Ex-Autonomy boss Mike Lynch charged with fraud in the US

Mike Lynch, the former chief executive of software giant Autonomy, has been charged with fraud in the US.

The charge, which carries a maximum term of 20 years, relates to Autonomy’s $11bn sale in 2011 to computer giant Hewlett-Packard.

Autonomy was seen as a runaway British success at the time of its sale. Mr. Lynch’s lawyers say he will “vigorously defend the charges”.

Mr. Lynch is currently a scientific adviser to the Prime Minister.

The court documents say Mr. Lynch made $815m fraudulently from the 14 charges leveled at him.

Autonomy was founded by Mr. Lynch in 1996. It developed software that could extract useful information from “unstructured” sources such as phone calls, emails or video, and then do things such as suggest answers to a call-center operator or monitor TV channels for words or subjects.

Before it was bought by Hewlett-Packard, it had headquarters in San Francisco and Cambridge.

In 2010, about 68% of Autonomy’s reported revenues came from the US and elsewhere in the Americas.

In 2012, a year after the takeover, HP wrote off three-quarters of the value of Autonomy.

‘Travesty of justice’

Earlier this year, Sushovan Hussain, Autonomy’s former finance chief was found guilty of fraud.

According to this week’s charges, between 2009 and 2011, Mr Lynch and Stephen Chamberlain, vice president of finance, along with other co-conspirators, artificially inflated Autonomy’s revenues by overstating them.

The two are also accused of making misleading statements to regulators and market analysts covering the company.

The charge sheet also says they “intimidated, pressured and paid off persons who raised complaints about or openly criticized Autonomy’s financial practices and performance”.

‘Stale’

Mr. Lynch’s lawyers, Chris Morvillo of Clifford Chance and Reid Weingarten of Steptoe & Johnson, said in a statement that the indictment was “a travesty of justice”.

The statement said Mr. Lynch was a “world-leading entrepreneur who started from nothing” and was being made a scapegoat for HP’s failures.

It called the allegations “stale” and said they amounted to a business dispute over the application of UK accounting standards, something which is the subject of a civil case with HP in the English courts.

HP issued a statement welcoming the start of proceedings: “HPE is gratified that justice prevailed and that Mr. Hussain was held accountable for his criminal actions when he was convicted in April of this year.

“HPE is now pleased to learn that Dr. Lynch and Mr. Chamberlain have also been criminally charged in this matter by a federal Grand Jury.

“HPE believes that the facts uncovered during the course of this matter will further demonstrate the harm that was caused by Dr. Lynch, Mr. Chamberlain, Mr. Hussain, and others to HP and looks forward to seeing justice served once again.”