April 13, 2024

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Tech bigs praised British engineer Steve Jobs who masterminded $11 billion 'fraud': prosecutors

Tech bigs praised British engineer Steve Jobs who masterminded $11 billion 'fraud': prosecutors

Mike Lynch, the wealthy tech founder who was once hailed as Britain's answer to Steve Jobs, will testify in his US trial to defend himself against charges that he defrauded Hewlett-Packard in the $11 billion sale of his software company Autonomy, his lawyer said in court. Monday. .

Federal prosecutors in San Francisco accused Lynch, Autonomy co-founder and former CFO Stephen Chamberlain, of scheming to inflate the company's revenues starting in 2009 and ending with HP's disastrous 2011 acquisition of the company.

Prosecutor Adam Reeves said in federal court in San Francisco that Lynch “told a great story,” touting the British technology company's revenues and “pure software” business model.

“HP took over and thought this type of software company was exactly what they needed,” Reeves said.

Mike Lynch, co-founder of Autonomy, was accused of scheming to inflate the company's revenue. Reuters

Meanwhile, Reeves said Autonomy was secretly profiting from reselling devices and using improper accounting to meet analyst forecasts at Lynch's direction.

After the deal, HP reduced the value of the British company by $8.8 billion a year, saying it had uncovered serious accounting irregularities.

Reed Weingarten, Lynch's attorney, urged the jury to be skeptical, saying HP was “happy to pay” billions of dollars for Autonomy and accelerated its due diligence process to weed out potential competitors.

Weingarten said the Cambridge-educated Lynch was focused on technology, and trusted Autonomy's finances to Sushuvan Hossain, then Autonomy's chief financial officer.

“Mike spent many sleepless nights worrying about autonomy, but not about accountability,” Weingarten said.

Prosecutors accuse Lynch and Chamberlain of padding Autonomy's finances through old agreements and “back and forth” deals that advanced money to customers through sham contracts. Part of the purpose was to entice buyers like HP, prosecutors said.

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In the trial scheduled to last until late May, jurors may hear from dozens of witnesses, including Leo Apotheker, the former HP CEO who was fired weeks after the autonomy deal was announced.

Lynch faces 16 counts of fraud and conspiracy. Chamberlain faces 15 charges.

Both men are presumed innocent. The jury of 12 must reach a unanimous verdict to convict either of them.

Former HP CEO Leo Apotheker was fired weeks after the autonomy deal was announced. Reuters

The collapse of Home Rule launched more than a decade of legal battles on Lynch's behalf.

HP largely won a civil suit against him and Hussein in London in 2022, seeking $4 billion in damages.

HP didn't know what it was doing with Autonomy, and was far from understanding its technology, Lynch said.

Hussein was convicted separately on US charges in 2018. Months later, prosecutors brought charges against Lynch and Chamberlain.

After the deal, HP reduced the value of the British company by $8.8 billion a year, saying it had uncovered serious accounting irregularities. Bloomberg

Lynch fought extradition, but was eventually transferred to the United States to face charges after Britain's Supreme Court refused to allow him to appeal last year.

US District Judge Charles Breyer, who is overseeing the trial, granted Lynch $100 million bail, but restricted him to a home in San Francisco under 24-hour guard.

Lynch's lawyer said in court that his net worth is about $450 million.

Hussain was found guilty of 16 charges in a jury trial before Breyer in 2018. He was released from prison in January after serving a five-year sentence.