It is impossible to overstate the significance of British tech entrepreneur Mike Lynch’s acquittal by a San Francisco jury.
Dr Lynch, the founder and former chief executive of Autonomy, was cleared on Thursday night of criminal charges that he fraudulently inflated the FTSE-100 software company’s revenues prior to its $11bn takeover in 2011 by Hewlett-Packard.
Odds stacked against him
Very few people in Dr Lynch’s position – a British businessman extradited to the United States to face federal trial – would have been brave enough to face trial and plead not guilty.
The vast majority of defendants to US criminal charges tend to reach a plea bargain, pleading guilty in return for a more lenient sentence, since the punishment for being found guilty at trial in the US is so ferocious. Dr Lynch could have faced 20 years in prison had he been found guilty.
As a mathematician, specialising in probability, Dr Lynch would have known better than most the extent to which the odds were stacked against him.
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Analysis by the Pew Research Centre suggests that, in 2022, just 0.4% of defendants in US federal criminal cases went to trial and were acquitted.
Making Dr Lynch’s decision all the more bold was the fact that his erstwhile colleague Sushovan Hussain, Autonomy’s former chief financial officer, had been found guilty in 2018 over the same case – in front of the same judge – and jailed for five years.
Yet he was determined to have his day in court and tell his story to the jurors.
The winning argument
At the heart of Dr Lynch’s defence was that he was a tech expert and start-up specialist rather than someone who would have been deeply involved in Cambridge-based Autonomy’s accounting practices.
Reid Weingarten, Dr Lynch’s lawyer, told the jurors: “He is a start-up guy who liked to be eating cold pizza at two in the morning while inventing something.”
That would have played well in a city in which tech start-ups thrive.
Witnesses called by Dr Lynch also reinforced the message that he was not involved in accounting issues.
Jonathan Bloomer, who had chaired Autonomy’s audit committee, testified: “He wasn’t particularly interested in the finance side. Mike was mostly interested in the strategy, new products, new areas to look at.
“He didn’t come to the audit committee.”
Dr Lynch himself sought to make this clear when he took the stand, telling jurors of his bemusement at some of the witnesses produced by federal prosecutors: “I’ve sat and watched a parade of witnesses that I’ve never met and some that I may have just shaken their hand, and I’ve heard about a series of transactions I have no involvement in.”
Mike Lynch became Britain’s first tech billionaire when Autonomy, the software company he founded, floated on the stock market
Who is Mike Lynch?
Ilford-born Dr Lynch – whose firefighter father came from County Cork and whose mother was a nurse, hailed from County Tipperary – also spoke of his experiences growing up in 1970s Essex as the son of Irish immigrants at a time when the IRA were bombing English cities, telling them: “You had to learn to run fast.”
He also engaged the jurors with recollections of other experiences, including mopping the floor at his mother’s hospital – “I’m still a demon mopper”, he told them – and of his passion for breeding rare-breed pigs and cattle at his Suffolk farm.
Dr Lynch’s acquittal will revive the debate over whether he should even be tried.
The UK reaction
Politicians and business leaders alike protested vehemently at his extradition to the US to face charges arguing that, if there was a case to be heard, it should be heard in the UK as Autonomy was a UK-listed, UK-regulated and UK-audited company.
The Serious Fraud Office looked into the takeover but dropped its investigation in 2015.
Extradition contradiction
There was also deep unhappiness at how the case highlighted, yet again, the one-sidedness of the extradition treaty signed with the US by Tony Blair‘s government in 2003.
Dr Lynch was the latest in a long line of British business people hauled before the US courts – most of whom ended up behind bars – yet the UK was unable, for instance, to secure the extradition of the US diplomat’s wife Anne Sacoolas for causing the death of British teenager Harry Dunn by careless driving in 2019.
Accordingly, Dr Lynch won cross-party support when he was seeking to avoid extradition, with the former Brexit secretary David Davis, the security minister Tom Tugendhat and the former Liberal Democrat leaders Sir Vince Cable and Sir Menzies Campbell, among those rallying to his cause. They pointed out that, under the terms of the extradition treaty, three times as many people had been sent from the UK to face trial in the US than had gone the other way.
Mr Davis posted on X last night: “The Mike Lynch case is a fantastic correction of a miscarriage of justice which we have been fighting for a number of years.”
In the event, Priti Patel, the then home secretary, signed Dr Lynch’s extradition order in January 2022 – a decision rubber-stamped by the UK courts in May last year.
His friends and supporters were shocked when, days later, he was collected by Metropolitan Police officers and driven to Heathrow Airport and handed to US marshals.
Dr Lynch later told friends in a letter: “Although I can’t fault the politeness of the people involved, they were helpful and understanding, the reality of the situation is that from that moment, my phone and laptop were taken from me and I was put in handcuffs for the duration of the flight and transfer to the courthouse.”
Taken a toll
He spent a night in custody and was ordered to pay an £80m bond, surrender his passport and was placed under 24-hour armed guard, paid for by himself, in San Francisco. While his wife, Angela Bacares, attended his trial, his daughters were unable to because they were sitting university and A-level exams.
The trial has not only taken a toll on Dr Lynch and his family.
Caught in the crossfire has been another former FTSE-100 company – the cyber-security business Darktrace.
Dr Lynch’s investment company, Invoke Capital, was the first to back Darktrace and remained its biggest shareholder for many years while Dr Lynch was on its board until 2018.
His ties to Darktrace undoubtedly cast a shadow – something Dr Lynch himself highlighted in August 2022 when he said the US authorities “vindictive pursuit” of him had “depressed its share price” and left it vulnerable to takeover by a US private equity company.
That warning duly proved correct when, in April this year, Darktrace agreed to a £4.2bn takeover by the US private equity firm Thoma Bravo – depriving the UK of a business poised to become a global leader in AI-driven cyber security.
An embarrassment
The acquittal will not only be embarrassing to US prosecutors. It again serves to remind how Hewlett Packard, which wrote down the value of Autonomy by $8.8bn a year after the takeover, overpaid for the business.
Autonomy was always a company that divided opinions in the City and HP would, had it sought them out during the due diligence process, found no shortage of analysts who had questioned Autonomy’s accounting.
Its subsequent pursuit of Dr Lynch was, at best, an attempt at face-covering and, at worst, a bad case of sour grapes.