Macquarie bankers approved Eddie Sheehy’s $10.3m ‘golden handshake’ for ‘worthless’ Nuix options

Macquarie Group executives allege a $10.3m payment to former CEO Eddie Sheehy was to clear the way for his exit, not compensate him for the true value of his share options.

Dan Phillips said he didn’t definitively find out Mr Sheehy’s options had lapsed until 2016.

Macquarie bankers approved a $10.3m “golden handshake” for “worthless” options held by former Nuix boss Eddie Sheehy to smooth the way for his departure – not to compensate him for their true value – a court has heard.

Dan Phillips and David Standen said they did this despite being aware Mr Sheehy’s options had allegedly expired by 2011, some five years earlier.

Mr Sheehy is in the Federal Court pursuing Nuix for compensation he alleges he was entitled to when the company was finally floated on the ASX in 2020.

A letter sent to Mr Sheehy by then Nuix chairman Tony Castagna is central to the dispute as it allegedly offered the ex-CEO options in the company which would expire in 2010, but also gave assurances that any dilution of the company’s equity would be matched in his options.

Despite the letter, Mr Sheehy’s options continued to be recorded in Nuix documents well past their alleged expiry.

Mr Standen, the global co-head of Macquarie Capital’s venture capital arm, played a key role in the purchase of a stake in Nuix by the bank. On Wednesday, he said he knew Mr Sheehy’s options had expired in 2010 and were unable to be struck.

Mr Standen said he had intended Nuix to renegotiate its options deal with Mr Sheehy, but it never happened.

“I thought they’d been granted but weren’t exercisable,” he said.

David Standen outside Federal Court on Wednesday.

This is despite the company recording the options in internal documents over several years and Macquarie buying a slice of Mr Sheehy’s entitlements in 2016.

Ian Jackman SC, acting for Mr Sheehy, asked Mr Standen if he had failed to correct the record or was actually of the opinion the options remained current.

The court heard Mr Standen allegedly continued to approve documents to be circulated after the alleged expiry which represented Mr Sheehy held 570,000 options in Nuix. The banker told the court it wasn’t his responsibility to ensure their accuracy.

“It wasn’t the ordinary course for me to get into the internal correctness of the spreadsheet,” Mr Standen said.

Mr Jackman asked Mr Standen why the investment veteran had failed to correct the record and conform to the requirements of the Corporations Act in what may be a “criminal act”.

Mr Standen, who sat on Nuix’s remuneration board and was a director from 2011, said he did “not recall that” or the documents shown to the court in which Mr Sheehy’s options were detailed.

Mr Sheehy’s options could have seen him entitled to up to 11 per cent of shares in Nuix. Macquarie first invested in Nuix in 2011, increasing its stake in 2016 to own more than half the company.

Former Nuix chief executive Eddie Sheehy.

In 2016, Macquarie paid Mr Sheehy $10.3m for almost 20 per cent of his options in the business, in a deal Mr Standen described as a “golden handshake”, not a commercial transaction.

As part of the deal Macquarie struck, the options, which had allegedly lapsed, were converted into shares, leaving the group with a higher stake in Nuix.

But Mr Jackman quizzed Mr Standen why the deal was never described in board minutes, papers, or communication to Macquarie or Nuix directors as a “golden handshake” despite legal requirements that records be “accurate”. “We just didn’t record it,” he replied. “Why would we?”

Mr Phillips, another Macquarie banker, said he didn’t definitively find out Mr Sheehy’s options had lapsed until 2016.

“I’m not sure I ever saw the letter of the option arraignment before then,” he said.

Mr Sheehy left Nuix in 2017.

Nuix had blocked Mr Sheehy’s attempts to strike his options, alleging although they were bound to record he held them he did not meet their requirements to convert as the IPO did not qualify as a “sale” of the business.

Mr Sheehy lodged the action in the lead up to the company’s $1.8bn float in 2021. It delivered Macquarie a $556m windfall. Mr Sheehy wants Nuix to apply a 50:1 share split to his options, increasing his holdings substantially.