The last time veteran Dublin tech entrepreneur Brian Maccaba was embroiled in a high profile court case, it was about sex, money and reputation. This time, it’s about money, an elaborate corporate web, alleged “underhand” dealings and a business merger gone awry.

The case has yet to go to a full hearing but preliminary court filings show the 61-year-old is accused of using a “front” as part of an elaborate ruse to acquire a 50 per cent stake in Dublin tech firm Waratek Ltd, valued at up to $28 million.

Maccaba is best known as the founder in 1989 of early tech high-flier Cognotec which made foreign exchange software for banks. Cognotec soaked up millions in investment from the likes of Japanese conglomerate Softbank.

Maccaba was born Brian McCabe. Originally from Glenageary, Co Dublin, he has been based in London for years. He converted to Judaism in 1990 and in 2004 was at the centre of an “indecent proposal” scandal in the UK. Maccaba sued a rabbi for slander who claimed he had offered $1 million for another man’s wife. The case ran for an epic 41 days. Maccaba lost and was faced with a legal bill of over €2 million.

The stakes were high then. And they are high again this time – even if the labyrinthine detail in each case is vastly different.

The spark that lit the current legal dispute is a rescinded merger in 2017 between the Dublin-headquartered cybersecurity firm Waratek Ltd and companies associated with Maccaba.

Waratek Ltd has enjoyed considerable success with its patented pioneering security software which protects businesses from cyber attacks. The anti-virus technology was the brainchild of company founders John Holt, Waratek’s chief operations officer, and his son John Matthew Holt, the firm’s chief technology officer who conceived of and designed the software. 

From Sydney originally, the Holts started the business in Australia but moved it to Ireland in 2009 believing they would have more opportunities for growth. Their main offices are on Harcourt Street in Dublin city centre. The company subsequently expanded, opening subsidiaries in the US, London, Tokyo and elsewhere in the world.

Widely praised as an innovator within the IT security industry, Waratek has received multiple awards, achieved Gartner Cool Vendor status and has lured in international investors including Mangrove, the main venture capitalists behind Skype. Fortune 500 businesses are said to feature among its customer base. According to its website, Waratek’s premium technology partners are IBM Cloud, Microsoft Azure and Red Hat Linux.

The company focused initially on fintech businesses that needed reliable software before branching out. By 2014, the future looked bright for Waratek. Maccaba, group chief executive at the time, exuded optimism in a Sunday Business Post interview. “In 2013 we were focused on the city of London. Now we have a team covering the New York market, Wall Street and beyond,” he said.

A white knight

Cracking the large US market was a key part of Waratek’s strategy.  But in 2015, the firm struggled after a prospective investment failed to materialise. Maccaba stepped into the breach, introducing the company to a contact and family friend in America, James Casper. 

Casper apparently owned a company called JCA Investment Holdings Ltd and was said to be interested in buying the rights to sell Waratek’s security technology in America. A US distribution deal with JCA subsidiary Wrasp was signed on November 26, 2015. Revenues were to be split on a 50:50 basis between the two parties and, allegedly in exchange for territorial exclusivity, Wrasp agreed to make minimum quarterly royalty payments to Waratek Inc, a Delaware incorporated US marketing vehicle, of $385,000. 

“We’re excited to work with the Waratek Inc team to bring this pioneering technology to the largest cybersecurity market in the world,” Maccaba was quoted as saying at the time.

The Irish businessman correctly abstained from voting on the agreement because Casper was an acquaintance of his.

Despite this corporate probity, Waratek founder John Matthew Holt would claim later on affidavit that all was not as it seemed. While this would subsequently blow up in respect of the proposed merger that followed in 2017, the Waratek founder claimed the initial terms of the US licensing agreement were altered in favour of JCA, with Maccaba allegedly informing the board of Waratek Ltd that it was the best deal that could be achieved in the timeframe available.  

Much more serious allegations would emerge down the line, all involving Maccaba. The key claim is the contention that the tech entrepreneur and company executive did not disclose that he, or people close to him, had an interest in JCA and therefore had skin in the game. 

The case has yet to go to trial and the former Cognotec boss has not, to date, set out his sworn position on affidavit. However, he fully denies the allegations against him.

The case is being taken by Waratek Holdings, Waratek Inc and Wrasp Security against Waratek Ltd, John Holt and John Matthew Holt. However, the plaintiffs are also being sued in a counterclaim along with Brian Maccaba, JCA Investment Holdings and Breezefield.

What a court will have to decide is whether Maccaba was unfairly sidelined when the merger came unstuck, or whether he purposely misled the board of Waratek partners about the JCA trade.

But first, an outline of events as they are alleged to have occurred.

A capital opportunity

With the licensing deal sewn up stateside, Waratek Ltd offloaded its shareholding in Waratek Inc, the US marketing division of the cybersecurity ware firm, to JCA for USD$10,000. According to Holt, the Dublin tech firm only became aware at a later date that Maccaba’s wife Hilary Guiney was a director of Wrasp and JCA and that the $10,000 acquisition was paid from her personal funds. 

In September 2016, a plan was hatched for a merger between Waratek Ltd, Waratek Inc and Wrasp Security.  The union would effectively bring in US parent firm JCA as a major shareholder.

Maccaba allegedly argued in favour of the deal before the board of Waratek Ltd on the basis that the split between the Dublin tech firm, home to the business’s intellectual property assets, and the US sales division was putting off potential investors. A union between the three entities would help attract outside backers.

Discussions on a merger got underway in earnest. A shelf company called Waratek Holdings was set up to facilitate the proposed deal. Under the plan, JCA would initially take a 40 percent stake in the consolidated business with room to adjust the shareholding upwards to 50 per cent if certain conditions were met down the line.

Holt claims Maccaba initially carried out the negotiations on behalf of Waratek Ltd, having allegedly advised the board at all times that Waratek Inc and Wrasp were owned, through JCA, by Casper. 

A sea change allegedly happened around November 2016 when board members of the Dublin tech firm, David Randall and Michael An are said to have first found out that Maccaba had pumped as much as $220,000 into Inc, the American marketing wing of Waratek as opposed to the $100,000 he had previously disclosed to An in an email the previous April. An allegedly responded to the April email by asking Maccaba to hold the six-figure investment until it was put to the board for approval. Maccaba allegedly replied to the effect that it was too late because he had already wired the money to Inc. 

In court documents, it is claimed the Waratek Ltd board was “very surprised” to discover – also in November 2016  – that Maccaba had been a director of Inc for around six months. Full disclosure was sought from Maccaba in respect of his dealings with Inc.

Holt says in light of these discoveries, An took over the negotiation of the planned merger with the JCA group of companies. 

On March 2, 2017, shareholders of Waratek Ltd were notified of the potential merger with Waratek USA and how shelf vehicle Waratek Holdings would acquire the entire issued share capital of the Dublin IT firm. The court heard this notification stated that Waratek Holdings was owned and controlled by James Casper, who was described as the current owner of JCA. “The offer explicitly states that Waratek Holdings is an unaffiliated arm’s length purchaser,” Holt claims.

The merger documents were executed in Ireland on May 4, 2017 between Waratek and JCA parent company, Breezefield Ltd.  It is claimed Breezefield then agreed to sell 100 per cent of JCA’s shares to Waratek Holdings in exchange for a stake in Waratek Holdings which it held for JCA’s beneficial owners. 

But within months of its consummation, the deal, in all of its corporate complexity, was unwound leaving the door open to a bitter courtroom battle.

Maccaba was let go with immediate effect, allegedly for gross misconduct

The following account is what John Matthew Holt claims transpired. 

(The firms linked to Maccaba have responded in a limited capacity in the context of a pre-trial row over whether they should lodge money as security for costs, ahead of the hearing, in case they lose and the defendants are left out of pocket on their legal bills. Security for costs applications are brought by defendants who suspect the parties suing them are impecunious.)

EY investigates the merger

Soon after the merger, on August 16, 2017, Holt claims Maccaba’s solicitors, McCarthy Johnson, wrote to the board of Waratek Ltd to inform members that Breezefield’s shareholding in Waratek Holdings had been transferred to two new companies, Waterbuck Way Ltd and Dreamwalk Lane Ltd.

Allegedly disquieted by these and previous events, Waratek Ltd brought in accountancy giant EY to probe the merger and Maccaba’s role in it. While a report was being prepared, the Dublin businessman was suspended from his role as CEO for the Waratek group. Under scrutiny by EY was Maccaba’s alleged directorship of Inc, his wife’s directorships of JCA and Wrasp and any links, direct or otherwise, to Breezefield, Waterbuck and Dreamwalk.

The court has heard the EY report concluded that while the proposed merger was seen as being commercially driven to assist all Waratek companies in raising capital, Maccaba’s involvement with Inc was more hands-on than was known by the board of directors of the Dublin firm.

It allegedly emerged in the report that close to $1 million in payments had been allegedly made to Waratek Inc between May 2016 and April 2017 by Maccaba, his wife Hilary Guiney and a third person, Sean Wallace. The first tranche of US royalties due by Wrasp to Waratek Ltd, in the sum of $385,000, was allegedly paid out from funds that came from Israeli lawyer and associate of Maccaba, Zalli Jaffe. Based in Jerusalem, Jaffe previously held $1 million on Maccaba’s behalf following the sale of his family home, the court was told. Jaffe is said to have identified himself as being the sole director and shareholder of Breezefield, JCA’s parent company.

Maccaba is also said to have been behind a short term loan from Wrasp to Waratek Ltd. 

Waterbuck and Dreamwalk were allegedly found to be subsidiaries of Breezefield with company directors known to Maccaba. 

Another purported black mark followed around a week after Maccaba’s suspension, when he and Zaffi are alleged to have met with venture capitalist Jason Booma of DC based Columbia Capital on August 29, 2017. It is claimed at this meeting, Jaffe was represented to the VC firm as the majority shareholder in Waratek, with a 50 per cent plus stake. 

In December of that year, following an extraordinary general meeting, the board of Waratek Ltd ruled the entire merger transaction was null and void. 

Maccaba was let go with immediate effect, allegedly for gross misconduct. Holt claims the sales staff at Waratek Inc resigned en masse in January 2018 “on becoming aware of the true ownership of Waratek Inc” and a new team had to be appointed amid the internal upheaval.

Holt, the Australian software developer, claims information that has subsequently come to light shows Casper, the American businessman, did not incorporate or own JCA at the time of the merger. He claims, unknown to Waratek, JCA was in fact controlled by Maccaba, his wife and other persons connected to him and that Casper had been asked by Maccaba to act as a director. He partly relies on what appear to be conflicting filings with the Companies Registration Office citing Casper as the 100 per cent shareholder of JCA while also listing his stake at nil in 2016’s financial statements. 

He claims that during the merger negotiations, communications sent to the board of Waratek Ltd, purporting to be from Casper, were in fact drafted by Maccaba.

Holt and Waratek Ltd side claim Casper was nothing more than a “front” to enable Maccaba soak up and walk away with a 50 per cent holding in the software group.

Holt points to emails sent by Maccaba in 2016 which allegedly show the former chief executive was driving the deal for JCA behind the scenes, ghost-writing draft terms and instructions

In the fallout, the US license agreement was terminated with Wrasp and a new investor, Wildermuth, came on board with Waratek Ltd providing $3 million in backing. The Dublin tech firm claims Wrasp has no continuing sales and marketing rights of the security software since the plug on the deal was pulled. This is disputed by Wrasp which alleges it retains a non-exclusive license to sell Waratek technology on a worldwide basis. 

A valid union?

But in legal terms, there was bigger fish to fry. The Waratek merger was clearly an unhappy business match. But the real question remained. Was it lawful?

Having been left out in the cold, Maccaba’s side, led by Waratek Holdings, initiated proceedings in Ireland in 2018. Apart from damages, the reliefs sought by the tech boss include a declaration from the Commercial division of the High Court that the May 2017 merger is valid and binding and that Holdings is the owner of 100 per cent of the share capital of Waratek Ltd, the company which – in the absence of a merger – holds the group’s goodwill, business and software assets. 

Maccaba’s side says that once the share sale was approved by the board of directors of Waratek Ltd, the deal was valid. They allege the Holts conspired to make false claims about being kept in the dark about Maccaba’s links to JCA in order to purposely scupper the merger for their own benefit. This is denied.

In response, the Holts and Waratek Ltd have stuck to their position that the merger was void and unenforceable because it was allegedly “procured by fraudulent misrepresentation”. The defendants argue that the merger was not an arm’s length transaction and therefore could not be a bona fide sale under the company’s articles of association. They have also counterclaimed (including against Maccaba personally) for alleged conspiracy, misrepresentation and breach of fiduciary duty. Damages are sought.

Holt points to emails sent by Maccaba in 2016 which allegedly show the former chief executive was driving the deal for JCA behind the scenes, ghost-writing draft terms and instructions on behalf of Casper – when he was supposed to be representing Waratek.

These claims are fully denied by Maccaba who insists he acted properly and disclosed his interests ahead of the deal. But as noted, he has not engaged with the allegations by swearing an affidavit setting out his response. In a recent pre-trial ruling, Justice Michael Quinn said this was “a remarkable feature of the case” given the “very serious allegations” made against Maccaba personally.  

Another unusual feature was that when Maccaba was personally served with a counterclaim from the defendants, he was reluctant to instruct Arthur Cox, the solicitors on record for the plaintiff companies, to accept service on his behalf. 

For his part, Holt says: “The position, therefore, is that very serious misconduct has not been contradicted by sworn evidence.”

“A cynical exercise”

This is not to suggest there has been a blanket silence from the plaintiffs.  Edwin Alkin, a director of Waratek Holdings, has sworn affidavits setting out what they maintain are grave grievances.

He states that the purported unwinding of the Waratek merger has left his company owning nothing and with no means to carry on any business activities. By contrast, he says: “There is no evidence that Waratek Limited has suffered any loss that would or could possibly cancel out the value of the business misappropriated by it.”

By his account: “It is common case that Waratek Limited was aware prior to the merger that Mr Maccaba had a financial interest in Waratek USA. That admission is made.”

The defendants deny any such admission.

Alkin also accuses the Holts of being “engaged in a cynical exercise to dilute the shareholding in the Waratek businesses”

“Mr Maccaba engaged in an elaborate ruse, through persons connected with him (including his wife and his lawyers) and a web of companies of which he is clearly the ultimate beneficial owner, to engineer a situation where he would acquire a 50 per cent shareholding in Waratek Limited,” Holt has claimed.

Alkin says activities carried on by the US entities prior to the May 2017 merger – and the unwinding of the merger seven months later -would be elaborated upon by his side in expert evidence provided by accountancy firm Deloitte.  This may include details of alleged loss by Waratek Inc – including that it spent $2.2 million investing in sales, marketing and promotional events. 

But according to the defendants’ claims, the marketing company was something of a busted flush. They point to accumulated six-figure losses on the financial statements of the US firm, alleged problems meeting the rent in their offices in Georgia, and claim Inc secured only one contract prior to the merger, which delivered $270,000 for Waratek Ltd. Other deals were allegedly not delivered, with Holt claiming “the sales pipeline was worthless”.

Alkin also accuses the Holts of being “engaged in a cynical exercise to dilute the shareholding in the Waratek businesses” by issuing close to two million shares in Waratek Ltd at 0.01 euro each.

The case, if it comes to trial, is likely to be vigorously contested. The court has heard a trial could run for four or five weeks. The Holts and Waratek Ltd say their legal advisors have put the cost of defending the action at over half a million euro. The plaintiff companies say the sum is likely to be half that amount.