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Autonomy founder's fraud trial begins in the US

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The fraud trial of tech entrepreneur Mike Lynch has started in the US, with the Autonomy founder having been extradited last year.

19th Mar 2024
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The fraud trial of tech entrepreneur Mike Lynch has started in the US.

Lynch, who co-founded Autonomy in 1996, was extradited last year on the back of charges laid by federal prosecutors alleging that he inflated the value of the software business before selling it to HP for $11bn in 2011.

At the time, the deal was ranked among the largest of its kind but HP subsequently wrote down the value of Autonomy $8.8bn a year later.

Now, the prosecution is pursuing charges alleging Lynch and his co-defendant, former Autonomy vice president of finance Stephen Chamberlain, camouflaged Autonomy’s value with false and misleading financial statements, both to the US Securities and Exchange Commission and directly to HP during the pre-acquisition due diligence period.

This comes after HP’s write down triggered an avalanche of regulatory investigations and legal claims against the UK business intelligence software company.

Trial underway

With the trial now underway, prosecutor Adam Reeves has told the federal court in San Francisco that Lynch "spun a fabulous tale," according to Reuters.

"HP ate it up – they thought this kind of software company is exactly what they needed," he added.

Lynch's attorney Reid Weingarten, says Reuters, urged the jury to be skeptical, noting that HP was "happy to pay" billions for Autonomy's software and ‘rushed the due-dilligence process to shut out potential competitors’.

Weingarten added that Lynch was focused on technology and left the finances to others.

"Mike had many sleepless nights worrying about Autonomy, but not about accounting,” he said.

Extradition

The criminal case had been dubbed “one of the largest corporate frauds ever prosecuted” by US Attorneys and was held up by Lynch’s extradition battle.

His appeal turned on whether as a UK-listed subject to IFRS accounting standards, the case should be heard by a UK court. Those arguments failed to convince High Court judges, who subsequently issued a decision backing the arguments of US prosecutors and the district judge.

Given the greater loss and harm experienced by victims of the fraud in the US, it was right for the trial to be heard in that country, they ruled.

Former Autonomy chief financial officer Sushovan Hussain was found guilty by a jury in 2019 on 16 counts of accounting fraud at the San Francisco federal court. Judge Breyer sentenced Hussain to five years in prison, fined him $4m (£3.1m) and ordered him to forfeit $6.1m (£4.73m).

Lynch’s trial continues.

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By FactChecker
21st Mar 2024 00:21

Given the amount of speculation out there, it would be nice if an article on an Accounting forum gave at least a little insight into the actual charges.
Merely stating that "charges alleging Lynch and his co-defendant, former Autonomy vice president of finance Stephen Chamberlain, camouflaged Autonomy’s value with false and misleading financial statements, both to the US Securities and Exchange Commission and directly to HP during the pre-acquisition due diligence period" gives us not a clue as the nature of the claimed malfeasance.

If, and I doubt it, that is deemed too risky whilst sub judice ...then at least provide a summary of the 16 counts of accounting fraud on which Sushovan Hussain was found guilty by a jury in 2019.

As it stands, this tells us less than watching CNN.

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