Mike Lynch, the Irish tech tycoon and ex-founder and CEO of Autonomy, has asserted in a San Francisco federal court that he played no part in the dealings at the centre of a criminal case accusing him of participating in one of Silicon Valley’s most notorious fraud. Mr Lynch and Stephen Chamberlain, former finance VP of Autonomy, are on trial for their alleged role in conspiratorial and fraudulent actions.
They allegedly misrepresented Autonomy’s revenue in preparation for the company’s acquisition by Hewlett-Packard in 2011 for $11.5 billion (€10.6 billion). The suspect activities involved intricate and unlawful accounting practices such as backdating sales, carrying out circular transactions with clients to incentivise them to make purchases, and falsely presenting hardware agreements as software sales.
US prosecutors initiated the trial in March, depicted Mr Lynch as the main instigator of the deceptive deal in which HP sought a transformation into a software firm but ended up marking down Autonomy’s value by $8.8 billion and firing numerous workers.
Donning a dark suit, white shirt, and blue tie, the 58-year-old Mr Lynch appeared composed during his Thursday testimony, sometimes chuckling and sharing banter with his attorney. He referred to his experience during the trial weeks as strange, mentioning his unfamiliarity with many of the witnesses and his non-involvement in many transactions being discussed.
Despite its flaws, Mr Lynch stated that Autonomy was a thriving business banking $300 million a year prior to the HP acquisition. He was relieved of his duties by HP in 2012 due to poor business performance. A UK judge deemed Mr Lynch culpable of defrauding HP in a 2022 civil fraud case. He was extradited to the US last year to confront federal criminal charges, to which he denies guilt and has since been under house arrest in San Francisco.
Mr Lynch alleges that HP used him as a fall guy to conceal their mismanagement of Autonomy post-acquisition. The presiding trial judge has put restrictions on what can be discussed about post-acquisition issues in front of the jury.
As explained by Mr Lynch, the unavoidably tempting 60% premium on its share price that HP proffered to Autonomy’s shareholders amid the acquisition, made it virtually impossible for a chief executive to decline. Moreover, Lynch highlighted that if anyone attempted to thwart this arrangement, retaining their CEO position would be unachievable.
According to Lynch, from 2009 onwards, Autonomy catered to in excess of 20,000 customers across over 20 nations. He emphasised that the purported fraudulent transactions currently under scrutiny in court constituted only a negligible part of them. He went on to add that he was oblivious to these transactions.
He used the analogy of a seemingly pristine kitchen still harbouring bacteria when scrutinised under a microscope to illustrate his point.
Furthermore, Lynch disassociated himself from the erstwhile CFO of Autonomy, Sushovan Hussain, who received a five-year sentence in a US prison in 2019 for fraudulent activities. He dispelled the rumours that they were childhood mates because they went to the same school. On reflection, he would have addressed earlier Hussain’s escalating role in the sales team, he confessed.
Lynch portrayed his humble origin story to the jury – born to Irish immigrant parents in London in the 1970s, his burgeoning passion for technology, his academic career, the founding of Autonomy, and his present familial circumstances.
His spouse was present during the trial. Lynch stated that his two university-student daughters could not make it to the sessions. In between the trial, he spoke about his rural English home and his passion for rearing livestock where his penchant for medieval pig breeds got a mention.
His testimony will span multiple days, followed by the prosecution’s cross-examination. His team previously requested a mistrial claiming the government deliberately brought up his extradition during the trial. The request got rejected by the judge on Thursday morning, with a stern rebuke to the government for their wholly inappropriate queries to a member of Lynch’s legal squad who was a witness previously.
Copyright The Financial Times Limited 2024.
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