Mike Lynch Defends Himself At HP-Autonomy Trial In US

British entrepreneur Dr Mike Lynch took to the stand in San Francisco on Thursday, as he defends himself against serious criminal charges.

The Guardian reported that Autonomy’s co-founder and former CEO, admitted on the stand that his role at the British software firm had been more of a technical nature, rather than business-focused.

The trial stems Hewlett-Packard’s disastrous $11 billion (£8.7bn) acquisition of Autonomy in 2011. The acquisition resulted in bitter mud slinging after HP filed an $8.8bn write-down of Autonomy in 2012.

HP Autonomy deal

HP alleged at the time that the majority of that charge, more than $5 billion, had resulted from a number of practices used by former members of Autonomy’s management team to inflate the value of the company and mislead investors and potential buyers at the time of the acquisition.

The remainder of that write-off charge was related to other factors such as the trading value of HP stock and marketplace performance.

Legal battles soon followed, and in April 2015 HP sued Lynch, alongside former Autonomy CFO Sushovan Hussain at the High Court in London, seeking $5bn in damages.

Lynch countersued HP for $160m in 2015, saying at the time the company had ruined his reputation and that it was “incompetent in its operation of Autonomy”, leading to the acquisition’s failure.

In the UK the Serious Fraud Office (SFO) in 2015 dropped its investigation into the sale of Autonomy to HP.

Eventually in September 2016 HPE sold its software business, including the Autonomy division, to British IT firm Micro Focus for $8.8 billion.

US extradition

HPE (the resulting software operation after HP’s split in 2015) however continued its attempt to recoup its losses in its lawsuit against Lynch, and Autonomy’s former chief financial officer, Sushovan Hussain, who in 2019 was sentenced to five years in prison in the US.

HP’s UK court case against Lynch resulted in a British judge ruling in January 2022 that HP “substantially succeeded” in its lawsuit. However the judge ruled any damages would be “considerably less” than the $5 billion sought by HP.

After that verdict, then Home Secretary Priti Patel approved the extradition to US of Mike Lynch to face 17 counts of US charges, including wire fraud, conspiracy and securities fraud, which carries a maximum term of 20 years in prison.

If convicted, Lynch faces up to 25 years in prison.

He has pleaded not guilty, and has previously said he “vigorously rejects all allegations against him”.

Lynch was extradited to the US in May 2023, and confined to an address in San Francisco under house arrest. Lynch was also ordered to pay a $100 million (£79m) bond and is watched by 24-hour armed guards he must pay for himself.

In October 2023 Lynch launched a legal challenge to dismiss the US allegations against him.

Mike Lynch defence

Now on Thursday Lynch took to the stand at the San Francisco federal courthouse as a key witness in his own criminal fraud trial.

According to the Guardian newspaper, the trial continued as planned Thursday despite the defense team moving for a mistrial over alleged improper questioning of a witness by the prosecution. Lynch’s defense team called the questioning, which indirectly referenced the tech titan’s extradition, “egregious” and “highly improper” in a filing.

US district judge Charles Breyer reportedly denied the motion to dismiss, but acknowledged the prosecution’s questions were improper and ordered the jury to exclude the questions and subsequent testimony from their deliberation.

According to the Guardian, in his testimony, Dr Lynch said his job involved delegating many tasks to employees, and that his background upon founding the company was more technical in nature than business-focused.

While the government has painted Lynch’s business dealings as clearly fraudulent, Lynch in his testimony on Thursday attempted to highlight more complexity, stating that like any business, Autonomy was “not perfect”.

“The reality of life is that it’s nuanced, and it is messy,” he was quoted as saying. “[In this trial] we are peering through the door and seeing the sausage being made. One thing to bear in mind is if you take the microscope into a spotless kitchen, you will always find bacteria. And I don’t think Autonomy is any different.”

The Autonomy co-founder described the trial experience thus far as “surreal”, saying he has watched “a parade of witnesses [he’s] never met” describe decisions in which he had no involvement.

Prosecutors have called upwards of 30 witnesses since the trial began in March, the Guardian noted.

According to the Guardian, Lynch addressed the jury directly throughout his questioning, explaining concepts central to the case including earnings reports, hardware sales and the timeline of Autonomy’s founding and ill-fated acquisition. He also paused to explain British terms to the American jury, including phrases like “bean counters” and “good bloke”.

Hardware sales

The Guardian reported that much of the questioning Thursday sought to address the government’s focus on Autonomy’s dealings in hardware sales.

The prosecution claims that although the company had portrayed itself as a software company, it relied heavily on hardware sales, something Lynch “did everything he could” to conceal from the market.

Lynch reportedly said Autonomy often sold hardware and software together as a package, and that hardware sales were an important means to mitigate business risks, including changing relationships with suppliers.

The Court adjourned Thursday afternoon before the defense finished questioning, which will resume on Tuesday following a US holiday.

Lynch is the final witness the defense will call to the stand, meaning the trial will be wrapping in the coming weeks, the Guardian reported.