Jan 9, 2020

Modern Health co-founder sues company, claims kickbacks

Illustration: Aïda Amer/Axios

The ousted co-founder of a Kleiner Perkins-backed startup claims that the company — which sells mental health services as an employee benefit — bribed and lied to prospective customers, according to a lawsuit filed in San Francisco Superior Court.

Why it matters: The allegations, denied in their entirety by defendant Modern Health and its CEO, dispute the honesty of those providing support to employees of such major companies as Netflix.

The plaintiff is Erica Johnson, a neurobiology researcher and engineer who co-founded Modern Health in 2017 with Alyson Friedensohn, but was later fired.

  • Johnson filed suit against both Modern Health and Friedensohn for breach of contract, wrongful termination, relation, and defamation.
  • She alleges that Friedensohn gave stock to agents of prospective customers as a bribe to get business — and repeatedly asked Modern Health employees to lie to prospective customers about key aspects of the company's business (e.g., the size of its network, services, and regulatory compliance).
  • Her allegations are largely mirrored in a second lawsuit filed against Modern Health and Friedensohn, by a small venture capital firm led by two former executives at LinkedIn (where Johnson's husband also used to work).

Yes, but: The complaint is explosive, but does not include any emails, affidavits, or other supporting evidence. When contacted by Axios, Johnson's attorney declined to provide additional information, and neither Johnson herself nor C3 Ventures responded to our inquiries.

Modern Health and its attorney emphatically deny all the allegations, including the equity kickbacks, as does a current company employee whom Johnson's lawsuit claims was instructed to lie. The company also has re-upped several of its large customers, which may raise doubts over claims that it misrepresented its capabilities.

Modern Health has not yet filed a legal response, although is required to do so by month's end (unless the two sides enter arbitration). In a statement to Axios, Modern Health says:

“It’s unfortunate that a former employee and a couple of her friends would bring such meritless claims, whose only purpose is to try and distract the company from its mission of improving access to critical mental health care resources.”

The big picture: Silicon Valley is known for encouraging startups to “move fast and break things." But, in recent years, companies have come under stricter scrutiny, particularly in highly-regulated industries like healthcare where rule-breaking can have severe consequences for the end-user.

  • Go deeper: Erica Johnson's complaint is below:

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Johnson & Johnson's latest legal woes

Photo: Mark Ralston/AFP via Getty Images

A San Diego Superior Court judge ordered Johnson & Johnson to pay $344 million for misrepresenting the risks of vaginal-mesh implants, Bloomberg reports.

The big picture: The fine isn't very large in the grand scheme of things, and although California was only the first state to bring its claims against J&J to trial, the company previously resolved similar claims by 41 other states for $117 million.

Go deeper: Johnson & Johnson's legal bills keep mounting

WHO warns of 13 emerging health threats including possible pandemics

Photo: Probst/ullstein bild via Getty Images

Government leaders need to implement a "decade of change" and invest more in the key health priorities and systems to prevent global health threats over the next decade, the World Health Organization warned last week.

What's new: Climate change, infectious diseases and epidemic threats, socioeconomic inequalities, and conflicts are some of the 13 urgent challenges WHO says will imperil global health — but addressing them is "within reach" if action is taken now.

Go deeperArrowJan 20, 2020

Ex-Kleiner Perkins partner raises $87 million for digital health fund

Illustration: Sarah Grillo/Axios

Lynne Chou O'Keefe, a former partner at Kleiner Perkins, has launched a new venture capital firm called Define Ventures that will focus on early-stage digital health companies. She also raised $87 million for the firm's debut fund.

Why it matters: Digital health is a growing area, with Define to focus on such sub-sectors as telemedicine, clinical research databases, and chronic condition management.

Go deeperArrowJan 13, 2020