Hussain Ties to Ex-Autonomy CEO May Imply Hush Money, U.S. Says

(Bloomberg) -- The former chief financial officer of Autonomy Corp. was ordered to disclose details about his financial dealings with Michael Lynch, the company’s former chief executive officer, that prosecutors said raise concerns about “potential hush money.”

Sushovan Hussain was found guilty in April of orchestrating an accounting fraud to arrive at the $10.3 billion price Hewlett-Packard Co. paid for Autonomy, a U.K. software maker, in 2011. As part of his sentencing in San Francisco federal court scheduled for next month, Hussain disclosed his stake, with Lynch, in startup company Darktrace Ltd. and venture capital firm Invoke Capital.

Hussain sold shares in an entity related to Darktrace to Lynch, and plans to sell him more, for a total of about $4 million to pay legal bills, according to a court filing last week. Based on the apparent value of the holdings, prosecutors estimate Hussain’s stake in Lynch’s businesses may be worth $100 million.

“It would appear that Dr. Lynch is paying a ridiculously high dollar value” for shares Hussain sold him, “raising questions” about the purpose of the transactions, prosecutors said in the Nov. 14 filing.

Inflated Value

U.S. District Judge Charles Breyer ordered Hussain late Monday to turn over to prosecutors detailed records of the investments, including transactions involving Lynch, by Nov. 22.

Hussain’s lawyer, John Keker, said he plans to ask the court to block the government’s request by Nov. 20.

Autonomy was the U.K.’s second-largest software business when Hewlett-Packard acquired it. Hewlett-Packard later wrote down its value by $8.8 billion, citing fraud by Autonomy and asking the U.S. Justice Department to investigate. Prosecutors have identified Lynch as a co-conspirator in the fraud but he has not been charged.

The government argues that Lynch’s reassembling of his inner circle at Autonomy, including Hussain, by itself isn’t illegal but may have created financial relationships that prevented some of them from coming forward as witnesses.

“Where the same circle of participants who defrauded Autonomy’s investors, HP, and HP’s investors are all reliant on the wealthiest of the co-conspirators, the government has legitimate concerns about hush money,” prosecutors said in the filing.

Emmanuel Fyle, a spokesman for Hewlett Packard Enterprise Co. in London, didn’t immediately respond to a request for comment outside normal business hours. HPE was formed in the breakup of Hewlett-Packard Co.’s corporate computing divisions from its printer and PC business in 2015.

This case is U.S. v. Hussain, 16-cr-00462, U.S. District Court, Northern District of California (San Francisco).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editors responsible for this story: Elizabeth Wollman at ewollman@bloomberg.net, Robert Fenner

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