Closing arguments were delivered today in Mike Lynch's criminal fraud trial in San Francisco, over a decade after the HP/Autonomy merger that provoked the whole kerfuffle.

Federal prosecutors accuse Lynch and his co-defendant Stephen Chamberlain of defrauding American computer giant HP when it bought his software business Autonomy for $11 billion in 2011. As CEO and VP of finance respectively, Lynch and Chamberlain allegedly inflated Autonomy's value prior to that takeover through accounting misconduct for the express purpose of fraudulently selling the business at a premium.

Just a year after buying Autonomy, HP claimed it had been hoodwinked and ended up writing down Autonomy's value by nearly $9 billion. Lynch has disputed HP's claim for years, saying the loss of value was caused by post-takeover mismanagement. HP in 2015 split in two: HPE and HP Inc.

This particular trial, on the US West Coast, was challenging to get going, as Lynch is a British citizen and Autonomy was based in the UK. The former CEO attempted to be tried in an English court, but in 2022 the UK government approved Lynch's extradition to the US to face criminal charges of fraud. An appeal against his extradition failed in 2023, and just over a year ago Lynch was flown to the States, where he has remained on bail with a GPS ankle tag.

However, getting Lynch to the US didn't mean the immediate start of the trial. In September, Lynch's attorneys attempted to get the charges dismissed, though federal prosecutors didn't let up and filed a brief opposing the request the next month, arguing "the defendants employed virtually every accounting trick in the book."

Ultimately, Lynch's legal eagles were only able to delay the trial, which started on March 18. Lynch is facing 16 counts of fraud and conspiracy to commit fraud, and if found guilty of all of them, he could spend up to 20 years in prison, depending on how sentencing goes. Meanwhile, Chamberlain is on the hook for 15 counts.

The trial has seen a plethora of witnesses, over 30 of which were called by the Feds and include Leo Apotheker, who was HP's CEO at the time of the acquisition. Prosecutors argued Lynch had made more than $600 million from the acquisition, or as the Feds put it: Lynch had hundreds of millions of reasons to rip off HP.

Lynch, who painted himself as simply a smart, savvy entrepreneur, took the stand and defended himself on the grounds that he was just the tech and marketing guy, and even if there was fraud, he had nothing to do with it. Additionally, he argued HP could only blame itself for rushing the Autonomy deal and not doing proper due diligence: If there had been anything wrong with the numbers, it was on HP to identify and act on that, he said.

After those closing arguments, proceedings were handed over to the jury. It's never clear how long it will take for a decision to be reached, though for reference it only took the jury at the FTX fraud trial four hours to find Sam Bankman-Fried guilty.

The last (mostly) in a string of cases and litigation

The end of the trial will probably mark the end of the litigation sparked by the Autonomy acquisition.

The lawsuits kicked off almost immediately after HP's $8.8 billion write-off, starting with HP shareholders suing the Silicon Valley legend later in 2012. In 2015, HP then sued Lynch and former Autonomy CFO Sushovan Hussain in the High Court of England and Wales, with the former filing a $150 million countersuit for defamation.

HPE, which took over that civil suit against Lynch and Hussain from HP, won the case in 2022 and is now seeking $4 billion in damages.

The first criminal legal battles began in 2017 with the indictment and trial of Hussain. In that case, federal prosecutors had a key witness in Christopher Egan, Autonomy's head of sales, who wasn't tried in exchange for his testimony. Hussain was found guilty in 2018 and was sentenced to five years in prison. In January, he was released from incarceration, before Lynch's criminal trial had even begun.

Though technically, the end of the trial won't be the end of all litigation. The damages in the England civil case still have yet to be finalized. ®

https://www.theregister.com//2024/06/03/lynch_autonomy_trial/