The affidavit also outlines a cosy relationship between founder Tony Castagna, Macquarie and senior Nuix executives including then CFO Stephen Doyle, who is currently the subject of an Australian Securities and Investments Commission (ASIC) insider trading investigation.
The affidavit alleges a $100 million funding package with industry fund UniSuper was scuppered shortly before being finalised by Castagna in mid-2016. “I am going to be charged with tax evasion and money laundering and I do not want to tell UniSuper. I am going to kill the deal instead,” Castagna allegedly told Sheehy.
“Tony, I think you need to resign,” Sheehy alleges he told Castagna. “The AFP and ATO are two of Nuix’s biggest and most prominent customers, and it does not look good. It’s not good for the company. All our global regulator customers like the IRS and SEC in the US and the FSA in the UK will hear. It will be really bad for the company.”
The affidavit reports text messages between then Nuix director and Macquarie representative David Standen, where Sheehy says: “He [Castagna] cannot be our chairman when he is charged. I can see the headlines – ‘Panama Papers investigation company chairman charged with tax fraud and money laundering’. It has kept me awake much of the night … it will be a milestone around his neck as customers leave and competitors belly laugh.”
It says within weeks of the UniSuper deal falling apart, Castagna brokered a deal with Macquarie to buy some shares.
Sheehy’s request for his resignation was ignored, and he alleges he was bullied out of the company.
Castagna was charged and in April 2018 a Supreme Court jury found Castagna and his cousin guilty of money laundering and tax evasion. He went to jail.
Tony Castagna was sent to jail and acquitted in June 2019.Credit:Dominic Lorrimer
On June 5, 2019, the Court of Criminal Appeal quashed his conviction, and he was acquitted. The Crown case was that he had avoided tax by channelling his consultancy fees from Macquarie to Vanuatu via a New Zealand bank account operated by a UK company.
Even if it was assumed the Crown case was strong, the appeal court judges said a new trial was not appropriate in part because of Castagna’s age, he was then 72, and he’d already been in jail for more than a year.
Soon after his acquittal he rejoined the Nuix board. Days before Nuix listed he resigned and unbeknown to investors Nuix entered a consultancy arrangement with Castagna which was terminated in May 2021.
Jonathan Rubinsztein CEO of NuixCredit:Jessica Hromas
Nuix elected not to call Castagna as a witness in the recent court proceedings, which meant many of the allegations raised in the affidavit could not be heard in court. The case finished on Thursday with final submissions in August. The judge will then make a finding later in the year.
Despite the unrelenting bad headlines you wouldn’t know if from serial optimist Nuix CEO Jonathan Rubinsztein’s letter to staff on Friday.
“Happy July 1 … Today is an exciting day for all of us at Nuix as our new structure officially comes into place,” he told staff. “This is part of our journey of creating a Nuix that’s more customer-focused, with a simpler organisational structure that makes it easier to work with us – for our customers, our stakeholders and you – our people.”
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Absent was any mention of the court case which, if successful, would have a profound impact on Nuix’s finances.
Nor did he mention that customers were being smacked with double-digit price hikes, well in excess of inflation, and some products on the new price list are up almost 200 per cent.
He also failed to mention the other elephant in the room, Nuix’s financial performance for 2022. If the share price performance is any guide, investors are expecting more bad news when it reports its full-year results in August.
Since Rubinsztein’s appointment as CEO was announced in October last year, the share price has gone from $3.05 to close on Friday at 78¢.
The company’s line internally is that the scandals are just noise, but worried staff have their CVs prepared.
An investor in March last year described Nuix as lipstick on a pig, after watching the shares tumble.
A year later, the descriptions are far worse. After listening to the court case, one investor told an online forum Nuix was a “train wreck” and a basket case. “$1 million here … $10 million there … Monopoly money. And yet again the record keeping is dismal,” the investor wrote.
But there are always drinks. In the next couple of weeks staff are invited for a Nuix reboot to kick off the new year. Investors can only hope.
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