Mike Lynch masterminded 'multiyear, multilayered fraud', court hears
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Mike Lynch has been accused of masterminding a “multiyear, multilayered fraud” at Autonomy that tricked HP into massively overpaying for the business.
On the first day of Mr Lynch’s criminal trial in San Francisco on Monday, the court heard accusations that the tech entrepreneur “spun a fabulous tale” to lure HP into paying $11bn (£8.6bn) for Autonomy.
US prosecutors claim that Mr Lynch and other Autonomy executives inflated the company’s value using illegal accounting practices.
Prosecutors sought to paint Mr Lynch, Autonomy’s founder, as “a controlling, dominating, intimidating boss” who was “the driving force” behind the alleged fraud”.
The prosecution alleged that Mr Lynch masterminded an accounting fraud by back-dating contracts and “roundtrip” deals in which customers were paid for fake purchases of Autonomy’s software. It said that part of the purpose was to entice buyers like HP.
Adam Reeves, assistant US attorney, told the jury: “You will learn that these deals made no sense unless you were trying to falsely inflate your revenue.”
Mr Reeves added: “HP ate it up – they thought this kind of software company is exactly what they needed.”
A technology entrepreneur who was once lionised as “Britain’s Bill Gates”, Mr Lynch is facing 16 counts of fraud related to the sale of Autonomy, the former FTSE 100 software company, in 2011.
HP wrote down almost all the value of the £7bn deal a year later and claimed serious accounting improprieties.
Stephen Chamberlain, Autonomy’s former finance director, has also been charged. Both men have pleaded not guilty.
Mr Lynch made around $800m from the deal. He was charged in 2018 and fought extradition, but was ultimately unsuccessful and arrived in the US last year.
Charles Breyer, the judge overseeing the trial, granted Mr Lynch bail secured by a $100m bond, but restricted him to a home in San Francisco with round-the-clock guards and a tracker attached to his leg.
The trial is expected to last around 10 weeks with dozens of witnesses potentially being called by the US government including Leo Apotheker, the HP boss who pushed through the deal to buy Autonomy.
Mr Lynch is likely to give evidence in the second half of the trial. He has insisted that HP destroyed value by mismanaging the company and previously claimed he was being scapegoated for problems at Autonomy after it was taken over.
He has said that HP did not know what it was doing with Autonomy and was out of its depth in understanding its technology.
The technology entrepreneur built Autonomy into a European giant before co-founding cyber-security company Darktrace.
In 2006, he was awarded an OBE and appointed to the board of the BBC. During the year he sold Autonomy, David Cameron appointed him to the Government’s Council for Science and Technology.
The 12-person jury in the US case must reach a unanimous verdict to find Mr Lynch or Chamberlain guilty.
The case continues.