Uber’s Ousted CEO Travis Kalanick Described a Lawsuit Against Him as ‘a Personal Attack’

Will Uber ever find a replacement for Travis – or is this all part of Travis’ plan? In this roundup, senior RSG contributor John Ince covers Uber’s search for a CEO, Uber’s supposed revenue, and an update on all the lawsuits Uber is facing.

John Ince covers Uber's search to replace former CEO Travis Kalanick, Uber's supposed revenue, and an update on all the lawsuits Uber is facing -

Uber’s ousted CEO Travis Kalanick described a lawsuit against him as ‘a personal attack’ [Business Insider via Reuters]

Sum and Substance: Ousted Uber CEO Travis Kalanick has described a lawsuit against him as a “public and personal attack” in a court filing, which we first saw via BuzzFeed News. Kalanick filed his response late on Thursday to the suit brought by Benchmark Capital, an early investor in Uber suing him for alleged fraud, breach of contract, and fiduciary duty.

The filing said: “Benchmark Capital Partners initiated this action as part of its public and personal attack on Travis Kalanick, the founder of Uber.” It accused Benchmark of “secretly planning” to oust Kalanick shortly after his parents were involved in a boating accident, resulting in the death of his mother. “It executed its plan at the most shameful of times: immediately after Kalanick experienced a horrible personal tragedy,” the filing said.

Kalanick resigned as CEO in late July, after a number of scandals blew up around the company, but still sits on Uber’s board. Benchmark Capital also holds a board seat, and says it controls 20% of voting rights. The suit revolves around a decision in 2016 to expand Uber’s board of voting directors from eight to 11, with Kalanick controlling who had those seats. Benchmark claimed it would never have allowed the three extra seats if it had known about Kalanick’s “gross mismanagement and other misconduct at Uber”, citing scandals such as Uber’s “Greyball” software to deceive authorities, and an executive apparently accessing a rape victim’s medical files in India. Benchmark wants that 2016 decision rescinded, so pushing Kalanick from Uber’s board.

Kalanick’s filing gives a brief history of Uber, and a timeline of how Kalanick’s July resignation came about. It said a week-and-a-half after the funeral of Kalanick’s mother, two Benchmark partners went to his hotel room and demanded he step down. “They threatened to launch a public campaign against him if he refused,” the filing said. And it said Benchmark’s allegations of fraud were “threadbare.”

My Take: Okay, Travis, yes, Benchmark’s suit was a personal and public attack on you. Agreed, now what?  Travis Kalanick’s legal response to the Benchmark’s fraud lawsuit is telling. In his 15 page brief, after all the obligatory legal posturing, his main argument is that these matters should be decided by an arbiter – not a judge.

Why is this so important to Travis? Because it would keep all the sordid details out of the public eye. This appears to be the key issue for Travis.  It also might serve to explain why Travis agreed to step down when presented with that demand letter from Benchmark in Chicago.  Perhaps as the demand letter was presented to Travis, Benchmark also threatened to air all of Travis’s dirty laundry via a lawsuit.

Travis had the votes to stay on as CEO.  Why else would Travis have agreed to step down – unless he was afraid of what people might learn about the company and him?  Remember, Uber has not had a CFO for over two years. Could be something to think about…

Jeff Immelt has emerged as the front-runner to become Uber’s CEO [Recode]

Sum and Substance: Former General Electric chairman Jeff Immelt has become the front-runner candidate to become CEO of Uber, according to numerous sources with knowledge of the situation. While the tension on the board of the car-hailing company remains high — due of late to an ugly lawsuit that one of its major investors, Benchmark, is waging against its ousted co-founder and CEO Travis Kalanick — sources said that a majority of the board is coalescing around the experienced Immelt.

That could certainly change, said sources, and there are two other executives who are also still being considered, neither of whom is a woman, as some had hoped. Sources said a vote of Uber’s directors is likely to happen within the next two weeks, which does not have to be unanimous, although most directors are hoping it will be. In any case, Immelt has pulled ahead, said several sources.

… And, also suffice it to say, such machinations are unlikely to faze an experienced CEO like Immelt, which is one of the attractions of him, said numerous sources close to the deliberations. “He certainly is not someone anyone can push around easily, which is probably his best characteristic,” said one source. “We all know Immelt’s not the dynamic entrepreneur that Travis is, but he can certainly settle things down.” Another source added that Immelt is also a known quantity to investors and Wall Street, as well as among techies, which would help greatly when Uber prepares to go public in the coming few years. “Even if Uber sold itself, Jeff could handle that too,” the source said.

Also critical is to stop the focus on Uber’s corporate drama that continues to spin out of control, much of it self-inflicted. The Benchmark lawsuit against Kalanick appears to be the final straw and has been badly received by the board and the company employees, as well as by much of Silicon Valley.

My Take:  At this point, this is all speculation, so I’m not going to get into too deep of an analysis of Immelt’s qualifications for this job. I’ll save that for when the CEO search has been finalized.

I’ll just say that anybody who takes this job better have thick skin, especially with 433 lawsuits filed against Uber, just within the last year.  (See article below.) With huge questions hovering over the company and their strategy, their morality and their finances, the fact that someone of Immelt’s stature is giving this a serious look is encouraging.  If he were able to steer Uber to profitability and a successful IPO, that would be a major accomplishment.

In the first 3 months of 2017, Uber earned a revenue of $3.4 billion [The TechNews]

Sum and Substance:… amidst all these chaotic news the ride-hailing company earned higher revenue than the last quarter. In the first 3 months of 2017, Uber earned a revenue of $3.4 billion. Uber was struggling to cover its financial distress for quite a long time. The company’s better performance in this latest quarter shows hope for its investors. Revenue of the company for this quarter increased as much as 18 percent. Nevertheless, the ride-sharing giant couldn’t make any profit. Moreover, Uber losses decreased to $704 million from $991 million.

UBER’S HEAD OF FINANCE LEAVES

Regardless of narrowing the loss, the company is still worried about its finance. Finance head of Uber joined other executives leaving the company. Gautam Gupta, Uber’s head of finance goes to join an unnamed Silicon Valley startup. He was handling Uber’s finance for 4 years. As Mr. Gupta leaves the company, it started looking for a CFO. However, experts say that it’ll be challenging for Uber Technologies Inc. to find the CFO it needs. The organization search for a highly experienced chief financial officer who will also be able to handle IPO matters as the company plans to go public.

My Take:  There are a few noteworthy announcements buried in this short piece – one of many stories on Uber’s recently released, highly abbreviated financials. It’s worth noting that Uber is the source of all this information – for whatever that’s worth as a caution.

Now to the revelations. First, with Gautam Gupta, Uber head of finance for the last 4 years, leaving, we’ve really got to be wondering who’s in charge of Uber finances.  They haven’t had a CFO for over two years – virtually unheard of for a company this size. Second, Uber’s quarterly losses – at $704 million – remain astronomical for a startup. Uber spins this as an improvement from the previous quarter when they only lost $991 million. Strange reasoning for sure.

Third, the gross bookings figure cited in this article and other places is grossly misleading because Uber uses the unusual practice of counting the entire fare in UberPOOL as gross revenues, when they’re actually only keeping the commission. Why does Uber do this? Who knows. It certainly makes Uber’s growth look more impressive, but soon it’s going to have to change when new accounting principles take effect in January 2018 or 2019 – all information uncovered by our esteemed reader and commentator, Scott Myers.

Uber has reportedly been sued at least 433 times in 2017 [VentureBeat]

Sum and Substance: According to a story by Courthouse News Service, the ride-hailing service has been sued “at least 433 times this year.” The service cites the numbers from its own database that tracks legal filings. The datapoint was tucked into a story about another legal filing against Uber made by a female passenger who claims an “Uber driver pushed her from a speeding car when, alarmed by his erratic behavior, she asked him to let her out.”

… Courthouse says the actions include “claims of negligence, failure to train, exaggerating the background checks it claims to do on its drivers, many injury accidents, including an alleged death caused by an Uber driver using his mobile phone while driving, and class actions about its treatment of drivers, including failing to secure workers’ compensation insurance for them, and failing to serve disabled passengers.” … There’s a Florida Uber driver suing the company for its ban on carrying firearms. There’s a new class action lawsuit claiming Uber failed to secure workers’ compensation coverage for drivers. There’s a lawsuit that claims Uber’s change in payment models is stiffing some drivers. And poor handicap access. A woman who claims that she and at least 200 other women have been sexually assaulted by Uber drivers. And the woman who was raped by an Uber driver in India has now sued the company for illegally obtaining her medical records. … The company’s highest-profile legal dispute is now the lawsuit filed by investor Benchmark against the company and former CEO Travis Kalanick, claiming the latter should be removed for the board and misled investors. Kalanick has said the claims are without merit.

My Take: Last I heard, there were about 100 lawsuits pending against Uber, but I don’t recall the source. This sounds more authoritative because it’s the result of a database search. If true, this is an astounding number. It’s an indication that ill will has a direct effect on the bottom line. It also helps that Uber has deep pockets – a winning formula for any enterprising lawyer. 

Readers, what do you think of this week’s round up? Do you have any lawsuit updates to share? Let us know in the comments!

-John @ RSG