Lynch case takes another turn after co-defendant takes aim at key City witnesses
THE continued fight over Mike Lynch’s proposed extradition to the US to face fraud charges has taken another turn after his co-defendant’s legal team attempted to discredit the evidence of two City analysts who have testified against Autonomy executives in previous court cases.
In legal documents filed in Northern California, Lynch’s co-defendent Stephan Chamberlain alleges that analysts Daud Khan and Paul Morland – both expected to be called on as witnesses in any trial – communicated with short-sellers, had knowledge of accounting practices which they later claimed to be ignorant of, and were driven by “personal animus” towards Lynch and the software firm he founded, Autonomy.
Khan told City PM last night the claims were “baseless.”
Chamberlain’s legal team say in a previous court case, in which Autonomy chief financial officer Sushovan Hussain was jailed for 60 months after being found guilty of fraud, analysts Khan and Morland were presented by the US government as “objective, independent market observers” who claimed that “Autonomy management presented deceptive information” leading to an inflated share price.
Unlike Lynch, who awaits an extradition decision in the UK, Chamberlain is in the US and was able to obtain communications between Khan and Morland through US legal disclosure rules. City PM understands Khan and Morland are both likely to give evidence in the case against Lynch and Chamberlain in the US, if it goes to court.
Among the 270 emails seen by Chamberlain’s legal team is one in which Khan allegedly emailed a Citibank analyst saying he relished being a “thorn in (Lynch’s) side… then a dagger… then an AK-47.”
In another email, Khan allegedly said a fall in Autonomy’s short price could lead to a “Hitler moment” for Mike Lynch in which his “generals tell him the war is lost and that he has to step down.”
A key element of the charges against Autonomy senior staff is that they concealed the selling of hardware to inflate revenue figures.
However Chamberlain’s team, in a motion to obtain more evidence, allege the emails “reveal that Khan and other analysts discussed specific accounting practices that the government later claimed Autonomy concealed.”
Home Secretary Priti Patel will decide whether Lynch is to be extradited to face charges in the US before the end of the year. She has delayed the decision numerous times. Meanwhile Hewlett Packard, which bought Autonomy in 2011 before it wrote off much of the company’s value and sparked the misaccounting controversy, await a ruling in a civil case against Lynch at the High Court. A judgment in that case is also expected before the turn of the year,
Khan, who reported on Autonomy for a number of investment firms including Cazenove (later acquired by JP Morgan) and Berenberg across a 10 year period that included the alleged wire fraud, told City PM last night that “the claims are baseless and take communications out of context. Much of the stated communication is between myself and others that worked in the city that I had been friends with for many years.
“To suggest I colluded with short sellers is laughable, any job as an equity analyst involves speaking with Long-only institutions and hedge funds, and some of those hedge funds were owners of Autonomy shares and not short sellers. Of course Dr. Lynch and I were adversaries in the professional sense, I had a sell recommendation on Autonomy and he was wildly positive about the company’s prospects and a major shareholder. Despite aggressive tactics to try and silence my research, it was never personal and I was focussed on highlighting the numerous areas of concerns I addressed in my published research. With regards hardware selling, it was a topic that I never even thought about until the infamous 2nd quarter 2010, when Dr. Lynch himself claimed that Autonomy wasn’t a hardware re-seller.”
Morland was contacted by City PM for comment.
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