Former Darktrace board member Sushovan Hussain (above) is appealing a 5-year prison sentence for his role in the disastrous HP Autonomy deal.
In upmarket offices off London’s Trafalgar Square, a short walk from Parliament, rows of Darktrace employees are working the phones, flogging the startup’s artificial intelligence software, which hunts down hackers on the networks of major businesses. Above them a monitor tracks sales wins: happy faces for staff performing well, sad for those lagging behind. This hard-driving sales department, which has landed big clients like HSBC and British Telecom, has helped make Darktrace one of the U.K.’s hottest tech companies. According to Darktrace’s own estimate, the company is worth at least $2 billion and management is looking to take it public. As a sign of its stature, Darktrace’s 37-year-old co-CEO Poppy Gustafsson was named an Officer of the British Empire in June for her contributions to cybersecurity.
“Let’s be honest,” says Gustafsson, looking over to her 55-year-old American co-CEO Nicole Eagan, “we are really good at what we do.”
Queen Elizabeth wasn’t the only one to laud Gustafsson for her achievements. Soon after the OBE award was made public, she received a call from a former mentor and onetime Darktrace board member Sushovan Hussain, 55, offering congratulations on her dazzling career. Only this talk would prove to be bittersweet. Hussain was phoning just a month after being sentenced in a San Francisco courthouse to five years of prison and a $4 million fine relating to a $11.7 billion federal fraud.
He was convicted for his role in HP’s cataclysmic acquisition of British data analytics company Autonomy for more than $10 billion in 2011. The value of the company was written down by $8.8 billion after HP alleged Autonomy execs – particularly Hussain, as Autonomy’s CFO — had used a variety of accounting tricks, including backdated contracts and “channel stuffing” to cook the books. The result was to falsely overstate Autonomy’s revenue by as much as 20% over a period of several years, greatly inflating the amount HP paid for the company. Federal prosecutors were apoplectic, saying Hussain and his co-conspirators’ crimes reflected “an attitude that, like a James Bond villain or a Mafioso, they were above the law.” They also compared him to disgraced WorldCom CEO Bernie Ebbers.
Poppy Gustafsson, co-CEO of Darktrace, is a qualified chartered accountant and former CFO of the cyber security firm.
John Phillips / Getty Images
As a $5 billion civil fraud suit brought by HP in the U.K. rumbles on, the U.S. has pressed ahead with criminal charges in what prosecutors say is the largest fraud case in the history of the Northern District of California. Hussain, who is in the process of appealing his conviction, is the first of the old Autonomy guard to have been found guilty, going down for 14 counts of wire fraud, one of securities fraud and one of conspiracy. Two others – Autonomy founder and ex-CEO Mike Lynch and former finance VP Steve Chamberlain – were also charged but Lynch has yet to appear in court and a U.S. request for the extradition of Lynch is pending in the U.K. Earlier this week, Lynch submitted himself for arrest, in what his lawyers described as a “formality” in the extradition process. Lynch and Hussain are the focus of HP’s U.K. civil fraud claim, which lumbered through closing arguments in December and January. They are now awaiting a verdict. Lawyers for all three have professed their clients’ innocence.
Like Hussain, both Lynch and Chamberlain have been deeply involved in Darktrace’s development. Hussain, Lynch and current Darktrace co-CEO Eagan cofounded Invoke Capital, the venture capital company that helped get Darktrace off the ground. Chamberlain is today Darktrace’s operations manager, even if his LinkedIn page doesn’t note any affiliation with the firm. “I see that he’s able to undertake his job. And I’m a firm believer that people are innocent until proven otherwise,” says Gustafsson.
Though Hussain officially departed Darktrace shortly before he was charged in November 2016, interviews with more than 25 current and former employees reveal his lasting and sometimes troubling influence on the rapidly growing cybersecurity firm. First, he has skin in the game. When asked about Hussain’s holdings in Darktrace, the company repeatedly denies he has any stock. But he does, albeit indirectly, via ICP Darktrace Holdings, part of Invoke Capital, where he is still employed. That holdings business has the largest stake in Darktrace at 39.5%. Invoke and Darktrace also share the same floor in open-plan London offices.
Nicole Eagan, co-CEO of Darktrace, has a long history working at tech companies from Oracle to troubled Autonomy.
David Paul Morris / Bloomberg
Gustafsson and Eagan say they have little interaction with Hussain today, though the former acknowledges his early influence. She says they spoke “very regularly” in the early years after the firm was founded in 2013 but has not spoken to him since that congratulatory call. Without any more guidance from Hussain, business, they say, has been booming. Headcount has risen to 1,250 since May 2018 from 750. Over the same period Darktrace claims it’s seen a 74% increase in customers and claims it’s making preparations for an as-yet unconfirmed IPO. The latest revenue figures for the year ended June 2018 landed at $78 million, up from $40 million the prior year.
“We have built this hugely successful company,” says Gustafsson, of her and Eagan’s leadership. “And we are both fiercely, fiercely proud of this business and what it has achieved.” Gustafsson and Eagan, in a two-hour interview at the company’s London headquarters, stress they’re firmly in control of the company, and have been since they became joint chiefs in October 2016. They deny claims from one former employee that Hussain was seen as “everyone’s boss’ boss.”
Former Autonomy CEO Mike Lynch was arrested on Wednesday and is now out on bail in the U.K. as he awaits likely extradition to the U.S. One of his first creations at Autonomy was a virtual dog, reportedly modelled after his own pet called Gromit.
Simon Dawson / Bloomberg
He was quite the role model. In addition to Hussain’s financial fraud at Autonomy, he also faced allegations of sexual harassment by Darktrace employees. These claims led to one of two sexual harassment investigations the firm faced in 2017 and 2018 – the second involving a close associate of Hussain’s in the U.S. – that threatened to let off cultural hand grenades at a company that proudly claims to have more than 40% female staff and pay women $1.34 for every $1.32 that men earn per hour.
As he remains restricted to travel in northern California, with a GPS tracker wrapped around his ankle because of his conviction in the fraud case, Hussain’s ties to Darktrace cast a shadow over the young business as it prepares to debut on a bigger stage as a publicly-traded company.
Hussain was a man, ostensibly, destined for success, not a biblical fall from grace. In his prelapsarian days, the Bangladesh-born Hussain earned an undergraduate degree in economics from Cambridge University in the 1980s before spending the early part of his career in various financial roles at British oil and gas giant LASMO. In 2001 he became chief financial officer and president at Autonomy, a Cambridge-based business that crunched so-called big data for clients, like Coca-Cola, Ford and the U.S. military. (Forbes was also a former customer). During his time there Hussain was hailed as a “big shot” by The Times of London and received the FTSE 100 Financial Director of the Year award in 2010. One of the originals in a now-saturated market, Autonomy was a sought-after property, one on which HP’s ex-CEO Léo Apotheker took an $10.3 billion gamble. It proved to be a woeful bet, and HP began alleging accounting fraud in 2012, just 14 months after the acquisition.
Darktrace’s AI technology promises to hunt down hackers on business networks. It has found hackers in strange places before, including an internet-connected fish tank.
Michael S. Williamson / The Washington Post
Rather than get bogged down with the legal debacle that ensued, Hussain joined ex-Autonomy execs, including Lynch and Eagan, as founding members of Invoke in summer 2012, a matter of months before HP first alleged financial irregularities. They then joined Chamberlain and Gustafsson to launch Darktrace with a handful of former British spies fresh out of MI5 and GCHQ in 2013.
The Autonomy connection persists today; half of Darktrace’s board and six of its eight top executives are ex-Autonomy folks, which included Gustafsson (ex-corporate controller) and co-CEO Nicole Eagan (ex-chief marketing officer).
In the early days, Hussain was guiding the management team at Darktrace, including Gustafsson (who started off as financial controller) and chief revenue officer Nick Trim. Hussain was also a lead fundraiser for the business, especially in the U.S., where he helped raise $65 million in a round led by New York-based private equity firm KKR in 2016. An additional $75 million round closed in 2017 after Hussain had been charged with financial fraud. Darktrace denies he was involved in that latter round, though one former senior employee insists he was. “Sushovan (Hussain) was the lead in the deal room,” says the ex-staffer. Darktrace, while it won’t provide specifics, confirms Hussain was heavily involved in helping it secure funds.
“Crime can never pay. Yet, the proverbial pot of gold awaits Hussain at the end of any sentence the court may impose.”
He would also ask staff from various offices for daily sales updates (something Darktrace disputes) and helped develop sales strategy, according to former employees, one of whom said that was the case up until at least mid-2017. Sales team members would also have to give Hussain mock pitches, as if they were trying to hawk Darktrace’s artificial intelligence software to a real customer. Two ex-colleagues say he was an imposing figure in the room. “That was the part that they dreaded the most, that final pitch to him,” says one former sales employee. “He kept the sales managers in check,” adds another.
So embedded was Hussain in Darktrace culture he appeared in amusing video skits designed to galvanize staff during yearly sales meetups at grand locations. During one in 2017, after he had left the board, Hussain appeared as Morpheus, the Laurence Fishburne character from The Matrix who memorably said “Remember, all I’m offering is the truth,” three former employees confirmed. “Management thought [the videos] were hilarious. Everyone was just like what the hell is this,” the former employee adds.
Just before he flew off to San Francisco for his trial in early 2018 Darktrace employees organized a farewell get together at The Admiralty pub, close to the company’s London headquarters. Gustafsson and other Darktrace executives, despite the charges, attended.
But, just a month after the drinks, Darktrace says it learned of a formal allegation of sexual harassment made against Hussain. The alleged incident took place at a dinner for top sales people at Manhattan’s upscale Japanese restaurant Nobu, two former staffers who knew of the event recalled. The meal turned sour when Hussain asked inappropriate sexual questions of one female sales employee and touched the leg of another, the ex-employees recalled. They say the event took place in the first half of 2017 and a complaint was made to HR that year. Darktrace disputes this, saying it only learned of the accusation in February 2018. The company also claims details of the anecdote described by the sources are false, though it refuses to specify which details. Darktrace adds there were contradictory reports of what took place, with some allegations impossible to confirm.
Because Hussain wasn’t an employee of Darktrace at the time, the company says it passed its findings – which it declined to give Forbes — on to Invoke Capital, where Hussain (whose lawyers also declined to comment) was employed. Invoke told Forbes it took action, but declined to provide details. The Darktrace staffer alleged to have been inappropriately touched has since left the company and was unreachable for comment. Darktrace co-CEO Gustafsson stresses the company “will not tolerate sexual harassment of our employees.”
What is clear is that long after the complaint, Hussain was still able to call in favors. His daughter was given a three-week internship at Darktrace in the summer of 2018.
So embedded was Hussain in Darktrace’s culture he appeared in amusing video skits designed to galvanize staff.
Meanwhile, throughout 2017 and 2018, Darktrace was dealing with another sexual harassment saga that involved a sales chief in the San Francisco office, Randy Cheek. It was an office Hussain was familiar with, having worked closely with the sales team there, including Cheek, sources who were there at the time confirm. Indeed, in a letter written by Cheek to the judge in Hussain’s case, the American refers to Hussain as his “dear friend” with whom he regularly went running and compares him to Santa Claus. Cheek, who was promoted to senior vice president of sales in March 2017, even credits Hussain with helping him “become the number two employee at Darktrace” and that he was “involved in my every decision,” before praising the then-alleged fraudster’s “leadership” at the cybersecurity firm.
The culture in the California office was troubled, according to eight former Darktrace employees. Throughout 2017, employees raised multiple complaints about Cheek, claiming he’d made inappropriate comments to numerous female employees. In one interview, the sales director allegedly asked whether the interviewee had a boyfriend, later implying that he’d have to keep her presence a secret from his wife, three ex-staffers claim.
In another episode, during a reorganization of the office, Cheek made a lewd comment to a colleague who’d changed out of a dress and into jeans, two former employees claim. According to their account, he told her that he and other members of staff were “looking forward to seeing you bend over in that dress.”
Darktrace investigated, conducting 20 interviews over two weeks into the claims that led it to a decision in February 2018 to “part ways” with Cheek. Some ex-employees chafed at the response, noting it took around half a year from the first allegation about Cheek in summer 2017 to his ousting. Cheek denies all allegations and insists the claims are fabricated. Darktrace refuses to comment on specifics, citing “legal limits to what we’re allowed to discuss.”
Co-CEO Eagan, who says she herself was once a victim of sexual assault at a previous job, says Darktrace management took the harassment claims seriously, investigated and ultimately did the right thing. She admits the harassment allegations resulted in “short-term commercial pain” in the Bay Area, but ultimately the company’s decision was “right for the culture of the company.”
When Hussain’s legal ordeal comes to an end, he should still be very wealthy, in part thanks to Invoke’s Darktrace stock. The U.S. government thinks so. Prior to his sentencing, prosecutors wrote to the judge that, “Crime can never pay. Yet, the proverbial pot of gold awaits Hussain at the end of any sentence the court may impose.”
They say Hussain was worth at least $60 million “and likely much more,” noting Lynch had “bestowed” on his old finance chief 193,188 shares of ICP Darktrace Holdings worth approximately $58 million and 215,000 shares of ICP Holdings “that may be worth even more.” (Hussain’s legal team disputes the valuation, saying the shares were effectively worthless because sales of them were “severely restricted” and “the government itself has, by its threats and allegations, made it impossible for Mr. Hussain monetize his shares.”) Hussain sold some of those ICP Darktrace Holdings shares to Lynch in 2018 and 2019 to pay legal fees and deposited 182,627 with the California Northern District Court to get bail, though he can expect them back as long as he doesn’t flee the country. According to prosecutors, Hussain is living, on bail, in a $7,500-per-month San Francisco penthouse apartment. Invoke confirms it has helped Hussain with accommodation costs, maintains he is innocent and says it will support him through his appeal.
Gustafsson was called by the defense to offer written testimony and face cross examination in Mike Lynch’s civil fraud trial in the U.K. Both Gustafsson and Eagan also wrote letters to the judge in support of Hussain, both describing him as a close, long-term friend and respected business partner. “His absence is a huge loss, not just to the business world, but to the many young men and women that are starting out in their professional careers that will no longer be able to access his generosity of experience,” wrote Gustafsson. And Lynch’s American trial—one that will be shared with Chamberlain—hasn’t even started. (Lynch and Chamberlain’s lawyers say their clients are innocent of all charges). If he’s extradited, Lynch will at least be close to his old business partner of 15 years, Hussain, whose own appeal campaign in San Francisco is underway.
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