The company had been the focus of scrutiny for years – a seller of controversial surveillance equipment coveted by governments across the world. So when three financiers behind a private equity fund led the acquisition of NSO Group in 2019, they promised to do “whatever is necessary” to ensure the company’s technology would not be used to abuse human rights.
The trio pledged that their London-based firm, Novalpina Capital, would establish “a new model for public transparency”, an ambition they described as “wholly without precedent within the cybersecurity industry”.
Two years later, the business partners are locked in a behind-the-scenes power struggle that has been largely concealed from public view.
The exact nature of the conflict is unclear, but it has been described as a “struggle for control” of the private equity group. And it may have significant implications for Novalpina Capital fund investments, including NSO Group, whose technology has allegedly been used by repressive regimes to target human rights activists, political opponents and journalists.
The Guardian understands that Novalpina Capital’s boardroom rift has resulted in the suspension of the shareholder voting rights of Stephen Peel, a former British Olympic rower and one of the three co-founders of the private equity company.
A document seen by the Guardian suggests that six voting managers at Novalpina Capital Group Sarl, a Luxembourg entity that is part of a chain of Novalpina companies, suspended Peel’s voting rights in January. The action was taken, the document states, in light of an alleged “breach” of Peel’s contractual obligations and alleged actions “against the company’s interests”. Lawyers for Peel said any allegations against him were “entirely without merit”.
The document and other sources have nevertheless painted a picture of a rupture at the heart of the private equity group. It follows a report by Sky News earlier this month suggesting there had been an “internal bust-up” between the partners that “cast doubt among investors about” the group’s future leadership.
Sky News cited one source who said the partners were “at loggerheads over agreeing a strategy for deploying new capital from the fund”.
The document seen by the Guardian suggests that Peel’s two Novalpina Capital co-founders and partners, Stefan Kowski and Bastian Lueken, were among the six voting managers who signed off on two resolutions in January to suspend Peel’s voting rights as a shareholder at Novalpina Capital Group Sarl.
The voting rights were suspended with some exceptions, including signing off on the company’s annual account, the document suggests, adding that the rights may be reinstated in the future under certain conditions. It is not clear whether the rights have since been reinstated for Peel or what impact the suspension has had on his ability to exert control over the fund’s investments.
Peel’s lawyers strenuously denied that he ever acted inappropriately or contrary to the companies’ interests, or without appropriate authorisations, or in any way that deceived his partners, whom they called “opponents in the struggle for control of the company”.
Relations between the partners are understood to have been strained for several months. The Guardian was told that one possible source of tension was related to an NSO Group entity’s agreement to pay hundreds of thousands of euros in legal and public relations fees relating to Peel’s wife, Yana Peel. Those expense claims were connected to a legal dispute between Yana Peel and the Guardian arising from the fund’s acquisition of NSO that was settled last year.
Stephen Peel’s lawyers said the “manner” in which the legal fees were paid had been approved by Kowski and Lueken and strongly disputed the suggestion that the payment of the expense claims was a source of disagreement between the partners. Kowski declined to comment. The Guardian could not reach Lueken. A spokesperson for Novalpina, who represents all three partners, declined to comment.
The ongoing uncertainty over the leadership of Novalpina Capital is likely to raise questions for investors in the funds managed by the private equity group, including the Oregon Investment Council, which oversees investments by the state’s multibillion-dollar public employee pension fund
In 2017, when pitching the Oregon Investment Council for new investment in the fund, Peel described his partners as the “most talented individuals” he had been fortunate enough to work with and hire.
Pressed by Oregon officials at the time on whether the trio planned to “stay together”, Peel assured the investment council – which agreed to invest more than $200m into the group’s fund – that they would. “We are totally committed for the next several decades,” Peel said.
It was two years after that, following the fund’s buyout of NSO Group, that Novalpina Capital received a letter from Amnesty International and other human rights and privacy advocates raising what they called “serious concerns” regarding accountability for NSO Group’s involvement in alleged spyware abuses.
In an open letter published in response, Peel confirmed that Novalpina Capital had “control of the board of NSO”, owned approximately two-thirds of the NSO holding company, and had appointed a majority of NSO Group’s board of directors. NSO Group’s website still lists Peel and Kowski as two board members.
He added in his letter: “We are determined to do whatever is necessary to ensure that NSO technology is used for the purpose for which it is intended – the prevention of harm to fundamental human rights arising from terrorism and serious crime – and not abused in a manner that undermines other equally fundamental human rights.”
The company has continued to face intense scrutiny. In the US, NSO Group is being sued by WhatsApp following allegations that its software was used to target 1,400 of the messaging app’s users.
NSO Group has denied the claim and, because it has claimed it acts on behalf of foreign governments, is seeking sovereign immunity from the suit. The company also argues that its government clients are only meant to use its technology against terrorists and criminals, and it is not privy to who is targeted by its surveillance tools.
