Dubber sacks suspended CEO McGovern as probe continues into missing $26.6m

Dubber sacks suspended CEO McGovern as probe continues into missing $26.6m

Dubber Corporation co-founder and former CEO Steve McGovern 

Almost six weeks after revealing $26.6 million in missing corporate funds, software company Dubber Corporation (ASX: DUB) has sacked its co-founder and CEO Steve McGovern who is embroiled in the controversy.

McGovern, who was suspended by the company on 1 March and is now subject of an Australian Securities and Investments Commission (ASIC) investigation, has also been removed as a company director, effective immediately.

Dubber announced to shareholders on 1 March that an audit review of its half-year accounts flagged that the $26.6 million held in a term deposit on behalf of the company by third-party trustee Christopher William Legal was no longer available to it.

The funds were part of $60 million deposited by the company in the account between mid-2019 and August 2021.

The company informed the ASX at the time of allegations that the funds may have been misused by either McGovern or the trustee Christopher Warren Legal - or both. McGovern was immediately suspended as Dubber launched an investigation into the missing funds.

The company today revealed that a trust account ledger provided by Christopher William Legal showed many unauthorised transfers in and out of the account, which was unknown to the company until 27 February 2024.

Dubber today alleges that documents that were “likely falsified” were presented to the company and its external auditor “to support the ongoing existence of the term deposits”.

The company also alleges that the funds were “likely misappropriated” by McGovern and Christopher William Legal’s principal Mark Madafferi for “unauthorised purposes, including payments to multiple third parties and entities”.

The subsequent ASIC probe had expressed concern that McGovern and Madafferi may have breached the Corporations Act in a suspected misuse of the term deposit funds.

In the interim, ASIC secured a Federal Court order preventing McGovern and Madafferi from leaving or attempting to leave Australia until 13 September as it continues to investigate the matter.

Dubber says it continues to undertake its own investigations in an effort to recover the missing millions. Last month the company revealed that $3.4 million had been recovered, leaving $26.6 million still unaccounted.

The company has also finalised plans for an equity capital raising to replenish its balance sheet, with the fully underwritten entitlement offer set to raise about $24 million.

The one-for-one offer is priced at 5c per share, which will raise $20.92 million, while an institutional placement will raise a further $3.14 million.

Dubber last month secured a bridging loan of $5 million from Tiga Trading, a company associated with Thorney Investment Group, to bolster its working capital. Part of the proceeds of the share issue will be used to repay this debt.

In the meantime, executive director Peter Pawlowitsch will remain as acting CEO until a permanent CEO is appointed.

Dubber has moved to fill the leadership vacuum with the appointment of tech industry veteran David Coventry as deputy CEO. Coventry has more than 30 years’ experience in the technology and telecommunications industries globally, including stints at Telstra (ASX: TLS) and Optus.

Dubber, described as a market leader in conversation intelligence and unified conversational recording, posted a $69.2 million loss in FY23 as revenue surged 84 per cent to $30.03 million.

However, the company today has revealed that the alleged misappropriation of funds led to an overstatement of assets and earnings from interest income, leading to an understatement of its operating loss by $4.6 million in aggregate for FY22 and previous years.

Dubber finally released its interim earnings results today, revealing an after-tax loss of $22.15 million, a 41 per cent improvement on the previous corresponding period. Total revenue of $18.73 million was up 37 per cent.

The alleged misappropriation of funds has led Dubber to cut its revenue guidance for FY24 from $45 million to between of $38.1 million and $41.6 million. Normalised cash costs are expected to remain on track at $65 million.

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