When Allan Beechinor, chief executive of the data compliance startup Altada, was asked in a podcast about mentorship what advice he would give to his 20-year old self, he laughed and replied: “I’d probably kick my ass.”

But the tech engineer, recognised within his sector as an artificial intelligence (AI) thought leader, then took a minute to consider the question in a more serious light.

“Always think that people have good intentions,” he said.

“If they don’t, that’s their loss. Don’t go around with a heavy heart or heavy burdens on your shoulder. Just get rid of that negativity, stay focused, stay humble. Whatever you do, keep driving forward. Momentum is key. If you stop and stand still, it’s over.”

At the time of the podcast in April 2018, Beechinor was not to know that his own motives and intentions would be tested in a bitter courtroom corporate battle for the very survival of the company he co-founded.

This is the story of that bitter courtroom battle.

*****

A year earlier, Beechinor, a 5.30am riser and keen proponent of Israeli self-defence art Krav Maga, had forged a business relationship with two substantial business names, US financier and former Morgan Stanley banker Jeffrey Leo and Brendan Cannon of Canton Communications.  Altada, a data privacy management specialist, was the result. 

Cannon has an MBA in business and is an old hand in tech having worked in senior roles in Intel and as chief operating officer of Adaptive, a data governance software company founded in California in 1997 with EMEA headquarters based at the Digital Hub in Dublin. He took out a business loan from Bank of Ireland to help fund the investment in Altada.

But the real money was to come from Leo, a financier with an address at the K Club in Co Kildare. He had fingers in several pies in Ireland mainly in the hotel and tourism sector. In 2016, he joined forces with Bernard Brogan Snr, the 1970s Dublin GAA star, and David Webster, the former manager of the five-star Powerscourt Hotel in Wicklow to form Podium Hospitality.

With backing from billionaire Ohio chicken farmers James and Mary Wenning, the consortium aimed to acquire and rejuvenate under-performing hotels.

The cherry on the cake was being namechecked by global research and insights firm Gartner as a go-to company for privacy management in its highly esteemed cool vendor list

The  220-acre Dundrum House Hotel and golf resort in Co Tipperary, sold by a receiver, and the Pillo Hotel, formerly a Marriott,  in Ashbourne, Co Meath were early targets.

By teaming up with Beechinor, a software engineer, artificial intelligence mentor at University College Dublin (UCD), and an advisor to the International Development Agency (IDA), Leo had a tailor made opportunity to expand his horizons into the tech sector, by offering money and strategic advice. 

Altada’s mission statement was to build a risk management application that would handle data privacy compliance for both small and large enterprises. The timing was bang on the money. Stringent new GDPR privacy regulations across the European Union were coming into force in May 2018. Not without good cause. From Facebook to the MyFitnessPal app, a pandemic of data breaches had impinged on the confidential information of millions of users. In the year running up to the commencement of the new rules, businesses were being repeatedly warned that running the gauntlet on compliance under GDPR could result in fines of up to €20 million or 4 per cent of global turnover where personal data was found to be lost, destroyed, hacked or leaked. 

Faced with going bust or running for court cover from its creditors, Beechinor took the latter option and sought the appointment of an examiner citing severe cash flow problems.

The three founders – Beechinor, Leo and Cannon – had a plan to capitalise on the new GDPR rules through artificial intelligence (AI) technology. The Altada machine learning tool would index and classify data in automatic compliance with GDPR and other data protection regimes such as the CCPA in California. 

Founded in March 2017, the company’s base was split between Dublin and a coworking space in Cork city. 

National and international plaudits soon followed.

The year 2018 saw Altada pick up a gong for ‘Tech Start-Up of the Year’ at the IT@Cork Awards. It was also recognised by the Sophia Business Angels Network in the south of France and identified as a top 25 tech firm to watch in Europe. The cherry on the cake was being namechecked by global research and insights firm Gartner as a go-to company for privacy management in its highly esteemed cool vendor list for young businesses with annual revenue of less than $100 million. 

Cannon was the original chief executive of the company but stood down in April 2018 to make way for Beechinor who had initially filled the role of chief technical officer. Cannon has since become a non-executive director.

In an interview with Business and Finance in November 2018 Beechinor said the company was on a steady growth path. Having started with just six employees 18 months previously, Altada had built up a team of 34 people and had plans to recruit further while expanding its customer base.  The firm was operating in the US and EU markets and was eyeing up Asia in 2019.

But not long after, Altada’s fortunes started to nosedive. By last summer, the company was in deep, deep trouble. Losses of €1.7 million had piled up. The company, still in the R&D stage, was insolvent.  

Faced with going bust or running for court cover from its creditors, Beechinor took the latter option and sought the appointment of an examiner citing severe cash flow problems.

It was complicated by the fact that Leo opposed the examinership petition, preferring to push the nuclear button and liquidate the business. 

What followed was a courtroom showdown involving claims of fraud, deception, corporate theft, phoenix companies and a raid on intellectual property rights. 

Cash, it seems, wasn’t the root of all Altada’s problems. It soon became apparent that Leo and Beechinor had fallen out of their business arrangement in fairly spectacular fashion.

But from the embers, a lifeline has emerged. On September 20, the High Court appointed accountant Joseph Walsh as examiner to Altada allowing the business up to 100 days breathing space from its creditors. This was hopefully time enough for him to put together a restructuring proposal and source new capital.

The examinership process is ongoing. In the face of keen opposition, Beechinor’s bid to salvage the idea, the company and the investment prevailed. At least for now. But not before it went right to the brink.

So what happened? Where did it all go wrong for Altada? And who, if anyone, was to blame?

Contested versions of the same story

Perhaps unsurprisingly, two very different versions of Altada’s short history emerged between the founders in court, each account vying for supremacy.

In Beechinor’s version, set out on affidavit, Leo allegedly agreed in May 2017 to invest €1.5 million through his company Steelworks Investments in exchange for a 33.3 percent stake in the tech startup. The tech boss said Leo’s money allowed the company to survive as a loss making entity while the product was under development.

In the meantime consultancy work brought in turnover of €386,000 which helped to pay the bills and keep the business afloat, the court heard. The firm won a contract with fintech company Data Fusion International assisting on a case management system for the Criminal Assets Bureau (CAB).

Altada also did work in exchange for equity in Fitvision, a company part owned by Leo, which provided IT infrastructure services to global retail giant Primark. Altada had a similar equity arrangement with Noppera Bo (named after a faceless ghost in Japanese legend) a company that developed “smart city” technology aimed at improving civic life. Beechinor was its chief technology officer. 

None of these side ventures mitigated the fact that as a startup Altada had to mainline investment credit to keep day to day operations afloat. The business relied on Leo’s money. This fact was not contested between the parties.

But the nature of the business arrangement between Leo and the company was in hot dispute. Beechinor maintained Leo had agreed to provide upfront and ongoing investment to Altada until 2020. 

For his part, the financier denied that he was ever an equity investor in the business. He claimed the money he had pledged to Altada was intended as a loan. Claiming to have directed around €1 million towards the business, he expressed deep dissatisfaction that he had “nothing to show for it” when the tide went out. 

“Steelworks provided almost the entirety of the funds which the company used for its working capital, and if it were not for Steelworks, the company would have been wound up a long time ago,” he said on affidavit last September when the examinership petition was live.

Leo allegedly turned off the finance tap late last year leaving the company struggling to pay staff wages on Christmas week. Beechinor said money had to be scraped together from various sales receipts. 

Leo’s funding of the company from there on in was described by Beechinor as “sporadic”. The fracture lines between Leo and Beechinor deepened from January 2019 when a build up of unpaid taxes led to Revenue slapping  a succession of attachment orders on to the firm’s bank account. On three occasions the attachment order was discharged when the company received income. But the fourth order remained in place last summer as Altada headed for the wall.

Beechinor claimed the Leo shortfall left him propping up the business with loans from his own venture Algo.

By the time it came to a head and the examinership petition landed in court last July, Revenue was owed around €186,000 in payroll taxes. The total Revenue bill was €252,594. 

*****

Corporate rescue petitions are usually the preserve of the High Court but a cost cutting, ‘examinership-lite’ regime was introduced for ailing SMEs back in 2013. As a startup, Altada fit the bill. That meant the application to protect the company from its creditors came before the Circuit Court at the end of July. Beechinor fronted a failed petition for the urgent appointment of an interim examiner on an ex parte (one side only) basis. 

The application was put back for hearing to early September before Judge Elma Sheahan. The delay would afford all relevant parties an opportunity to be heard, including Leo.

When the case returned, Beechinor outlined to the court his view that the company could yet have a bright future.  The product was close to being market ready and a potential investor, who had already carried out due diligence on the company, was waiting in the wings. The interested party, on standby with an immediate six figure cash injection to hand, was US investor Peter Kearns of Princeton Capital who knew Beechinor from other businesses.

There were other positives cited by the Altada CEO. Having determined its feasibility, the Tokyo headquartered cyber security giant Trend Micro Inc expressed interest in being a partner on Altada’s finished product. IBM was also keen on the software tool and Enterprise Ireland had indicated a willingness to provide funding based on beta round testing of the product.

O’Reilly’s report also set out that Altada was in something of a catch 22 situation as regards future investment.

Auditor accountant Gerard O’Reilly submitted an independent expert’s report in support of the examinership petition. The usual caveats applied. “It should be noted that this report has been prepared within a very restricted time period and accordingly, the level of analysis carried out has been restricted and reliance has been placed on certain information provided by one of the directors of the Company which was not capable of being independently verified,” he stated.

However he was satisfied he had enough material to make a determination on the existential threat facing the business. 

He calculated Leo’s total investment in Altada at €779,353.66, significantly lower than the sum contended for by Leo.  O’Reilly’s report also found that while acting as chief financial officer, Leo had initially refused Beechinor and Cannon access to the company books and accounts until code produced by the company for sister outfit Fitvision was released to him.

Losses and lenders

The auditor said he did not have sufficient evidence to solve the founders dispute over whether Leo was an equity investor or a straight up lender. However he did note that the minutes of an emergency board meeting, held on July 19, 2019 and attended by all three founders, had concluded that funds from Steelworks constituted an investment.

Leo wasn’t the only party out money. The accounts showed Cannon and Beechinor had each plugged over €200,000 into the business, personally and through investment vehicles.  

But O’Reilly’s report also set out that Altada was in something of a catch 22 situation as regards future investment. Enterprise Ireland was interested in making an investment of €250,000 but was blocked from making a move while the company was without a tax clearance certificate. The auditor was briefed that Leo had allegedly withheld information required for the Enterprise Ireland funding application.

Leo was also claimed to be a hindrance in bringing on board outside investors having allegedly been barred from acting as a broker in the US by the Financial Industry Regulatory Authority (Finra) for “failing to respond to Finra requests for information concerning alleged violations of outside business activities and private securities transactions”. 

These were matters an examiner could further explore, O’Reilly said. 

Beechinor called Leo’s assertions “unfair, misguided and simply untruthful”.

In essence, the report concluded that the business had a reasonable prospect of survival. According to 12 month cash flow projections, Altada would bring in over €1.6 million in income and funding leaving it more than €300,000 in the black once running costs were accounted for. This was based on the product going live. Sales of €1.38 million were anticipated.

But the submissions before the Circuit Court were not all one way. Weighing down the examinership petition were serious objections raised by Leo who maintained he was a creditor rather than a shareholder.

In the weeks that followed he would raise a host of objections to the proposed examinership, from the viability of the potential investor to an alleged lack of candour in the petition, alleged bias in the independent expert’s report and a slew of alleged improprieties at Altada including corporate theft, dissipation of investment funds and the alleged setting up of phoenix companies by Beechinor to divert business away from the data solutions firm.

Beechinor called Leo’s assertions “unfair, misguided and simply untruthful”. The chief executive of the struggling AI start-up framed the motivation behind the examinership petition in benign terms. This was about preserving the company and the jobs of its staff.

Judge Sheahan knocked back the examinership application but put a stay on her order until close of business, Tuesday September 10. 

Her refusal to offer court protection to the business was instantly appealed to the High Court. Filings lodged by Beechinor’s side noted that the Circuit Court judge had “very fairly” indicated that the examiner application process was “novel” to her. Judge Sheahan is more typically found presiding over criminal matters.

Leo did not acquiesce to the petition on the second outing.

“I believe Steelworks has been deceived,” Leo said on affidavit before the High Court.

While it was not immediately clear that the US financier would be financially better off if the company went kaput,  the bottom line did not appear to be his sole motivation.

Leo argued on affidavit that a provisional liquidator would be able to trace the investment funds advanced and see, according to his allegation, “how they have been dissipated”.

There was another bone of contention around intellectual property. He urgently sought an external IP audit. 

By contrast with Beechinor, the version of Altada presented to the court by Leo was more a case of smoke and mirrors.

“I believe Steelworks has been deceived,” Leo said on affidavit before the High Court. He claimed Beechinor had prevented his company from doing an intellectual property audit, a step apparently required to regularise the company’s lending arrangements. “The refusal to do so remains unexplained,” he added.

He went further, claiming that as recently as last September Altada had “outright refused” a ‘silver bullet’ rescue loan of €500,000 from Steelworks that would have obviated the need to bring an examinership petition. Again, the loan was predicated on an IP audit being undertaken by a third party as a matter of priority.

Correspondence before the court showed a proposed five year loan offer from Steelworks last July sought a charge over Altada’s source code to be held in escrow, on top of the requirement for an IT audit. However Leo was adamant that he did not intend to liquidate the company and use the IP in connection with other ventures. 

“Again I reiterate that I believe that there is no product or that it is not developed to the extent that it is merchantable and/or can be sold or launched in any way. This is the reason why I believe the examinership application was initiated: to hide and prevent any further analysis or consideration of the IP product such that the debt of Steelworks would be crammed down and the product could be divested, sold or traded and in some way hid behind the screen and protection of the proposed examinership,” he said.

These are strong allegations, hotly denied by Beechinor.

The antipathy between the men was evident in the court filings. Leo complained that Beechinor had made “personalized and vituperative” comments about him on affidavit. And in return he made pointed comments about Beechinor’s alleged behaviour as chief executive of the company.

In round two, Leo also raised issues about staff, claiming that nine of the 21 company employees appeared to have been given the chop since the examinership petition first darkened the door of the courts and that one former staff member had moved to take legal action against Altada.  He also argued there was no reality to the financials behind the plan to save the business.

“I deny that I am litigating grievances. I say that I am standing on my rights as a creditor, ” he swore on affidavit.  He claimed information provided around income and expenditure, particularly around €740,570 of net wages and salaries, was opaque and that he Beechinor allegedly “unilaterally sacked” Quantus Advisory as accountants in favour of his own preferred firm. 

There was further mud-slinging with Leo denying alleged “derogatory” claims by Beechinor that Brogan, the Dublin GAA player, had recently distanced himself from the financier. Leo said he continued to have a good relationship with Brogan.

The Revenue adopted a neutral position to the petition.

But this time the outcome did not go Leo’s way.

The judge hearing the case was Justice Robert Haughton , who usually presides over the Commercial division of the High Court. He was not swayed. Applying the statutory test to determine whether a company has a reasonable chance of being rescued, he allowed the petition and appointed Walsh of JW Accountants as examiner. Altada had the room it needed to manoeuvre.

Since the petition passed, Walsh has moved on investor interest and Mason Hayes and Curran solicitors have been hired to carry out an IP audit.

Proposals, which will likely involve a debt compromise, will be put to creditors this week with the case due back before the High Court in early November. By then it should be clear if the fledgling firm might finally fly.