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Mike Lynch: Autonomy founder’s fraud trial begins in US

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British tech entrepreneur Mike Lynch is appearing in court in the US, as his trial on fraud charges gets under way.

Once dubbed “Britain’s Bill Gates”, Mr. Lynch is accused of overinflating the value of his software firm when he sold it to Hewlett-Packard (HP) in 2011. The 58-year-old, who faces 16 charges, faces up to 25 years in prison if convicted. He denies the claims. He was extradited to the US last year, after a UK judge ruled in favor of HP in a similar civil fraud case.

In opening arguments, Mr. Lynch’s attorney Reid Weingarten said the tycoon was preparing to take the stand at trial, as he seeks to defend a record that has been severely battered since the sale of the firm Autonomy for more than $11bn (£8.6bn). At the time, the deal ranked as the largest-ever takeover of a British technology business.

But just a year later, HP wrote down the value of Autonomy by $8.8bn and claimed it had been duped into overpaying for the company.

Mr. Weingarten told the jury that Mr. Lynch had focused on technology, leaving the finances to others. “Mike had many sleepless nights worrying about Autonomy, but not about accounting,” Mr. Weingarten said, according to the Reuters news agency. Mr. Lynch co-founded Autonomy in 1996.

It grew to become one of the UK’s top 100 public companies, known for software that could extract useful information from “unstructured” sources such as phone calls, emails or video.

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US prosecutors in San Francisco say Mr. Lynch backdated agreements to mislead about the company’s sales; concealed the firm’s loss-making business reselling hardware; and intimidated or paid off people who raised concerns, among other claims. In court filings, his attorneys have argued that the “real reason for the write-down” was a failure by HP to manage the merger.

“Then, with its stock price crumbling under the weight of its own mismanagement, circled the wagons to protect its new leaders and wantonly accused” Mr. Lynch of fraud, they wrote. Mr. Lynch, a former UK government adviser who sat on the boards of the BBC and the British Library, vigorously fought attempts by US prosecutors to bring him to trial in America, which is known for its punitive approach to white-collar crime.

In 2019, Autonomy’s former chief financial officer Sushovan Hussain was jailed for five years and fined millions of dollars on 16 counts of fraud, securities fraud and other charges.  In 2022, HP won a civil fraud case against Mr. Lynch and Hussain heard by London’s High Court. It is now seeking a reported $4bn.

In that case, Mr. Lynch and Hussain argued that HP’s claim was “‘manufactured’ to cover and justify a change of corporate mind, and to cast them as scapegoats for what in reality is buyer’s remorse coupled with management failings”.

As well as Mr. Lynch, Autonomy’s former finance executive Stephen Chamberlain is also on trial.