UK Tech Tycoon Lynch Cleared of HP Fraud Charges in US Trial

(Bloomberg) — UK tech tycoon Mike Lynch was found not guilty of criminal charges that he pulled off Silicon Valley’s biggest-ever fraud 13 years ago by duping Hewlett Packard Co. into buying his software startup for $11 billion.

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His victory is stunning after he lost a civil trial in the UK in 2022 over allegations that he and Autonomy Corp.’s former finance chief used accounting tricks to inflate the company’s revenue ahead of its 2011 sale.

The verdict Thursday from a jury in San Francisco federal court offers a remarkable redemption for Lynch, who has argued for years that he’s been scapegoated for the ill-fated acquisition of Autonomy by one of the oldest US tech companies.

Lynch hugged his lawyer and wiped his eyes after the verdict was read as some people in the courtroom were audibly crying. Lynch declined to comment.

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

Lynch Testified

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

Prosecutors alleged that Autonomy used a number of manipulations to make its revenue growth appear better than it was, such as back-dating contracts, pretending to ship goods, and overpaying for unnecessary services so vendors would then buy the company’s products.

Lynch, who served as an adviser to two UK prime ministers, was accused in a 2018 indictment of pocketing more than $800 million when Hewlett Packard bought Autonomy, then the second-biggest tech company in Britain.

Delegated Decisions

On the stand, Lynch claimed ignorance of some of the wrongdoing attributed to him, saying he delegated key decisions to underlings, and denied other allegations. He maintained that the $8.8 billion write-down Hewlett Packard took the year after the acquisition was really the Silicon Valley giant’s own fault.

US District Judge Charles 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 as long as 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 court.

After the verdict, jurors told lawyers for Lynch that they weren’t convinced of the credibility of testimony by Autonomy’s former US finance chief, Brent Hogenson, who held himself out as a whistleblower who escalated accounting concerns to Lynch and was fired.

Jury’s Doubts

Members of the jury also had doubts about the government’s proof that Lynch was involved in questionable hardware sales at Autonomy.

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

In the London civil case, Hewlett Packard is seeking $4 billion in damages, though the UK judge has said he’ll likely award “substantially less.”

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 business. HPE didn’t immediately respond to a request for comment on the verdict.

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

–With assistance from Brody Ford.

(Updates with comments by defendant Chamberlain, US attorney’s office and jurors)