Poppy love
New year honours
, Issue 1640
Welcoming her into government, Starmer described the "former Darktrace CEO” as "an accomplished entrepreneur who brings invaluable experience to the role”. This involves running an upgraded Office for Investment to make the UK "the first choice for investment and the best place in the world to do business”.
Given Baroness Gustafsson OBE CBE's role at the heart of one of the UK's largest corporate frauds, however, others may wonder if she is less an entrepreneur who knows about growing business and more a practitioner of the less economically productive dark arts of creative accounting.
Lynch's mob
Gustafsson became boss of cybersecurity company Darktrace in 2013, thanks to her closeness to its founder, the late Mike Lynch.
Unmentioned in all the announcements of her new job, she had been European financial controller of his Autonomy company before he sold it to Hewlett Packard in a deal over which he was famously prosecuted in the US – and acquitted – for fraudulently overstating the value of the company. Before then, a judge in London's high court had found him and his finance director Sushovan Hussain (who was given a prison sentence in the US) to have acted fraudulently.
The 2022 judgment in the latter case poses serious questions over Starmer's latest appointment.
Gustafsson, a chartered accountant, came to Autonomy in 2009, having previously worked on its audits at Deloitte (which would face its own £15m fine for serious misconduct in signing off the company's misleading accounts). She was soon in the thick of the transactions that would land Lynch and Hussain with the fraud judgment.
Among Autonomy's ruses were schemes to create illusory sales by buying and reselling hardware and selling software services with upfront premiums in return for future discounts, artificially accelerating revenue and thus making Autonomy look a better prospect.
"Vice” ring
The hardware scheme was described by Mr Justice Hildyard as a "vice”. Its "purpose was to cover shortfalls in software revenues and perpetuate the appearance of meeting revenue forecasts, [so that] their true nature was being concealed and their effect on Autonomy's trading performance was being disguised”. Troublingly, he found that Gustafsson was "aware of the hardware reselling strategy”.
When it came to selling software services, Gustafsson was tasked with identifying what could be sold to clients even if there was little sign they needed it. In court, in relation to a deal with Morgan Stanley bank, she "acknowledged that she had little idea of what the software set out in her emails actually was”.
Or in her own words in evidence: "It certainly didn't change the metrics I was putting in... I have no idea of what any of [the listed products] is... what's a kick-start metadata? I have literally no idea.”
Unconvincing
Hildyard agreed with Hewlett Packard that "the only rational explanation for Ms Gustafsson being tasked with putting together the software offering was that it was primarily driven by accounting considerations”. He didn't accept her denial of this, adding that "her attempt to explain her role was not convincing”.
Hildyard found "improper accounting and misstatement of recognised revenue” through such transactions and concluded that Autonomy was guilty of a "breach of duty and improper use of power”.
Hildyard lamented that "one of the tragedies” of the case was that "an innovative and ground-breaking product, its architect and the company will probably always be associated with fraud”. Hardly the sign-off a government minister with a significant role in it would want.
Next issue on sale: 22nd January 2025
More top stories in the latest issue:
IN WITH THE OLD...
The damehood for Patricia Hewitt was one of a number of honours for figures from the Blair years bestowed by Keir Starmer.
THORN ON YOUR SIDE
After missing out on a cabinet job, Emily Thornberry kept her counsel and backed the leadership anyway. Now she has been made a dame.
BLOWN RANGER
Lord Ranger of Mayfair has been stripped of his CBE, following a 2023 ethics report that found him guilty of bullying and harassing a journalist.
YOUNG & FOOLISH
Kemi Badenoch describes Toby Young as someone "who operates from first principles – Conservative principles”. His track record suggests otherwise.
FUJITSU'S SAKE!
Fujitsu has won a £9.6m Home Office contract, despite having pledged not to bid for government contracts until the Post Office inquiry is complete.
CALLED TO ORDURE
The rise in podcasts has led to establishment boobies conducting state-of-the-nation interviews, including 80-year-old House of Lords speaker Lord McFall.
