Uber pushed the limits of the law. Now comes the reckoning

Uber pushed the limits of the law. Now comes the reckoning

The ride-hailing company faces at least five U.S. probes, two more than previously reported, and the new CEO will need to dig the company out of trouble, Bloomberg reports.

Shortly after taking over Uber Technologies Inc. in September, Dara Khosrowshahi told employees to brace for a painful six months. U.S. officials are looking into possible bribes, illicit software, questionable pricing schemes and theft of a competitor’s intellectual property. The very attributes that, for years, set the company on a rocket-ship trajectory—a tendency to ignore rules, to compete with a mix of ferocity and paranoia—have unleashed forces that are now dragging Uber back to down to earth.

Uber faces at least five criminal probes from the Justice Department—two more than previously reported. Bloomberg has learned that authorities are asking questions about whether Uber violated price-transparency laws, and officials are separately looking into the company’s role in the alleged theft of schematics and other documents outlining Alphabet Inc.’s autonomous-driving technology. Uber is also defending itself against dozens of civil suits, including one brought by Alphabet that’s scheduled to go to trial in December.

Some governments, sensing weakness, are moving toward possible bans of the ride-hailing app. London, one of Uber’s most profitable cities, took steps to outlaw the service, citing “a lack of corporate responsibility” and specifically, company software known as Greyball, which is the subject of yet another U.S. probe. (Uber said it didn’t use the program to target officials in London, as it had elsewhere, and will continue to operate there while it appeals a ban.) Brazil is weighing legislation that could make the service illegal—or at least treat it more like a taxi company, which is nearly as offensive in the eyes of Uber.

Interviews with more than a dozen current and former employees, including several senior executives, describe a widely held view inside the company of the law as something to be tested. Travis Kalanick, the co-founder and former CEO, set up a legal department with that mandate early in his tenure. The approach created a spirit of rule-breaking that has now swamped the company in litigation and federal inquisition, said the people, who asked not to be identified discussing sensitive matters.

Kalanick took pride in his skills as a micromanager. When he was dissatisfied with performance in one of the hundreds of cities where Uber operates, Kalanick would dive in by texting local managers to up their game, set extraordinary growth targets or attack the competition. His interventions sometimes put the company at greater legal risk, a group of major investors claimed when they ousted him as CEO in June. Khosrowshahi has been on an apology tour on behalf of his predecessor since starting. Spokespeople for Kalanick, Uber and the Justice Department declined to comment.

Kalanick also defined Uber’s culture by hiring deputies who were, in many instances, either willing to push legal boundaries or look the other way. Chief Security Officer Joe Sullivan, who previously held the same title at Facebook, runs a unit where Uber devised some of the most controversial weapons in its arsenal. Uber’s own board is now looking at Sullivan’s team, with the help of an outside law firm.

Salle Yoo, the longtime legal chief who will soon leave the company, encouraged her staff to embrace Kalanick’s unique corporate temperament. “I tell my team, ‘We’re not here to solve legal problems. We’re here to solve business problems. Legal is our tool,’” Yoo said on a podcast early this year. “I am going to be supportive of innovation.”

From Uber’s inception, the app drew the ire of officials. After a couple years of constant sparring with authorities, Kalanick recognized he needed help and hired Yoo as the first general counsel in 2012. Yoo, an avid tennis player, had spent 13 years at the corporate law firm Davis Wright Tremaine and rose to become partner. One of her first tasks at Uber, according to colleagues, was to help Kalanick answer a crucial question: Should the company ignore taxi regulations?

Around that time, a pair of upstarts in San Francisco, Lyft Inc. and Sidecar, had begun allowing regular people to make money by driving strangers in their cars, but Uber was still exclusively for professionally licensed drivers, primarily behind the wheel of black cars. Kalanick railed against the model publicly, arguing that these new hometown rivals were breaking the law. But no one was shutting them down. Kalanick, a fiercely competitive entrepreneur, asked Yoo to help draft a legal framework to get on the road.

This is a great story. Continue reading… https://www.bloomberg.com/news/features/2017-10-11/uber-pushed-the-limits-of-the-law-now-comes-the-reckoning

  • Uber pushed the limits of the law. Now comes the reckoning

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