Mike Lynch, the former British technology tycoon, faces trial for defrauding HP

Every morning at his home in San Francisco's Pacific Heights neighborhood, the man once referred to as Britain's Bill Gates goes to work.

This guy, Mike Lynch, checks in with his investment firm, Envoke Capital, on its recent performance. He is talking with researchers in Cambridge, England, which he personally funds, about ways in which artificial intelligence can be used to help people with hearing difficulties. He receives updates on heritage Red Poll cattle and other livestock on his farm in Suffolk, in eastern England.

Ultimately, Mr. Lynch, 58, turned to his most important task: defending himself against 16 felony counts of conspiracy and fraud. If convicted, he faces up to 20 years behind bars.

The trial begins Monday in San Francisco, where federal prosecutors – who extradited Mr. Lynch from Britain in May and placed him under house arrest – have accused the former technology mogul of defrauding Hewlett-Packard when he was… HP sold his software company, Autonomy, for $11 billion In 2011.

In 2012, HP announced $8.8 billion write-off He blamed “serious accounting irregularities” at Autonomy. Stunned investors called it one of the worst takeovers in history. Since then, Mr. Lynch has fought a series of complex and overlapping legal battles in the United States and Britain.

In 2022, London judge V Civil case It found Mr. Lynch and Susuvan Hossain, former CFO of Autonomy, responsible for defrauding HP. The judge said the case was “among the longest and most complex in English legal history”, with the trial lasting more than three months, presenting tens of thousands of documents and, ultimately, a ruling that lasted more than three months. 1000 pages.

Mr. Lynch disputes HP's claims and plans to appeal the ruling. His lawyers called it a “case study in buyer's remorse” and pointed the finger at HP executives for mismanagement of Autonomy. Hearings were held last month to decide damages, with HP demanding about $4 billion and Mr. Lynch arguing that he owed nothing.

Mr. Lynch's legal troubles are also a reminder of the decline of Hewlett-Packard, once a giant of the American technology industry. The former Silicon Valley giant has since split, and has long been overshadowed by younger companies such as Alphabet, Apple and Microsoft.

As for his upcoming criminal trial, Mr. Lynch's prospects do not look good. The judge, Charles Breyer of the Northern District of California, rejected some evidence that Mr. Lynch's lawyers tried to present that they say showed that HP mismanaged Autonomy after it acquired the company. Judge Breyer also oversaw Mr. Hussein's trial He was convicted in 2018 On charges similar to those Mr. Lynch now faces. Mr. Hussein was recently released from a federal prison in Pennsylvania.

Last year, Mr. Lynch lost a bid to avoid extradition despite pressure from the British government, which agreed to transfer him to the United States on the same day of the ruling against him in the civil case brought by HP.

Last month, he sued the Serious Fraud Office, Britain's securities regulator, over its handling of data requests from the US government. This lawsuit is a last-ditch attempt to postpone the US criminal trial. It's settled Advance this month.

Mr. Lynch still has significant resources to defend himself in the San Francisco courtroom. “Mike Lynch has confidence that he will be vindicated when he finally has the opportunity to tell his story to a jury,” Reed Weingarten, one of the leading defense attorneys representing Mr. Lynch in the United States, said in a statement. . “We look forward to this opportunity to tell Mike Lynch’s story and allow him to put this unfortunate chapter behind him.”

Since his extradition, Lynch has lived under 24-hour surveillance and under a court-mandated private security guard, a major downfall for a man who was once considered one of Britain's biggest technological success stories.

Born into a working-class family outside London, he attended private school on a scholarship and graduated from Cambridge before founding Autonomy in 1996. The company helped clients analyze unstructured information in order to uncover hidden insights about their businesses.

By 2011, Autonomy had become one of Britain's most prominent technology companies, with its home base in Cambridge sometimes called “Silicon Fen”.

“He definitely raised the profile of Cambridge technology,” said Tony Quested, editor of Business Weekly, a technology trade magazine based in Cambridge. “There weren't many at that time.”

Mr. Lynch has become a celebrity in British technology circles. He was a member of the Royal Society, one of the most important scientific societies in the country. an advisor to David Cameron, the Prime Minister at the time; He sat on the board of directors of the BBC.

HP, led by Leo Apotheker, the former head of German software giant SAP, came up with the idea of ​​buying Autonomy to transform itself from a legacy hardware provider into a higher-margin software company. HP Agreed to buy autonomy In mid-2011, it was about 60 percent more than its market value.

Things got tense quickly.

Mr. Apotheker left his position as CEO a month after the deal was announced, as investors and analysts revolted against the high price of the Autonomy acquisition and the plan to spin off HP's personal computer division (which was born from another major acquisition, Compaq.)

He was replaced by Meg Whitman, the former eBay president who sat on HP's board of directors. Within HP, Autonomy's star quickly faded amid the rapid decline in sales. Mr. Lynch, who clashed with Ms. Whitman, was fired in May 2012.

Later that year, HP said it had been defrauded by Autonomy, misled by irregularities including contract lapses and the use of hardware sales to boost revenues, especially at the end of the quarter. The multi-billion-dollar debt write-off marked the beginning of Mr. Lynch's legal troubles, which will culminate this month in another long and complex trial.

Over the years, Mr. Lynch has denied describing the company as rife with fraud. He has it Blame Ms. Whitman, now the US ambassador to Kenya, and other senior executives who clashed with him over the disintegration of self-government. His lawyers have argued in court filings that HP executives, for example, knew about the hardware sales and did not raise it as an issue.

They pointed to internal emails showing shifting calculations of Autonomy's value, at one point valuing it at more than $11 billion. They also noted that accountants at EY, the global accounting and consulting firm formerly known as Ernst & Young, who worked for HP did not believe the price of the Autonomy acquisition was inflated due to accounting irregularities.

US federal prosecutors said in court documents that Lynch, long known as a tough boss, enjoyed being tough and maintaining control. (In one filing, government lawyers described an inside sales video at Autonomy in which he portrayed himself as… A Mafia boss, who noted that he named the meeting rooms after villains in James Bond movies.) Witness testimony included Ms. Whitman and Katherine Lesjak, the former chief financial officer of HP.

Prosecutors have sought to present tens of thousands of pieces of evidence and a list of 44 witnesses, and estimate the trial could last until the end of May.

Mr. Lynch's freedom and legacy are at stake.

He has sought to bolster his reputation as a public intellectual by giving interviews on the subject of technology, but has kept a low profile since his extradition. His last article was in April, when he encouraged British policymakers to do just that Incubating startups in the field of artificial intelligence.

Autonomy is now part of Canadian software company OpenText. Mr. Lynch's investment firm Invocation has made significant early investments in companies such as the cybersecurity firm Darktrace.

But associating with Mr. Lynch could be risky. In December, Darktrace shareholders rejected a board nominee proposed by Invocation. And in the company Financial depositsDarktrace described “independence issues” as a risk “from a reputational and legal perspective.”