Lynch’s ‘Unusual Level of Control’ at Autonomy Worries Judge

(Bloomberg) --

An auditor’s comment on Mike Lynch’s “unusual level of control” at Autonomy Corp. may come back to trouble the software company’s founder as a London judge prepares to decide whether a $5 billion fraud took place at the firm.

Entering the last few days of the 10-month trial, Judge Robert Hildyard interrupted Lynch’s attorney to ask about Deloitte’s analysis of Lynch’s management style, coupled with his “very restrictive” limits on spending. It’s a central feature of the mammoth lawsuit brought by Hewlett-Packard Co., which accuses the tech entrepreneur of overseeing a scheme to artificially inflate Autonomy’s sales before HP bought it.

Did a policy that Lynch personally approve one-time corporate purchases over $30,000 “symbolize” the executive’s desire to exercise control over his company, Hildyard asked Lynch’s lawyer Robert Miles. The attorney said that none of the particular transactions were under scrutiny and in practice Lynch didn’t regularly sign off on the spending.

The trial is wrapping up with Lynch saying that HP has spent tens of millions of dollars attempting to prove fraud but failed to tie the founder to any wrongdoing. Miles argued that that the claim was manufactured to explain away HP’s disastrous mismanagement of the $11 billion Autonomy acquisition.

HP brought the case “out of buyer’s remorse,” Miles said. “Even where arguably there is some evidence of wrong taking place,” there is none to show Lynch was involved or even aware of it, he said.

Lynch is separately gearing up to fight an extradition battle with the U.S., where he faces criminal charges of wire and securities fraud. The American request is with British prosecutors who are yet to formally start proceedings.

Miles emphasized the differences between U.S. and U.K. proceedings. The criminal trial of Lynch’s finance director Sushovan Hussain in the U.S. didn’t consider HP’s difficulties with Autonomy’s integration, he said. Hussain is currently on bail, appealing his conviction.

To contact the reporter on this story: Jonathan Browning in London at jbrowning9@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser

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