Federal prosecutors on Monday painted one-time British tech star Mike Lynch because the ruthless mastermind of an $11 billion deal that defrauded Silicon Valley pioneer Hewlett Packard.
However his lawyer depicted him as a visionary who was made a scapegoat for a determined purchaser’s unhealthy choice.
The contrasting portraits of Lynch, 58, emerged firstly of a prison trial revolving round HP’s 2011 acquisition of British software program maker Autonomy — a deal that was initially celebrated as a coup, however as an alternative unraveled right into a costly debacle.
Lynch, as soon as hailed for instance of British ingenuity, is dealing with 16 felony counts of fraud and conspiracy that might ship him to jail for greater than 20 years if a jury convicts him of all expenses. The trial in San Francisco federal court docket is scheduled to final two to a few months.
Though the trial is usually about Lynch’s 16-year reign that culminated in his 2012 firing by then-HP CEO Meg Whitman simply 9 months after the takeover, the proceedings can even solid a highlight on the decay and chaos at a storied Silicon Valley firm.
Whitman’s predecessor, Leo Apotheker, snapped up Autonomy as a part of a plan to minimize HP’s dependence on promoting private computer systems and printers amid the upheaval unleashed by the rise of the smartphone. However after the deal devolved right into a monetary scandal, Whitman wound up shedding 1000’s of staff as HP’s fortunes sagged, main ultimately to the corporate being cut up in two in 2015.
Lynch’s lawyer, Reid Weingarten, hammered on HP’s deteriorating situation in 2011 as the first motive the corporate sought to finish the Autonomy acquisition with out even conducting an intensive evaluation of the enterprise. Issues have been so unhealthy, Weingarten advised the the jury, that Apotheker had likened HP to a “burning platform” within the ocean. In the meantime, Whitman, he stated, had praised Autonomy’s merchandise as “magical software.”
“HP was in desperate shape, so they needed to do something,” Weingarten advised the jury throughout his hourlong opening assertion.
In his 80-minute opening assertion, federal prosecutor Adam Reeves asserted Lynch began mendacity to HP executives as quickly as deal discussions started with an early 2011 assembly held at HP’s headquarters in Palo Alto, California — the identical metropolis the place Invoice Hewlett and Dave Packard began the corporate in 1939.
“It was the scene of an $11 billion fraud,” Reeves stated of that preliminary assembly between Lynch and HP executives. Though Lynch made it appear to be he was working a “money-making machine,” Reeves stated, “Autonomy’s success was in fact an elaborate multilayered, multiyear fraud.”
Reeves stated the prosecution will current witnesses who will clarify how Autonomy cooked its books and engineered a wide range of offers to inflate its income in unlawful methods throughout a 2 1/2-year interval that duped HP into paying for an acquisition it could come to rue. And Lynch orchestrated the skullduggery, in keeping with Reeves.
“He was a dominating, controlling boss,” Reeves advised the jury. “For many years, he ran Autonomy with an iron fist.”
Though he acknowledged Lynch is a “hard charger” who demanded the perfect from his staff, Weingarten stated Lynch delegated most accounting and advertising and marketing points whereas he targeted totally on innovation.
“Mike was ahead of everybody for a long time,” Weingarten stated. “He is a startup guy who liked to be eating cold pizza at 2 in the morning while inventing something.”
Weingarten additionally confirmed the jury an inside HP doc drawn up in July 2011 — a month earlier than the acquisition was introduced — valuing Autonomy at $46 billion, suggesting the evaluation confirmed HP thought it was getting a discount to accumulate the rights to software program that helped companies discover info buried in emails and Phrase paperwork.
Autonomy’s “software was so powerful that no competitor was near them and it sold like hotcakes,” Weingarten stated.
Lynch, who has been free on $100 million bail since being extradited to the U.S. final Might, sat stoically by a lot of the opening statements whereas displays showing on a show and sometimes peering on the legal professionals and jury.
The jury ultimately will get to listen to from Lynch, who Weingarten promised will testify to inform his aspect of the story.
“We want you to know him, we think that helps us,” Weingarten stated.
The testimony will probably open the door for prosecutors to drill down into Lynch’s motives for making a deal from which he pocketed greater than $800 million, in keeping with court docket paperwork.
Apotheker, who was changed Whitman a couple of weeks after the Autonomy deal was introduced, additionally is anticipated to testify. Whitman, presently the U.S. ambassador to Kenya, isn’t anticipated to come back to court docket in the course of the trial, though her administration of HP and the Autonomy takeover is anticipated to be positioned underneath a microscope.
Lynch’s trial will concurrently cowl fraud allegations made towards Stephen Chamberlain, Autonomy’s former vice chairman of finance.
Sushovan Hussain, Autonomy’s former chief monetary officer and Lynch’s former workplace mate, was sentenced to 5 years in jail in 2019 after being convicted on 16 prison counts of fraud and conspiracy. Though Hussain’s identify was talked about throughout Monday’s opening statements, his conviction wasn’t.
