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New York State Attorney General Investigating WeWork
- iscrewyou 7y agoThey are focusing on self dealing by Neumann. Can’t wait to read about it from Matt Levine. It’s amazing to see this story keep on developing apparently after it was all supposed to be said and done when he left the company.
- hanniabu 7y agoI'm sure this would have never been brought up if a bunch of powerful people didn't lose a lot of money. They all would have happily ignored it as they dumped their billions of dollars worth of stock on the general public to deal with. Now that they've been burnt they're out for retribution.
- tempestn 7y agoCan't help thinking of the Showtime show Billions, especially since it's the NYAG's office.
- H8crilA 7y agoConspiracy theories everywhere. While simple explanations exist: it's on top of NYAG's list just because this case is famous. NYAG is a law enforcement officer, but also a politician. He/she will prioritise cases based on the eyeball count, and WeWork is killing the eyeball count.
- dsfyu404ed 7y agoExactly. Smacking down a rich billionaire who did something dirty is a political win you can present to the voters in NY and recovering money for other billionaires who got fleeced is a win you can present to the moneyed elite. Incentive alignments like that are fairly rare. There is nothing to lose here because even if you lose it can become a rallying cry for preventing it in the future. Even if there were no legal basis for the investigation it would likely still happen because it is such a massive political win that even if the AG was too dumb to take it up on their own accord the AG's boss would strongly suggest an investigation be opened. Just to be clean I'm not defending Neuman/WeWork definitely did wrong and I think the statutes around securities fraud are broad enough to nail them, just that the technical legality is a footnote compared to the other motivators here. It should be obvious why this kind of prosecution is a politician's wet dream (and make no mistake, a state AG is a politician, just not an elected one) regardless of whether there's clear law violation or not. Government doesn't swing into action like this because it's morally right or whatever (it may be morally right, but that is tangential). It swings into action because there are stakeholders to please and it's rare to have two big stakeholder groups aligned like this.
- JumpCrisscross 7y ago> and recovering money for other billionaires who got fleeced WeWork has employees in New York. Many exercised stock options. Many are about to be laid off and start filing for unemployment benefits.
- dsfyu404ed 7y ago>Many of them are about to be laid off and start filing for unemployment benefits. Make that three groups the AG can potentially please. Win^3 is way better than win^2 Too bad we don't get all around wins like this more often.
- zepearl 7y ago> Can’t wait to read about it from Matt Levine. And from Scott Galloway ( https://www.profgalloway.com https://www.profgalloway.com ) :) Very interesting as what I understood was that, technically (SEC, SOX, whatever...), nothing of what Neumann did went against the rules, but maybe in this case the actions will be compared to the "spirit" of the (aggregated) rules? EDIT: and I guess that Softbank would be happy if Neumann would somehow lose shares/votes.
- jsjohnst 7y ago> Very interesting as what I understood was that, technically (SEC, SOX, whatever...), nothing of what Neumann did went against the rules What have you read that gave you that impression?
- mc32 7y agoI say this in jest but whatever he does, don’t talk to them without a lawyer and become another Martha Stewart.
- abbadadda 7y agoMatt Levine has been crushing this story, as well as dealbreaker and ftalphaville.
- carty76ers 7y agoThe article should have started with: “A company, who weeks after attempting to cash out low-value shares with the dollars of future investors by attempting to IPO under hand-wavy numbers,” Then continued with the real article: Is now “expected to lay off thousands of employees beginning this week as it faces ballooning losses”
- koolba 7y agoYou forgot the part where they delayed the layoffs because they didn’t have enough cash in hand to pay severance.
- algaeontoast 7y agoNeumann deserves to have the book thrown at him for this. Although, I wish a more severe fate for Elizabeth Holmes.
- jb12 7y agoI can't wait to read the bestseller that eventually gets written about WeWork
- zepearl 7y agoWeRead (sorry, had to....)
- golemotron 7y agoThe Art of the Self-Deal.
- buboard 7y agoIronically, it's only going to make Neumann richer, along with the movie sequels.
- colejohnson66 7y agoWould it? I’m not familiar with laws around representing people, but if someone unrelated to Neumann wrote it with no input from him, would royalties still be owed?
- buboard 7y agoi m confident he has all the time in the world to write it himself now
- rosybox 7y agoNothing he did was hidden though. His board knew what he was doing when WeWork leased his properties, his board knew about all these things. Journalists have been writing about this weird arrangement for years. If anything I could see investors sue the board and the company on civil grounds, but if everything is above board is it a crime? I could see it being a crime if he had been doing this in secret. His actions definitely seems wrong and stupid, but is it fraud?
- ummonk 7y agoBeing above board about your self dealing doesn’t absolve you of it though, and it is even worse when you control a majority of the voting stock.
- deleted 7y ago[deleted]
- shuckles 7y agoIt’s not even clear to me that lots of above board self dealing reduces the chance of unseemly self dealing. My guess is, if anything, they’re positively correlated.
- abbadadda 7y agoAll of this is more or less fine while the company is valued at billions of dollars. But you're right, I'm not exactly sure about the legal angle. The biggest loser, besides the unfortunate employees, is SoftBank. I don't think there is a case to be made by SoftBank, as they encouraged Neumann's behaviour, but the employees may have strong grounds for a case.
- cfors 7y agoImagine working at a company, that has these gigantic valuations, and you hold stock in this company. Since you probably don't have the insights to the actual finances of the company you, like everyone else, base the company's valuation on the private market. Then only to find out that your shares you thought were worth $100, are now worth $15 (except much worse). In the meantime, your CEO walks away with over a billion dollars in his pocket on a handshake deal to basically shut up and leave. I would be furious if I was an employee that dedicated time and energy to this company.
- CPLX 7y agoThis will be interesting. If he did even the most basic work to cover his ass, like memorializing these agreements, getting some kind of board approval, nominally recusing himself from the decisions, etc, it’s going to be almost impossible to prosecute him. Which is a bit of a shame, of course, but the business judgment rule is pretty much a cornerstone of our laws at this point. Now if he falsified records or hid things on the other hand, it could get fascinating to watch.
- wbl 7y agoWhy is it a shame? The people hurt had ample opportunity not to enable it and were sophisticated investors.
- CPLX 7y agoIt’s a shame that we allow people no enrich themselves by ransacking investor money while others in the organization suffer hardships and layoffs and life disruptions. The business culture that enables this is unhealthy and this type of behavior is shameful.
- donatj 7y ago> enrich themselves by ransacking investor money Isn't this entirely the point of running a business? > others in the organization suffer hardships and layoffs and life disruptions I feel like you know what you're getting into working for this sort of company.
- enraged_camel 7y ago>> Isn't this entirely the point of running a business? No, the point of running a business is not to ransack investor money, but to grow it. Why would investors invest otherwise? >> I feel like you know what you're getting into working for this sort of company This sounds like victim-blaming to me.
- wpietri 7y ago
- code4tee 7y agoThere’s little question WeWork was a train wreck from a corporate governance and oversight standpoint. Less clear if anything criminal happened but let’s wait and see what the AG comes up with.
- dragonwriter 7y ago> Less clear if anything criminal happened The NY AG’s domain is not limited to criminal law; there are plenty of civil laws with public causes of action enforced by the AG’s office.
- pcora 7y agoSo, Chuck Rhoades is after them?
- chirau 7y agoThere's no case against Adam. You bicker on the ethics of his operations, but he did not violate any law. In fact, he took advantage of poor corporate laws, which is not a crime either. Be bitter with him, fair enough, but be intelligent still It's in the same bracket with the whole "Amazon pays $0 in taxes". Taking advantage of poor laws is not a crime. You can accuse them all you want, but we all do it albeit at a microscopic scale. Punishing circumventers is not the answer, reviewing the law is. Neumann did what was best for him. It was legal. That's all. Your expectation of a person doing what is good for the greater good is your own weakness. I'm not telling you to stop, just don't cry foul when folks from other schools of thought do what they do best. Maximize returns.
- staplers 7y agoYou write like you're his lawyer.. or even worse, him.
- rchaud 7y agoMost HN-posted stories about big gubmint looking into startups will have at least a few comments that seem eager to advocate on the behalf of the company in question. Perhaps they imagine themselves as one day being in a position to get paid $6m as a trademark fee for the name "We".
- colejohnson66 7y agoI’m not one of these people, but maybe they just don’t understand the purpose of this and think it’s a “shakedown,” a “help me get re-elected” thing, etc. Not everything is a conspiracy.
- girvo 7y ago> You can accuse them all you want, but we all do it albeit at a microscopic scale. I've always found this argument fascinating. I certainly don't, with the specific example of taxes (within my country, Australia). Is it that rampant in the US? Or is it really more that people who break the law assume everyone else does too?
- birdyrooster 7y agoEmpty WeWork booth at KubeCon today was... amusing to say the least. Great opportunity for photos.
- odiroot 7y agoThey could have sublet it.
- birdyrooster 7y agoIt became a free coworking space
- willart4food 7y ago> Neumann bought properties which he then leased back to WeWork, borrowed against his own stake in the company, Sounds familiar... Enron? Is Neumann the smartest guy in the room?
- alexnewman 7y agoI'm hoping that they all get laid off and he voluntarily gives 90% of his money to them. It's what I would do. People would be astounded to what would happen tax time.
- alexnewman 7y agoWhy am I being so hardcore voted down for this?
- buboard 7y agoHe might already be in Israel. Investors wouldn't want judges to start investigating and breaking up the tons of deals that are similar to this and that we don't know about. At best he'd be accused of some kind of fraud, settle with the company and move on.
- williesleg 7y agoAnother shakedown by a corrupt politician.
- torgian 7y agoI know there’s a Wework office in Hong Kong in Central. I wonder if it’s still open?