Benchmark Capital Sues Former Uber CEO Travis Kalanick For 'Selfish' Fraud

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According to a complaint filed by Benchmark Capital Partners in a DE court, Mr Kalanick - who stepped down as CEO of the company earlier this year - "fraudulently obtained control" of seats on Uber's board of directors by covering up "gross mismanagement and other misconduct". Both Kalanick and Benchmark hold Uber board seats.

Benchmark's complaint comes the same day that Ryan Graves, Uber's first employee and a longtime board member, stepped down as one of the top officials in the company's operations department.

The decision expanded Uber's board from eight to 11 seats and gave Kalanick control of three seats.

The lawsuit stems from Kalanick's previous machinations to increase the size of the company's board of directors, which allowed Kalanick to name himself to one of those seats.

Marcel Kahan, a professor at New York University Law School, agrees, saying that a court may well decide that Benchmark simply should have been more careful before deciding to cede so much power to Kalanick.

Benchmark's lawsuit "is a big deal", said David Larcker, director of Stanford University's Corporate Governance Research Initiative.

Kalanick was forced to resign from Uber as chief executive in late June in a shareholder coup orchestrated by Benchmark and other board members. It concerns an agreement between Kalanick and investors in June of 2016. Benchmark said it would not have approved the three seats, had it known about these issues, and that Kalanick used the seats to gain power knowing that he could be removed.

Benchmark Capital now owns a 13 per cent stake in Uber which equates to about $9.1 billion. It alleges that Kalanick promised in writing to ensure the two other board vacant seats would be unbiased, and contingent on the rest of the board's approval.

Kalanick's pugnacious style largely defined Uber's approach and helped it become a transportation colossus valued at $68 billion, the largest private firm backed by venture capitalists in the world. "Moreover, the value of Benchmark's investment in Uber is significantly threatened by Kalanick's continued presence on the board". On Thursday, Benchmark Capital Partners, one of the earliest investors in the ride-hailing company, filed a lawsuit against Kalanick with the hope of squashing any such plans.

The shareholders had felt that there was an immediate need for Kalanick to step down as CEO, since the company needed a better leadership. Benchmark Capital claims Kalanick knew about these problems, and his failure to disclose this information and other things like it makes the stock-holder vote invalid.

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