5 ms·

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

by 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)
      - chii 7y ago
        As an employee it sucks, but an IPO was never a garantee, and it's not grounds for a suit. As for job security, as long as any contractual severance package is honoured, there's also no grounds for a suit. The way the system works is not in favour of an employee, and it ain't gonna be changing any time soon unfortunately. This is why working for yourself is the best option, and only use employers as a stepping stone towards that. See https://mtlynch.io/why-i-quit-google/ https://mtlynch.io/why-i-quit-google/ - it's not different in Google or Facebook, and certainly going to be the same in WeWork.
        cowsandmilk 7y ago
        > As an employee it sucks, but an IPO was never a guarantee, and it's not grounds for a suit. Why not? Returns in any company are not a guarantee. Yet, you are allowed to sue as a shareholder. Owning shares in a company when it is private does come with less privileges, but certainly does not prevent a shareholder from suing the company.
    - cowsandmilk 7y ago
      > 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 "Hey Chief, I know the band of robbers hit 30 houses last night, but they were all Chinese people here on visas; no American citizens were harmed, so we shouldn't investigate." Fortunately, that's not how the American legal system works. And if it worked that way, it would harm the US tremendously. Generally, investors are more ready to invest in places where there is a rule of law and functioning judicial system. Sure, the American justice system is not perfect, but it is better than many places. Foreign investors can confidently put their money into American companies, including through VC funds, and know there are some protections. If those protections only applied to American citizens or US public pension funds, we would face a large reduction in investment of foreign capital in the US.
      - mbesto 7y ago
        > "Hey Chief, I know the band of robbers hit 30 houses last night, but they were all Chinese people here on visas; no American citizens were harmed, so we shouldn't investigate." <Chinese people on visas in the US> != <Foreign fund with no physical presence in the country> Big difference, I'm not sure how that's relevant. > and know there are some protections. To my knowledge, the only protection the SEC provides for private investment is when the seller provides deliberately fabricated documents.[0] To my knowledge, this has not happened with WeWork - everything was pretty much out in the open. > We would face a large reduction in investment of foreign capital in the US. This isn't just any foreign capital, but a sovereign wealth fund, which had a foreign GP (SoftBank) that poorly executed its due diligence. The US doesn't need this type of capital - it's not the norm. In fact, it's probably better that the US doesn't promote investors who act recklessly and potentially mislead non-accredited US persons who have a stake in a private business (e.g. WeWork employees). [0] - https://www.bloomberg.com/opinion/articles/2018-05-17/securities-fraud-can-happen-with-private-transactions https://www.bloomberg.com/opinion/articles/2018-05-17/securi...
        fennecfoxen 7y ago
        It is difficult to express precisely how distressing the attitudes in this comment are. You propose we abandon all pretense of enforcing the law as a neutral arbiter, in favor a world where the executive branch uses selective enforcement as a crude political cudgel against parties who they disfavor (or should disfavor). Taking this approach is a great way to corrode society, to make sure that politics and enforcement of the law are power games centered about punishing the regime's political enemies, without any regard to justice whatsoever. It is the dark ooze of pure corruption, and you are advocating for it. If you want an honest ban of Saudi investment money, here is what you do: you bring it to Congress, and get them to pass a law that makes the investment illegal. Then, until the moment that the last of their money is returned to them, you give them fair and equal treatment under the law and the same access to justice you would give your best friends. The alternative is monstrous.
  - asdfasgasdgasdg 7y ago
    > I think what we’re all saying is that while what he did wasn’t illegal I don't think that's what anonu was saying: > Adam Neuman should go to jail. The self-dealing was well publicized - certainly - and illegal
  - deleted 7y ago
    [deleted]
- seem_2211 7y ago
  It'd be interesting to know where the lines get drawn here. Private businesses are set up with a primary purpose of being self dealing (looking at what Adam Neumann did, and it's hard to argue that from the outset at least, it doesn't look that dissimilar to how a lot of private equity companies run).
  - netcan 7y ago
    It gets into obscure territory... private equity & various types of "corporate structure" can end creating (or be drawn specifically to create) serious conflicts of interest. They are not a single, uniform interest group and "self dealing" means screwing (fiduciary failure) someone.
    - hef19898 7y ago
      In Germany you can basically go to jail for "stealing" money from a company you own to 100% (in some cases). Self-Dealing can be allowed for managing directs who are also majority owners (e.g. I'm allowed in certain limitis to sign contracts between me and my own company representing both "parties"). But still there are limits. No idea how this works in the US, but I can imagine that there are limits.
      - my123 7y ago
        Of course, you can basically go to jail for "stealing" money from a company you own to 100%. Being able to do so makes a creditor unable to recover their money in limited-liability companies (a clear majority).
        hef19898 7y ago
        Which also makes perfectly sense, if you ask me!
  - godzillabrennus 7y ago
    Private businesses are primarily setup to be of the benefit to shareholders. https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co. If management is making decisions to enrich themselves first before the shareholders then they could run afoul if regulators. Adam was likely not a target of this so long as valuation went up. Now that it’s fallen his shareholders are arguably potentially hurt by his actions and regulators can swoop in.
- bravo22 7y ago
  Did he do everything to maximize the position of the corporation and the shareholders or did he act mainly in his own interests as a shareholder? There are no overt acts, I agree, but that also means a good DA can convince a judge that certain actions of his were primarily for self interest. The fact that he walked away with 1Bn dollar when other shareholders lost money does not look good. It is hard to argue that your actions were not primarily for self enrichment when you walk away with a ton of money and everyone else at the table loses. In a way his lawyers would have an uphill battle convincing the judge that his actions were primarily to further the enterprise and that through a series of unfortunate events he is the only one who ended up with a lot of money.
  - deleted 7y ago
    [deleted]
- anonu 7y ago
  Since he had outside investors, he was a fiduciary and had obligations under many US security laws to meet certain duties. https://en.m.wikipedia.org/wiki/Fiduciary https://en.m.wikipedia.org/wiki/Fiduciary A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. And I would argue that it doesn't matter if SoftBank was the only investor and/or they weren't "harmed" in the situation.
  - crazygringo 7y ago
    You are correct about fiduciary duty, even in private companies. Cases I'm aware of violating fiduciary duty, however, have all involved actions the board wasn't aware of. WeWork seems fairly unique in that Adam Neumann's actions all seem to have been highly transparent. I'm certainly not a lawyer, so I'm actually quite curious about the ramifications of fiduciary responsibility here. That responsibility is to the other investors... but if they are equally assenting, then I don't see how there's a crime here. On the other hand, if this is, say, Adam Neumann with SoftBank harming other dissenting investors who have small minority stakes, then there's quite possibly a case here -- that might include SoftBank as well for some kind of negligence, no?
    - rtkwe 7y ago
      I could easily see them finding that the board was mislead about the process involved in selecting himself as the best option to lease building from which would remove the 'but the board knew about it' wrinkle.
- netcan 7y ago
  That's what the court's for, I guess. He was obviously nearing the boundaries of illegal self dealing. Whether or not clear legal lines were probably crossed... we'll see.
adrr 7y ago
Is self dealing illegal for private companies? What security markets were involved? I never heard of any prosecution of gross mismanagement of VC funds even with companies like Clinkle.
- Spooky23 7y ago
  WeWork has a lot of debt, and there are a lot of fraud scenarios if risks were misrepresented to bond holders. Given the scale of recklessness and insanity here, I’m sure there are all sorts of problems with the firm.
  - deleted 7y ago
    [deleted]
- mytailorisrich 7y ago
  Self-dealing is a breach of fiduciary duties and can apply to work for all companies, not just publicly traded ones. In fact it does not just apply to work within a company. See: https://www.investopedia.com/terms/s/self-dealing.asp https://www.investopedia.com/terms/s/self-dealing.asp
  - danielisaac 7y ago
    This is a slight oversimplification. Self-dealing can create a presumption of unfairness, but it's rebuttable under certain circumstances. For example, if Adam had disclosed the transaction to the board and the board authorized it, it wouldn't be a breach. Likewise, if Adam can demonstrate the complete fairness of the transaction (a high bar), then he could be in the clear. It will largely depend on the AG's investigation. See Delaware General Corporate Law § 144: https://codes.findlaw.com/de/title-8-corporations/de-code-sect-8-144.html https://codes.findlaw.com/de/title-8-corporations/de-code-se...
deleted 7y ago
[deleted]
tyingq 7y ago
I agree, but I'm not sure there's a legal basis for it. Lampert gutted Sears with similarly public self-dealing. The only avenue that seemed open to address it was civil suits from shareholders.
vajaya 7y ago
Adam Neuman is bound to be canonised in our capitalist society. When his grand grandchildren donate to Harvard and waltz in high class ballrooms, nobody knows or cares about how their ancestor made that wealth and even for those who do, the story would have already been glamorised.

by anonu 7y ago

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)
    - chii 7y ago
      As an employee it sucks, but an IPO was never a garantee, and it's not grounds for a suit. As for job security, as long as any contractual severance package is honoured, there's also no grounds for a suit. The way the system works is not in favour of an employee, and it ain't gonna be changing any time soon unfortunately. This is why working for yourself is the best option, and only use employers as a stepping stone towards that. See https://mtlynch.io/why-i-quit-google/ https://mtlynch.io/why-i-quit-google/ - it's not different in Google or Facebook, and certainly going to be the same in WeWork.
      - cowsandmilk 7y ago
        > As an employee it sucks, but an IPO was never a guarantee, and it's not grounds for a suit. Why not? Returns in any company are not a guarantee. Yet, you are allowed to sue as a shareholder. Owning shares in a company when it is private does come with less privileges, but certainly does not prevent a shareholder from suing the company.
  - cowsandmilk 7y ago
    > 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 "Hey Chief, I know the band of robbers hit 30 houses last night, but they were all Chinese people here on visas; no American citizens were harmed, so we shouldn't investigate." Fortunately, that's not how the American legal system works. And if it worked that way, it would harm the US tremendously. Generally, investors are more ready to invest in places where there is a rule of law and functioning judicial system. Sure, the American justice system is not perfect, but it is better than many places. Foreign investors can confidently put their money into American companies, including through VC funds, and know there are some protections. If those protections only applied to American citizens or US public pension funds, we would face a large reduction in investment of foreign capital in the US.
    - mbesto 7y ago
      > "Hey Chief, I know the band of robbers hit 30 houses last night, but they were all Chinese people here on visas; no American citizens were harmed, so we shouldn't investigate." <Chinese people on visas in the US> != <Foreign fund with no physical presence in the country> Big difference, I'm not sure how that's relevant. > and know there are some protections. To my knowledge, the only protection the SEC provides for private investment is when the seller provides deliberately fabricated documents.[0] To my knowledge, this has not happened with WeWork - everything was pretty much out in the open. > We would face a large reduction in investment of foreign capital in the US. This isn't just any foreign capital, but a sovereign wealth fund, which had a foreign GP (SoftBank) that poorly executed its due diligence. The US doesn't need this type of capital - it's not the norm. In fact, it's probably better that the US doesn't promote investors who act recklessly and potentially mislead non-accredited US persons who have a stake in a private business (e.g. WeWork employees). [0] - https://www.bloomberg.com/opinion/articles/2018-05-17/securities-fraud-can-happen-with-private-transactions https://www.bloomberg.com/opinion/articles/2018-05-17/securi...
      - fennecfoxen 7y ago
        It is difficult to express precisely how distressing the attitudes in this comment are. You propose we abandon all pretense of enforcing the law as a neutral arbiter, in favor a world where the executive branch uses selective enforcement as a crude political cudgel against parties who they disfavor (or should disfavor). Taking this approach is a great way to corrode society, to make sure that politics and enforcement of the law are power games centered about punishing the regime's political enemies, without any regard to justice whatsoever. It is the dark ooze of pure corruption, and you are advocating for it. If you want an honest ban of Saudi investment money, here is what you do: you bring it to Congress, and get them to pass a law that makes the investment illegal. Then, until the moment that the last of their money is returned to them, you give them fair and equal treatment under the law and the same access to justice you would give your best friends. The alternative is monstrous.
- asdfasgasdgasdg 7y ago
  > I think what we’re all saying is that while what he did wasn’t illegal I don't think that's what anonu was saying: > Adam Neuman should go to jail. The self-dealing was well publicized - certainly - and illegal
- deleted 7y ago
  [deleted]
seem_2211 7y ago
It'd be interesting to know where the lines get drawn here. Private businesses are set up with a primary purpose of being self dealing (looking at what Adam Neumann did, and it's hard to argue that from the outset at least, it doesn't look that dissimilar to how a lot of private equity companies run).
- netcan 7y ago
  It gets into obscure territory... private equity & various types of "corporate structure" can end creating (or be drawn specifically to create) serious conflicts of interest. They are not a single, uniform interest group and "self dealing" means screwing (fiduciary failure) someone.
  - hef19898 7y ago
    In Germany you can basically go to jail for "stealing" money from a company you own to 100% (in some cases). Self-Dealing can be allowed for managing directs who are also majority owners (e.g. I'm allowed in certain limitis to sign contracts between me and my own company representing both "parties"). But still there are limits. No idea how this works in the US, but I can imagine that there are limits.
    - my123 7y ago
      Of course, you can basically go to jail for "stealing" money from a company you own to 100%. Being able to do so makes a creditor unable to recover their money in limited-liability companies (a clear majority).
      - hef19898 7y ago
        Which also makes perfectly sense, if you ask me!
- godzillabrennus 7y ago
  Private businesses are primarily setup to be of the benefit to shareholders. https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co. If management is making decisions to enrich themselves first before the shareholders then they could run afoul if regulators. Adam was likely not a target of this so long as valuation went up. Now that it’s fallen his shareholders are arguably potentially hurt by his actions and regulators can swoop in.
bravo22 7y ago
Did he do everything to maximize the position of the corporation and the shareholders or did he act mainly in his own interests as a shareholder? There are no overt acts, I agree, but that also means a good DA can convince a judge that certain actions of his were primarily for self interest. The fact that he walked away with 1Bn dollar when other shareholders lost money does not look good. It is hard to argue that your actions were not primarily for self enrichment when you walk away with a ton of money and everyone else at the table loses. In a way his lawyers would have an uphill battle convincing the judge that his actions were primarily to further the enterprise and that through a series of unfortunate events he is the only one who ended up with a lot of money.
- deleted 7y ago
  [deleted]
anonu 7y ago
Since he had outside investors, he was a fiduciary and had obligations under many US security laws to meet certain duties. https://en.m.wikipedia.org/wiki/Fiduciary https://en.m.wikipedia.org/wiki/Fiduciary A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. And I would argue that it doesn't matter if SoftBank was the only investor and/or they weren't "harmed" in the situation.
- crazygringo 7y ago
  You are correct about fiduciary duty, even in private companies. Cases I'm aware of violating fiduciary duty, however, have all involved actions the board wasn't aware of. WeWork seems fairly unique in that Adam Neumann's actions all seem to have been highly transparent. I'm certainly not a lawyer, so I'm actually quite curious about the ramifications of fiduciary responsibility here. That responsibility is to the other investors... but if they are equally assenting, then I don't see how there's a crime here. On the other hand, if this is, say, Adam Neumann with SoftBank harming other dissenting investors who have small minority stakes, then there's quite possibly a case here -- that might include SoftBank as well for some kind of negligence, no?
  - rtkwe 7y ago
    I could easily see them finding that the board was mislead about the process involved in selecting himself as the best option to lease building from which would remove the 'but the board knew about it' wrinkle.
netcan 7y ago
That's what the court's for, I guess. He was obviously nearing the boundaries of illegal self dealing. Whether or not clear legal lines were probably crossed... we'll see.

adrr 7y ago

Is self dealing illegal for private companies? What security markets were involved? I never heard of any prosecution of gross mismanagement of VC funds even with companies like Clinkle.

Spooky23 7y ago
WeWork has a lot of debt, and there are a lot of fraud scenarios if risks were misrepresented to bond holders. Given the scale of recklessness and insanity here, I’m sure there are all sorts of problems with the firm.
- deleted 7y ago
  [deleted]
mytailorisrich 7y ago
Self-dealing is a breach of fiduciary duties and can apply to work for all companies, not just publicly traded ones. In fact it does not just apply to work within a company. See: https://www.investopedia.com/terms/s/self-dealing.asp https://www.investopedia.com/terms/s/self-dealing.asp
- danielisaac 7y ago
  This is a slight oversimplification. Self-dealing can create a presumption of unfairness, but it's rebuttable under certain circumstances. For example, if Adam had disclosed the transaction to the board and the board authorized it, it wouldn't be a breach. Likewise, if Adam can demonstrate the complete fairness of the transaction (a high bar), then he could be in the clear. It will largely depend on the AG's investigation. See Delaware General Corporate Law § 144: https://codes.findlaw.com/de/title-8-corporations/de-code-sect-8-144.html https://codes.findlaw.com/de/title-8-corporations/de-code-se...

deleted 7y ago

[deleted]

tyingq 7y ago

I agree, but I'm not sure there's a legal basis for it. Lampert gutted Sears with similarly public self-dealing. The only avenue that seemed open to address it was civil suits from shareholders.

vajaya 7y ago

Adam Neuman is bound to be canonised in our capitalist society. When his grand grandchildren donate to Harvard and waltz in high class ballrooms, nobody knows or cares about how their ancestor made that wealth and even for those who do, the story would have already been glamorised.