More Woes for Uber: Exec Resigns, Investor Sues Ousted CEO

Alain Brian
Août 12, 2017

Early Uber champion Benchmark Capital Partners LP fired a broadside in Delaware Chancery Court on Thursday at the company and former CEO Travis Kalanick with a suit claiming fraud and concealment of gross mismanagement and seeking an injunction barring Kalanick's participation in board decisions.

The suit alleges that Kalanick fraudulently withheld critical information from Uber's board of directors when he asked to increase the size of the board from eight to 11 members. Members of Uber's board, not including Kalanick or Benchmark's Matt Cohler, said they were "disappointed that a disagreement between shareholders has resulted in litigation", according to an emailed statement.

"The Board of Directors is disappointed that a disagreement between shareholders has resulted in litigation", the directors wrote.

San Francisco: A major Uber investor has sued founder Travis Kalanick, accusing the recently departed chief executive of covering misdeeds while rigging the board in order to return to power at the company. Benchmark's lawsuit alleged that Kalanick was scheming to regain power by attempting to "pack the board".

The investors called on Benchmark to remove itself from the company board and divest enough of its shares so that the firm would no longer have the right to appoint other board seats.

Reuters confirmed the email with a source close to one of the investors.

"The combination of this lawsuit and his cofounder's statement that he's not coming back are pretty strong statements", said Ben Narasin, a Silicon Valley venture capitalist. "Naturally, we share your concerns about the problems that the Company has confronted in recent months, but we are greatly concerned about the tactics employed by Benchmark to address them, which strike us as ethically dubious and, critically, value-destructive".

The email from the board of directions was signed by Yasir Al-Rumayyan, Ryan Graves, Arianna Huffington, Wan Ling Martello and David Trujillo.

While Benchmark's voting power nominally gives it the clout to outvote Kalanick, Kalanick now controls three out of 11 board seats, his own and two vacant seats. Notably, Kalanick is one of the board members on the search committee for a new CEO, which may be one of the reasons nobody has stepped up to take the job.

Kalanick, who had been the driving force behind Uber's massive global expansion and whose brash style had made him a liability, still holds a large voting stake in the company, whose Dollars 68 billion valuation makes it the world's largest venture-backed startup.

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