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Nothing 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 be

Nothing 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 ago
Being 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 ago
  It’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 ago
All 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 ago
  Imagine 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.
  - mbesto 7y ago
    > I would be furious if I was an employee that dedicated time and energy to this company. And those employees probably have justification for a civil case, which doesn't require the SEC to be involved.
    - paxys 7y ago
      Those employees definitely ended up in a shitty situation, but there are no grounds for a lawsuit.
    - papito 7y ago
      I guess it's a lesson. Never personally invest yourself into any company, since - as just a foot soldier - you have zero control over the events. Even if you have a chance to get your walkaway money, it's just a job. They pay you for your skills and your talent, not your personal life. Be involved, be professional, care, but do not get personally attached. What you bring from a job is learning experience and new friendships, but the job itself should be viewed as a pretty ephemeral concept. Never fall for the "we are a family" line - it's incredibly hard to be fired from a "family".
  - adrr 7y ago
    If your a shareholder you can get the financials of the company assuming wework was a Delaware Corp. Exercise 1 share of your options to become a shareholder.
    - dannyw 7y ago
      Sometimes you have to forfeit these rights in order to receive your shares.
  - buboard 7y ago
    What about those employees that did sell some stock at high valuations though? Some employees were indeed able to sell shares twice along the way, just like Neumann was. The most recent sale opportunity, in January 2019, offered employees $54 per share if they sold their equity to SoftBank, WeWork’s largest outside shareholder, according to WeWork’s financial prospectus, at an overall valuation of around $23 billion. Not everyone was eligible to sell, nor did everyone take that opportunity. Those who did are, with the benefit of hindsight, thankful. https://www.vox.com/recode/2019/9/30/20887656/juul-wework-employees-silicon-valley-valuations-explainer https://www.vox.com/recode/2019/9/30/20887656/juul-wework-em... Plus i m not sure how sympathetic judges are going to be for employees' anger that they didn't become overnight millionaires
- thaumasiotes 7y ago
  > All of this is more or less fine while the company is valued at billions of dollars. It's still valued at billions of dollars. The absolute valuation is irrelevant. As another article I read said, building an $8 billion company out of $10 billion of investment is not an especially great achievement. In particular, it is not similar to building an $8 billion company out of $10 million of investment.
  - abbadadda 7y ago
    Sure. Could have clarified that what I meant was "It is more or less fine while it is working." When the valuation goes under the amount invested, I'd say that is no longer the case. That is, while everything is going well no one thinks to file a lawsuit. Appreciate your correction nonetheless.
samstave 7y ago
Regardless of anything; isnt theere a literal wealth of real-estate knowledge to be had from what wework accomplished...? Surely there will be some serious real-estate developments to come from this to the massive profit of those who have access to that knowledge... (Are they the martin skreli of real-estate?)
- sk5t 7y ago
  I'd be interested to know your reasons for supposing We might or may have amassed proprietary insight into RE markets or even something like how to improve office layouts, or even how to optimize the fluid dynamics of beer taps.
  - kevin_thibedeau 7y ago
    The meatless movement can finally put an end to Marsha cooking fish in the microwave.
    - torgian 7y ago
      This was the one comment I wanted to reply to, and only because it makes no sense to me lol
  - samstave 7y ago
    Square footage cost realities, contract negotiations, market norms in price, such things... Im not saying they DO have such insight, but if they have zero, or negative insight - well, then it goes more to say about those who invested in them doesnt it?
    - seanhunter 7y ago
      Commercial real estate is a very active, competitive and generally well-understood business. Not sure WeWork would have insights over and above say Regus given that WeWork were not able to build a sustainable business at the pricing levels they had. So while we have a price point for flexible co-working rental it's not a level which allows for profitable unit economics. We don't (publicly) know whether the clearing price does or what that price is and neither do WeWork. Someone like CBRE or Regus might though.
anonu 7y ago
Adam Neuman should go to jail. The self-dealing was well publicized - certainly - and illegal. Since the securities markets were involved, the govt can step in and read him the riot act (and hopefully more) And I think that is important. That kind of scrutiny puts a check on rampant misbehavior by investors or entrepreneurs.
- jakelazaroff 7y ago
  As much as I want to see him punished, I’m not sure I agree there’s a case here. Which part of his self-dealing was illegal? Obviously the investigation may reveal things, but based on what we know now I can’t think of any “certainly illegal” self-dealing.
  - Zelphyr 7y ago
    I think what we’re all saying is that while what he did wasn’t illegal, it should have been, and probably once was but we’ve allowed corporations to pay off our politicians to make laws legalizing actions like his.
    - mbesto 7y ago
      But who is precisely harmed as a result that wasn't already well informed of the risk that was posed to them? I don't think that many people think that the Saudi Sovereign Wealth Fund losing money (SoftBank's largest LP) is harming any American citizens. The only thing I can think of is that some of WeWork's investor LP's might be public pension funds, but even then, the individuals who are responsible for deploying that capital (LP representatives) should be held accountable then.
      - bguillet 7y ago
        The company itself and most importantly WeWork employees were harmed (some of them won't have a job soon, and were promised a huge IPO)
        7y ago
ceejayoz 7y ago
The board was under his complete control, wasn't it? He had a majority voting state in WeWork.
iamaelephant 7y ago
This is some truly galaxy brain logic even by the contrarian standards of hacker news. Your thinking is that you can't be breaking the law if people know about it?
- birdyrooster 7y ago
  If this isn’t a sign of the times, then I don’t know what signs of time are.
  - birdyrooster 7y ago
    I don’t know what signs of time are I guess.
- berberous 7y ago
  Certain crimes depend on deception, such as fraud. If there was no misrepresentation, there was no fraud. What specific law do you believe was broken?
deleted 7y ago
[deleted]
kbumsik 7y ago
> but is it fraud? I'm Korean and the law system is very different from America, but I think he will be likely accused of embezzlement rather than fraud if he were Korean
- voldacar 7y ago
  Even if the board and shareholders bought his grift for years and were ok with his self-dealing at the time?
  - baddox 7y ago
    If board members were complicit then I'm convinced we have plenty of room in prison for them as well.
    - smabie 7y ago
      But then who are they stealing from?
      - kbumsik 7y ago
        Could be the company's money. It doesn't need to be specifically which investor's money.
      - alwayseasy 7y ago
        Technically once you invest it's not your money anymore and using it improperly can put you in legal jeopardy.
arthens 7y ago
> Nothing he did was hidden though A crime committed publicly is still a crime tho. > His board knew what he was doing with the leasing his own spaces, his board knew about all these things. For all we know the board could be accessory to the crimes. The board could have gone along with it if they were directly or indirectly getting something they wanted. According to the article, Adam Neumann indulging in self-dealing to enrich himself is "among the issues". We don't know the full scope of the investigation.
deleted 7y ago
[deleted]
johnpowell 7y ago
The NYAG doesn't generally go after people just to see what happens. They have a reason to think this is a case that needs investigation that might not be public.
- yspeak 7y ago
  Actually they do. They have a long and varied track record of pursuing those the media and/or the left have demonized based on creative but tenuous legal arguments designed to advance the AG's political ambitions, generate the most publicity and settlements that are paid out to left wing causes. I never believed we work was viable but everyone knew what was going on. This is all for AG's political career.
JumpCrisscross 7y ago
> Nothing he did was hidden though Nothing we know of was. I wouldn’t assume we know the whole picture. There is also at least a case to be made that the Board derelicted its duty to minority shareholders and so, though probably not criminally liable, needs to at least e.g. not sign off on nine-figure consulting fees to Adam.
wyldfire 7y ago
> but if everything is above board is it a crime? If he and the board conspired to deceive investors, then it's probably criminal fraud. That's just one potential reason why the AG would be looking into WeWork.
Nursie 7y ago
> Nothing he did was hidden though. I think that it's entirely possible one can do things which may turn out to be criminal in the eyes of the regulator even while the board may approve. Or be dazzled by the person who held most of the cards, perhaps.

ummonk 7y ago

Being 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 ago
It’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 ago

All 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 ago
Imagine 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.
- mbesto 7y ago
  > I would be furious if I was an employee that dedicated time and energy to this company. And those employees probably have justification for a civil case, which doesn't require the SEC to be involved.
  - paxys 7y ago
    Those employees definitely ended up in a shitty situation, but there are no grounds for a lawsuit.
  - papito 7y ago
    I guess it's a lesson. Never personally invest yourself into any company, since - as just a foot soldier - you have zero control over the events. Even if you have a chance to get your walkaway money, it's just a job. They pay you for your skills and your talent, not your personal life. Be involved, be professional, care, but do not get personally attached. What you bring from a job is learning experience and new friendships, but the job itself should be viewed as a pretty ephemeral concept. Never fall for the "we are a family" line - it's incredibly hard to be fired from a "family".
- adrr 7y ago
  If your a shareholder you can get the financials of the company assuming wework was a Delaware Corp. Exercise 1 share of your options to become a shareholder.
  - dannyw 7y ago
    Sometimes you have to forfeit these rights in order to receive your shares.
- buboard 7y ago
  What about those employees that did sell some stock at high valuations though? Some employees were indeed able to sell shares twice along the way, just like Neumann was. The most recent sale opportunity, in January 2019, offered employees $54 per share if they sold their equity to SoftBank, WeWork’s largest outside shareholder, according to WeWork’s financial prospectus, at an overall valuation of around $23 billion. Not everyone was eligible to sell, nor did everyone take that opportunity. Those who did are, with the benefit of hindsight, thankful. https://www.vox.com/recode/2019/9/30/20887656/juul-wework-employees-silicon-valley-valuations-explainer https://www.vox.com/recode/2019/9/30/20887656/juul-wework-em... Plus i m not sure how sympathetic judges are going to be for employees' anger that they didn't become overnight millionaires
thaumasiotes 7y ago
> All of this is more or less fine while the company is valued at billions of dollars. It's still valued at billions of dollars. The absolute valuation is irrelevant. As another article I read said, building an $8 billion company out of $10 billion of investment is not an especially great achievement. In particular, it is not similar to building an $8 billion company out of $10 million of investment.
- abbadadda 7y ago
  Sure. Could have clarified that what I meant was "It is more or less fine while it is working." When the valuation goes under the amount invested, I'd say that is no longer the case. That is, while everything is going well no one thinks to file a lawsuit. Appreciate your correction nonetheless.

samstave 7y ago

Regardless of anything; isnt theere a literal wealth of real-estate knowledge to be had from what wework accomplished...? Surely there will be some serious real-estate developments to come from this to the massive profit of those who have access to that knowledge... (Are they the martin skreli of real-estate?)

sk5t 7y ago
I'd be interested to know your reasons for supposing We might or may have amassed proprietary insight into RE markets or even something like how to improve office layouts, or even how to optimize the fluid dynamics of beer taps.
- kevin_thibedeau 7y ago
  The meatless movement can finally put an end to Marsha cooking fish in the microwave.
  - torgian 7y ago
    This was the one comment I wanted to reply to, and only because it makes no sense to me lol
- samstave 7y ago
  Square footage cost realities, contract negotiations, market norms in price, such things... Im not saying they DO have such insight, but if they have zero, or negative insight - well, then it goes more to say about those who invested in them doesnt it?
  - seanhunter 7y ago
    Commercial real estate is a very active, competitive and generally well-understood business. Not sure WeWork would have insights over and above say Regus given that WeWork were not able to build a sustainable business at the pricing levels they had. So while we have a price point for flexible co-working rental it's not a level which allows for profitable unit economics. We don't (publicly) know whether the clearing price does or what that price is and neither do WeWork. Someone like CBRE or Regus might though.

anonu 7y ago

Adam Neuman should go to jail. The self-dealing was well publicized - certainly - and illegal. Since the securities markets were involved, the govt can step in and read him the riot act (and hopefully more) And I think that is important. That kind of scrutiny puts a check on rampant misbehavior by investors or entrepreneurs.

jakelazaroff 7y ago
As much as I want to see him punished, I’m not sure I agree there’s a case here. Which part of his self-dealing was illegal? Obviously the investigation may reveal things, but based on what we know now I can’t think of any “certainly illegal” self-dealing.
- Zelphyr 7y ago
  I think what we’re all saying is that while what he did wasn’t illegal, it should have been, and probably once was but we’ve allowed corporations to pay off our politicians to make laws legalizing actions like his.
  - mbesto 7y ago
    But who is precisely harmed as a result that wasn't already well informed of the risk that was posed to them? I don't think that many people think that the Saudi Sovereign Wealth Fund losing money (SoftBank's largest LP) is harming any American citizens. The only thing I can think of is that some of WeWork's investor LP's might be public pension funds, but even then, the individuals who are responsible for deploying that capital (LP representatives) should be held accountable then.
    - bguillet 7y ago
      The company itself and most importantly WeWork employees were harmed (some of them won't have a job soon, and were promised a huge IPO)
      - 7y ago

ceejayoz 7y ago

The board was under his complete control, wasn't it? He had a majority voting state in WeWork.

iamaelephant 7y ago

This is some truly galaxy brain logic even by the contrarian standards of hacker news. Your thinking is that you can't be breaking the law if people know about it?

birdyrooster 7y ago
If this isn’t a sign of the times, then I don’t know what signs of time are.
- birdyrooster 7y ago
  I don’t know what signs of time are I guess.
berberous 7y ago
Certain crimes depend on deception, such as fraud. If there was no misrepresentation, there was no fraud. What specific law do you believe was broken?

deleted 7y ago

[deleted]

kbumsik 7y ago

> but is it fraud? I'm Korean and the law system is very different from America, but I think he will be likely accused of embezzlement rather than fraud if he were Korean

voldacar 7y ago
Even if the board and shareholders bought his grift for years and were ok with his self-dealing at the time?
- baddox 7y ago
  If board members were complicit then I'm convinced we have plenty of room in prison for them as well.
  - smabie 7y ago
    But then who are they stealing from?
    - kbumsik 7y ago
      Could be the company's money. It doesn't need to be specifically which investor's money.
    - alwayseasy 7y ago
      Technically once you invest it's not your money anymore and using it improperly can put you in legal jeopardy.

arthens 7y ago

> Nothing he did was hidden though A crime committed publicly is still a crime tho. > His board knew what he was doing with the leasing his own spaces, his board knew about all these things. For all we know the board could be accessory to the crimes. The board could have gone along with it if they were directly or indirectly getting something they wanted. According to the article, Adam Neumann indulging in self-dealing to enrich himself is "among the issues". We don't know the full scope of the investigation.

deleted 7y ago

[deleted]

johnpowell 7y ago

The NYAG doesn't generally go after people just to see what happens. They have a reason to think this is a case that needs investigation that might not be public.

yspeak 7y ago
Actually they do. They have a long and varied track record of pursuing those the media and/or the left have demonized based on creative but tenuous legal arguments designed to advance the AG's political ambitions, generate the most publicity and settlements that are paid out to left wing causes. I never believed we work was viable but everyone knew what was going on. This is all for AG's political career.

JumpCrisscross 7y ago

> Nothing he did was hidden though Nothing we know of was. I wouldn’t assume we know the whole picture. There is also at least a case to be made that the Board derelicted its duty to minority shareholders and so, though probably not criminally liable, needs to at least e.g. not sign off on nine-figure consulting fees to Adam.

wyldfire 7y ago

> but if everything is above board is it a crime? If he and the board conspired to deceive investors, then it's probably criminal fraud. That's just one potential reason why the AG would be looking into WeWork.

Nursie 7y ago

> Nothing he did was hidden though. I think that it's entirely possible one can do things which may turn out to be criminal in the eyes of the regulator even while the board may approve. Or be dazzled by the person who held most of the cards, perhaps.