Our sales were to genuine customers, Autonomy ex-CEO Mike Lynch insists in court

Boss bats away the idea deals were 'circular' to pump up revenues

Autonomy trial As his marathon Autonomy-era cross-examination comes to an end, former CEO Mike Lynch has entered detailed denials to every allegation put to him by Hewlett Packard’s legal team – and appears to have the judge on his side.

Over the last week, Lynch has been grilled in London's High Court by Laurence Rabinowitz QC about Autonomy’s finances and deals it made with resellers and OEMs in the run-up to its buyout by HPE.

As well as falling back on his time-honoured line that Deloitte signed off on whatever Autonomy was doing (they “test every OEM contract over $1m”, in Lynch’s words), the British biz's founder also gave highly detailed responses to Rabinowitz’s questions about whether deals had a true commercial rationale.

HPE’s case against Lynch and co-defendant Sushovan Hussain is that a number of deals struck in the runup to the purchase of Autonomy for $11bn were fraudulent and designed purely to move money around in circles so it showed up in the accounts as revenues. This, alleges HPE, was part of Lynch and Hussain’s master plan to make Autonomy look like a more tempting takeover target than it truly was.

Not all of today's session was plain sailing for Lynch. Rabinowitz asked him why Autonomy had “issued tens of millions of dollars of credit notes and wrote off tens of millions of dollars of debts in relation to the VAR deals that we’ve been talking about” over the last few weeks in the High Court.

The former CEO replied: “Well, no, I don’t believe Autonomy did write off tens of millions of dollars of records. Mr Scott took a decision without my knowledge to reverse two deals. The write-off of debt that I know about, which was the Vatican one, was done by HP finance after the acquisition.”

Describing that as “completely wrong”, Rabinowitz went on to say that reseller CEO John Baiocco had testified that Autonomy issued his firm $21.6m in credit notes in August 2011, right between HP offering to buy Autonomy and the two sides agreeing the sale.

Later, Lynch denied that he and Hussain had embarked on a programme of making resellers “whole” in the runup to the HP buyout of August 2011 completing. He said: “I was not involved at all in any programme to make VARs [resellers] whole,” also denying he was involved in write-downs that took place at the time.

Summarising, the former CEO, who has also been indicted with criminal fraud offences in America, told the High Court: “So in $2.2bn of revenue, what we’re actually seeing is something along the lines of $9m where we didn’t get the cash."

"And the reason we get the cash is these are real deals with real customers who really install software that really gets used most of the time. Now, in real business, things do go wrong for - once in a while, and Autonomy did have a bad debt rate but it was 1 per cent, it was perfectly normal for the industry’.”

The case continues. ®

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