Shortly after taking over Uber Technologies, Inc. earlier this year, Dara Khosrowshahi warned employees to face a difficult six months. The company is facing at least five criminal probes from the United States Department of Justice (DOJ). Beyond this, U.S. officials are looking into possible illicit software, bribes, questionable pricing schemes, and theft of a competitor’s intellectual property. Some governments across the globe are looking into passing laws banning the ride-hailing application. London, one of Uber’s most profitable cities, did just that, citing a lack of corporate responsibility as the reason. Uber continues operating there as it appeals the ban. Brazil, on the other hand, is looking into legislation that would either make Uber illegal or treat it like a taxi company.
An Ousted CEO
An article published by Bloomberg noted that interviews with over a dozen current and former Uber employees, including senior executives, described the company culture as viewing the law as something to be tested. This approach, which co-founder and former CEO Travis Kalanick, set up a legal department early in his tenure with Uber with this mandate in mind, is watching is coming back to bite the company now. Kalanick’s approach to micro-managing the business is what caused a group of major investors to claim Uber was at legal risk, resulting in his ouster as CEO earlier this summer.
Innovation versus Compliance
In 2012, Uber hired the company’s first general counsel, Salle Yoo, who had spent the previous 13 years at a corporate law firm and rose to partnership status. At the time, Uber was exclusively for professionally licensed drivers until startups Lyft Inc. and Sidecar, which were allowing regular people to make money driving strangers in their cars and were ignoring taxi laws, came to existence. By 2013, Kalanick rolled out its ride sharing on its existing platform with Yoo’s blessing to do so where regulatory rules were not being actively enforced. Because other startups were making millions in the ridesharing industry, Uber began using unconventional methods – trying to get more drivers by booking rides with other startups and trying to convince the drivers to switch and a software that scraped data published online to track competitors’ drivers in real time.
All the programs in use around the world by Uber was difficult to keep track of by the attorneys, putting the company at significant legal risk. Allegedly, even when Uber’s general counsel had differences in opinion with Kalanick’s methods or goals she failed to challenge him, his deputies, or to bring her concerns to the board.
While Kalanick has left and Yoo has announced she is on her way out, it is important to keep in mind that Uber’s next legal chief will not be able to easily shed the company’s legal past. Once attorneys allow clients to cross the line, unfortunately, it becomes more difficult to make a wrong right. Eventually the attorney becomes complicit. Uber is a good lesson for all practicing attorneys to make sure innovation does not trump legal ethics. The pressures or practicing law are difficult enough to have to face government probes and investigations on actions or inactions that took place during your tenure at the company.