VC Firm Benchmark Capital Sues to Oust Kalanick From Uber's Board

NEWS ANALYSIS: Major Uber investor Benchmark Capital claims it was defrauded by former CEO Travis Kalanick in a board organization vote and sues to remove him from the board.

Uber Leadership

NEWS ANALYSIS: Venture investment firm Benchmark Capital has filed suit claiming that former CEO Travis Kalanick fraudulently hid critical information from the board of directors.

Benchmark Capital wants former CEO Travis Kalanick to be gone from Uber, apparently forever.

Kalanick, who gave up his position as CEO of the ride-sharing company he founded, is being charged with fraud in a civil suit filed by Benchmark Capital. 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.

In that vote, Uber’s board agreed to the additional seats and also agreed that Kalanick could have the sole power to appoint those new board members. However, Benchmark also claims that Kalanick has reneged on his promise to make those new directors independent and diverse. Instead, the suit says that Kalanick appointed himself to one of those board positions and has refused to fill the others.

Benchmark’s suit lists four events that it says Kalanick hid from the board. They are Kalanick’s support for a harassing and abusive management style, the theft of trade secrets by a founder of Otto, an autonomous truck technology company that was acquired by Uber, the existence of the Grayball software to shut regulators out of the ride-sharing service, and the charge that Kalanick had received and read the medical records of a woman in India that complained of being raped by an Uber driver.

Kalanick gave up a direct management role in the company after the board voted to adopt a 10 point list of recommendations to improve corporate governance included in a report by an independent legal team that investigated the company's management practices.

The first line of the report begins, “Review and Reallocate the Responsibilities of Travis Kalanick.”

In June Kalanick announced he was taking a leave of to mourn the death of his mother. But a few days later he announced he had resigned as Uber CEO.

In the suit, Benchmark says that it would not have voted in favor of the changes to Uber’s board if it had known of those problems and it claims that Kalanick concealed the issues in an attempt to stay on the board and eventually return as CEO. If Benchmark gets its way that board vote would be invalidated and Kalanick would be forced off the Uber board.

Kalanick resigned as CEO of Uber on June 20, and in the process, gave up his seat on the company’s board because it was reserved for the CEO. However, immediately after his resignation, Kalanick exercised his right under his agreement with the board to fill one of those three board seats and he named himself.

At this point, Uber is still without a CEO while the board tries to find someone to fill the position. 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.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...