Mike Lynch, Former UK Tech Mogul, Face Trial for Defrauding HP

Every morning in his townhouse in the tony San Francisco neighborhood of Pacific Heights, the man once referred to as Britain’s Bill Gates gets to work.

That man, Mike Lynch, checks in with his investment firm, Invoke Capital, on its recent performance. He speaks with researchers in Cambridge, England, whom he funds personally, about the ways artificial intelligence could be used to help those with hearing difficulties. He receives updates on the heritage Red Poll cattle and other livestock at his farm in Suffolk, in the east of England.

Eventually, Mr. Lynch, 58, turns to his most important task: defending himself against 16 criminal counts of conspiracy and fraud. If convicted, he will face up to 20 years behind bars.

The trial begins on 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 tech mogul of defrauding Hewlett-Packard of billions when he sold HP his software company, Autonomy, for $11 billion in 2011.

In 2012, HP announced an $8.8 billion write-down and blamed it on “serious accounting improprieties” at Autonomy. Stunned investors called it one of the worst acquisitions in history. Mr. Lynch has since waged a series of complex, overlapping legal battles in the United States and Britain.

In 2022, a London judge in a civil case found Mr. Lynch and Sushovan Hussain, Autonomy’s former finance chief, liable for defrauding HP The judge said the case was “amongst the longest and most complex in English legal history,” with the trial running for more than three months, the presentation of tens of thousands of documents and, in the end, a ruling that ran to well over 1,000 pages.

Mr. Lynch contests HP’s claims and plans to appeal the ruling. His lawyers called it “a case study in buyer’s remorse,” and point the finger at HP’s executives for mismanaging Autonomy. Hearings were held last month to decide on damages, with HP seeking some $4 billion and Mr. Lynch arguing that he owed nothing.

Mr. Lynch’s legal travails also serve as a reminder of the decline of Hewlett-Packard, a onetime titan of the U.S. technology industry. The former Silicon Valley giant has since split up, and has long been overshadowed by younger leviathans like Alphabet, Apple and Microsoft.

For his upcoming criminal trial, Mr. Lynch’s odds do not look good. The judge, Charles Breyer of the Northern District of California, has dismissed some of the evidence Mr. Lynch’s lawyers tried to introduce which they say showed that HP mismanaged Autonomy after acquiring the company. Judge Breyer also oversaw the trial of Mr. Hussain, who was 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 had approved his transfer to the United States on the same day as the judgment against him in the civil case brought by HP.

Last month, he sued the Serious Fraud Office, Britain’s securities regulator, over its handling of data requests by the United States government. The lawsuit, a last-ditch bid to delay the U.S. criminal trial, was settled earlier this month.

Mr. Lynch still wields considerable resources to defend himself in the San Francisco courtroom. “Mike Lynch has faith that he will be vindicated when he finally gets a chance to tell his story to a jury,” Reid Weingarten, one of several prominent white-collar defense 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 allow 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 biggest tech success stories.

Born into a working-class family outside of London, he attended private school on a scholarship and graduated from Cambridge before founding Autonomy in 1996. The company helped clients analyze unstructured information in order to unearth hidden insights about their businesses.

By 2011, Autonomy had become one of Britain’s most prominent technology companies, with its home base of Cambridge sometimes called “Silicon Fen.”

“He certainly raised the profile of Cambridge technology,” said Tony Quested, the editor of Business Weekly, a technology trade publication based in Cambridge. “There wasn’t that much around at the time.”

Mr. Lynch became a celebrity in British tech circles. He was a member of the Royal Society, one of the country’s top scientific associations; an adviser to David Cameron, the prime minister at the time; and sat on the board of the BBC.

HP, then led by Léo Apotheker, a former chief of the German software giant SAP, hit upon the notion of buying Autonomy to transform itself from an aging hardware provider to a higher-margin software company. HP agreed to buy Autonomy in mid-2011 for some 60 percent more than its market value.

Things soured quickly.

Mr. Apotheker was out as chief executive 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 was born from another major takeover, of Compaq.)

He was replaced by Meg Whitman, the former eBay chief who sat on HP’s board. Within HP, Autonomy’s star quickly dimmed amid rapidly declining sales. 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 the backdating of contracts and the use of hardware sales to bolster revenue, particularly at the end of a quarter. The multibillion-dollar write-down marked the beginning of Mr. Lynch’s legal travails, which will culminate this month in another long and complex trial.

Over the years, Mr. Lynch has denied the characterization that the company was riddled with fraud. He has blamed Ms. Whitman, now the United States ambassador to Kenya, and other senior executives who clashed with him, for Autonomy’s disintegration. His lawyers have argued in court filings that HP executives, for example, knew about the hardware sales and hadn’t raised them as an issue.

They have pointed to internal emails showing the shifting calculations of Autonomy’s worth, at one point putting it at more than $11 billion. They have also noted that accountants for EY, the global accounting and consulting firm previously known as Ernst & Young, who were working for HP had not believed the Autonomy takeover price was inflated because of accounting irregularities.

U.S. federal prosecutors argued in court documents that Mr. Lynch, long known as a hard-charging boss, relished being tough and maintaining control. (In one filing, government lawyers 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 James Bond movie villains.) Witness depositions have included Ms. Whitman and Catherine Lesjak, HP’s former chief financial officer.

The prosecutors have sought to introduce tens of thousands of exhibits and a 44-person witness list, and they estimate that the trial could last until the end of May.

Mr. Lynch’s freedom, and his legacy, are at stake.

He has sought 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 embrace A.I. start-ups.

Autonomy is now part of the Canadian software company OpenText. Mr. Lynch’s investment firm, Invoke, has made crucial early investments in companies like the cybersecurity provider Darktrace.

But associations with Mr. Lynch can be fraught. In December, Darktrace shareholders rejected a nominee for the board proposed by Invoke. And in the company’s financial filings, Darktrace has described “Autonomy related matters” as a risk “from both a reputational and a legal perspective.”