refused Lynch’s request for a mistrial.

In the final days of the 11-week trial, Lynch himself took the stand. He argued the US was spinning a false picture of his company and former colleagues, claiming that the spectacle was “surreal”. Lawyers for the defence at times called the prosecution’s conduct “egregious” and ‘’highly improper”.

Lynch sought to present himself as a visionary technician, divorced from accounting matters, and markedly different to the domineering boss that US attorneys had claimed.

His lawyers appeared pleased with his performance, but even so, the jury’s total acquittal on Thursday came as a shock. For Lynch, it was vindication after more than a decade of seeking to clear his name.