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Faced with a U.S. indictment, British tech supremo Mike Lynch had a simple choice: Focus on the criminal trial—with a possible sentence of 20 years in prison—or fight a civil lawsuit first.
The former Autonomy Corp. chief executive officer chose the latter, surprising many including those at Hewlett Packard Enterprise Co., which brought the $5.1 billion suit and believed he’d fight the American charges first. “We’d rather get on with it,” Lynch said in January.
The nine-month trial between HP and Lynch is set to start Monday in London’s High Court, with at least three ex-CEOs expected to testify. The computer giant has accused Lynch of being the architect of a massive accounting fraud at Autonomy, once the U.K.’s second-biggest software company. Lynch counters by saying that HP, which under Meg Whitman pulled a U-turn on its software ambitions, simply ran his firm into the ground.
Autonomy was HP’s “unwanted stepchild,” Whitman is alleged to have told her senior management.
The case centers on HP’s 2011 purchase of Autonomy for $10.3 billion, a 60 percent premium to its share price. Lynch himself made $815 million from the deal and his reputation prospered, with appointments to advise the government and a new career as startup investor soon following.
All that fell apart when HP took an $8.8 billion writedown of the business just a year later. Whitman, the newly appointed boss at HP, accused Lynch of misstating Autonomy’s financial performance. The Palo Alto, California-based company has pursued the executive ever since, culminating in the current lawsuit that has already encompassed more than 100 million pages of documents.
The Key Players
Mike Lynch Age: 53 CEO of Autonomy from March 1996-2011 The founder of Autonomy will be under the spotlight over how much he knew about the company’s accounting practices. Even his own auditors, Deloitte, said Lynch was seen to exercise “a very unusual level of control for a FTSE 100 CEO.” His legal team says he wasn't an accountant and had “little involvement in the day-to-day detail.” Meg Whitman Age: 62 CEO of HP from September 2011-February 2018 Whitman took over HP as the Autonomy transaction was closing, with a mandate to refocus the firm on its existing businesses. But Autonomy was HP’s “unwanted stepchild,” she’s alleged to have told senior management at the firm, according Lynch’s legal filings. Leo Apotheker Age: 65 CEO of HP from November 2010-September 2011 The former SAP SE executive lasted less than a year at HP. Hired to help the computer giant move away from its low-margin hardware business, Apotheker orchestrated the Autonomy buyout. In September 2011, he told then-HP chairman Ray Lane: “If Autonomy and more software isn’t the solution, what is the alternative?” Cathie Lesjak Age: 60 CFO of HP units from September 2007-July 2018 The HP veteran was one of the few executives to voice objections to the Autonomy deal, the day before the transaction was announced. Lesjak was later picked to oversee a forensic look at the software firm's accounting, which led to the $8.8 billion writedown.