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Former British tech star portrayed as crook and visionary in trial over disastrous 2011 HP deal

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San Francisco, California –

Federal prosecutors on Monday painted former British tech star Mike Lynch as the ruthless mastermind of an $11 billion deal that defrauded Silicon Valley pioneer Hewlett Packard.

But his lawyer portrayed him as a visionary who became the scapegoat for a desperate buyer’s bad decision.

The contrasting portraits of Lynch, 58, emerged at the start of a criminal trial over HP’s 2011 acquisition of British software maker Autonomy – a deal that was initially celebrated as a coup, but s It’s instead turned into a costly debacle.

Lynch, once hailed as an example of British ingenuity, faces 16 counts of fraud and conspiracy that could send him to prison for more than 20 years if a jury finds him guilty of all charges. The trial in San Francisco federal court is expected to last two to three months.

Although the trial focuses primarily on Lynch’s 16-year reign that culminated with his firing in 2012 by then-HP CEO Meg Whitman just nine months after the takeover, the proceedings will also highlight the decadence and chaos of ‘a renowned Silicon Valley company.

Whitman’s predecessor, Leo Apotheker, acquired Autonomy as part of a plan to reduce HP’s reliance on selling personal computers and printers amid upheaval triggered by the rise of the smartphone. But after the deal descended into a financial scandal, Whitman ended up laying off thousands of workers as HP’s fortunes sank, ultimately leading to the company split in two in 2015.

Lynch’s attorney, Reid Weingarten, pointed to HP’s deteriorating situation in 2011 as the main reason the company sought to complete the acquisition of Autonomy without even conducting a thorough review of the company . Things were so bad, Weingarten told the jury, that Apotheker compared HP to a “burning platform” in the ocean. Meanwhile, Whitman, he said, had hailed Autonomy’s products as “magic software.”

“HP was in desperate shape, so they had to do something,” Weingarten told the jury during his hour-long opening statement.

In his 80-minute opening statement, federal prosecutor Adam Reeves said Lynch began lying to HP executives early in discussions about the deal, during a meeting in early 2011 at HP headquarters in Palo Alto, California – the same city where Bill Hewlett and Dave Packard founded the company in 1939.

“It was the scene of an $11 billion fraud,” Reeves said of that first meeting between Lynch and HP executives. Although Lynch made it seem like he was running a “money-making machine,” Reeves said Autonomy’s “success was actually a complex, multi-layered, multi-year fraud.”

Reeves said the prosecution will present witnesses who will explain how Autonomy falsified its accounts and engineered various transactions to illegally inflate its revenue over a 2 1/2-year period that duped HP into paying for a an acquisition he would regret. . And Lynch orchestrated the scheme, according to Reeves.

“He was a domineering and controlling boss,” Reeves told the jury. “For many years, he ruled Autonomy with an iron fist.”

Although he acknowledged that Lynch was a “tough guy” who demanded the best from his employees, Weingarten said Lynch delegated most accounting and marketing matters while focusing primarily on innovation.

“Mike was ahead of everyone for a long time,” Weingarten said. “He’s a startuper who loved eating cold pizza at 2 a.m. while inventing something.”

Weingarten also showed the jury an internal HP document written in July 2011 – a month before the acquisition was announced – valuing Autonomy at $46 billion, suggesting the valuation showed HP thought it was a good deal to acquire rights to software that helped businesses. find information buried in emails and Word documents.

Autonomy’s “software was so powerful that no competitor was close and it sold like hot cakes,” Weingarten said.

Lynch, who has been free on $100 million bail since his extradition to the United States last May, remained stoic during most of the opening statements while watching presentations appearing on a screen and occasionally watching the lawyers and the jury.

The jury will eventually hear from Lynch, to whom Weingarten has promised to testify to tell his side of the story.

“We want you to know about it, we think it helps us,” Weingarten said.

That testimony will likely allow prosecutors to delve deeper into Lynch’s motivations for making a deal that allowed him to pocket more than $800 million, according to court documents.

Apotheker, who replaced Whitman a few weeks after the home rule deal was announced, is also expected to testify. Whitman, currently the U.S. ambassador to Kenya, is not expected to appear in court during the trial, although her handling of HP and the Autonomy buyout is expected to come under the microscope.

Lynch’s trial will concurrently cover fraud allegations made against Stephen Chamberlain, Autonomy’s former vice president of finance.

Sushovan Hussain, Autonomy’s former chief financial officer and Lynch’s former office colleague, was sentenced to five years in prison in 2019 after being convicted of 16 counts of fraud and conspiracy. Although Hussain’s name was mentioned during Monday’s opening statements, his conviction was not.

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