How Mike Lynch’s court gamble paid off in Autonomy fraud trial (2024)

Alleged fraudsters do not usually give evidence at their own criminal trials. Just ask Donald Trump.

“The theory is you never testify,” the former president said last week after he was declared guilty in a New York courtroom, complaining that he had not had a fair hearing. “As soon as you testify… they’ll get you on something that you said slightly wrong.”

If Mike Lynch’s lawyers gave him similar advice, he did not listen to it. The British technology tycoon sat on the witness stand for four days in the closing sessions of his 12-week trial in San Francisco, as part of a case prosecutors called the largest fraud in Silicon Valley history.

Lynch, 58, was accused of masterminding a false accounting operation before his software company Autonomy was sold for $11.7bn (£7.1bn) to Hewlett Packard in 2011.

But after the trial wrapped up on Thursday in the US, Lynch was cleared.

It was a remarkable redemption that marked an end to a 12-year legal dispute that saw Lynch accused of a “multi-year, multi-layered fraud”, inflating the former FTSE 100 software company’s revenues through illegal accounting methods.

If found guilty, a man once dubbed “Britain’s Bill Gates” would have faced up to 25 years in a US prison.

Both Lynch and Stephen Chamberlain, the former Autonomy finance director who has also been charged, had pleaded not guilty. But while Chamberlain declined to take the stand, Lynch was always expected to testify.

It was a bold gambit, and not only because Lynch suffers from hearing difficulties that means he often resorts to reading lips.

Many criminal defendants wilt under intense cross-examination from prosecutors. But Lynch, who has spent more than a decade fighting fraud claims, has never been a shrinking violet.

“Mike was dying to tell his story to you,” Brian Heberlig, Lynch’s lawyer, told jurors during closing arguments on Monday.

For two months, Lynch had sat in the San Francisco courtroom, usually with his wife, Angela, in attendance while his two daughters sat university and A-level exams in England.

He watched on as US government lawyers laid out their case with a string of witnesses, including former Autonomy executives, City analysts and customers, most of whom Lynch says he did not recognise.

“It’s surreal,” Lynch said when asked by his lawyer Chris Morvillo what his reaction to the trial had been. “I’ve heard comments from people that just don’t paint the picture of the company that I and my colleagues and friends worked at for 15 years.

“I’ve sat and watched a parade of witnesses that I’ve never met and some that I may have just shaken their hand, and I’ve heard about a series of transactions I have no involvement in.”

In closing arguments on Monday, US lawyers said Lynch was “at the top” of a fraud conspiracy in which Autonomy concealed less-profitable hardware sales and engaged in “round-trip” deals in which it paid its own customers. “[Lynch] was in control, he domineered over Autonomy,” assistant US attorney Robert Leach told jurors.

He cited Joel Scott, Autonomy’s general counsel, who testified that Lynch had boasted of running Autonomy like the mob, saying: “We’re like the mafia, you can’t leave.”

Other witnesses in the trial included Autonomy’s former US finance chief Brent Hogenson, who had been paid a $750,000 settlement after being fired days after alerting regulators to alleged accounting improprieties (Lynch’s lawyers said they had shown Hogenson to be dishonest and incompetent).

The defence sought to refute allegations that Autonomy was cooking the books but also presented Lynch as an engineer who spent little time on accounting matters.

“My role was always the vision of the technology and where that would lead,” Lynch told the court. “I’m not an accountant. I don’t get involved in accounting decisions, and I’m not a salesperson… I can write pretty good code, even now, but I can’t sell for toffee.”

Lynch’s evidence went into great detail on his backstory and personal life. He said his teenage summer job cleaning hospitals had made him a “demon mopper” and waxed lyrical about the rare pigs and cows he keeps on his Suffolk farm, saying: “The medieval breeds of pigs are really robust.”

The level of detail earned a modest rebuke from district judge Charles Breyer, overseeing the trial, who said the court had heard “enough farm stories”.

Lynch acknowledged that Autonomy had not been perfect, saying that certain evidence presented during the trial was “extremely disappointing to hear” but that he was not aware of it at the time.

“The reality of life is that it is nuanced and it is messy, and sometimes you do your best to get through it, and companies are just like that,” he said.

He instead claimed HP had buyer’s remorse after agreeing to acquire Autonomy.

Leo Apotheker, the chief executive who pushed through the takeover, was sacked before the deal was completed, after which the US company changed strategy.

Lynch told the court that he had sat outside the HP boardroom as Apotheker was being removed, ready to talk through the deal with directors, only to be sent home. “[There was] total chaos and paralysis for weeks”,” he said.

Last week, the defence secured a small victory, when one of Lynch’s 16 charges was dropped, and his lawyers appeared pleased with the tycoon’s decision to testify.

“The prosecutor didn’t lay a glove on Mike, if this was a prize fight, they would have called it by noontime last Wednesday,” Heberlig said. “The Government has fallen woefully short of its burden [of proof].”

Sushovan Hussain, Autonomy’s chief financial officer, has already served a prison sentence over the sale.

Prosecutors said there was “no reasonable doubt that there was a fraud at Autonomy”, with both Lynch and Chamberlain involved – pointing out that the former made £500m from the sale.

“Dr Lynch had 500 million reasons to defraud HP. It tells you volumes about who was in charge and who benefited from this,” Leach, the prosecutor, said.

But Lynch wished to put his side of the story into the record.

During the trial, Autonomy’s founder said the company would go down as one of the most examined businesses ever. Now, Lynch has been fully vindicated.

How Mike Lynch’s court gamble paid off in Autonomy fraud trial (2024)


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