Former Autonomy Chief Mike Lynch is acquitted of fraud charges in the US

Mike Lynch, one of the UK’s most prominent tech entrepreneurs, has been acquitted by a San Francisco jury of criminal charges on Thursday. This ends a 12-year legal battle stemming out of one of Silicon Valley’s largest fraud cases.

Former Autonomy CEO was accused of inflating revenue at UK software company before its $11bn purchase by Hewlett-Packard, in 2011. Lynch’s verdict comes after a long fight that saw him extradited and placed under house arrest with 24-hour surveillance in the US before the trial.

Lynch has claimed for years that HP used him as a scapegoat to cover up its botched acquisition of Autonomy and subsequent mismanagement. He tried to argue that criminal charges be heard in UK. The jury began its deliberations on Tuesday afternoon after a two and a half month trial. They found him not guilty of all charges, as did Stephen Chamberlain who was Autonomy’s former vice president of finance.

After the verdict, Lynch expressed his “elation” and said that he “looked forward to returning to UK and getting back into what I love the most: my family and innovation in my field”.

The prosecution accused Lynch and Chamberlain for inflating revenue in the two-year period before the acquisition. They did this by using backdated contracts from Autonomy, offering “round trip” offers to customers, and concealing the fact that a portion of the high-margin, software revenue came from less profitable hardware sales.

The defendants were charged with 14 counts of fraud by wire and one count for conspiracy. The judge threw out another charge of securities fraud near the end.

“We respect and acknowledge the verdict,” said a spokesperson for the US Attorney’s Office in San Francisco. We thank the jury for paying attention to the evidence presented by the government in this case.

Christopher Morvillo, of Clifford Chance, and Brian Heberlig, of Steptoe said in a press release that the government’s actions in this case were “profoundly over-reaching”. The lawyers said that the verdict closed the book on 13 years of relentless efforts to blame Dr Lynch for HP’s documented ineptitude.

Autonomy’s sale was a major milestone in the UK tech industry at a moment when the Silicon Fen region, around Cambridge where the company was located, was growing in prominence. Autonomy software was used by large companies to search through unstructured data. It was a key piece of technology that helped HP rebuild its computer hardware business.

The US company, however, wrote off its investment of $8.8bn a year after the deal, and blamed $5bn on what they claimed was fraudulently inflating Autonomy’s revenue during the years prior to the deal. In 2022, a successor company, HPE, won a civil case against Lynch and sought $4bn damages.

Sushovan Hussain was released from prison in January, after completing a five-year term in the US, for fraud. The prosecution argued that by allowing Hussain to be viewed as the main figure in the fraud, Lynch was free to exercise personal control “without leaving a paper trail”. They tried to portray him as a controlling and domineering boss who aggressively attacked his critics.

Lynch testified during the trial that he was unaware of any fraud because he left accounting and contract issues to others, and focused his attention on marketing and technical matters.

Lynch, who earned a PhD at Cambridge, became one of the most influential figures in the UK tech industry. He served on a group of scientists that advised the UK Prime Minister and on Royal Society committees. In 2006, he was awarded the OBE for his services to business. In 2012, he founded venture capital firm Invoke Capital. Its investments include Darktrace.