HPQ HP Inc

By Stu Woo 

LONDON -- The U.S. government has charged one of Britain's best-known tech entrepreneurs with fraud related to his role at a software firm Hewlett-Packard bought for more than $11 billion before finding widespread accounting issues.

In criminal charges filed to the U.S. District Court in northern California on Thursday, prosecutors alleged that Mike Lynch, the founder and former chief executive of Autonomy Corp., and his lieutenants used false and misleading documents to make the company more attractive to a potential purchaser.

Hewlett-Packard in 2011 bought Autonomy for $11.1 billion. A year later it took an $8.8 billion write-down related to the deal and said it was duped into overpaying because of what it said appeared to be willfully inflated financial statements.

In 2015, Hewlett-Packard filed a lawsuit in London against Mr. Lynch and Autonomy's former finance chief seeking $5.1 billion in damages. The case is still winding through British courts. In April, a U.S. federal jury found Autonomy's former finance chief, Sushovan Hussain, guilty of falsifying financial statements and exaggerating the company's value. Mr. Hussain has denied wrongdoing and is appealing.

Mr. Lynch's lawyers on Friday said they rejected the U.S. government's charges and said the matter should be resolved in British courts.

"The claims amount to a business dispute over the application of U.K. accounting standards, which is the subject of a civil case with H-P in the courts of England, where it belongs," said Chris Morvillo, of Clifford Chance, and Reid Weingarten, of Steptoe & Johnson, in a joint statement.

Mr. Lynch's lawyers said "there was no conspiracy at Autonomy" and that Hewlett-Packard "has a long history of failed acquisitions" and was trying to blame Autonomy "for its own crippling errors."

After acquiring Autonomy, Hewlett-Packard in 2015 split into two companies, hardware company HP Inc. and corporate-computing giant Hewlett-Packard Enterprise Co. The Autonomy business went with HPE.

An HPE spokesman said Friday that the company was "pleased" that Mr. Lynch and others had been criminally charged and that it "looks forward to seeing justice served."

U.S. prosecutors alleged in the court filings that Mr. Lynch and his lieutenants artificially inflated revenue through a variety of methods, including via backdating written agreements to record revenue in earlier periods. They also say Mr. Lynch and others at Autonomy made false and misleading statements to independent auditors, analysts and regulators.

The filings say Mr. Lynch, as well as Autonomy's former vice president of finance, could face up to 20 years in prison and a $250,000 fine if convicted on the 14 counts of conspiracy and wire fraud.

Write to Stu Woo at Stu.Woo@wsj.com

(END) Dow Jones Newswires

November 30, 2018 08:16 ET (13:16 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.