Category: specific managers

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Alexander sued Whetstone but lost

In September 2018, Eric Alexander filed suit against Rachel Whetstone, alleging that she had violated a reciprocal non-disparagement clause in her severance agreement with Uber. In particular, Alexander alleged that Whetstone spread false, misleading, and disparaging information about Alexander’s response to the rape in India — which he says were the cause of his termination from Uber. Alexander also accused Whetstone of making a variety of racist comments, claimed that Whetstone incorrectly asserted he stole the rape victim’s medical file and bribed Indian authorities to get that file, and claimed that Whetstone said she would “ruin [his] career” by telling investigator Eric Holder about supposed misconduct.  Alexander argued that these statements were false and defamatory.

Whetstone argued, among other things, that a severance agreement required all disputes to be resolved through arbitration, not litigation. The court granted her motion to compel arbitration. In February 2023, the court entered judgment for Whetstone.

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Fired Chief Security Officer Joe Sullivan

Mike Isaac’s Super Pumped (p.396) reports new Uber chief legal officer Tony West fired Chief Security Officer Joe Sullivan for the 2016 incident in which Sullivan paid a hacker who had infiltrated Uber systems.  In West’s view, this was an improper payment, and Sullivan should have sought legal advice and informed authorities of the breach.  In Sullivan’s view, paying a hacker was legitimate.

Uber asked Sullivan to sign a non-disparagement agreement in exchange for a severance payment. When Sullivan refused to sign, Uber leaked the story to a reporter, calling the payment a cover-up operation to pay off hackers and hide evidence from consumers.  West’s view was vindicated when Sullivan was convicted of federal charges in 2022.

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Chief Security Officer Convicted of Obstruction

A federal jury convicted Joe Sullivan, former Chief Security Officer of Uber, for obstructing FTC proceedings in connection with his attempted cover-up of a 2016 hack of Uber.  See the 2016 incident in which Sullivan paid a hacker who had infiltrated Uber systems.

A US Attorney’s Office press release explains:

[S]hortly after learning the extent of the 2016 breach and rather than reporting it to the FTC, any other authorities, or Uber’s users, Sullivan executed a scheme to prevent any knowledge of the breach from reaching the FTC. For example, Sullivan told a subordinate that they “can’t let this get out,” instructed them that the information needed to be “tightly controlled,” and that the story outside of the security group was to be that “this investigation does not exist.” Sullivan then arranged to pay off the hackers in exchange for them signing non-disclosure agreements in which the hackers promised not to reveal the hack to anyone, and also contained the false representation that the hackers did not take or store any data in their hack. Uber paid the hackers $100,000 in bitcoin in December 2016, despite the fact that the hackers had refused to provide their true names. Uber was ultimately able to identify the two hackers in January of 2017 and required them to execute new copies of the non-disclosure agreements in their true names and emphasized that they were not allowed to talk about the hack to anyone else. …

The evidence showed that, despite knowing in great detail that Uber had suffered another data breach directly responsive to the FTC’s inquiry, Sullivan continued to work with the Uber lawyers handling or overseeing that inquiry, including the General Counsel of Uber, and never mentioned the incident to them. Instead, he touted the work that he and his team had done on data security. Uber ultimately entered into a preliminary settlement with the FTC in summer 2016, supported fully by Sullivan, without disclosing the 2016 data breach to the FTC.

In Fall 2017, Uber’s new management began investigating facts surrounding the 2016 data breach. When asked by Uber’s new CEO that had happened, Sullivan lied, falsely telling the CEO that the hackers had only been paid after they were identified and deleting from a draft summary prepared by one of his reports that the hack had involved personally identifying information and a very large quantity of user data. Sullivan lied again to Uber’s outside lawyers conducting an investigation into the incident. Nonetheless, the truth about the breach was ultimately discovered by Uber’s new management, which disclosed the breach publicly, and to the FTC, in November 2017. …

In finding Sullivan guilty, the jury concluded he obstructed justice, in violation of 18 U.S.C. § 1505, and that he committed misprision of felony (i.e., knew that a federal felony had been committed and took affirmative steps to conceal that felony), in violation of 18 U.S.C. § 4.

In 2003, Sullivan was sentenced to three years’ probation and a $50,000 fine.

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Flawed sequencing in Khosrowshahi hiring, and generous compensation

Mike Isaac’s Super Pumped (p.389) reports that the public had learned that Uber’s board wanted Khosrowshahi as its next CEO — before he and the company had agreed on terms.  As a result, Khosrowshahi was in a particularly strong position to negotiate high payment.

Isaac reports that if Khosrowshahi was able to take Uber public by the end of 2019 at a valuation of $120 billion, he would be paid more than $100 million. But when Uber went public, its IPO price was $45 per share, and it sank as low as $22 in both 2020 and 2022.

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Kalanick attempted to name two new directors

Mike Isaac’s Super Pumped (p.388) reports that, in September 2017 (after being ousted as CEO), Travis Kalanick tried to stack the board with supporters. He relied on an amendment to Uber’s charter that allowed him to name two new directors. But at the same time, new investor SoftBank received six new directors.  With those new directors plus an end to Kalanick’s shares with ten-to-one preferred voting rights, Kalanick no longer had control.

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Executive Leadership Team protested Kalanick’s communications

Mike Isaac’s Super Pumped (p. 369) reports Travis Kalanick continuing to meddle in Uber’s business — including demanding documents and trying to influence decisions — even after he resigned. Isaac presents a letter from all fourteen members of the Executive Leadership Team (which was temporarily running Uber after Kalanick’s departure):

Dear Board of Directors:

In fulfilling our obligation to surface issues we feel are significant, we call your attention to three examples:

1. Travis recently reached out directly to an employee, first asking if he would talk to a reporter about an upcoming negative story related to the Fawzi Kamel incident (Kamel was the driver in the March video). Previously, Travis’ personal lawyer had also reached out to this employee on the same topic.

Travis also requested that the employee produce private, internal emails for him, and said that if he refused to send them he would exercise his right as a board member to get them directly from the Security team. The employee did not produce the emails and Travis subsequently asked the Security team to produce the emails. The Security team also declined to produce the emails and reported the incident to Salle, who subsequently advised the ELT that we should stand firm against any requests that may violate an employee’s right of privacy, and that a Director on their own cannot conduct independent investigations.

Travis also asked whether the employee had spoken with the Covington investigators about the issue in question. The employee was very troubled by this given the confidential nature of the Covington process and reported his concerns to the Legal team.

2. Travis recently called an ELT member to ask if he could count on their votes (the particular purpose/vote was not identified). Current and former employees have reached out to the ELT with similar reports. This has put the ELT in a difficult position, wondering what Travis might be up to and whether or not it is a cause for concern.

3. Travis continues to reach out to employees beyond the ELT for business purposes. Regardless of the intention of the outreach, it is disruptive to the daily work at Uber. There is also cause for concern in that the outreach often comes with a request to conceal the conversation from management.

With deep respect,
The ELT

Isaac reports that all fourteen ELT members said they would resign if Kalanick continued trying to regain power.

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Investors asked Kalanick to resign

Mike Isaac’s Super Pumped (p. 344) reports that investors Benchmark, Fidelity, First Round, Lowercase Capital, Menlo Ventures, and others insisted that Travis Kalanick step down — or else they would go public with their request for his resignation, including giving the New York Times their letter requesting his resignation.

Investors’ letter to Kalanick:

Dear Travis:

On behalf of Benchmark, First Round, Lowercase Capital, Menlo Ventures, and others—which collectively owns more than 26% of Uber’s economic stock, and over 39% of Uber’s voting shares—we are writing to express our profound concerns about Uber’s direction and to propose a way forward.

Please know that we are deeply grateful for your vision and tireless efforts over the last eight years, which have created a company and an industry of which no one could have dreamed. Unfortunately, however, [the] series of recent revelations have deeply affected us. . . . [A]ll of these issues are causing tremendous damage to Uber’s brand and threaten to destroy Uber’s value for its shareholders and stakeholders. We believe the issues stem from deep–seated cultural and governance problems at Uber and from the tone at the top. . . . 

We must take concrete steps to address these issues and strengthen Uber’s brand and governance. If we do not adequately address these issues now, Uber’s brand and market share will continue to erode, to the detriment of the company and all of its shareholders, including you.

 . . . With these changes we firmly believe Uber can regain its place as one of the most important companies Silicon Valley has ever produced. We hope you will agree to move forward with us on this path.

“Moving Uber Forward”: Investor Demands

First, you must immediately and permanently resign as CEO. We strongly believe a change in leadership—coupled with effective Board oversight, governance improvements, and other immediate actions—is necessary for Uber to move forward. We need a trusted, experienced, and energetic new CEO who can help Uber navigate through its many current issues, and achieve its full potential.

Second, Uber’s current governance structures, including the composition and structure of the Board of Directors, are no longer appropriate for a $68 billion company with over 14,000 employees. The new CEO must report to an independent Board that will exercise appropriate oversight. . . . Further, as you know, the Holder Report calls for the appointment of additional independent Board members. To that end, you should fill two of the three Board seats you control (retaining one for yourself) with truly independent directors who comply with the Holder Report’s recommendations for qualification for service. . . . 

Third, . . . [y]ou should support a board led CEO search committee, with an independent chairperson, and the inclusion of a representative of senior management and a representative of the driver community. . . . 

Fourth, the company should immediately hire an adequately experienced interim or full–time Chief Financial Officer. The company has intentionally operated without a properly qualified executive in the top finance [role] for over two years. The investor group broadly believes that this specific executive hire needs to be addressed urgently.

We hope you will agree to move forward with us on this path, and look forward to your response.

Isaac reports Kalanick’s response:

“If this is the path you want to go down, things are gonna get ugly for you,” Kalanick said. “I mean it.”

In response, Kalanick called investors and Uber executives, seeking their support for a shareholder vote.  Finding limited support, Kalanick ultimately resigned.

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Board member mocked women talking at Uber all-hands

Mike Isaac’s Super Pumped (p. 331) reports tense discussions as Uber’s Board of Directors summarized the Holder Report and changes to Uber’s governance. After Arianna Huffington announced a woman joining Uber’s board, board member David Bonderman remarked “I’ll tell you what it shows. It’s that it’s much likelier to be more talking on the board.”  Isaac says “the room froze” and attendees perceived that “one of Uber’s board members [had] just made a sexist comment about women talking too much.”

Travis Kalanick, long in dispute with Bonderman, took this opportunity to have Bonderman removed from the Board. (Isaac p. 332-335)

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