At the height of his career, Mike Lynch – once the UK’s leading technology entrepreneur, nicknamed “Britain’s Bill Gates” – sold his software company to a Silicon Valley giant for a reported $11 billion (8 .6 billion pounds sterling). Last Monday, more than a dozen years later, that agreement became the centerpiece of a trial in San Francisco.
Lynch has been charged with 16 counts of wire fraud, securities fraud and conspiracy by U.S. authorities, who say Hewlett-Packard’s troubled acquisition of Lynch’s Autonomy was based on lies. If convicted, he faces up to 25 years in prison. He pleaded not guilty.
The trial will focus intensely on what did and did not happen in 2011, the year HP bought Autonomy – a time when over the next few weeks, jurors will hear from dozens of witnesses in a paneled and windowless courtroom. the road to the San Francisco skyscraper that Autonomy once occupied.
The man once considered “Britain’s Bill Gates” spent the first week of the trial quietly listening as federal prosecutors took over his former empire. Sometimes he turned to his laptop, played with his pen, or exchanged a word with his lawyers. From time to time he still smiled.
1. It’s 2011 again
David Cameron was still at number 10, Barack Obama was in the White House and moviegoers were flocking to the climactic Harry Potter film.
Lynch has long argued that the buyout was undone by HP’s mismanagement of Autonomy after it was completed, but, significantly, Justice Charles Breyer insisted that the trial should not include the consequences of the agreement.
The challenges created by the passage of time are obvious. Explaining complex financial transactions and discussions that took place more than a decade ago to a jury fresh from this case will be no easy feat. For example:
“I can’t give you a specific date with certainty,” the first witness, former Autonomy employee Ganesh Vaidyanathan, remarked Tuesday when asked about the precise timing of a 2010 conversation.
2. A simple foundation
Prosecutors therefore began by highlighting a single meeting.
In early 2011, Lynch flew to the United States and “told a fabulous corporate success story” during a meeting with HP executives at the company’s headquarters in Palo Alto, the court was told Assistant U.S. Attorney Adam Reeves. Desperate to diversify from hardware to software, HP “ate it all,” according to Reeves, who said the meeting was “the scene of an $11 billion fraud.” Through a “variety of accounting tricks” and deals that “made no sense unless you were trying to falsely inflate your income,” the government alleges that Autonomy constructed “a complex, several levels and over several years.
Driven by money and power, according to Reeves, Lynch routinely lied to analysts, investors and, ultimately, HP. The company’s auditors also lied “over and over again” for two and a half years, he claimed.
Amid an avalanche of technical details, Reeves encouraged the jury not to worry about “a lot of jargon” they might hear. “Keep your eye on the dollars,” he said. “Keep asking yourself: Does this deal make sense? »
Breyer warned jurors not to be swayed by personal likes or dislikes. This did not prevent the prosecution and the defense from drawing up two portraits of Lynch.
The government described a “dominant, controlling, intimidating” chief executive who, as Reeves said in his opening speech, ruled Autonomy “with an iron fist”.
Meanwhile, the tycoon’s lawyers spoke of a talented student born to poor Irish parents who grew up to become a brilliant inventor. Yes, he was a demanding boss with “exacting standards,” agreed Reid Weingarten, one of Lynch’s lawyers. But many “enjoyed the challenge of working with him.”
after newsletter promotion
In an effort to cement that impression in the minds of jurors, Lynch’s team will take the unusual step of putting him on the stand. “We think the better you know him, the better off we will be,” Weingarten said. While prosecutors refer to it as “Dr. Lynch” because of Lynch’s doctorate, the businessman’s lawyer deliberately avoids the honorific. “For me, it’s Mike,” Weingarten said.
The prosecution is trying to convince the jury that Lynch is guilty beyond a reasonable doubt. His lawyers, trying to dismantle the accusations, are looking into the nuances of this case. The government’s argument was “black and white,” Weingarten told the court. “And you know what? You’re going to see in this trial that that’s not how the world works. The world works in gray. The world is complicated.
The defense says the evidence is insufficient. Prosecutors could claim there was a fire, Weingarten said, but “you’ll just see smoke.”
Lynch’s team disputes the idea that he was a micromanager, pulling the strings attached to every corner of Autonomy. According to them, his approach was more to recruit talented managers and delegate the smallest details. Weingarten said Lynch had “very little involvement” in the day-to-day accounting.
Lynch’s lawyers also strongly objected to the idea that HP was a victim. In a “desperate situation,” this company saw Autonomy as a “Hail Mary,” they say — and, after persuading a reluctant Lynch to sell his company at a high price, it rushed to make a deal that she feared that she would be usurped by a rival. tenderer.
Although the spotlight is on Lynch, he is not the only defendant on trial. Steve Chamberlain, former chief financial officer at Autonomy, has pleaded not guilty to 15 counts of wire fraud and conspiracy. He is accused of misleading the firm’s auditors.
It would be “unfair,” according to Lynch’s lawyers, to hold one man – in this case their client – responsible for all wrongdoing within a large multinational corporation.
Sushovan Hussain has been regularly mentioned. As financial director, he was Chamberlain’s boss and a close ally of Lynch. Hussain was convicted in 2018 of 16 counts of wire fraud and securities fraud, and jailed for five years starting in 2019.
The government will call dozens of people who worked with and within Autonomy to develop its case. Among them, Léo Apotheker, the boss of HP who agreed to buy Autonomy. Meg Whitman replaced Apotheker a few weeks after the announcement, later fired Lynch, and was in charge when HP reduced the value of the deal by $8.8 billion. Whitman, now the U.S. ambassador to Kenya, is not expected to appear.
Witnesses from Deloitte, Autonomy’s auditor, will testify. Lynch’s team has vowed to dispute “each time” the accounting firm claims it was misled.