Thursday, August 27, 2020
Page 3
Ninth Circuit:
U.S. Criminal Laws Were Validly Applied to Man Residing in U.K
Convictions of Man Who Inflated Value of Company Sold to Hewlett-Packard for $11.7 Billion Upheld; Was Sentenced to Five Years in Prison, Fined $4 Million, $6.1 Million in Property Seized
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday affirmed the wire fraud and securities fraud convictions of a man termed by prosecutors at his trial as the equivalent of “a James Bond villain or a Mafioso,” rejecting his contention that U.S. courts cannot punish him for his activities abroad.
Sushovan Hussain, former chief financial officer of Autonomy Corporation plc, headquartered in the United Kingdom and San Francisco, was sentenced on May 13, 2019 by District Court Judge Charles R. Breyer of the Northern District of California to five years in prison, and fined $4 million. In addition, forfeiture was ordered of his assets worth $6.1 million.
Hewlett-Packard Company in 2011 acquired Autonomy, a software technology company, for about $11.7 billion. It was found that Hussain, 55, a citizen and resident of the UK, had used sophisticated accounting methods to inflate Autonomy’s sales by inflated by $53.3 million in 2009, $99.08 million in 2010, and inflated by $53.3 million in 2009, $99.08 million in 2010, and $40.94 in the first half of 2011.
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SUSHOVAN HUSSAIN Ex-Chief Financial Officer |
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His chicanery was uncovered by the man who became Autonomy’s new CFO after Hussain left in May 2012.
Bress’s Opinion
The Ninth Circuit yesterday issued two opinions relating to Hussain’s appeal. In a published one, Judge Daniel A. Bress said:
“We hold that Hussain’s wire fraud convictions did not involve an impermissible extraterritorial application of United States law to foreign conduct because the ‘focus’ of the wire fraud statute is the use of the wires in furtherance of a scheme to defraud, and Hussain used domestic wires to perpetrate his fraud. We also hold that sufficient evidence supported Hussain’s conviction for securities fraud because a reasonable jury could conclude that Hussain’s approval of false and misleading financial information in an HP press release distributed to the investing public reflected a fraudulent scheme ‘in connection with’ U.S. securities.”
With respect to wire fraud, Bress said the “focus” of the governing statute “is the use of the wires in furtherance of a scheme to defraud,” and the conviction under the statute must be upheld “if Hussain’s use of the wires in furtherance of his fraud had a sufficient domestic nexus.”
It did, he declared, pointing out:
“The facts demonstrate that all fourteen counts of wire fraud involved the use of domestic wires in furtherance of the scheme to defraud, and Hussain does not seriously contend otherwise. Six counts stemmed from phone or video conference calls among participants in the United Kingdom and California, five counts focused on emails originating or terminating in California, and three involved press releases distributed from England to California. Since each count of wire fraud involved the use of a domestic wire, each conviction is a domestic application of the statute.”
Securities Fraud
The securities fraud conviction was based on false information Hussain provided as to Autonomy’s financial state which was used by HP in a press release.
Hussain asserted that the requisite mental state—an intent to defraud—was not shown. Bress said the argument was barely developed, and was thus waived, but, in any event, “ample evidence would allow a rational jury to find that Hussain had the requisite mens rea.”
He continued:
“Hussain, a senior executive, knew HP was a publicly traded company and knew HP would publicize its acquisition of Autonomy to investors, including through an important press release containing Autonomy’s financial information the accuracy of which Hussain expressly warranted. A jury was entitled to conclude based on the evidence that Hussain intended to defraud HP and its investors.”
The defendant also asserted that the government did not establish, as it must under a statute, that his conduct was “in connection with” the purchase or sale of HP securities. Bress responded:
“A press release is a primary method of informing the market about an acquisition. And it can hardly be a surprise—especially to a sophisticated executive like Hussain—that investors could and would base their trading decisions on it….Given the evidence presented at trial. Hussain’s assurances that the financial information in the press release was accurate was sufficiently ‘in connection with’ U.S. securities.”
Separate Opinion
In a memorandum decision, a three-judge panel rejected Hussain’s assaults on various evidentiary rulings.
One attack was on the order that property of the value of $6.1 million be forfeited. The opinion says:
“A court may require a defendant to forfeit money he ‘obtained’ due to his criminal pursuits….Hussain argues that the order sought more than this because it relied on the pre-tax amount and an incorrect exchange rate. The district court did not clearly err in determining that $6.1 million was the amount that Hussain ‘obtained’ because it reflected the inflated premium that HP paid Hussain for his shares in Autonomy. And Hussain cites no authority requiring the district court to offset this amount for foreign tax obligations or to use a different exchange rate.”
The case is United States v. Hussain, 19-10168.
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