Uber Investor Benchmark Capital Sues Former CEO Travis Kalanick For Fraud

There is no end to Uber’s woes this year. In yet another plot twist, Silicon Valley VC firm Benchmark Capital, that was one of the earliest investors in Uber, has filed a suit against ex-CEO Travis Kalanick accusing him of fraud, breach of contract and breach of fiduciary duty.

The complaint filed in Delaware Chancery Court mainly focusses around the June 2016 decision to expand the size of its board of voting directors from eight to 11, with Travis Kalanick having the sole right to designate those seats. Travis Kalanick later appointed himself to one of the seats after he was ousted as CEO, and the other two remain vacant.

Travis resigned from his post in June this year under pressure from investors, after a volatile few months rocked with scandals.

Benchmark, which still holds one of the seats on the Uber board, said that it would never have given Kalanick the three extra seats if it had known about his “gross mismanagement” and other misconduct  which included Kalanick’s personal involvement in acquiring a self-driving startup that stole trade secrets from a competitor, an Uber executive’s alleged malpractices and a pervasive culture of gender discrimination and sexual harassment.

Read here the complete list of scandals which the company has been embroiled in, in 2017.

The suit accuses, “Kalanick, the former CEO of Uber, to entrench himself on Uber’s Board of Directors and increase his power over Uber for his own selfish ends. Kalanick’s overarching objective is to pack Uber’s Board with loyal allies in an effort to insulate his prior conduct from scrutiny and clear the path for his eventual return as CEO—all to the detriment of Uber’s stockholders, employees, driver-partners, and customer.”

The suit added that Kalanick’s position on Uber’s board “is thus improper and inequitable, and should be invalidated.” It seeks an injunction to block Kalanick’s right to appoint new directors, asserting he had agreed to give up those rights when he stepped aside as CEO.

A spokesman for Travis Kalanick stated, “The lawsuit is completely without merit and riddled with lies and false allegations.” He added that Benchmark was acting in “its own best interests” instead of those of Uber, and added that Kalanick “is confident that these entirely baseless claims will be rejected.”

Benchmark invested in Uber six years ago in February 2011, when the ride-hailing service was still building itself up. Bill Gurley, a Benchmark partner, joined the company’s board at the time. Bill Gurley was once a mentor to Travis and one of his closest confidantes.  But he resigned from the company’s board in June 2017 after he grew increasingly unhappy with Kalanick’s behaviour as Uber sunk into a quagmire of scandals, according to sources close to the situation.

Today Benchmark’s stake – almost 13% (and up to 20% of Uber’s voting power) – would be worth almost $9 Bn in the $68 Bn valuation that Uber attained last year.

The lawsuit opens yet another sordid chapter in Uber’s saga of woes, which has been battling one scandal after another starting from allegations of sexual harassment to being sued by Google’s sister company, Waymo, for stolen trade secrets over self-driving cars.

The suit has again raised doubts about Uber’s future and more about Kalanick’s role going forward. Benchmark’s lawsuit will also cause investors to ponder over giving founders extensive power over their firms. If the allegations by Benchmark Capital prove true, Uber’s board will be restored to an eight-member board with one of the seat’s vacant and reserved for its new CEO. But it will also mean that Travis Kalanick could be kicked off Uber’s board of directors, thus, crashing any hopes he might have about returning to Uber in a substantial role a la Steve Jobs and Apple.

(The development was reported by Axios)

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.