Dubber sacks chief executive as searches for missing $26.6m

The software company has dumped chief executive Steve McGovern over alleged misuse of funds in a trust and it’s searching for a missing $26.6m.

Former Dubber CEO Steve McGovern at his Melbourne office. Picture: David Geraghty

Software company Dubber Corporation will continue to search for a missing $26.6m allegedly “misappropriated” by its sacked chief executive Steve McGovern and a trustee.

The money scandal was made public last month when Dubber revealed that it had discovered that company funds, which were supposed to have been held by a third party trustee in a term deposit on behalf of the company, may have allegedly been misused.

Mr McGovern was suspended pending the outcome of an investigation, with Dubber on Tuesday terminating his employment.

Dubber said it had deposited $60m into a trust account between mid 2019 and August 2021, and said the funds were allegedly misused by either or both Mr McGovern and the trustee, Christopher William Legal, whose principal is Mark Madafferi.

On Wednesday Dubber told the ASX that $26.6m remained unaccounted for and was “likely misappropriated by Mr McGovern and Mr Madafferi for unauthorised purposes, including payments to multiple third parties and entities”.

“Recipients of payments included certain personnel of the company or entities or individuals associated with them, which warranted further investigation, however no conclusive evidence has been identified to date that any individual connected to the company other than Mr McGovern was involved in the alleged misappropriation of funds,” Dubber said.

“While the investigation uncovered sufficient evidence for the company to terminate Mr McGovern’s employment, the board considered the evidence available did not warrant the company taking disciplinary steps against any other current personnel.”

Dubber also said the alleged misappropriation led to an overstatement of assets and earnings from interest income and additional unrecorded transactions – which may have been valid company transactions – that potentially meant operating losses were understated by $4.6m in 2022 and prior years.

Dubber said it intended to pursue recovery of the misappropriated funds and was also considering making a claim on the Victorian Fidelity Fund – a fund operated by the Victorian Legal Services Board which provides compensation for loss caused by dishonest or fraudulent behaviours of a lawyer.

“However, the process of recovering funds is in its infancy and may prove time consuming and costly. In addition, the outcome of that process is uncertain, and success cannot be guaranteed,” Dubber said.

“No amounts are recorded in the financial statements in respect of potential future recoveries.”

Former Dubber CEO Steve McGovern at his Melbourne office.

Mr McGovern has also ceased to be a director of the company. Executive director Peter Pawlowitsch will remain in the role of acting chief executive until a permanent CEO starts.

Dubber also told the ASX on Wednesday that it was undertaking a fully underwritten capital raising to raise about $24.06m by way of an institutional placement and an entitlement offer.

The company said it intended to use the funds received from the capital raising for additional working capital, bringing ordinary business creditors back into normal payment terms, and “the costs associated with the company’s financial investigation”.

The capital raise will also repay Thorney Investment Group, Dubber’s largest shareholder, which has committed to take up $2m of its institutional entitlement and sub-underwrite up to $7m of the retail component of the entitlement offer.

Dubber has also reduced its revenue guidance from $45m to a range of $38.1m to $41.6m as a result of the removal of revenue associated with a disputed contract of $1.7m, and delays to revenue anticipated as a result of the announcement of the misuse of company funds.

Dubber said that in the first half of the 2024 financial year it recorded a net loss of $22.1m, down 41 per cent on the previous corresponding period’s $37.3m loss.

It said its revenue for the first half grew 37 per cent to $18.7m, while its overall operating costs reduced by 27 per cent to $33.2m in the six months ending December 31, 2023.

The Australian Securities & Investments Commission last month launched an investigation into the scandal, looking at avenues for “possible recovery” of the funds.

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 also secured interim travel ban orders against Mr McGovern and Mr Madafferi.