Uber Investor Benchmark Sues Ousted CEO Travis Kalanick for Fraud

This has been a rough year for Uber. After a series of scandals including allegations of sexual harassment, discrimination and stealing technology and trade

Subscription Insider: Uber Investor Benchmark Sues Ousted CEO Travis Kalanick for Fraud

Source: Uber

This has been a rough year for Uber, the ride-sharing service available in 632 cities around the world. After a series of scandals including allegations of sexual harassment, discrimination and stealing technology and trade secrets, CEO Travis Kalanick was asked by investors to resign from the company he co-founded. Kalanick reluctantly stepped down in June, but remained on the board, but his seat may not be warm for long. Last week one of Uber’s largest investors, Benchmark, is suing Kalanick to try to boot him off the board of directors, reports the New York Times.

According to The Times, Benchmark, a venture capital firm that owns a 13 percent stake in Uber, filed a lawsuit against Kalanick in Delaware, accusing him of fraud, breach of contract and breach of his fiduciary duty. The lawsuit alleges that Kalanick gained inappropriate control of three board seats last year through ‘material misstatements and fraudulent concealment’ of information.

The goal was supposedly for Kalanick to stack the board in his favor, hoping that his prior behavior and misdeeds would be looked on more favorably by allies. The suit said Kalanick’s actions were to the ‘detriment of Uber stockholders, employees, driver-partners and customers.’

In a CNBC news report, a spokesperson for Uber submitted a statement on behalf of Kalanick:

Subscription Insider: Uber Investor Benchmark Sues Ousted CEO Travis Kalanick for Fraud

Source: Wikimedia

“The lawsuit is completely without merit and riddled with lies and false allegations. This is continued evidence of Benchmark acting in its own best interests contrary to the interests of Uber, its employees and its other shareholders. Benchmark’s lawsuit is a transparent attempt to deprive Travis Kalanick of his rights as a founder and shareholder and to silence his voice regarding the management of the company he helped create. Travis will continue to act in the interests of Uber and all of its stakeholders and is confident that these entirely baseless claims will be rejected.”

Axios, who first reported the lawsuit, said that the feud between early investor Benchmark and Kalanick has been heating up. This lawsuit supports that. According to Axios, the complaint alleges that in June 2016, Uber’s board voted to expand from eight directors to 11, giving Kalanick the right to name the directors to fill those seats. When Kalanick resigned, he took one of those three seats, while the other two seats remain vacant.

Axios also reported that, in the lawsuit, Benchmark alleges that Kalanick promised in writing as part of his resignation that the two vacant board seats would be subject to the approval by the full board, but Kalanick has not documented those changes to put them into effect. Kalanick owns a 10 percent stake in the privately-held company which has most recently been valued at $70 billion.

On the same day the lawsuit was filed, Uber’s first employee and CEO Ryan Graves resigned as the company’s vice president of operations. In an email to Uber staff, republished by Axios, Graves said he will transition out of his role in September to focus on his role on the board of directors. Here’s a brief excerpt that addresses Graves’ timing:

‘So, why now? Well, there is no great time for a move like this one. But it’s really important to me that this transition doesn’t take away from the importance of the onboarding process of our new CEO, whoever that might be. My hope is that ensuring my transition is known and planned for well before our board’s decision on CEO, it will help to make it clear to our team and to our new leader that I will be there to support however I can,’ Graves wrote.

In March, another executive, president Jeff Jones, resigned. He had only served in that role for six months. In a March 19 Recode article, Jones said, ‘It is now clear, however, that the beliefs and approach to leadership that have guided my career are inconsistent with what I saw and experienced at Uber, and I can no longer continue as president of the ride-sharing business.’

UPDATE: TechCrunch reports that the Uber co-founder chairman Garrett Camp sent out a statement on behalf of the board, saying the board of directors is disappointed that a disagreement between Benchmark and Kalanick had to be resolved in a lawsuit. It hopes the two will “resolve the matter quickly and cooperatively,” and it will help with that process. Camp also said in the statement that their top priority is putting a new CEO in place. End of story.

Insider Take:

At this point, Kalanick doesn’t have much credibility left, but it is in the court’s hands now to determine what did or didn’t happen behind closed doors at Uber. Regardless, infighting of this kind isn’t healthy for any company, especially a privately-held one that has its sights set on going public. Uber needs to get its house in order and figure out if Kalanick has a place in that house as it replaces other key players.

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