Case 3:18-cr-00577-CRB Document 313 Filed 01/31/24 Page 1 of 9
`
`
`
`
`
`
`PATRICK D. ROBBINS (CABN 152288)
`Attorney for the United States
`Acting Under Authority Conferred by 28 U.S.C. § 515
`
`MARTHA BOERSCH (CABN 126569)
`Chief, Criminal Division
`
`ROBERT S. LEACH (CABN 196191)
`ADAM A. REEVES (NYBN 2363877)
`KRISTINA N. GREEN (NYBN 5226204)
`ZACHARY G.F. ABRAHAMSON (CABN 310951)
`Assistant United States Attorneys
`
`450 Golden Gate Avenue, Box 36055
`San Francisco, California 94102-3495
`Telephone: (415) 436-7014
`Fax: (415) 436-7234
`Email: Robert.Leach@usdoj.gov
`
`Attorneys for United States of America
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`SAN FRANCISCO DIVISION
`
`)
`Case No. CR 18-577 CRB
`)
`
`)
`UNITED STATES’ OPPOSITION TO
`)
`DEFENDANT MICHAEL RICHARD LYNCH’S
`)
`MOTION IN LIMINE NO. 3: TO EXCLUDE
`)
`OPINION TESTIMONY OF CHRISTOPHER
`)
`YELLAND [ECF No. 294]
`)
`
`)
`Pretrial Conference: February 21, 2024, 2 p.m.
`)
`Trial Date: March 18, 2024
`)
`
`
`UNITED STATES OF AMERICA,
`Plaintiff,
`
`v.
`MICHAEL RICHARD LYNCH AND
`STEPHEN KEITH CHAMBERLAIN,
`Defendants.
`
`
`
`
` INTRODUCTION
`In United States v. Sushovan Hussain, the Court admitted testimony from Christopher Yelland, the
`U.K. Chartered Accountant who succeeded Hussain as Autonomy’s Chief Financial Officer in May
`2012. See generally Hussain Tr. Vol. 24 (4/16/2018) & 25 (4/17/2018). Yelland testified about a
`financial Restatement for a key Autonomy subsidiary that he was required to file and duty-bound to
`prepare correctly, the constituent components of that Restatement, and how those components impacted
`the financial statements of the parent company, Autonomy Corporation plc. The Ninth Circuit affirmed
`
`U.S.’ OPP’N TO LYNCH MOT. IN LIMINE NO. 3
`RE YELLAND, CASE NO. CR 18-577 CRB
`
`
`
`1
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`

`

`Case 3:18-cr-00577-CRB Document 313 Filed 01/31/24 Page 2 of 9
`
`
`
`
`
`
`admission of the Restatement. See United States v. Hussain, 818 Fed. Appx. 765, 766 (9th Cir. 2018)
`(memorandum disposition). Yelland should be permitted to testify about it again.
` Excluding Yelland’s testimony about the causes for restating Autonomy Systems Limited’s
`(“ASL”) financial statements in this fraud case would be like excluding a medical examiner’s testimony
`about the victim’s cause of death in a homicide case. Yelland’s Restatement was the equivalent of the
`autopsy. While he has special skills as an accountant, Yelland will testify as a percipient witness about
`what he found in Autonomy’s business records after the defendants resigned; why his findings caused
`Yelland to feel obligated under law to restate ASL’s statutory accounts (the English term for publicly
`filed financial statements); how he concluded what the proper accounting should be; and how the
`required adjustments impacted the Autonomy group as a whole. Needless to say, this is highly relevant,
`non-expert testimony about the scope of the defendants’ falsification of Autonomy’s alleged revenues.
`Dr. Lynch’s myriad of objections fails. Because Yelland is testifying as a percipient witness,
`Federal Rule of Evidence 702 does not apply, and even if it did, Yelland would easily qualify as an
`expert and Dr. Lynch has had ample notice about the substance of Yelland’s testimony under Federal
`Rule of Criminal Procedure 16. Rule 403 is likewise no barrier – the defense is free to cross-examine
`Yelland about his bias, method, and experience. Finally, the defense’s hearsay and Confrontation
`Clause objections are misplaced. Yelland was the preparer of the Restatement and can competently
`testify to its constituent parts. The Confrontation Clause applies to testimonial statements, not ordinary
`business records. For these reasons, Dr, Lynch’s motion to exclude should be denied.
`FACTUAL BACKGROUND
`Autonomy Corporation plc was a holding company for a group of related companies engaged in
`the business of software development and distribution, including U.S.-based companies Autonomy, Inc.
`and ZANTAZ, Inc. and ASL, a U.K.-based company. ASL licensed Autonomy software to other
`entities in the Autonomy group and participated in the earnings of its fellow group companies. In other
`words, when transactions by certain Autonomy group companies (such as Autonomy, Inc. or ZANTAZ)
`generated revenue, those transactions also generated revenue for ASL. During the relevant time period,
`Autonomy Corporation plc issued press releases to the market announcing earnings for the group as a
`
`U.S.’ OPP’N TO LYNCH MOT. IN LIMINE NO. 3
`RE YELLAND, CASE NO. CR 18-577 CRB
`
`
`
`2
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`

`

`Case 3:18-cr-00577-CRB Document 313 Filed 01/31/24 Page 3 of 9
`
`
`
`
`
`
`whole, and ASL publicly filed financial statements reporting revenue earned in part through its licensing
`agreements with Autonomy group companies.
`
` ASL was subject to the Companies Act of 2006 in the U.K. ASL’s directors were required to
`prepare financial statements for each financial year that provided a true and fair view of the state of
`affairs of the company at year end and the profit and loss. See Trial Ex. 2445 at 10; Companies Act §§
`393 & 396. Its directors were forbidden from approving financial statements unless they were satisfied
`that the financial statements gave a true and fair view of the assets, liabilities, financial position, and
`profit or loss of the company. See Trial Ex. 2445 at 10; Companies Act § 393. ASL also was required
`to keep adequate accounting records that were sufficient to show and explain the company’s transactions
`and disclose with reasonable accuracy at any time the financial position of the company and enable the
`directors to ensure that the financial statements comply with the Companies Act. See Trial Ex. 2445 at
`10; Companies Act § 386. In addition, ASL’s directors were required to publicly file ASL’s financial
`statements with the Registrar of Companies (Companies House). See Companies Act §§ 441, 1060.
`Criminal penalties attached to each of these obligations. See Companies Act §§ 387 (duty to keep
`accounting records: offence); 414 (approval and signing of accounts); 451 (default in filing accounts and
`reports: offences).
`ASL’s financial statements were prepared in accordance with United Kingdom Generally
`Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). In
`preparing these financial statements, ASL’s directors were required to (1) select suitable accounting
`policies and then apply them consistently; (2) make reasonable and prudent judgments and accounting
`estimates; (3) state whether applicable U.K. Accounting Standards have been followed; and (4) prepare
`the financial statements on the going concern basis. See Trial Ex. 2445 at 10.
`
` On or about September 30, 2011, Lynch caused the filing of ASL’s Report and Financial
`Statements for the year ended December 31, 2010, as required by the Companies Act. See Trial Ex.
`1373. In May 2012, after two disastrous quarters of missed expectations, Dr. Lynch and others
`announced they were leaving Autonomy Corporation plc and ASL. At that time, Chris Yelland became
`a director of ASL and CFO of the Autonomy group. Yelland is a Chartered Accountant in the U.K. with
`more than 15 years of accounting and finance experience in the information technology industry.
`
`U.S.’ OPP’N TO LYNCH MOT. IN LIMINE NO. 3
`RE YELLAND, CASE NO. CR 18-577 CRB
`
`
`
`3
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`

`

`Case 3:18-cr-00577-CRB Document 313 Filed 01/31/24 Page 4 of 9
`
`
`
`
`
`
`Yelland, with others, undertook an accounting review of Autonomy Corporation plc and ASL’s
`historical financial statements and ultimately concluded that a restatement was required.
`On or about January 31, 2014, ASL filed with the Registrar of Companies its Report and
`Financial Statements for the 10 months ended October 31, 2011 (the “Restatement”). See Trial Ex.
`2445. Yelland signed the Restatement on behalf of the Board, subject to his duties under U.K. law and
`all of the criminal penalties described above. See id. at 9 &15. In the Restatement, ASL reduced its
`publicly reported revenue (or turnover). Compare Trial Ex. 1373 at 10 to Trial Ex. 2445 at 13. ASL
`also reduced its retained earnings balance at December 31, 2009, which reflects a substantial decrease in
`2009 revenue. Compare Trial Ex. 1373 at 11 to Trial Ex. 2445 at 37.
`Yelland is expected to testify that (1) the Restatement reflected adjustments for numerous
`transactions that impacted both ASL’s financial statements and Autonomy Corporation plc’s financial
`statements; (2) the adjustments were required both under United Kingdom Accounting Standards and
`International Financial Reporting Standards, with which Autonomy Corporation plc’s financial
`statements were required to comply; and (3) based upon his review of Autonomy business records and
`acting under the statutory obligations of the UK Companies Act, he concluded that Autonomy’s reported
`revenue of $870 million in 2010 was improperly inflated by approximately $156 million.
`
`
`In the end, Yelland should be permitted to testify about what he saw, heard, and did to straighten
`out the correct accounting treatment for ASL’s statutory accounts (and why). It is relevant to how the
`defendants falsified documents in order to falsely inflate the revenue. Although he is a fact witness,
`Yelland’s special skills as a Chartered Accountant are based on well-recognized accounting principles.
`The defense claims about divergent accounting opinions should be tested at trial, in cross-examination,
`not used to suppress otherwise highly relevant evidence.
`ARGUMENT
`
`I.
`
`LEGAL STANDARDS
`Under Federal Rule of Evidence 701, a witness not testifying as an expert may offer testimony in
`the form of an opinion if it is: “(a) rationally based on the witness’s perception; (b) helpful to clearly
`understanding the witness’s testimony or to determining a fact in issue; and (c) not based on scientific,
`technical, or other specialized knowledge within the scope of Rule 702.” FED. R. EVID. 701. Under
`
`U.S.’ OPP’N TO LYNCH MOT. IN LIMINE NO. 3
`RE YELLAND, CASE NO. CR 18-577 CRB
`
`
`
`4
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`

`

`Case 3:18-cr-00577-CRB Document 313 Filed 01/31/24 Page 5 of 9
`
`
`
`
`
`
`Rule 702, a “witness who is qualified as an expert by knowledge, skill, experience, training, or
`education, may testify” if a district court determines his testimony to be “both relevant and reliable.”
`Wendell v. GlaxoSmithKline LLC, 858 F.3d 1227, 1232 (9th Cir. 2017) (citation omitted); FED. R. EVID.
`702.
`
` Federal Rule of Evidence 701(c) thus limits a lay witness’s testimony “in the form of opinions
`or inferences” to those “not based on scientific, technical, or other specialized knowledge within the
`scope of Rule 702” concerning the admissibility of expert opinion testimony. FED. R. EVID. 701(c).
`Subsection (c) was added in 2000 “to eliminate the risk that the reliability requirements set forth in Rule
`702 will be evaded through the simple expedient of proffering an expert in lay witness clothing.” FED.
`R. EVID. 701 advisory committee’s note. The advisory committee’s note explains that the amendment
`“does not purport to change” the prevailing view that a witness could testify regarding “the
`particularized knowledge that the witness has by virtue of his or her position,” but only to prohibit
`testimony based on “experience, training or specialized knowledge within the realm of an expert.” Id.
`Courts have recognized that the line between admissible lay opinion based upon “particularized
`knowledge” and inadmissible expert opinion based upon “experience, training or specialized
`knowledge” is “not easy to draw.” E.g., United States v. Ayala-Pizarro, 407 F.3d 25, 28 (1st Cir. 2005);
`United States v. Perkins, 470 F.3d 150, 155 (4th Cir. 2006). “[W]hether evidence is more properly
`offered by an expert or a lay witness depends on the basis of the opinion, not its subject matter.” United
`States v. Perez, 962 F.3d 420, 436 (9th Cir. 2020) (quotation omitted); see, e.g., United States v. Lopez,
`762 F.3d 852, 863-65 (9th Cir. 2014) (testimony violated Rule 701 because agent did not personally
`witness deportation); United States v. Durham, 464 F.3d 976, 982-83 (9th Cir. 2006) (witness familiar
`with marijuana could testify substance appeared to be marijuana). “The gatekeeping inquiry [as to
`whether opinion is expert or lay] is always case-specific.” United States v. Holguin, 51 F.4th 841, 857
`(9th Cir. 2022); see also United States v. Simas, 937 F.2d 459, 464 (9th Cir. 1991) (“The admission of
`lay opinion testimony is within the broad discretion of the trial judge [and] not to be disturbed unless it
`is manifestly erroneous.”) (citation omitted).
`Nonetheless, courts, including the Ninth Circuit, have found that lay opinion is admissible where
`based upon the witness’s particularized knowledge, even if formed over time, applied to the witness’s
`
`U.S.’ OPP’N TO LYNCH MOT. IN LIMINE NO. 3
`RE YELLAND, CASE NO. CR 18-577 CRB
`
`
`
`5
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`

`

`Case 3:18-cr-00577-CRB Document 313 Filed 01/31/24 Page 6 of 9
`
`
`
`
`
`
`percipient observations. See, e.g., Dorn v. Burlington N. Santa Fe R.R. Co., 397 F.3d 1183, 1192 (9th
`Cir. 2005) (holding that district court erred in excluding investigating officer’s testimony regarding the
`angle of a tire mark, reasoning that his “perception . . . would not constitute the opinion of an expert, but
`the observation of a percipient witness . . . or a permissible opinion by a lay witness”); United States v.
`Beckman, 298 F.3d 788, 795 (9th Cir. 2002) (finding that testimony of government’s cooperating
`witness with extensive knowledge of internal drug operations was properly admitted under Rule 701(c)
`because he testified regarding his observations and conclusions at the time of the conspiracy). Indeed,
`the Ninth Circuit – under substantially similar identical circumstances – has affirmed the admission of
`testimony under Rule 701(c) by “witnesses with personal roles in reviewing the company’s finances and
`applicable reporting obligations for purposes other than . . . litigation.” SEC v. Sabhlok, 495 Fed. Appx.
`786, 787 (9th Cir. 2012) (unpublished).
`The Second Circuit’s Bank of China v. NBM LLC, 359 F.3d 171 (2d Cir. 2004), is particularly
`instructive. There, the court held that the district court properly admitted some of the testimony of a
`witness who had conducted an investigation into the propriety of certain bank transactions, while other
`portions of that testimony were found to have violated Rule 701(c). Id. at 181-82. The court emphasized
`that “[t]he fact that [the witness] has specialized knowledge, or that he carried out the investigation
`because of that knowledge, does not preclude him from testifying pursuant to Rule 701,” since he could
`properly give testimony that “was based on the investigation and reflected his investigatory findings and
`conclusions,” so long as it was not “rooted exclusively in his expertise in international banking.” Id. at
`181. Thus, “to the extent [the witness’s] testimony was grounded in the investigation he undertook in his
`role as a Bank of China employee, it was admissible . . . because it was based on his perceptions”; on
`the other hand, the witness’s “explanations regarding typical international banking transactions or
`definitions of banking terms, and any conclusions that he made that were not a result of his
`investigation, were improperly admitted.” Id. at 181, 182. See also United States v. Oriedo, 498 F.3d
`593, 602-03 (7th Cir. 2007) (holding that a witness’s “specialized knowledge” may “inform his mental
`state” or his percipient observations); United States v. Rigas, 490 F.3d 208, 224 (2d Cir. 2007) (court
`properly admitted accounting employee’s testimony regarding his observations of effect of fraudulent
`transactions on company’s books and records).
`
`U.S.’ OPP’N TO LYNCH MOT. IN LIMINE NO. 3
`RE YELLAND, CASE NO. CR 18-577 CRB
`
`
`
`6
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`

`

`Case 3:18-cr-00577-CRB Document 313 Filed 01/31/24 Page 7 of 9
`
`
`
`
`
`
`Similarly, the Ninth Circuit has observed that Rule 701 encompasses the principle that “[a] lay
`witness’s opinion testimony necessarily draws on the witness’s own understanding, including a wealth
`of personal information, experience, and education, that cannot be placed before the jury.” United
`States v. Gadson, 763 F.3d 1189, 1208 (9th Cir. 2014). In Gadson, this Court “examine[d] the scope of
`Rule 701” and noted that the promulgators rejected the notion that witnesses should be required “to limit
`their testimony just to the facts they perceived and avoid opinions or inferences based on those facts”—
`in part because that distinction “proved to be unworkable in practice.” Id. at 1206 (quotations omitted).
`Furthermore, the promulgators rejected the notion that lay opinion would mislead juries given that “the
`natural characteristics of the adversarial system will generally lead to an acceptable result, and any
`weaknesses in the lay witness’s testimony can be emphasized through cross-examination and argument.”
`Id. (quotation omitted).
`YELLAND’S TESTIMONY IS NOT INADMINISSIBLE EXPERT OPINION
`II.
`
`Applying these standards here, Yelland’s testimony is not inadmissible expert opinion. To the
`contrary, Yelland is testifying to what he saw, heard, and did (and why) as the chief accountant for
`Autonomy and to a Restatement he was required by law to get right. While Yelland has specialized
`knowledge as a Chartered Accountant, he was applying it to his own percipient observations at the time.
`His testimony fits well within the Ninth Circuit’s holding in Dorn and Sabhlok and the Second Circuit’s
`guidance in Bank of China.
`The fact that Dr. Lynch’s company was required to file financial statements conforming to
`professional standards should not mean that insiders who worked for the company need to qualify as
`experts before they can testify about what they contemporaneously observed and did. To hold otherwise
`would preclude direct contemporaneous observations of criminal conduct or business decisions absent
`every insider’s qualification under Daubert. The rules and cases do not require that result. See SEC v.
`Jasper, 678 F.3d 1116, 1124 (9th Cir. 2012) (admission of annual financial statement was not error
`simply because allegedly expert accounting judgments were involved). Accountants, engineers, and
`doctors prepare business records all the time to contemporaneously describe their decisions, reasons, and
`actions – Dr. Lynch’s proposed reading of the case law would turn Daubert into a sword to exclude
`knowledgeable witnesses in professional settings.
`
`U.S.’ OPP’N TO LYNCH MOT. IN LIMINE NO. 3
`RE YELLAND, CASE NO. CR 18-577 CRB
`
`
`
`7
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`

`

`Case 3:18-cr-00577-CRB Document 313 Filed 01/31/24 Page 8 of 9
`
`
`
`
`
`
`III. NO RULE 16(A)(1)(G) DISCLOSURE WAS REQUIRED, AND IN ANY EVENT THE
`DEFENSE HAS AMPLE NOTICE
`
`Rule 16(A)(1)(G) of the Federal Rules of Criminal Procedure provides that, upon a defendant’s
`request, the government must disclose “a complete statement of all opinions that the government will
`elicit from the witness in its case- in-chief, . . . the bases and reasons for them; the witness’s
`qualifications” and a summary of recent prior expert testimony offered by the witness. FED. R. CRIM. P.
`16(a)(1)(G)(i)-(iii). As the Ninth Circuit recently noted, the rule was “not intended to create
`unreasonable procedural hurdles.” United States v. Alahmedalabdaloklah, 76 F.4th 1183, 1239 (9th Cir.
`Aug. 9, 2023) (notice requirement merely provides “fair opportunity” to prepare cross-examination).
`Here, the government was not required to provide notice of Yelland’s testimony under the expert
`disclosure rules. But the disclosures it did make – including Yelland’s testimony in Hussain and the
`parallel U.K. civil case, as well as memoranda of government interviews of him, and his summary charts
`– amply discharge any obligation. Dr. Lynch has had a fair opportunity to prepare for cross-examination
`– indeed, he has cross-examined Yelland previously with the benefit of Yelland’s Hussain testimony.
`THE COURT SHOULD NOT EXCLUDE YELLAND’S TESTIMOMY BASED ON
`IV.
`RULES 403, 802, 703, OR THE CONFRONTATION CLAUSE
`
`Defendant’s Rule 403 arguments all go the weight accorded Yelland’s testimony. Defendant
`wishes to present Yelland as a hopelessly biased, untrained lackey for HP – he is free to do that cross-
`examination. Dr. Lynch also criticizes Yelland’s qualifications, yet the Court addressed this in Hussain:
`The defendant also argued that Yelland’s testimony should have been excluded because
`he was not qualified to opine on international accounting standards. But Hussain failed to
`explain why the distinction among accounting rules mattered in terms of revenue
`recognition; the restatement indicated that the change principally affected the expensing
`of research and development costs. See Restatement at 3, 14. In any event, this argument
`similarly goes to the weight of Yelland’s testimony, not its admissibility.
`
`ECF No. 419 at 59.
`
`Dr. Lynch’s hearsay and Confrontation Clause claims also fail. Yelland should be able to
`explain why he took actions and what information formed the basis for his decisions, and limiting
`instructions may appropriately guide the jury. None of Dr. Lynch’s cases (which are all non-binding)
`are to the contrary. Further, with respect to the Confrontation Clause, it applies only to testimonial
`
`U.S.’ OPP’N TO LYNCH MOT. IN LIMINE NO. 3
`RE YELLAND, CASE NO. CR 18-577 CRB
`
`
`
`8
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`

`

`Case 3:18-cr-00577-CRB Document 313 Filed 01/31/24 Page 9 of 9
`
`
`
`
`
`
`statements. Crawford v. Washington, 541 U.S. 36, 49 (2004). None of the cases suggest that
`accountants cannot explain what records they relied on to reach decisions or to the contents of business
`records, which are almost by definition non-testimonial.
`CONCLUSION
`For these reasons, the Court should deny the motion.
`DATED: January 31, 2024
`Respectfully submitted,
`
`
`
`
`PATRICK D. ROBBINS
`Attorney for the United States Attorney
`Acting Under Authority Conferrred by
`28 U.S.C. § 515
`
`_________________________________________
`ROBERT S. LEACH
`ADAM A. REEVES
`KRISTINA N. GREEN
`ZACHARY G.F. ABRAHAMSON
`Assistant United States Attorneys
`
`
`
`U.S.’ OPP’N TO LYNCH MOT. IN LIMINE NO. 3
`RE YELLAND, CASE NO. CR 18-577 CRB
`
`
`
`9
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`