Tech entrepreneur Mike Lynch acquitted of defrauding HP; he was smart to testify 

A San Francisco jury that heard three months of testimony unanimously acquitted Autonomy CEO Mike Lynch of 15 criminal charges of conspiracy and wire fraud over the 2011 sale of his company to Hewlett-Packard. The government charged that Lynch misrepresented the value of his company at $11 billion and HP had to write down the value of the company by more than half. 

This sale, a major British tech deals at the time, was supposed to give a jump start to HP’s software business but it did not. HP won a civil case against Lynch in London, but damages have not been set. This U.S. case was a criminal one brought by the U.S. Justice Department. 

Lynch, a software entrepreneur who has both been praised for his ingenuity and criticized for this sale, told jurors himself that he did not lie to HP but depended in good faith on the calculations of others. He spent three days on the stand and clearly made a positive impression.  

In a battle between a rich founder executive and a sophisticated larger company, where the larger company bought the founder’s company, people will assume that the larger company is responsible for doing its due diligence. They will likely assume the company executives should know better than to rely purely on representations of the other side’s management.  

Some jurors tend to believe that these companies and executives operate in infested waters and should know it is ‘buyer beware.’ And the theme that HP and Whitman would blame others for their own mismanagement or failures is easy for some jurors to believe. 

Finally, some on the jury may have expected former HP CEO Meg Whitman to testify, and when she didn’t, that may have raised some suspicion and doubt in their minds. Whitman, a one-time California gubernatorial candidate, was running the company when it took the massive write down for the Autonomy purchase and she led some of the accusations against Lynch. 

And the fact that Lynch did testify and that he, over days, played guide and teacher to the jury about British phrases may have endeared him to the jurors. Given all that, it wasn’t a surprising outcome. 

I was quoted about this case in several trade publications including CIO.com and Accounting WEB

This entry was posted in CEOs, Complaints Against Executives, Criminal Prosecutions, Litigation and tagged , , , . Bookmark the permalink.

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