As the US government targets Darktrace personnel as witnesses for Autonomy founder Mike Lynch's forthcoming criminal trial, it's also seeking extra evidence from internal Autonomy whistleblowers.
News broke last weekend that US prosecutors were demanding disclosure of documents, emails, and chat logs from infosec firm Darktrace's CEO, Poppy Gustafsson. Prosecutors want her, among others, to appear as a witness at the trial of Mike Lynch - an early investor in Darktrace - and ex-VP Stephen Chamberlain.
Lynch and Chamberlain are accused of fraudulently bulking up Autonomy's reported revenues, deceiving Hewlett Packard (as it was called in 2011) into buying Autonomy for $11bn. HP later wrote down the British software company's value by $8.8bn, crying fraud as it did so. Among other things, the US alleges Autonomy presented itself to the world as a "pure play" software company while generating a chunk of its profits from hardware sales that weren't revealed in its public accounts.
Both men deny wrongdoing, saying everything they did was within accounting standards of the time – and was signed off by Autonomy auditor Deloitte.
Chamberlain had earlier made a legal request aimed at two British financial analysts, Daud Khan and Paul Morland, to make similar disclosures. While the US's most recent filing in United States v Lynch [PDF] "does not oppose the defendant's motion," it rejected Chamberlain's demand for a bill of particulars: a document going into more detail about whatever crimes the prosecution claims he committed.
Referring to the previous trial and conviction of Autonomy CFO Sushovan Hussain, prosecutors told the US District Court for Northern California last week: "The financial statements alleged to be fraudulent in United States v. Lynch and Chamberlain will be the same as the financial statements proven to be fraudulent in United States v Hussain."
Although details of legal strategies have yet to be made public in the US criminal proceedings, it appears Chamberlain (and Lynch) want to force prosecutors to put all their evidence and allegations on the table as early as possible. This may or may not be related to a very large coincidence that saw US prosecutors announcing a fresh batch of charges against Lynch just before HPE's High Court civil trial against him began in 2019.
We're building a cast list
For the upcoming criminal trial, the US is seeking extra evidence [PDF] from a batch of people it claims were "financially dependent" upon Lynch, implying they helped him with the fraud he and Chamberlain allegedly committed with Autonomy's accounts:
- Darktrace CEO Poppy Gustafsson, formerly a senior lieutenant of Lynch's at Autonomy
- Darktrace channel chief Gary Szukalski, formerly of Autonomy reseller Filetek
- Ex-Autonomy CTO Pete Menell
- Darktrace chief strategy officer Nicole Eagan, formerly of Autonomy
- Former Autonomy bean counter Elizabeth "Lisa" Harris, now with Darktrace
- Darktrace US MD Rob Sass
- Darktrace's country manager for Italy, Corrado Broli
Readers who followed the High Court saga during 2019-20 will remember that Eagan was due to testify as one of Lynch's witnesses until, with Lynch's blessing and to HPE's fury, she did not appear, so HPE did not get the chance to cross-examine her. Lynch's camp later said Eagan had merely "stood down," prompting a highly dischuffed HPE to accuse it of trying to pull the wool over the court's eyes and avoid negative "PR implications."
Other recent legal manoeuvrings by Chamberlain to which the US has said it doesn't object is a bid to force more evidence disclosure from ex-Autonomy personnel mentioned in the High Court.
- Brit analysts formed pact to crash Autonomy's market valuation, ex-CFO tells US court
- Autonomy founder Lynch scores extradition decision delay as Home Sec ponders sending him to US
- Hard drives at Autonomy offices were destroyed the same month CEO Lynch quit, extradition trial was told
- Autonomy founder Mike Lynch loses first stage in fight against extradition to US
One of those targeted by Chamberlain is former Autonomy "director of revenue" Percy Tejeda, who was made redundant shortly after what US prosecutors and HPE alike described as whistleblowing. Tejeda emailed his manager, Autonomy's US CFO Brent Hogenson, in July 2010 blowing the whistle on what he clearly believed were fake revenue generation carousels involving Autonomy and its resellers. Hogenson forwarded the email to Lynch (and auditor Deloitte) along with his own worries about Autonomy's accounting practices.
"I may well have looked at it," said Lynch about that email while being cross-examined, adding: "I may well have read it, I don't know."
Tejeda's full message and the email chain ending with Lynch being copied in was presented in evidence to the High Court. It can be downloaded here [PDF, five pages].
Also mentioned in the email was Autonomy finance worker Reena Prasad. She is another person targeted by Chamberlain for extra evidence disclosure in his criminal trial as a potential witness. Along with Tejeda (and eventually Hogenson), she was sacked from Autonomy after the whistleblowing, with HPE having alleged that Sushovan Hussain personally "wanted her gone" in the aftermath.
Extradition by next year?
While the criminal trial might seem a long way off, a hint was given in the US's most recent filing that prosecutors believe it might begin within the next couple of years:
The government anticipates that defendant Lynch will be required to appear before the Court next year, at which time this case can proceed to trial.
This aligns with Lynch's US attorney, Chris Morvillo, telling Westminster Magistrates' Court earlier this year that a criminal trial is likely to start in 2023. One might guess that Lynch will make an early procedural appearance before US Senior District Judge Charles Breyer in the second half of 2022, with the full trial taking place the following year.
Informed sources recently suggested to The Register that High Court judge Mr Justice Hildyard will send a draft version of his judgment to each side's legal teams next month, with formal hand-down pencilled in for February 2022. This would make hand-down two years after live hearings in the case ended.
Lynch's team are doubtless hoping the judgment will go their way, letting them cite findings in his favour as a reason to stop the Autonomy founder's extradition – and thus his criminal trial. The odds of an appeal seem to be lengthening as the extradition case gains greater prominence.
Currently being pursued by the US through London's criminal courts, Lynch's extradition case is due for a Home Office decision next Monday. Some sources suggested that Home Secretary Priti Patel will kick it into the long grass again, giving Lynch Christmas and New Year in the UK with his family.
If Patel says yes to extradition, Lynch is expected to appeal; similarly, the US is expected to appeal a negative decision. In extradition cases the route of appeal goes back to the High Court, albeit under criminal rules – meaning a different judge will hear the case.
The cases continue. ®