Statement on behalf of Dr Mike Lynch from his lawyers Christopher Morvillo and Reid Weingarten

February 5, 2020

Mike Lynch has submitted himself for arrest, a formality required as part of the extradition process initiated by the US Department of Justice (DOJ).

This case has wider implications for British business. The US claims concern alleged conduct in the UK. Dr Lynch is a British citizen who ran a British company listed on the London Stock Exchange, governed by English law and UK accounting standards. This extradition request reflects yet another example of the DOJ's attempts to exert extraterritorial jurisdiction over non-US conduct. The forum bar in the UK Extradition Act was enacted by the UK Parliament to protect British citizens from such a scenario.

Dr Lynch vigorously rejects all the allegations against him and is determined to continue to fight these charges.

Since Hewlett-Packard (HP) first raised these allegations more than seven years ago, Dr Lynch has steadfastly denied them and has worked hard to properly respond and set the record straight. The UK Serous Fraud Office previously investigated and did not pursue the allegations. Dr Lynch has now answered HP’s claims in the appropriate forum, the High Court in London, where he attended court every day of the 10-month trial. During that trial, Dr Lynch testified about all of these allegations for more than 20 days. He has not hidden, nor has he shied away from defending his conduct. Having patiently and diligently defended the case in England for several years, he awaits the civil trial judgment. The US DOJ should not have commenced extradition proceedings prior to the judgment of the English High Court.

Alex Bailin QC, said in court:

Dr. Lynch categorically denies all the allegations against him and will be resisting extradition on the basis of the forum bar. These matters concern a British citizen, UK-based conduct, a UK listed plc, culminating in a UK civil trial in which judgment is pending – these matters unquestionably belong here in the UK. The forum bar exists to provide real protection against this interventionist type of action and this, we will say, is a paradigm forum bar case.

I can also say that the superseding indictment, reaching back and spanning almost a decade, is breathtakingly broad. The jurisdictional claim here is unwarranted and immediately raises questions about whether this court's process is being abused and issues of dual criminality.

On 22 March 2019, a superseding indictment was filed against Mike Lynch in the United States. In response, Dr Lynch’s lawyers, Chris Morvillo of Clifford Chance and Reid Weingarten of Steptoe & Johnson, issued the following statement:

These new allegations are simply preposterous.

For the last 6 years, Mike Lynch has been diligently and responsibly responding to HP’s specious allegations, guided and surrounded by more lawyers than he would care to count. At all times he has acted lawfully and professionally in defending himself and his work at great personal sacrifice.

Simultaneously, and despite all odds, Mike Lynch has built another billion-dollar UK company. He has helped former colleagues who lost their jobs (because of these allegations), secure employment to support their families at normal rates for their fulltime work. He has also generously helped former colleagues hire lawyers to defend themselves against these contrived allegations. Yet somehow, without a shred of evidence, these same acts of ingenuity and kindness, all of which occurred entirely in the UK, are now said to support a conspiracy against the United States.

Something is horribly amiss in San Francisco, where the Wild West "shoot first, ask questions later" approach to investigations — originally deployed by HP in this case — is sadly still alive and well.

Mike Lynch is vehemently not guilty of these charges. When the true facts are revealed, it will be apparent that the allegations are false and recklessly maintained and that, like HP's civil claims, the allegations serve only to underscore that this entire dispute is a flawed theory in search of facts.

Conspicuously filed on the eve of the UK civil trial between Mike Lynch and HP, the makeweight new charges unveiled in San Francisco today are plainly designed to inflame and breathe life into a case plagued by aging and unsupported allegations.

They are denied. Unequivocally.

Notably, however, these questionable new allegations, like the underlying charges, are predicated on events that occurred predominantly in England. While the US may seek to police the world, this commercial dispute is about to be heard in the UK courts, where it belongs, and Mike Lynch is looking forward to defending his good name in his home country.

On 29 November 2018, an indictment was filed against Mike Lynch in the United States. In response, Dr Lynch’s lawyers, Chris Morvillo of Clifford Chance and Reid Weingarten of Steptoe & Johnson, issued the following statement:

This indictment is a travesty of justice. Mike Lynch is a world-leading entrepreneur who started from nothing and
spent his life building a multi-billion dollar technology business that solved critical problems for companies and governments all around the world. These stale allegations are meritless and we reject them emphatically.

This case is unsupportable. It targets a British citizen with rehashed allegations about a British company regarding events that occurred in Britain a decade ago. It has no place in a US court. The claims amount to a business dispute over the application of UK accounting standards, which is the subject of a civil case with HP in the courts of England, where it belongs.

There was no conspiracy at Autonomy and no fraud against HP for the DoJ to take up. HP has a long history of failed acquisitions. Autonomy was merely the latest successful company it destroyed. HP has sought to blame Autonomy for its own crippling errors, and has falsely accused Mike Lynch to cover its own tracks.

Mike Lynch will not be a scapegoat for their failures. He has done nothing wrong and will vigorously defend the charges against him.

A federal grand jury indicted Michael Richard Lynch, the former Chief Executive Officer (“CEO”) of Autonomy Corporation plc (“Autonomy”), with conspiracy to commit wire fraud and multiple counts of wire fraud, announced United States Attorney Alex G. Tse and Federal Bureau of Investigation (FBI) Special Agent in Charge John F. Bennett. Stephen Keith Chamberlain, Autonomy’s former Vice President for Finance, was also indicted today in the same indictment for the same offenses.

According to the indictment, Lynch, 53, and Chamberlain, 46, both citizens and residents of the United Kingdom, allegedly engaged in a scheme to defraud purchasers and sellers of Autonomy securities, including the Hewlett-Packard Company, about the true performance of Autonomy’s business, its financial condition, and its prospects for growth.

Prior to October 2011, Autonomy was a company incorporated in the United Kingdom that maintained dual headquarters in San Francisco and Cambridge. In 2010, about 68% of Autonomy’s reported revenues came from the United States and other countries in the Americas. The case involves the acquisition by Palo Alto-based Hewlett-Packard Company and Hewlett-Packard Vision B.V., a wholly-owned subsidiary of HP (collectively “HP”), of Autonomy. On August 18, 2011, HP entered into an Offer Agreement with Autonomy and publicly announced its offer to acquire Autonomy for approximately $11 billion. On October 3, 2011, HP’s acquisition of Autonomy closed and HP acquired control of Autonomy.

According to the Indictment, between 2009 and 2011, Lynch and Chamberlain, and other co-conspirators, (1) artificially inflating Autonomy’s revenues by backdating written agreements to record revenue in prior periods; recording revenue on contracts that were subject to side letters or other contingencies that impacted revenue recognition; and improperly recorded revenue for reciprocal or roundtrip transactions; (2) made false and misleading statements to Autonomy’s independent auditor about transactions allegedly supporting the recognition of revenue and other items in Autonomy’s financial statements; (3) made false and misleading statements to market analysts covering Autonomy about Autonomy’s true performance and the nature and composition of its products, revenues and expenses; (4) made false and misleading statements to Autonomy’s regulators in response to inquiries about its financial statements; (5) made false and misleading statements that Autonomy was a so-called “pure software” company while concealing the fact that Autonomy engaged in hidden, loss-making resales of hardware separate from its sale of appliances; (6) made false and misleading statements about Autonomy’s alleged sales of original manufactured equipment or “OEM” licenses; and (7) intimidated, pressured and paid off persons who raised complaints about or openly criticized Autonomy’s financial practices and performance.

As part of the alleged scheme to defraud, Autonomy issued materially false and misleading quarterly and annual financial statements which the defendants allegedly provided to HP during the time that HP was considering whether to purchase Autonomy. The indictment alleges that Lynch and Chamberlain caused Autonomy to make materially false and misleading statements directly to HP regarding Autonomy’s financial condition, performance, and business during the negotiations between HP and Autonomy leading up to the August 18, 2011 acquisition announcement. Allegedly, the defendants, and their co-conspirators, made false and misleading statements about the nature of Autonomy’s products, concealed Autonomy’s non-appliance hardware sales, and made other false and misleading statements during HP’s “due diligence” of Autonomy.

In sum, the indictment charges Lynch and Chamberlain with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and thirteen (13) counts of wire fraud, in violation of 18 U.S.C. § 1343. The indictment also includes asset forfeiture allegations.

No federal court appearance has yet been scheduled for the defendants.

The indictment filed today merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendants face a maximum sentence of twenty (20) years in prison, and a fine of $250,000, plus restitution, for each count of wire fraud and for the conspiracy count. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Assistant U.S. Attorneys Robert S. Leach, Adam A. Reeves, and William Frentzen are prosecuting the case with the assistance of Beth Margen, Phillip Villanueva, and Bridget Kilkenny. The prosecution is the result of a multi-year investigation involving the FBI and the United States Securities and Exchange Commission.

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