Scoop: Benchmark Capital sues Travis Kalanick for fraud - Axios
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Scoop: Benchmark Capital sues Travis Kalanick for fraud

Lazaro Gamio / Axios

The battle between Benchmark Capital and Travis Kalanick just went nuclear, with the venture capital firm suing the former Uber CEO for fraud, breach of contract and breach of fiduciary duty. The complaint was filed earlier today in Delaware Chancery Court.

Key graph, per the suit: "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 customers."

Why it matters: If Benchmark's suit is successful, Kalanick would be kicked off Uber's board of directors -- thus eliminating any faint hopes of him returning to the company in a substantial role.

What to know: Benchmark was an early investor in Uber, and has a seat on its board of directors. It also helped spearhead the move to have Kalanick resign in June, and tensions between the two have contributed, in part, to the slow pace of finding a replacement. Oh, and venture capital firms don't usually sue fellow board members of their single most valuable investment.

Complaint: The suit revolves around the June 2016 decision to expand the size of Uber's board of voting directors from eight to 11, with Kalanick having the sole right to designate those seats. Kalanick would later name himself to one of those seats following his resignation, since his prior board seat was reserved for the company's CEO. The other two seats remain unfilled. Benchmark argues that it never would have granted Kalanick those three extra seats had it known about his "gross mismanagement and other misconduct at Uber" — which Benchmark claims included "pervasive gender discrimination and sexual harassment," and the existence of confidential findings (a.k.a. The Stroz Report) that recently-acquired self-driving startup Otto had "allegedly harbored trade secrets stolen from a competitor." Benchmark argues that this alleged nondisclosure of material information invalidates Benchmark's vote to enlarge the board.

Moreover, Benchmark alleges that Kalanick pledged in writing -- as part of his resignation agreement -- that the two empty board seats would be independent and subject to approval by the entire board (something Benchmark says was the reason it didn't sue for fraud at the time). But, according to the complaint, Kalanick has not been willing to codify those changes via an amended voting agreement.

What Benchmark wants: An invalidation of the June 2016 stockholder vote and related actions, which would effectively eliminate the three board seats. And, in so doing, remove Kalanick from Uber's board of directors. It also is asking the court for a preliminary injunction against Kalanick's ongoing involvement in Uber board matters which, if granted, would remove him from the CEO search process.

Stakes: Per the complaint, Kalanick currently holds around a 10% equity stake in Uber, which most recently was valued at around $70 billion. Benchmark holds approximately 13 percent.

Comment from Kalanick spox: "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."

More: Axios was unable to reach Benchmark (Update: It declined comment). Uber, which is named as a "nominal defendant" (which is just a statutory requirement, it isn't an actual defendant in the case) declined comment. It also is worth noting that, earlier today, Uber's first employee and original CEO, Ryan Graves, said he would step down as VP of operation but maintain his board seat.

Read the entire complaint:

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Ex-Y Combinator COO working on self-driving car startup

via QasarYounis.com

Qasar Younis, a former Google product manager who was most recently chief operating officer at startup accelerator Y Combinator, is quietly working on an autonomous driving startup, Axios has learned from multiple sources.

The details: The company is said to be working on simulation software for self-driving cars, and is finalizing a $10 million funding round led by Andreessen Horowitz (with Marc Andreessen joining the board of directors). Andreessen Horowitz declined comment, while Younis did not return requests for comment.

Background: Younis left Y Combinator in March after four years at the famed Silicon Valley accelerator. Before that, he spent three years as a product manager at Google, which he joined after the search giant acquired his startup (and YC alum) TalkBin. Early in his career, Younis was an engineer with General Motors.

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Kim Jong-un: "Deranged" Trump will "pay dearly" for threats

A man watches a TV news program on a public screen showing an image of North Korean leader Kim Jong Un. Photo: Eugene Hoshiko / AP

North Korea's Supreme Leader Kim Jong-un said Trump will "pay dearly" for his speech calling for destruction of the DPRK. Kim released a statement saying he thinks Trump's speech shows "mentally deranged behavior" and that Trump "is unfit" to serve at the "command of a country." He called Trump a "rogue and a gangster fond of playing with fire, rather than a politician."

The key line: Now that Trump's made "the most ferocious declaration of a war in history that he would destroy the DPRK, we will consider with seriousness exercising of a corresponding, highest level of hard-line countermeasure in history"

Go deeper with our Expert Voices conversation on how war with North Korea would unfold

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U.S. and Russia hold secret talks "somewhere in Middle East"

Alexei Druzhinin, Sputnik, Kremlin Pool Photo via AP

Senior representatives from the U.S. and Russian militaries met in an undisclosed location "somewhere in the Middle East" to discuss the tensions surrounding the anti-ISIS fight in Syria, the AP reports. Army Col. Ryan Dillon wouldn't tell reporters who was there or how long the meeting was.

  • Why pay attention: This is a potential violation of the U.S. ban on military-to-military cooperation with Russia in light of Russia's annexation of part of Crimea. Plus, it shows an increased willingness to coordinate efforts in the region as Russian forces are deployed alongside pro-Syrian forces in the effort to take Deir el-Zour, a strategically significant city in Eastern Syria currently held by ISIS. Russia has warned it would retaliate if Russian forces are attacked.
  • What they discussed: Where forces are located around Deir el-Zour.
  • Up next: Col. Dillon said he wasn't disclosing the location since there might be more talks.
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Haley: I don't want to be Secretary of State

U.N. Ambassador Nikki Haley during the U.N. General Assembly. Photo: Bebeto Matthews / AP

During a press conference this afternoon, U.N. Ambassador Nikki Haley told reporters that while "there's going to be chatter" surrounding her job, she is simply trying "to do a good job and I'm trying to be responsible in my job…I'm trying to serve the president of this country as best I can."

Do you want to be Secretary of State? "No, I do not."

More on the situation around the globe:

  • North Korea: "We're not gonna run scared…If North Korea attacks the United States or our allies, the United States will respond. Period."
  • Myanmar: "The president is very concerned…It's something a lot of us can't stomach." Haley added that Secretary of State Rex Tillerson had spoken to the de facto leader of Myanmar, Aung San Suu Kyi, earlier this week.
  • Iran: "If we don't do something and we make the same mistakes we made with North Korea, we will be dealing with an Iran that has nuclear weapons and ballistic missile technology."
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Mueller seeks phone records on first Trump Jr.-Russia statement

Mueller departs the Capitol after a closed-door meeting with members of the Senate Judiciary Committee. Photo: J. Scott Applewhite / AP

Special Counsel Bob Mueller has requested phone records relating to the initial, misleading statement about the Trump Tower meeting between Donald Trump Jr. and a Russian lawyer that was drafted aboard Air Force One, Politico reports, citing two people "familiar with the investigation."

Why it matters: President Trump helped draft that statement, which carries legal risk.

Go Deeper: Russia probe narrows in on 13 categories, including meetings between Trump and Comey.

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Manafort's continuing to work on affairs abroad

AP Photo / Carolyn Kaster

Trump's former campaign chairman Paul Manafort is working on the Kurdish independence referendum now, which the U.S. opposes over fears it could destabilize Iraq and the fight against ISIS, the NYT reports.

Context: Manafort's foreign lobbying jobs in the past have gotten him in hot water: The government investigation into him began in 2014 over his consulting in the Ukraine; a new investigation opened in 2016; and the news recently surfaced that the government wiretapped him before and after the election under FISA court orders, which were reportedly part of an effort to understand foreign powers.

  • A spokesman for one of the leaders of the referendum movement confirmed Manafort is working on it, but wouldn't detail in what capacity.
  • The referendum is scheduled for Monday.
  • Manafort has not yet registered with the Department of Justice under the Foreign Agents Registration Act for the referendum work. Manafort's spokesman, Jason Maloni, said if his work requires registration, he will. The White House and the DOJ didn't immediately respond to requests for comment.

One key point: Former American diplomat, Peter W. Galbraith, told the NYT "they're a foreign country who wants to get international recognition, and if you can get somebody who is close to the president of the United States to be your advocate, then that could help."

This isn't the only project Manafort's working on abroad:

  • He's advising a billionaire in China on infrastructure contracts.
  • He's working on a plan linked to the Chinese government's China Development Bank related to Puerto Rico's bond debt.
  • He met with Lenin Moreno, now the president of Ecuador, earlier this year about investment opportunities.

Go deeper:

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Study: Flint water crisis caused reproductive issues

The Flint Water Plant tower in Flint, Michigan. Photo: Carlos Osorio / AP

The water crisis in Flint caused a variety of serious issues for both fetuses and newborns and their mothers due to increased levels of lead, according to a new study by Kansas University researchers cited in the Detroit Free Press.

By the numbers: After the city began using the Flint River as its water source in April 2014, fetal death rates jumped by 58% while fertility rates for women dropped by 12%, per the study.

  • The researchers compared birth rates and fetal death data from Flint and 15 other large cities in Michigan, telling the Detroit Free Press that "Flint's numbers fell off a cliff" after the water switch while the other cities remained constant.
  • The babies born in Flint after the water switch were born earlier and an average of 150 grams lighter than in other Michigan cities. They also gained weight slower in their first weeks.

Worth considering: The study has not been peer-reviewed yet, but the Kansas researchers hope that their work will spur other studies to confirm their findings and instigate changes in policy.

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Facebook will turn over Russian-bought ads to Congress

Jeff Chiu / AP

Facebook will give congressional investigators access to the more than 3,000 ads bought by Russian operatives during the campaign, it said on Thursday, reversing a previous decision that had drawn criticism. It also said it would increase transparency around political ad spending in a move that gets ahead of any new disclosure rules lawmakers could try to impose on digital campaign ad spending.
Details: Facebook had previously said it hadn't provided that information to congressional investigators, citing privacy concerns and federal law, but had provided the information to Special Counsel Robert Mueller. Colin Stretch, the company's general counsel, said Thursday that the decision had been made after a legal review.
"We believe it is vitally important that government authorities have the information they need to deliver to the public a full assessment of what happened in the 2016 election," said Stretch in a blog post. "That is an assessment that can be made only by investigators with access to classified intelligence and information from all relevant companies and industries — and we want to do our part."

New rules for political ads: In what is perhaps the most drastic change for advertisers and ad buyers, Zuckerberg said that in the coming months they will not only require that advertisers have to disclose which page paid for an ad, "but we will also make it so you can visit an advertiser's page and see the ads they're currently running to any audience on Facebook."

In a separate post, Facebook issued a set of answers to questions around the probe. Key takeaways:
  • Facebook says it didn't know when the ads were purchased that they might be part of a Russian operation because they were uploaded using Facebook's self-service tool, and weren't sold directly from a Facebook salesperson to a client.
  • The company says it's possible there are more ads from Russian or other foreign actors using fake accounts, but it is actively looking for this type of abuse. "It's possible that government investigators have information that could help us," said Elliot Schrage, the company's top policy executive, in the post.
What they're not doing: Releasing this information to the public.That's not likely to satisfy critics who argue there should be more transparency required about who buys digital political ads. Facebook cited "sensitive national security and privacy issues" involved in the investigation.
Key quote: "I don't want anyone to use our tools to undermine democracy," said Facebook CEO Mark Zuckerberg on Thursday. "Now, I wish I could tell you that we're going to be able to stop all interference. But that just wouldn't be realistic."
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EU cracks down on Silicon Valley with new tax proposals

Kirsty Wigglesworth / AP

The European Union wants to raise taxes for some of the biggest U.S. tech companies, like Amazon, Google and Facebook, in an effort to open up competition to other businesses that service over 500 million EU customers. In a proposal laid out Thursday, EU regulators said international tax laws are outdated and suggested they would put forward new mandates if a rewrite of the international tax code didn't happen by next spring.

Why it matters: The absence of regulation to curb the dominance of tech giants has enabled them to grow so big that just a few companies own the majority of digital advertising and e-commerce revenue globally. European regulators have been far more aggressive in policing technology companies than the U.S. government and has issued several antitrust penalties, including a $2.7 billion fine against Google earlier this year.

Recommendations: EU regulators recommended several options, including an "equalization" tax, on digital revenue and a "withholding" tax on digital transactions of goods and services to companies outside of the EU.

In response, the technology industry trade group ITI released a statement urging the EU to ensure its policymaking "is consistent with the larger multilateral cooperation" and urging US lawmakers to modernize the U.S. tax code by passing pro-growth tax reform.


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Mnuchin on sanctions: Do business with U.S. or North Korea, "not both"

Treasury Secretary Steve Mnuchin detailed the intent of Trump's new sanctions on North Korea at the UNGA Thursday. Photo: Alex Brandon / AP

President Trump's executive order issuing new sanctions on North Korea sends a clear signal to foreign financial institutions that they can do business with North Korea or the U.S., "but not both," said Treasury Secretary Steve Mnuchin at the UN General Assembly Thursday. "No bank in any country should be used to facilitate Kim Jon Un's destructive behavior," he said.

Mnuchin disputed that the order targets China, North Korea's largest trading partner: "This action is directed at everyone, it is in no way specifically directed at China... we appreciate the way they're working with us."