Early Uber Investor Sues Former CEO Travis Kalanick for Fraud

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Benchmark's suit, filed in Delaware Chancery Court, seeks to have Kalanick removed as a director by reversing the board-expansion decision.

Benchmark, which was an early investor in Uber and has a seat on its board of directors, alleges that Kalanick's "overarching objective" is to pack the board with "loyal allies in an effort to insulate his prior conduct from scrutiny and clear the path for his eventual return as CEO - all to the detriment of Uber's stockholders, employees, driver-partners, and customers".

Members of the board sent an e-mail to Uber staff expressing dismay over the Benchmark lawsuit, according to a copy of the note.

The allegations have been called by the former CEO's spokesperson as completely without merit and baseless. Benchmark's suit accuses Kalanick of intending to use the board seats to put himself back in the CEO seat. The other two are still unfilled.

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. In a long list of items that Benchmark characterizes as "gross mismanagement" by Kalanick is his "personal involvement in causing Uber to acquire a self-driving vehicle start-up that, according to a confidential report not disclosed to Benchmark at the time (the "Stroz Report"), allegedly harbored trade secrets stolen from a competitor".

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According to Pishevar, Benchmark's lawsuit has "held the company hostage to a public relations disaster". But in a statement, Kalanick's spokesperson said the lawsuit is an attempt to deprive Kalanick of his rights as an Uber founder and shareholder. The three investors and Benchmark did not immediately respond to a request for comment.

One Uber investor told Reuters that Kalanick's continued role at the company has complicated the CEO search and scared off some good candidates.

It's the latest sign that, despite Kalanick's recent resignation from Uber, the company continues to find itself immeshed in Kalanick-related chaos. Eight days later, under pressure from the board, he resigned. The former Kalanick confidant was said to be one of the key people who urged for him to resign. Tensions between Uber and Benchmark have remained high, which Axios says has contributed to the slow pace in finding a new CEO. "Despite rumors I'm sure you've seen in the news, Travis is not returning as CEO".

The suit revolves around a decision a year ago to increase Uber's board from eight seats to 11, with those additional three seats in the sole control of Kalanick.