Autonomy founder given bail at extradition hearing

Mike Lynch, the founder of IT software company Autonomy, has been freed on bail following an extradition hearing over HP case 

The US Department of Justice has applied for the extradition of Lynch, former CEO of Autonomy plc, to face fraud charges in the United States over allegations of accounting fraud related to the sale of Autonomy to US tech giant Hewlett-Packard (HP).

The extradition proceedings started on 6 February at Westminster Magistrates Court. Following the hearing, Lynch was released on £10m bail.

The extradition relates to the £8.4bn sale of Autonomy to HP in 2011. A year later HP wrote down $8.8bn relating to the acquisition, claiming accounting irregularities, partly down to revenue recognition accounting treatment relating to the way software rental and acquisitions were reported.

The allegations have been denied by Lynch, who claims that the difference in accounting rules between the UK and US were the reason for any discrepancies over the value of the company.

At the hearing, QC Alex Bailin said: ‘Since 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’, adding that he ‘rejects all the allegations against him and is determined to continue to fight these charges’.

The US indictment includes one count of conspiracy and 13 counts of fraud, including making ‘false and misleading statements to Autonomy’s independent auditor and ‘issuing materially false and misleading quarterly and annual reports’.

Lynch has always strongly denied claims of accounting malpractice or fraud and his lawyers have described the indictment as a ‘travesty of justice.’

If extradited to the US, Lynch could face a jail sentence. The offences carry a maximum term of 20 years in prison, plus a fine of up to twice the gross gain or loss.

The US criminal proceedings do not affect the ongoing £3.8bn civil case at the High Court where HP is seeking damages from Lynch. A decision in the civil trial is expected this year.

In the UK, the Financial Reporting Council (FRC) had opened an investigation into Deloitte and two of its audit engagement partners, as well as the former chief financial officer and vice president of finance at software company Autonomy, over alleged accounting irregularities, but this was halted in November 2018 due to the court proceedings in the US and UK.

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