Scoop: Benchmark Capital sues Travis Kalanick for fraud - Axios
Top Stories
Featured

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:

Sign up for Axios newsletters and alerts.

Featured

Trump trade adviser circulated docs linking manufacturing declines to abortion, spousal abuse

Peter Navarro. Photo: Andrew Harnik / AP

Peter Navarro, President Trump's top adviser on trade policy, circulated two diagrams internally claiming without evidence that decreased manufacturing is causing divorce, spousal abuse, increased abortion rates, increased drug use and more, according to the Washington Post, which obtained the documents.

Why it matters: President Trump and Navarro are aligned on trade, both contending that broad agreements like NAFTA are killing U.S. manufacturing. Two White House officials told the Post of concerns that "such unverified information could end up steering White House policy."

Go deeper: The art of the deal-breaker.

Featured

White House weighs in on Niger deaths, travel ban ruling

Trump at a Rose Garden press conference Tuesday afternoon. Photo: Carolyn Kaster / AP

President Trump called the families of the four U.S. service members killed in action in Niger to offer condolences, Press Secretary Sanders said Tuesday evening. Trump was questioned about his public silence on the deaths yesterday, and falsely claimed his predecessors had declined to call families of those killed.

The White House also released a statement calling a Hawaii federal judge's block on Trump's revised travel ban a "dangerously flawed" decision. The Justice Department will "vigorously defend" the ban, the White House said.

Meanwhile, Trump sent out two afternoon Twitter attacks — one aimed at the media and the other aimed at Democrats in Congress.

Featured

McCain says he'll support bipartisan health care plan

McCain speaks after he received the Liberty Medal from the National Constitution Center in Philadelphia. Photo: Matt Rourke / AP

Sen. John McCain, whose opposition sunk an earlier Republican health care proposal, said Tuesday night that he looks "forward to supporting" the bipartisan plan put forward by Republican Sen. Lamar Alexander and Democratic Sen. Patty Murray. McCain added that he hopes the plan is "a sign of increased bipartisanship moving forward."

President Trump has called it a "good short term solution" and Chuck Schumer has said most Democrats are supportive. House conservatives, meanwhile, are more skeptical.

Go deeper: The details of the plan.

Featured

Mueller's team interviewed Sean Spicer Monday

Spicer resigned as Press Secretary over the summer. Photo: Alex Brandon / AP

Former White House Press Secretary Sean Spicer was interviewed Monday by Special Counsel Robert Mueller's team, Politico reports. Spicer fielded questions on the firing of James Comey and Trump's meetings with Russians, including his Oval Office meeting with Russian Foreign Minister Sergei Lavrov, per Politico, in a meeting that lasted "much of the day."

The big picture: Mueller's investigation has reached people who were in the room when Trump made key decisions and statements that are now under scrutiny.

Go deeper: Spicer kept notebooks detailing goings-on at the White House; Mueller wants to speak with six Trump aides

Featured

Close Putin ally linked to Russia's fake news factory

Photo: Mikhail Klimentyev / AP

The Russian "troll factory" that spread misinformation during the 2016 U.S. election, the Internet Research Agency (IRA), was funded by a close ally of Vladimir Putin's, according to a CNN report. The oligarch, Yevgeny Prigozhin, is nicknamed "Putin's Chef." His business, Concord Management and Consulting, had a contact drawn up with IRA in 2013 for 20 million rubles ($650,000).

Why it matters: This is further evidence that election meddling efforts reached into Putin's inner circle.

Featured

EPA loosens radiation safety standards

Photo: Pablo Martinez Monsivais / AP

The Environmental Protection Agency has labeled levels of radiation 10x greater than those considered acceptable under the Obama administration as not harmful to people's health, according to a Bloomberg report. The EPA sets such regulations in case of nuclear meltdowns or other events that expose the public to radiation.

  • EPA spokesman Michael Abboud said: "EPA has not changed its standards regarding radiation exposure, and no protective guidelines were changed during this administration...The guidance was released on January 11, 2017 -- before the President was inaugurated." Bloomberg said an FAQ on the decision was released last month.
  • Jeff Ruch, executive director of the Public Employees for Environmental Responsibility, told Bloomberg: "This appears to be another case of the Pruitt EPA proclaiming conclusions exactly opposite...of scientific research."
Featured

Facebook's head of experimental hardware is leaving

Regina Dugan is leaving Facebook. Photo: Photo by Brad Barket/Getty Images

The head of Facebook's skunkworks division Building 8 will leave the company. Regina Dugan said in a statement given to Recode that there's "is a tidal shift going on in Silicon Valley, and those of us in this industry have greater responsibilities than ever before" and that the "time feels right" to be "thoughtful about new ways to contribute in times of disruption." She said in a different post that she will be in charge of a "new endeavour."

Why it matters: Dugan arrived at Facebook last year to lead a division tasked with projects like building a way to type with your mind. Her departure comes as the company faces enormous pressure over its role in an increasingly unequal and divided society.

Featured

Magic Leap confirms $502 million fundraise

Magic Leap CEO Rony Abovitz
Photo by Brian Ach/Getty Images for Wired

Magic Leap, the secretive "mixed reality" startup, announced on Tuesday that it has raised $502 million in new venture capital funding led by Singapore sovereign wealth fund Temasek. This is the same round that Axios discussed last week, based on a Delaware regulatory filing (which authorized up to $1 billion in new shares at an increased valuation). The post-money valuation appears to be around $5 billion.

Bottom line: Investors clearly keep seeing something they like in Magic Leap, but consumers are still waiting for the Florida-based company's first product to debut.

Cap table: In addition to Temasek, other new Magic Leap investors include EDBI (Singapore), Grupo Globo (Brazil) and Janus Henderson Investors. Return backers include Alibaba Group, Fidelity Management and Research Company, Google, J.P. Morgan Investment Management, and T. Rowe Price.

Related: A pair of former Magic Leap engineers today announced that their new startup, which helps streamline the design process of 3D concepts for VR/AR apps, has raised $3.5 million in seed funding.

Featured

Federal judge blocks Trump's latest travel ban

An Iraqi family landed in the United States as a federal court blocked a travel ban in March. Photo: Felipe Dana / AP

A federal judge in Hawaii has blocked President Trump's third attempt at implementing a travel ban, which was set to go into effect Wednesday.

What's next: The administration is almost certain to appeal, meaning the revised ban could again reach the U.S. Supreme Court. But for now, the block means the administration cannot deny travelers from six of the eight countries officials said were either unable or unwilling to provide the information the U.S. requested for entry.

  • His quote: Judge Derrick K. Watson in Hawaii, who issued a temporary restraining order against the administration, said the latest version of the ban, "suffers from precisely the same maladies as its predecessor."
  • What's in question: As with the previous versions, the underlying decision relies on whether the ban is based on animosity toward Muslims.
  • What makes this ban different from the previous versions: The latest order was only passed after the U.S. underwent extensive negotiations with other countries for more information that would vet their citizens. The list of countries affected by the ban also now includes North Korea and Venezuela, two countries that are not Muslim-majority. The other countries include Syria, Libya, Iran, Yemen, Chad, and Somalia.
  • What critics are saying: Challengers argue the additions are largely "symbolic," per the Washington Post's Matt Zapotosky, who writes that the new order would only impact" certain government officials from Venezuela, and very few people actually travel to the U.S. from North Korea each year."
Featured

Trump's short list for Fed chair

Yellen at a hearing in Washington. Photo: Andrew Harnik / AP

President Trump is expected to name his pick to be chairman of the Federal Reserve before leaving on an Asia trip Nov. 3, Bloomberg reports. Here are the candidates:

  1. Current chair Janet Yellen
  2. Fed board member Jerome Powell
  3. National Economic Council Director Gary Cohn
  4. Former Fed member Kevin Warsh
  5. Stanford University economist John Taylor
Why it matters: "At issue for the next Fed chair, if Yellen isn't renominated, is ensuring the long expansion doesn't give way to a recession," Bloomberg writes.