Home » Mike Lynch: four key takeaways from the fraud trial of ‘Britain’s Bill Gates’

Mike Lynch: four key takeaways from the fraud trial of ‘Britain’s Bill Gates’

A US jury has begun deliberating the fate of British tech entrepreneur Mike Lynch in a corporate fraud trial that began in March, as a years-long saga over a 2011 acquisition deal approaches its end.

Lynch is charged with 15 counts of fraud, though originally he faced 16; one count of securities fraud was dismissed last week in a notable victory for his defense.

The charges center on allegations that Lynch artificially inflated numbers at his software firm Autonomy prior to an $11bn acquisition deal made with Hewlett-Packard. HP wrote down Autonomy’s value by $8.8bn in 2012, saying it had uncovered serious accounting improprieties.

The British technology tycoon once lauded as “Britain’s Bill Gates” faces as many as 25 years in prison and was extradited to the US for the trial, which has taken place in a San Francisco federal court house. Lynch has pleaded not guilty.

The 11-week-long trial chronicled the alleged missteps made by the businessman, who prosecutors said was the “driving force” behind a “massive” years-long fraud. Lynch’s team, meanwhile, argued the case amounted to a “routine business dispute” in which there was no deliberate wrongdoing.

After many days of arguments from opposing sides, including testimony from Lynch himself, here is what we have learned about the controversial case.

  1. 1. Prosecutors argue Lynch showed a pattern of intimidation

    Throughout the trial, prosecutors sought to paint Lynch as a ruthless businessman who “spun a fabulous tale of corporate success” to deceive HP into making a bad deal.

    To that end, they interviewed witnesses about indications of a mob-like business culture at Autonomy, citing everything from the presence of piranhas in the office fish tank to meeting rooms named after James Bond villains to characterize the executive as a tough, threatening boss.

    On the stand, Lynch sought to humanize himself, discussing his childhood in England and the exciting rise of his company. He soberly explained business decisions at Autonomy, arguing that he did not have a direct hand in the alleged fraud in question.

    In closing arguments, assistant US attorney Robert Leach told jurors they should have no reasonable doubt there was fraud at Autonomy, and that Lynch directed it. He highlighted that Lynch had made £500m ($640m) from the HP deal, and told jurors to follow the money.

    “Dr Lynch had 500m reasons to defraud HP,” he said. “It tells you volumes about who was in charge and who benefited from this.”

  2. 2. Decade-old memories make vague evidence: ‘I can’t give you a specific date for certain’

    The trial centers around Hewlett-Packard’s 2011 acquisition of Autonomy and alleged fraudulent actions taken by Lynch in the time leading up to it. Crucially, US district judge Charles Breyer ruled that the trial not be focused on actions following the acquisition. The defense has criticized the decision, as Lynch has long maintained the financial struggles Autonomy faced were a result of HP’s mismanagement.

    With proceedings focused on allegations that Lynch purposefully inflated the company’s revenue starting in 2009 to entice buyers, much of the trial consisted of witnesses being forced to recall business minutia, accounting decisions and conversations from as far back as 15 years ago.

    “I can’t give you a specific date for certain,” one former Autonomy employee said in early testimony. That sentiment was echoed throughout proceedings, with Lynch himself saying on the stand that it was “surreal” to watch “a parade of witnesses [he’s] never met” describe decisions in which he had no involvement.

  3. 3. Lynch’s team has alleged the trial is unfair

    Court proceedings became contentious at some points, with Lynch’s defense team at one point moving for a mistrial based on “egregious” and “highly improper” prosecutorial conduct.

    In that line of questioning, which the defense said was “infected with deliberate misconduct highly prejudicial to Dr Lynch”, prosecutors indirectly implied that Lynch had been extradited for the proceedings. The only way for Lynch to address such references, the defense argued, would be to discuss post-acquisition events – which the judge has precluded. This effectively “hamstr[u]ng his fundamental rights to a fair trial”, the motion stated.

    Breyer 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.

    Such language from the defense echoes rhetoric used in the UK trial of Autonomy executive Sushovan Hussain, whose attorneys called Hewlett-Packard’s case “exaggerated” and “unfair”.

    Hussain was separately convicted in 2018 at a trial in the same court on charges of conspiracy, wire fraud and securities fraud related to the deal with HP. He was released from US prison in January after serving a five-year sentence.

  4. 4. Lynch argues that this is all just a big misunderstanding of accounting differences between the UK and the US

    Cultural, linguistic and business differences between the US and the UK emerged as points of contention throughout the 12-week trial. Some cultural exchanges were comical in nature – Lynch explaining Britishisms to the jury, including his use of the term “bean counters” to reference accountants in one business missive.

    Others were more consequential, with the differences between US and UK accounting standards key to Lynch’s defense. Prosecutors called Ganesh Vaidyanathan, a former accounting director at Autonomy in the US, as a witness, who testified about potential accounting issues he first raised inside the company in 2010.

    However, during their cross-examination of Vaidyanathan, defense attorneys sought to highlight the differences between international financial reporting standards (IFRS), which were in use at Autonomy, and generally accepted accounting principles (GAAP), the financial reporting standards largely used for US-based companies.

    Lynch’s team has long argued that the case is a “dispute over differences between UK and US accounting systems” and “certain business judgments”, and not deliberate fraud.

    Reuters contributed reporting