Mike Lynch, former British tech mogul, faces the test of his life
Every morning, the man once called Britain’s Bill Gates goes to work in his mansion in San Francisco’s cool Pacific Heights neighborhood.
That man, Mike Lynch, contacts his investment firm Invoke Capital about its recent performance. He speaks to researchers in Cambridge, England, whom he personally funds, about the ways artificial intelligence can be used to help people with hearing problems. He receives updates on the heritage Red Poll cattle and other livestock on his farm in Suffolk, eastern England.
Ultimately, the 58-year-old Mr. Lynch turns to his most important task: defending himself against 16 charges of conspiracy and fraud. If convicted, he faces 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 magnate of defrauding Hewlett-Packard of billions when he HP sold its software company Autonomy for $11 billion in 2011.
In 2012, HP announced a Write-down of $8.8 billion and blamed “serious accounting irregularities” at Autonomy. Stunned investors called it one of the worst takeovers in history. Mr. Lynch has since fought a series of complex, overlapping legal battles in the United States and Britain.
In 2022, a London judge ruled a civil case found Mr Lynch and Sushovan Hussain, Autonomy’s former chief financial officer, liable for defrauding HP. The judge said the case was “one of the longest and most complex in English legal history”, with the trial lasting more than three months, the presentation of dozens of thousands of documents and ultimately a judgment running to more than a thousand 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 mismanaging Autonomy. Hearings were held last month to decide damages, with HP demanding around $4 billion and Mr Lynch claiming he was owed nothing.
Mr. Lynch’s legal troubles also recall the decline of Hewlett-Packard, once a titan of the American technology industry. The former Silicon Valley giant has since broken up and has long been overshadowed by younger leviathans like Alphabet, Apple and Microsoft.
Mr. Lynch’s chances for his upcoming criminal trial do not look good. The judge, Charles Breyer of the Northern District of California, rejected some of the evidence that Mr. Lynch’s lawyers tried to present that they said showed HP mismanaged Autonomy after acquiring the company. Judge Breyer also oversaw the trial of Mr. Hussain, who was also convicted in 2018 of charges similar to those Mr. Lynch now faces. Mr. Hussain was recently released from a federal prison in Pennsylvania.
Last year, Mr. Lynch lost a bid to avoid extradition despite lobbying the British government, which approved his transfer to the United States on the same day as the verdict against him in the civil case brought by HP.
Last month he sued the Serious Fraud Office, the British securities regulator, over the way the US government handled data requests. The lawsuit, a last-ditch effort to delay the American criminal trial, was arranged earlier this month.
Mr. Lynch still has significant resources to defend himself in a San Francisco courtroom. “Mike Lynch is confident he will be proven right when he finally gets the chance to tell his story to a jury,” Reid Weingarten, one of the prominent white-collar lawyers representing Mr. Lynch in the United States, said in a statement . . “We look forward to this opportunity to tell Mike Lynch’s story and enable him to put this unfortunate chapter behind him.”
Since his extradition, Mr Lynch has lived under 24-hour surveillance and court-mandated private security, a drastic fall for a man once considered one of Britain’s greatest technology success stories.
Born into a working-class family outside London, he went to private school on a scholarship and graduated from Cambridge before founding Autonomy in 1996. The company helped clients analyze unstructured information to discover hidden insights about their business.
By 2011, Autonomy had become one of Britain’s leading technology companies, based in Cambridge, also known as ‘Silicon Fen’.
“He has certainly raised the profile of Cambridge technology,” says Tony Quested, editor of Business Weekly, a technology trade magazine based in Cambridge. “There wasn’t much back then.”
Mr Lynch became a celebrity in British tech circles. He was a member of the Royal Society, one of the country’s top scientific societies; an adviser to David Cameron, then Prime Minister; and was on the board of the BBC.
HP, led at the time by Léo Apotheker, a former head of German software giant SAP, came up with the idea of acquiring Autonomy to transform itself from an aging hardware supplier to a higher-margin software company. PK agreed to purchase Autonomy in mid-2011 for approximately 60 percent more than the market value.
The situation deteriorated rapidly.
Mr. Apotheker resigned from his position as CEO a month after the deal was announced, as investors and analysts revolted against both the high price of the Autonomy acquisition and a plan to spin off HP’s personal computer division (which emerged from another major acquisition of Compaq.)
He was replaced by Meg Whitman, the former eBay chief who served on HP’s board. Within HP, Autonomy’s star quickly faded as sales fell rapidly. Mr Lynch, who clashed with Ms Whitman, was fired in May 2012.
Later that year, HP said it had been duped by Autonomy, misled by improprieties including rolling back contracts and using hardware sales to boost revenue, especially at the end of a quarter. The multibillion-dollar write-off marked the start of Mr. Lynch’s legal troubles, which will culminate this month in another long and complex lawsuit.
Over the years, Mr. Lynch has denied the characterization that the company was rife with fraud. He has accused Ms. Whitman, now U.S. ambassador to Kenya, and other senior executives who clashed with him over Autonomy’s breakup. His lawyers have argued in lawsuits that HP executives, for example, knew about the hardware sales and did not raise them as a problem.
They have pointed to internal emails showing shifting calculations of Autonomy’s value, which at one point was estimated at more than $11 billion. They also noted that accountants from EY, the global accounting and consulting firm formerly known as Ernst & Young, who worked for HP, had not believed that Autonomy’s acquisition price was too high because of accounting irregularities.
U.S. federal prosecutors argued in court papers that Mr. Lynch, long known as a tough boss, liked to be tough and maintain control. (In one filing, government attorneys described an internal sales video at Autonomy in which he portrayed himself as (a Mafia don, and noted that he had named conference rooms after villains from the James Bond films.) Witness testimony included Ms. Whitman and Catherine Lesjak, HP’s former chief financial officer.
Prosecutors have sought to introduce tens of thousands of pieces of evidence and a witness list of 44 people, and they estimate the trial could last until the end of May.
Mr. Lynch’s freedom and his legacy are at stake.
He has tried to foster a reputation as a public intellectual by giving interviews on the subject of technology, but has kept a low profile since his extradition. His last published piece was in April, when he encouraged British policymakers to do so embrace AI startups.
Autonomy is now part of the Canadian software company OpenText. Mr. Lynch’s investment firm, Invoke, has made crucial early investments in companies such as cybersecurity provider Darktrace.
But associations with Mr. Lynch can be fraught. In December, Darktrace shareholders rejected a candidate for the board proposed by Invoke. And in the company financial returnsDarktrace has described “Autonomy-related matters” as a risk “from both a reputational and legal perspective.”