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June 7, 2024

Mike Lynch innocent of defrauding HP over Autonomy acquisition, say US jury

Former Autonomy CEO Mike Lynch has been acquitted in case alleging he inflated the value of the startup before its acquisition by HP in 2011.

By Greg Noone

UK tech entrepreneur Mike Lynch has been found not guilty of fraud in a US court. In the judgement delivered by the court in San Francisco, Lynch successfully fended off 14 counts of wire fraud and one of conspiracy related to the sale of his startup Autonomy to Hewlett-Packard (HP) in 2011. That partnership eventually grew acrimonious when HP judged the $11.1bn purchasing price for the startup vastly out of proportion to its actual value, leading to the ousting of the firm’s chief executive and a separate civil suit for Lynch. 

“I am elated with today’s verdict,” said the British tech entrepreneur. “I am looking forward  to the UK and getting back to what I love most: my family and innovating in my field.” 

A view of the HP logo atop a building, used to illustrate a story about the trial of Mike Lynch.
A US court has found UK tech entrepreneur Mike Lynch innocent of defrauding HP during its acquisition of his startup, Autonomy. (Photo: Shutterstock)

HP takeover flawed, said Lynch

US prosecutors accused Lynch and Autonomy’s former financial officer, Stephen Chamberlain, of inflating the startup’s revenue through fraudulent transactions, primarily through disguising sales of hardware as software (Chamberlain was also acquitted in yesterday’s verdict.) For his part, Lynch said that his role as the startup’s chief executive was to oversee the technical side of the business while its chief financial officer, Sushovan Hussain, managed its accounting. In 2018, Hussain was convicted of wire fraud in a case related to the acquisition.

Lynch further argued that HP had rushed through the due diligence process required for such a complex takeover bid (audit giant Deloitte was fined £15m in 2020 for failing to spot irregularities in the deal.) The British tech entrepreneur initially said he was sceptical that a deal could even work, eventually being persuaded by a 64% premium HP offered on Autonomy’s stock price. Even then, Lynch claimed he was not fully kept abreast of the takeover’s practicalities, only seeing the press release announcing the acquisition after it had been published. 

Lynch still facing damages from successful civil suit

US prosecutors argued that this hardly mattered given Lynch and Chamberlain’s prior efforts to artificially inflate their company’s revenues. According to the former, Lynch was a ruthless and highly involved chief executive, naming meeting rooms after Bond villains and keeping a piranha tank in the company headquarters atrium. 

The reality was altogether different, Lynch responded. While running Autonomy was certainly complicated, he told the jury that many of the decisions made by him and his colleagues were more benign than they initially appeared to be. Neither was the company flawless, he said. “One thing to bear in mind is if you take [a] microscope into a spotless kitchen, you will always find bacteria,” Lynch argued. “And I don’t think Autonomy is any different.”

Though Lynch has been found innocent of criminal charges in a US jury trial, the tech entrepreneur lost a separate civil suit mounted against him by HP in the UK earlier this year. Directed against Lynch and former Autonomy CFO Hussain, that verdict could see both men lose up to £3bn if judges award the full damages sought by HP. 

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Read more: UK tech entrepreneur Mike Lynch denies fraud at US trial

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