Corporate regulator wins travel bans on Dubber chief

The corporate regulator has won interim travel restraint orders against Dubber Corp managing director Steve McGovern and a Melbourne lawyer as it investigates millions in missing funds.

Dubber CEO Steve McGovern at his Melbourne office. Picture: David Geraghty / The Australian

The corporate regulator has won restraining interim travel restraint orders against Dubber Corporation managing director Steve McGovern and a Melbourne lawyer as it investigates millions in missing funds.

Software company Dubber suspended Mr McGovern this month after funds totalling almost a third of its market value were “applied for other purposes”.

The Australian Securities & Investments Commission launched an investigation and Dubber is continuing its own probe, looking at avenues for “possible recovery” of the funds.

They are chasing millions of dollars that were diverted away from an interest-bearing term deposit, believed to have been held with National Australia Bank, and have put the exposure at up to $26.6m.

ASIC also secured the interim orders against Mark Madafferi, solicitor and principal of North Melbourne law firm, Christopher William Legal.

The firm is believed to have acted as trustee for the accounts.

The orders which prevent Mr McGovern and Mr Madafferi from leaving or attempting to leave Australia until September 13 or until further orders, were made by the Federal Court after an application by ASIC. The orders were made on an ex-parte basis following a hearing on March 18.

ASIC commenced an investigation on March 1, after Dubber alerted ASIC and the ASX that Mr McGovern was suspended as CEO and the basis for that suspension.

ASIC said in a statement that it had concerns that Mr McGovern and Mr Madafferi may have breached the Corporations Act in respect of the suspected misuse of term deposit funds of Dubber or one of its subsidiaries, purportedly held on trust by Mr Madafferi.

ASIC understands that $26.6m is still unaccounted for.

As the hearing was held in their absence, Mr McGovern and Mr Madafferi have not yet had the opportunity to respond to ASIC’s application.

Mr McGovern is a British national with permanent residence in Australia. Mr Madafferi is a citizen of Australia.

The matter is next due before court on March 27.

The drastic step by the corporate regulator is a sign of its three week old investigation advancing, but there is no suggestion that the funds have been dissipated by either the chief executive or the lawyer.

Behind the scenes, Dubber is working on both short-term and medium-turn ways to patch up the holes in its balance sheet prompted by the crisis.

While it declined to comment, it is working on a due diligence process with its advisers that would see more than one underwriter support its efforts to undertake a capital raising on the ASX.

The company wants to focus on getting back on track, with the recovery efforts then effectively falling into the hands of the corporate regulator. The software group would aid ASIC’s efforts and it is likely to call upon forensic accountants as it seeks to track down any missing funds.

At the same time, auditor Ernst & Young is understood to be working on finalising the accounts, which could be released subject to the company agreeing both fresh financial facilities and on the terms of an equity raising.

These moves would aim to restore the company’s financial footing, and allow it to keep growing its business. Dubber has been keen to get back to ‘business as usual’ even while Mr McGovern’s status is formalised.

Once his suspension shifts into a likely more permanent exit, Dubber would be free to seek a new chief executive. Both internal candidates who were not involved in the alleged misuse of funds, or external hires that may function as a ‘new broom’, could be considered.

Melbourne billionaire Alex Waislitz’s Thorney Investment Group has already provided crucial loan support to tide the company over and could provide further capital in any equity raising.

Last week, a unit of his Thorney lent the company up to $5m but just $1.5m was available immediately. The rest will be available once the company strikes an underwriting agreement for a capital raising, with a discounted $20m raising is in the works.

A Thorney representative could also be invited on to the board if it lifts its stake from about 14.7 per cent, both to reassure investors and also to aid with strategy as the company shifts beyond ensuring its own survival and seeks to reset.

Mr McGovern could not be reached for comment and Christopher William Legal did not respond to a request for comment.