UK government hastily processed vetting for top investment minister

Watchdog was given only 48 hours to scrutinize tech executive Poppy Gustafsson, known for her work with Mike Lynch’s companies, Autonomy and Darktrace.

The British government gave watchdogs fewer than two days to vet the country’s new investment minister – despite a complicated legal past that saw dozens of mentions of her name in two of the most complex fraud cases in U.K. and U.S. legal history. 

Former tech executive Poppy Gustafsson’s name was submitted for scrutiny to the House of Lords’ Appointment Commission (HOLAC) — which clears new picks for the U.K.’s second chamber — less than 48 hours before she was announced as a surprise choice for Labour’s investment minister last October, one person close to the development of the government’s investment strategy told POLITICO, a statement confirmed by a separate official.

Prime Minister Keir Starmer is now facing “serious questions” over the speed of her appointment, the opposition Conservatives charged Wednesday, amid allegations the senior post was filled without the full scrutiny it warranted.

A British government spokesperson said: “All processes were followed for the appointment of the investment minister, and the list of ministers’ interests will be published as part of this.”

Gustafsson rose to the top of the business world as one of the co-founders of Darktrace, a leading British cybersecurity firm with substantial links to intelligence services on both sides of the Atlantic. 

She was a senior employee and protégé of Mike Lynch — the tech entrepreneur dubbed the “British Bill Gates” — who was found liable for financial fraud in the U.K. in 2022 but was cleared of multiple counts of fraud by a U.S. court last year. Lynch died along with his daughter and six others in a freak accident when his yacht sank off the coast of Sicily two months after he was acquitted.

There is no suggestion that Gustafsson herself has been involved in any wrongdoing, nor was she directly accused of any in Lynch’s various court cases, where her role was only that of a witness.

Darktrace and Autonomy — another tech company founded by Lynch — became subject to intense legal scrutiny in Britain and America as part of a decade-long battle between the tech entrepreneur, Hewlett-Packard (HP) the company he was accused of defrauding, and several U.S. government departments — including the FBI.

Conservative Richard Holden, the shadow paymaster general, said: “Appointing ministers and giving individuals a life-long position in our legislature is a serious matter. 

“This is not a process for Sir Keir Starmer to play fast and loose with, especially when appointing someone who was involved in one of the biggest and most complex fraud cases in legal history that straddled the Atlantic."

Meteoric rise

Gustafsson’s connection to Lynch began early in her career. 

At Deloitte, she worked on the audit of Autonomy, the Cambridge-based software firm he founded that became one of Britain’s most celebrated tech success stories and was known for its cutting-edge technology and aggressive workplace culture.

By 2009, Gustafsson had left Deloitte to join Autonomy as its European financial controller. She worked under Lynch’s close confidant Sushovan Hussain, Autonomy’s chief financial officer.

Autonomy’s meteoric rise was underpinned by practices that would later be called into question. In 2011, tech giant HP acquired Autonomy for $11.7 billion, touting it as a game-changing addition to its portfolio. Just a year later, the deal unravelled spectacularly. 

HP accused Lynch and Hussain of fraudulent practices, including inflating Autonomy’s revenue by reselling hardware at a loss. By November 2012, HP had written off $5 billion of the acquisition’s value and referred the matter to the Serious Fraud Office in the U.K.

That spiralled into a decade of British and American legal battles, with Gustafsson herself asked to testify.

In the U.S, Hussain, Autonomy’s chief financial officer, was eventually convicted of fraud and sentenced to five years in prison. Lynch faced civil lawsuits in the U.K. and criminal charges in the U.S. He was cleared on all U.S. criminal charges before his death last year.

From Autonomy to Darktrace

The case also shone a spotlight on Lynch’s new cyber-security venture – Darktrace – which was headed up by Gustafsson from 2016, and included many key players from Autonomy. In a 2013 interview with the Economist, Lynch proclaimed that “the band is all back together.”

The company — specializing in detecting insider cyber threats to companies and organizations — went on to hire numerous prominent former U.K. and U.S. intelligence officials from MI5, GCHQ, CIA and NSA, several of whom held substantial shares in the company. Jonathan Evans, a former head of MI5, sat on Darktrace’s board for a time. “We are a mixture of spooks and geeks,” said the then-CEO Nicole Eagan.

But during the U.S. fraud trial, the American government accused Lynch of hiring former Autonomy employees in a bid to “influence, delay, and prevent the testimony of persons” against him. More than a dozen senior Autonomy staff ultimately went to work for Lynch’s new outfit Darktrace or the investment vehicle that funded it. 

An FBI account of a 2014 interview with one former senior Autonomy employee, seen by POLITICO, includes the claim that the employee received multiple “job offers” from Gustafsson on behalf of Hussain “to leave HP and work for them.”

As the court case against Lynch and co-defendant Stephen Chamberlain in the U.S. heated up, the U.S. government sought further documents from Gustafsson as part of a subpoena — a written order that requires a person to appear before or produce evidence to a court — including her evidence to the U.K. civil trial. 

Gustafsson declined to fly to the U.S. to give evidence in Lynch and Chamberlain’s trial. She instead gave evidence as part of a deposition — sworn testimony admitted as evidence to jurors which still remains under seal — at the offices of Clifford Chance in London.

POLITICO’s review of a tranche of U.S. court documents shows that Gustafsson’s legal team provided the American government with contact logs between Lynch’s lawyers and their client as part of this process. This showed that she exchanged close to 20 texts and emails with Lynch’s team regarding her witness statement in the British civil case against him.

The prompted “concerns” from the U.S. government about the “significant degree” to which Lynch’s team may have been involved in drafting her statement, according to a motion submitted during Lynch’s trial by U.S. government lawyers. Gustaffson’s office declined to comment on either of the above points.

Jewel in the crown

After the fall of Autonomy, Darktrace became a crown jewel of the U.K. tech scene in the second half of the 2010s. 

Its CEOs accompanied Tory prime ministers David Cameron and Theresa May on trade missions, and in 2021, Gustafsson oversaw Darktrace’s IPO on the London Stock Exchange. Valued at more than £2 billion at launch, the company briefly soared to a peak valuation of £7 billion. 

But accounting errors, combined with failed buyout talks with American private equity firm Thoma Bravo, sent shares tumbling. By 2023, Darktrace’s valuation had plummeted, and short-sellers were circling.

When Thoma Bravo finally acquired the company for £4.2 billion last April, it landed Lynch a reported £300 million payday. Gustafsson announced her resignation from Darktrace September.

Prime Minister Keir Starmer hailed Gustafsson as “an accomplished entrepreneur who brings invaluable experience to the role” when she was appointed last year.

As investment minister and a member of the House of Lords, Gustafsson is expected to oversee the U.K.’s attempt to cultivate its own answer to the U.S. tech giants. 

In December she was made a Commander of the Order of the British Empire for “services to the cyber security industry."

The fledgling U.K. government had been turned down by its first choice for the investment minister role — Benjamin Wegg-Prosser, the co-founder of lobbying firm Global Counsel. That prompted a scramble to find a name to announce ahead of a flagship investment summit late last year. 

Gustafsson was unveiled only three days before the event, and there are now questions about whether full due diligence could have realistically been carried during this sped-up process.

HOLAC, which vets Lords appointments, raised concerns in 2023 that it needed to guard against any suggestion of “rubber stamping” appointments “without sufficient scrutiny” following the separate move to bring in ex-Prime Minister David Cameron to the House of Lords to serve as Rishi Sunak’s foreign secretary.

A House of Lords Appointments Commission spokesperson said in a statement: “When vetting ministerial peerages for propriety, HOLAC carries out all its usual checks with departments and agencies, albeit on an expedited timescale. 

“The Commission would not provide advice supporting a candidate if it was not able to complete vetting.”

No.10 Downing Street, the Department for Business and Trade and the U.K. Cabinet Office — which oversees propriety and ethics in Whitehall — declined to answer a series of questions from POLITICO on the process of appointing the new minister.

Susan Hawley, executive director of Spotlight on Corruption said: “It is long overdue for the House of Lords Appointment Commission to be given a statutory and independent role in screening and approving peerages."

She warned: “Bouncing HOLAC into appointments and shortcutting vetting processes is always going to be a recipe for reputational issues to emerge later down the line."

Holden, the Conservative spokesperson, said: “It’s time for the prime minister to answer the serious questions hanging over this appointment.”

James Smith