Former Atomos CEO Says She Was Fired for Investigating Securities Fraud

In April, Atomos said it fired CEO Estelle McGechie because she refused to move to Australia, but she says it was actually because she refused to turn a blind eye to what she says was securities fraud. securities and income manipulation.

McGechie’s lawsuit, filed in California Superior Court, also alleges significant and repeated gender discrimination by its management and board of directors. The full complaint cites multiple instances of said discrimination and alleges multiple illegal actions taken by the company and its board of directors. She says that because she “dared” to speak out about “rampant illegal conduct” at Atomos – a company listed on the Australian Stock Exchange (ASX) – she suffered the consequences and was fired.

This contrasts with Atomos’ publicly stated reason for her dismissal (a requirement for ASX-listed companies when changes are made to a management team), namely that she refused to move to the headquarters of the company in Melbourne, Australia.

“Following Ms. McGechie’s investigation and reports of securities fraud and manipulation of Atomos earnings, including misreporting significant sales forecast information to shareholders, ‘channel stuffing’ (sending excessive products to distributors to prematurely record sales and fraudulently inflate revenue), knowingly shipping defective and unusable merchandise to prematurely record sales and insider trading, Atomos terminated her,” the complaint, seen by PetaPixelbed.

Estelle McGechie

Australian-born, McGechie previously worked for The Walt Disney Company, Apple, Logitech and most recently Frame.io before joining Atomos in June 2021. Adobe acquired Frame.io in August of the same year. McGechie says she was recruited by Atomos based on her prestigious career and unique product experience. Her complaint says that although she was brought in to “transform the organization”, her male colleagues “resisted her calls to bring the company into compliance”.

As Atomos’ only female leader, McGechie says the attitude towards her was “indicative of the insidious ‘boys club’ culture within the company” and that she was subjected to inappropriate conduct. , was micromanaged, harshly criticized for her management style, and targeted when she spoke out.

“As a woman, Ms McGechie was expected to be a submissive ‘yes’ leader and, when she failed to comply, her days were numbered,” the complaint reads.

More damningly, McGechie says his complaints of illegal activity within the company were met with resistance and were the main reasons for his dismissal.

“Instead of taking her complaints of illegal conduct seriously, Atomos fired Ms. McGechie to avoid dealing with corporate fraud and scapegoating Ms. McGechie for the consequences of years of illegal conduct perpetrated by its male executives. .”

After her dismissal, McGechie alleges the company attempted to rehire her immediately in an apparent my culpabut fired her again after making it clear she was not going to turn a blind eye to the company’s multiple compliance issues.

“After hearing her final complaint regarding the illegal activity and its plans to address it, Atomos terminated her,” the complaint states. “Atomos continued its pattern of misleading shareholders by falsifying the reason for Ms. McGechie’s dismissal in its public announcements and repeatedly misleading shareholders regarding its financial forecasts.”

The complaint lists extreme detail about repeated instances of gender discrimination at the company for years, as well as multiple illegal activities it claims are taking place at the company. PetaPixel hosted the legal complaint so that interested parties can read it in full, but below is a summary of the allegations.

The story of a “Boys Club”

McGechie’s complaint states that Atomos is a company whose management team consisted of 10 men and her, making it the only woman in senior management. The complaint also states that in July 2021, out of 35 middle managers, only three were women. She says that before she was hired, the company’s board and management team were all male.

She portrays this as creating a “boys club” atmosphere, where older women were excluded from meetings, their opinions were not solicited, and all women were expected to adhere to stereotypical gender roles.

McGechie’s complaint highlights the company’s “uneven” history of treating women and cites several female employees who have reported experiencing discrimination or abusive behavior. She alleges that the company took no corrective action to remedy one of these situations and, in one case, terminated an employee for complaining.

In one of the few examples cited in the complaint, a former employee was allegedly harassed and sexually assaulted by a male executive on several occasions between 2016 and 2017 and, after reporting these incidents (which included attempts to “kiss and to touch her”) to then-COO Tony Trent and CFO James Cody, the two executives informed the stalker of the report. In response, he allegedly “aggravated his conduct”, culminating in the physical and verbal assault of the employee at work.

Apparently, the stalker threatened that if she ever told anyone about her conduct, he would tell people she had come to him. This interaction apparently took place in front of customers and employees at an event, after which the woman fled the event and quit.

“The incident was so disturbing that a male co-worker, who witnessed the conduct and attempted to protect the employee, also quit,” the report said.

In addition to the examples above and others in the complaint, McGechie cites her own personal experience of gender discrimination which she repeatedly experienced. She cites instances of dismissive treatment by board members, which was in “sharp contrast” to how he treated former male CEOs.

“Often in meetings, Board members Mr Stanley and Sir Hossein Yassaie expressed, non-verbally and verbally, that Ms McGechie was silent or only spoke when invited and in agreement with them,” the complaint reads. “On one occasion Sir Yassaie explicitly told him not to talk.”

The issue was so big that McGechie alleges it caused two Atomos acquisitions to fail because the target companies weren’t comfortable with the way Atomos was handling it.

Finally, McGechie found that his compensation was lower than that paid to the former CEO and the interim CEO. She also noted that the former CEO’s employment contract called for 12 months of starting salary upon separation, when she only got six months despite playing the same role.

“Her complaints about unequal pay based on her gender were dismissed and ignored,” the complaint states.

Allegations of Illegal Activities

In addition to gender discrimination, McGechie points to several illegal activities in which company management participated. For example, she says the company has a history of so-called “channel stuffing,” which involves inflating sales numbers by forcing more product through a distribution channel than is necessary. able to sell.

McGechie says she began looking into Atomos’ “irregular” sales patterns in late 2021 and found evidence of “channel stuffing” to manipulate sales revenue, which she says had been happening “for years”. She spoke to a former business development manager for the company who said he also witnessed the behavior and was told to “accept it”.

The complaint alleges that in June 2021, Atomos knowingly shipped AtomX CAST units, an accessory for the company’s Ninja recorder, on which no software was installed and which were “for all intents and purposes, clipboards “. The board and management team knew the units weren’t functional, but shipped them anyway to record sales for the fiscal year that ended in June.

McGechie says she also learned it happened in November 2020 with a new product sold under the name “Neon” which again shipped prematurely to record sales for a fiscal year and she alleges the company has misleads shareholders about Neon’s success and traction. The product’s packaging allegedly listed false and misleading claims, specifically that it had Android support (it didn’t) and had inaccurate monitor sizes. The package also mentioned Dolby Vision, implying it was a built-in feature, but the company wouldn’t have legal permission to use the Dolby Vision brand, and the Neon didn’t work with the set. full of Dolby features. The Neon also had “several” hardware flaws.

The legal document cites several other instances of illegal activity. The complaint paints a picture of a management team that would meet sales targets by any means necessary, and when McGechie tried to remedy the situation, she was fired.

McGechie says that even in the public statements regarding his dismissal, there were false and misleading statements. She says not only were the statements regarding her refusal to move to Australia “patently untrue”, but that the company was not truthful about its revenue projections, which she says were knowingly exaggerated – a statement she would do repeatedly. This was finally revealed in May 2022 when the company publicly disclosed that it would not meet these revenue projections, causing its stock value to plummet 40% in one day.

The complaint says the company blamed it for the slow sales saying that “slower than expected sales occurred in the first four months of calendar year 2022” and that the cause of the issues had been “ corrected in mid-April,” apparently putting the blame on its feet for a problem that had been internally acknowledged for months prior. McGechie says this fake bashing of her was done to burnish the company’s image.

“Atomos’ unlawful conduct cost Ms. McGechie millions of dollars in lost profits and other personal losses, as well as non-economic damages,” the lawsuit states.

Atomos did not respond to PetaPixel request for comment.


Picture credits: Header image background by Nick Chong.

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