On Friday, the US Department of Justice held Mike Lynch, the most celebrated tech entrepreneur of UK, responsible for conducting a fraud by selling his Autonomy software business for $11 billion, which comes to £8.6 billion.
Lynch made a profit of over $800 million from his own stakes in the Autonomy software business sale, a technology he founded himself back in 1996. He made the deal back in 2011, with US firm, Hewlett Packard. However, after one year Meg Whitman, the Chief Executive of Hewlett Packard, wrote off over three quarters of the decided value for the business sale. It appears that the acquisition of Autonomy software is now the most hazardous tale in the history of corporate takeovers.
Lynch has been accused of committing 14 counts of conspiracy and fraud, and under these charges, he now faces the risk of a maximum sentence of 20 years of prison. The Department of Justice accused the former Chief executive and member of the US government’s science and technology advisory committee with the following charges spanning over 2009 until October 2011,
“…fraudulent scheme to deceive… about the true performance of its business, financial performance and condition… revenue and expenses and prospects for growth”
The investment of the Department of Justice began in 2012, and the reports suggest the Lynch falsely exaggerated the revenues, and also made fallacious claims that the business was entirely revolving around the software. He also misled the regulators, while pressurizing and coercing analysts to back his claims. Lynch also falsely fired a US finance officer who attempted to question help about the inaccuracies in the financial statements of Autonomy.
The Serious Fraud Office spent seven years opening and closing the case of investigation into this matter, and Hewlett Packard resorted to a class action suit, filed by the shareholders who were the victims of this horrid acquisition. In 2015, Hewlett Packard filed a civil claim against Lynch on grounds of false booking the revenues of Autonomy. Lynch responded to this with a counter-suit on grounds of sabotaging his professional reputation. This trial was supposed to be held in March, but it is now likely to be postponed due to the criminal proceedings initiated by the Department of Justice.
Sushovan Hussain, the former chief finance officer of Autonomy was convicted for fraud back in April, but the sentence still has to be served. According to Lynch’s lawyers, the proceedings are a “travesty of justice” and the case has no basis and place in a US court. They also shun all allegations of conspiracies and fraud against Hewlett Packard.