Autonomy tycoon Mike Lynch faces US trial

Celebrated UK tech entrepreneur Mike Lynch stands trial in San Francisco today, accused of fraudulently inflating the value of his enterprise software company Autonomy before its sale to Hewlett-Packard 13 years ago.

Lynch – who has pleaded not guilty – has been fighting litigation from HP since the tech giant acquired his firm in 2011 for $11.1 billion to bolster its move into software.

Less than a year later, however, HP wrote off three-quarters of the company’s value after uncovering what it claims were “accounting irregularities” at the hands of Autonomy’s former management team.

The central accusation is that Autonomy’s execs – which include Lynch and former CFO Sushovan Hussain – inflated the firm’s revenues before the HP deal.

For years, Lynch has argued that Autonomy’s underperformance at HP was the result of mismanagement by its new owner, rather than fraud before the takeover.

Even at the time, the deal was considered controversial, with many of HP’s shareholders claiming that the firm – better known for its computer hardware – had overpaid for Autonomy, as it sought to pivot into the high margin software services sector.

As a result, there have also been ongoing disputes with HP’s and Autonomy’s auditors as to how much of the losses could be attributed to fraud.

In September 2020, big four accountancy firm Deloitte, which audited Autonomy between 2009 and 2011, was fined £15m for its audits which were deemed to contain “serious and serial failures”.

However, legal documents filed by Lynch’s lawyers last year highlight disagreements between HP and its external auditors, EY, over whether a $5bn figure could be attributed to fraud.

HP on the case 

The case has also been investigated by the US Securities and Exchange Commission, the FBI, and UK’s Serious Fraud Office, with the latter closing its investigation in 2015, concluding that the chance of successful prosecution was low.

HP doggedly pursued the case in the UK civil courts however, and in 2022 Lynch lost a six-year civil fraud case with the judge ruling that HP’s overpaying of the software business was down to fraud perpetrated by Lynch and Hussain.

Hussain is now in jail in the US, after being found guilty of fraud relating to the same deal.

As well as Autonomy, Lynch – who was awarded an OBE for services to enterprise in 2006 and was an adviser to David Cameron’s government – also co-founded $1bn valued video search engine Blinkx as well as London Stock Exchange-listed cyber firm Darktrace – another company mired in controversy after some of its customers wrote off its AI-focussed cyber sec products as “Snake Oil”.