Autonomy founder Lynch denies wrongdoing in HP fraud case

By Paul Sandle

LONDON (Reuters) - Mike Lynch, once hailed as Britain's answer to Bill Gates, denied all claims against him on Wednesday when he kicked off what is expected to be a month-long testimony in his multibillion-dollar fraud battle with Hewlett-Packard (HP).

HP is suing Autonomy founder Lynch along with his former finance chief Sushovan Hussain for more than $5 billion after the 2011 sale of the British company to the Silicon Valley group went disastrously wrong. HP paid $11 billion for Autonomy.

Lynch denies any wrongdoing and says HP's mismanagement was responsible for the failure of the acquisition, a deal that was designed to transform HP from a computer and printer maker into a software-focused enterprise services firm.

He was asked by HP's lawyer Laurence Rabinowitz if he had fraudulently inflated Autonomy's revenue to meet or beat market forecasts, and in the process misled auditors, the audit committee, analysts, investors and the market in general.

Lynch replied: "That is incorrect".

"It's important to get some perspective," he said.

The 54-year-old entrepreneur, a leading light in the British tech scene who has previously held an advisory role for the government, said no one was disputing the amount of cash Autonomy was taking to the bank.

Autonomy was "one of the most successful companies that England had ever produced," he said.

HP wrote down the value of Autonomy by $8.8 billion a year after the takeover, saying it had uncovered serious accounting improprieties.

HP's lawyers have told the court that Autonomy inflated its true value through a series of fraudulent transactions, such as selling hardware at a loss and so-called round-trip deals - a type of barter with no real commercial rationale - masterminded by Lynch.

HP's Rabinowitz said on Wednesday the trial needed to establish whether any underlying wrongdoing had taken place at Autonomy, and on a second level whether Lynch was responsible for any wrongdoing.

Rabinowitz said Lynch had an iron grip on Autonomy's finances, including approving relatively small deals. He said Autonomy's auditor Deloitte had noted that Lynch wanted to approve all purchase orders over $30,000, which it said was a "very unusual level of control" for a FTSE 100 CEO.

Lynch said in practice this did not happen, adding a review of emails showed he had only approved between one in 10 and two in 10 of the transactions as many were repeat contracts.

Asked by Rabinowitz if he thought there had been any wrongdoing at the company, Lynch replied that he had "come to learn of some examples" where someone had behaved improperly.

However he reiterated his defence that Autonomy had been destroyed due to management incompetence, politics and infighting at HP.

(Additional writing by Kate Holton; Editing by Mark Potter)