The music streamer and the exploited investor
GUVERA was a Gold Coast-based music-streaming business that was to be the next billion dollar technology outfit busting out of Australia.
It would have made 3000 investors rich and vindicated the prowess of associated fundraising entity Amma Private Equity, which raised $180 million for the music firm.
The dream fizzled.
A planned stockmarket float was blocked in 2016 amid concern about its user numbers and related-party deals. Then its 30 million-song library, including artists Justin Bieber and Lady Gaga, stopped playing when Guvera ceased operations last year.
By this year, Amma found itself afoul of a court judgment detailing the exploitation of an elderly Queenslander suffering Alzheimer's disease. That included an Amma representative taking the man to a bank twice to transfer $5.5 million into Guvera.
Now The Courier-Mail can reveal that Amma, whose sole director Darren Herft is Guvera's executive chairman, faces the threat of being wound up by that Queenslander's family after failing to pay $8 million.
Tracey Messer, daughter of the investor Keith Messer, told The Courier-Mail that principle had helped drive the legal action. "This is a classic example of taking advantage of an elderly man," she said. "My father was a conservative investor."
Amma used a string of accountants to promote tech companies, such as Guvera, to the accountants' clients. The Courier-Mail in 2016 revealed Amma offered accountants incentives such as free equity in the tech companies, or subsidised trips to conferences including paying for six days at the Montage Beverly Hills. The tech companies, meanwhile, paid commissions to Amma for raising funds.
One accountant's client was Mr Messer, now 82 and a former farmer from Hervey Bay. The Alzheimer's sufferer has dementia.
Tracey successfully filed a lawsuit on his behalf against Amma this year after he invested $6.6 million in Guvera in 2014. Amma stopped trying to defend the matter and Federal Court Judge Jennifer Davies was scathing.
Amma had engaged in "unconscionable" conduct, Justice Davies found. It "would have been apparent" to any Amma representative dealing with Mr Messer that he "had a significant cognitive impairment" in 2014. Tracey had even advised an Amma representative, James Forrestel, in March 2014 that her father did not want to invest more.
"Far from ceasing … Mr Forrestel extracted a further $6 million from him," Justice Davies found.
The court also heard testimony from a concerned Auswide bank employee about Mr Messer breaking term deposits to transfer almost $5.5 million to Guvera in July and October 2014. He came to the branch accompanied by another man, whom Justice Davies concluded was Mr Forrestel.
The banker was concerned Mr Messer was being taken advantage of, but head office said the bank could not intervene without evidence of incapacity.
Amma has not paid the $8.139 million court-ordered settlement from August, and Tracey in November filed a winding up action in Victoria's Supreme Court.
Mr Herft told The Courier-Mail that Amma would not defend the winding-up matter. "It may be wound up if Messer decides that that's what they want to do. So we're in (negotiations) with them at the present to try and avoid that," he said.
Then he doubled down.
"Our view is that Keith Messer was not suffering from dementia," he said. He argued Mr Messer had managed his own affairs. Then Mr Herft dismissed the testimony of geriatric medicine expert Samantha Hutson, who said Mr Messer's cognitive problems would have been overt in 2014.
He also alleged the Messers had been happy but their circumstances changed when the stockmarket float did not go ahead - claims that Tracey rejected.
GUVERA'S NEW PLANS
While that legal threat remains against Amma, other challenges linger for Guvera. It has just filed accounts detailing a $3.3 million loss for 2018.
Mr Herft, who arrived at The Courier-Mail in aviator sunglasses, a black t-shirt and sneakers, said some things were looking up for the music business.
"We're focusing from a positive perspective (on) some patents and some IP (intellectual property), and the use and sale of those patents and IP, and commercialisation," he told The Courier-Mail.
Guvera has licensed technology to and taken stock in Bndr (pronounced 'bender'), a company formed in March this year. Bndr, like Guvera, offers users an app on which they can listen to music for free. It also markets itself as a music label, promoting artists such as pop singer Sarah Cassidy, a finalist on The Voice UK.
"It's a first company of many that Guvera is hoping to license its technology to … we are hoping that Guvera can license its technology and its patents to other music companies going forward, to generate revenue," he said.
Mr Herft, 46, said Bndr was not a related entity to Amma. Still, Mr Herft was a director when Bndr started, while Amma's former head of capital Andy Nematalla is now on Bndr's board. When The Courier-Mail phoned Amma's number, it was answered as Bndr.
"That is more of a Bndr office, than an Amma or Guvera office," Mr Herft said. Mr Herft said Bndr was created by former Guvera staff, and he had become a director temporarily for the IP transaction but now did not have "much of a role".
He also said he was unaware who was involved in funding Bndr. Bndr said it had raised capital by itself and did not work with Amma.
Another threat had been looming last year, when the Australian Securities and Investments Commission said it was taking a "close and active interest in the fundraising associated with Guvera and related matters".
But Mr Herft said "we received a letter that ASIC would no longer be continuing that specific inquiry into Guvera's capital raising" and said he did not believe it was investigating any other matter. He maintained that Guvera and Amma had always adhered to the Corporations Act.
ASIC declined to comment.
Guvera, in fact, was now looking to sue others, Mr Herft said. "There's a range of parties that we've had advice on regarding litigation that we believe led to the non-IPO (float) of Guvera, stemming from The Courier-Mail to advisers to yeah, just some other parties as well," he said.
He accused The Courier-Mail of publishing incorrect stories, but refused to specify what was wrong. "You'll find out about that when the time's right, and it's coming, and the more you write, the harder it's going to come," he said.
Guvera, which once had dreams of tapping markets globally including India's Bollywood industry, still faces a tough 2019.
Auditors HLB Mann Judd refused to give an opinion about Guvera's accounts, saying the company had continued to breach "credit terms" with creditors owed $5.8 million. Its financing of $21.9 million remained unpaid, the auditors said.
Another line in the accounts stated that in 2018 Guvera had paid Amma $242,956 for raising capital.
"It must be incorrect," said Mr Herft, who signed the accounts. He said the money did not relate to new commissions in 2018, but was a mixture of about $120,000 in old fees and $120,000 in a staff tax arrangement with Amma.
According to past accounts, Amma had invoiced more than $20 million in commissions to Guvera. Mr Herft maintained Amma had written off $1.5 million in fees, but declined to say how much in total has been paid.
He said another Amma-linked entity, involving himself, Amma and other accountants, had put in $291,000 in 2018 to help Guvera. Creditors had also worked with Guvera, he added.
"We do see further prospects," he said. "There's no reason that Guvera can't go down the path of other operational activities.
"Will it do what it did in the past? I'd say most likely no."