by Isaac, Mike
Soon after, she called Rachel Whetstone, Kalanick’s head of communications, completely distraught. Holzwarth told Whetstone about the Korea incident, about Michael contacting her about it—she told her everything. Whetstone, aghast, apologized over and over to Holzwarth. Whetstone asked Holzwarth a few questions, tried to console her further, then the two hung up.
Whetstone congregated with other members of the executive leadership team at Uber—including Salle Yoo, the general counsel, Liane Hornsey, the chief of human resources, and Arianna Huffington, who was increasingly involved in managing damage control—to figure out how to handle the situation, and pray that it wouldn’t leak. The entire group was furious with Emil Michael; what he did was stupid, reckless, like something out of The Godfather.
Michael must have realized his error. The day after the executives met, Holzwarth started receiving texts from Michael, clearly trying to cover his ass. He texted:
I am so sorry for being cold the other day on the phone. I was super panicked. I should have asked about you and how you were doing. I care about you and consider you a friend. We shared some amazing times together. I hope you believe me. I would love to see you at some point too.
Michael tried dispatching other women to help him. He had his girlfriend text Holzwarth. Later, another female Uber employee texted Holzwarth to ask how she was doing. And yet another woman—a friend of Michael’s—contacted Holzwarth later in the day to invite her to a birthday party.
Holzwarth was sad, confused, scared. Most of all she was angry—angry at Emil Michael for putting her in this position. She didn’t want to be silenced, she would later tell a reporter. Michael was a bully, plain and simple, and thought he could bully her the same way Uber bullied those who got in the company’s way.
Holzwarth thought back to one of her earliest gigs: She had played violin at the launch party of The Information, a tech journalism startup that debuted a few years back. The site had covered Uber aggressively in the past, and she felt close to some of the people there.
She still had the reporter’s cell phone number.
Chapter 26
FATAL ERRORS
Starting with #deleteUber in January 2017, and continuing through the Fowler blog post, the Bloomberg video, the Trump council fiasco, and the Greyball revelations, Kalanick’s reputation had plummeted.
The Korea story reinforced what the public already suspected: that Travis often turned a blind eye towards Uber’s toxic culture, which went to the very top of the company. Executives Ed Baker and Amit Singhal were toast. Jeff Jones had exited in a blaze of bad press. Things looked dire for Emil Michael, his right hand and confidante. Looming above all of this was the Holder report, which had yet to be presented to the board of directors. Around Uber HQ “the Holder Report” took on a mythic air, like a corporate sword of Damocles, ready to fall at any moment. There were eight years of executive behavior to investigate. Who knew what else Holder would dig up?
Worse for Kalanick, his board of directors was putting new pressure on him to fire Anthony Levandowski. By late March, the dirt that had come out on Levandowski turned him into a major liability.
In December 2016, Levandowski had launched a self-driving-car test program in San Francisco without a permit and in direct defiance of the California transit authorities, who called the maneuver illegal. Almost immediately, the test program went awry. One of Uber’s test cars blew through a red light in broad daylight, an event captured on the dashboard camera of a nearby motorist. As the clip went viral online, Uber issued a statement: “This incident was due to human error. This vehicle was not part of the pilot and was not carrying customers. The driver involved has been suspended while we continue to investigate. This is why we believe so much in making the roads safer by building self-driving Ubers.”
But three months later, the New York Times published a story, citing internal documents, that claimed Uber’s narrative was false; it was the self-driving software that missed the red light, not the driver. Uber had lied to reporters, on the record, about an illegal program it was running in its hometown.
Levandowski made it look like Uber had something to hide in other ways. He refused to cooperate during the civil case filed by Waymo; towards the end of March, he pleaded his Fifth Amendment right not to incriminate himself should the government pursue a separate criminal prosecution.
Kalanick knew he needed to fire Levandowski, but he couldn’t bring himself to do it. Levandowski, like Kalanick, was a born charmer, full of charisma and showmanship. Their long walks along the Embarcadero together, the ongoing jam sessions, the “brother from another mother” mentality—all of it had enraptured Kalanick. The men shared a dream of a fully autonomous future, one where one software program piloting a fleet of automated vehicles could do the work of millions of drivers. But nevertheless, Kalanick had to act. To improve the optics, Kalanick and Levandowski dreamed up a series of internal demotions, claiming Levandowski would work on self-driving cars but remove himself from discussions around lidar, the key technology at the heart of Waymo’s lawsuit. The ridiculous gymnastics fooled no one; Levandowski was still running the show.
Kalanick had always struggled to fire people face-to-face, even when it was painfully clear—like in Levandowski’s case—that only Kalanick could swing the axe. Ultimately, it took pressure from Bill Gurley and David Bonderman on the board to force Kalanick’s hand. Towards the end of the spring of 2017, Anthony Levandowski was unceremoniously terminated. Kalanick was sad to lose such a close ally and friend. The rest of the company, from the top down, was not.
Weeks later, Judge William Alsup, who presided over Waymo’s civil case against Uber and Levandowski, would refer the case to the US Attorney’s Office in San Francisco for “investigation of possible theft of trade secrets.” If they decided to pursue the matter, it could mean bringing criminal charges against Levandowski, raising the possibility he might even spend real, hard time in prison.
“Uber regrets ever bringing Anthony Levandowski on board,” one of Uber’s lawyers later told the jury as the Waymo lawsuit went to trial. “All Uber has to show for Anthony Levandowski is this lawsuit.”
As each disaster hit in the first quarter of 2017, the company’s communications team scrambled to fix the damage. Some described it as walking through a field of landmines; every step forward brought them closer to the next explosion.
One tactic was to demonstrate transparency. Days after the Korea incident surfaced, Uber unveiled its first-ever diversity report, detailing the gender and ethnic breakdown of the company’s workforce. To discuss the findings, Liane Hornsey, the new head of HR who had started just weeks before Uber’s February scandals broke, expressed contrition in a press interview. She tried to soften Kalanick’s hard edges, and to acknowledge that while Uber had more work to do it was indeed up to the task of creating lasting internal change.
Hornsey’s interview seemed to dampen public outcry for the moment. Arianna Huffington also spoke out, saying the company would no longer hire “brilliant jerks.” Huffington soon began to assume a larger leadership role in the brand rehab campaign. She sensed a power vacuum, a crisis of leadership in the corporation and a personal crisis—of Kalanick’s ability to trust the people around him. She owned shares in the company, yes, but there was a special status and power being the person to help right the ship in a time of crisis—especially if that ship was a $69-billion Titanic like Uber.
The diversity report and Hornsey’s interview landed in late March, quelling public ire for just a little over two weeks. Then another bombshell hit.
By this time, the competition between Uber and Lyft had become a famous rivalry. Kalanick didn’t just want to beat Lyft; he wanted to bankrupt them. On April 13, 2017, it became clear how ruthless Uber had become. A report in the tech press unearthed the existence of Uber’s program “Hell,” the one that illicitly repurposed iPhone technology to target Lyft drivers and lure them to Uber. But that was just t
he beginning.
Hell had been created by a group called the “competitive intelligence” team—COIN for short—established to keep tabs on competitors. Uber engineers set up special computer servers which were unconnected to the company’s primary infrastructure and kept “unattributable” to Uber. On those servers, Uber stored, processed and analyzed information Uber engineers had “scraped” or harvested from Lyft’s apps, websites, and code repositories.
The team kept tabs on overseas competitors like Ola in India and DiDi in China. Another entity, the Strategic Services Group, the SSG for short, employed the most clandestine tactics of the bunch. It was made up of ex-CIA, Secret Service, and FBI operatives, and hired subcontractors on special anonymous contracts with Uber so that their names couldn’t be traced back to the company. This outfit of black-hat spies engaged in a wide range of activities, some of which eventually spun out of Uber’s control.
Led by Nick Gicinto, SSG operatives would carry out espionage and counterintelligence missions using virtual private networks, cheap laptops, and wireless hotspots paid for in cash. Undercover operations could include impersonating Uber drivers to gain access to closed WhatsApp group chats, hoping to gather intelligence on whether drivers were organizing or planning to strike against Uber.
They conducted physical surveillance, photographing and tracking competitors at DiDi and Lyft, and monitoring high-profile political figures, lawmakers, and police in contentious cities. They followed people on foot and in cars, tracking their digital activities and movements, and even took photographs of officials in public places. They impersonated Lyft drivers or riders to gain intelligence on the competing company. SSG operatives recorded private conversations between opponents at DiDi and at Grab, their Southeast Asian competitor. One Lyft executive grew so paranoid about being followed by Uber that he walked out onto his porch, lifted both middle fingers in the air and waved them around, sending a message to the spies he was absolutely sure were watching.
Internal communications within SSG were carried out over an enterprise version of an app called Wickr. Because of its architecture, Wickr end-to-end encrypted every message, meaning only the sender and recipient would be able to read them. All messages were automatically deleted after a certain period of time, undermining any future legal discovery. Craig Clark and Sullivan, both licensed lawyers, would often designate documents as attorney-client privileged, another safeguard against potential legal threats.
The budgets for these black ops departments were obfuscated; Kalanick had purview over them. With nearly unlimited resources, Kalanick and other members of his A-Team could dispatch SSG operatives to go on covert missions—“some real spycraft shit,” as one member of the team described it—and gather intelligence against those Kalanick perceived as threats. The mission to photograph Jean Liu, the DiDi president, at the Code conference was an undertaking by the SSG. It was unclear how much of this intelligence was actionable or even valuable. Nevertheless, Kalanick okayed budgets that spun into the tens of millions for surveillance activity, global operations, and information collection.
Kalanick wanted to know his competitors’ every move. He was fighting a war of inches, across multiple countries, and used the SSG to gain intelligence about the other side. But Kalanick’s motives went beyond utility. Photographing Jean Liu at the exact moment she learned of Uber’s $3.5-billion Saudi investment—that was revenge for the pain DiDi had caused him in China. People close to Kalanick said DiDi’s infiltration of his own ranks had changed something in the Uber CEO. After China, he harbored a constant, creeping suspicion that others were trying to blind him or trick him. Kalanick believed his spies could gather the data he needed to make sense of the ongoing fights.
Joe Sullivan, Kalanick’s security chief, didn’t see anything wrong with the practice. As he and his deputies, Mat Henley and Craig Clark, would later tell investigators, Uber’s activities hardly differed from information-gathering that all companies engage in. It was called market research. Buying intelligence from third-party firms to gain an edge was normal. Anyone who criticized Uber for running a slick spy unit should have seen things before Sullivan had arrived, when Uber’s systems were in utter disarray, every employee had access to “Heaven,” thieves defrauded Uber’s incentive system at will, and drivers were literally being murdered in their vehicles. When Sullivan assigned SSG operatives in the field in South America, India, and other locations, he did it to save lives, he said. And his efforts produced results quickly; Sullivan’s new law enforcement outreach division helped police investigate threats against Uber drivers, and fraud had fallen by more than thirty-two basis points, an enormous drop.
Still, the SSG and COIN made many people uncomfortable. Employees were unnerved by mass deletion of internal emails, group chats, and company data, carried out under an internal initiative to “eliminate data waste” throughout all levels of the company. Internally, many believed executives wanted to cover Uber’s tracks, anticipating a subpoena for some unknown future court case.
There were also the bribery problems in some Asian markets. Local employees considered bribery a necessary evil, a cost of doing business for an American company operating on foreign soil.
The never-before-reported details of a case in Indonesia, for example, would grow into an enormous problem. As Uber set up shop to compete with Grab in Indonesia, Uber would open “green light hubs,” which were makeshift checkpoints for drivers in the area to receive vehicle inspections, register complaints with district managers, and other activities. The problem was that the hubs were set up in suburban districts zoned for residential use only. Almost overnight, the green light hubs began attracting hundreds of drivers, which clogged the suburban streets and angered the locals. When the police found out, they threatened to shut Uber’s hubs down.
Instead of moving the company’s hubs, local Uber managers decided to pay off the cops. Every time a police officer would show up, an Uber manager would fork over a cash bribe—usually around 500,000 rupiah, around the equivalent of $35 USD, and the officer would leave. Unsurprisingly, the police became regular visitors.
Uber employees were known to take money from the petty cash bin to pay off bribes, or forge receipts in the amount of the bribe and enter them into the expense account management system for reimbursement, behavior that, as of this writing, the Department of Justice is still investigating as a potential violation of the Foreign Corrupt Practices Act.
Problems like this began to emerge throughout the company that spring as Eric Holder’s law firm, Covington & Burling, conducted hundreds of interviews with employees in preparing their report. Rachel Whetstone had warned Kalanick that bringing in an outsider was the fastest way to lose control. Now her warning seemed prophetic.
Kalanick was vulnerable, but his colleagues weren’t sure if he truly appreciated the gravity of the situation. Once investors found out the depths to which employees had carried out murky, even potentially criminal behavior, it would surely impact the company’s valuation. In just three months, Uber had gone from the world’s greatest investment to a $70 billion time bomb.
Just weeks after firing his close partner, Anthony Levandowski, Travis Kalanick was forced to fire another old friend. Eric Alexander was supposed to be Travis Kalanick’s fixer. Instead, he became a wrecking ball.
If Emil Michael was Kalanick’s number two, then Alexander was number three. That didn’t mean he was third in line to the CEO seat; Alexander’s official title was president of business in APAC, or the Asia Pacific region, responsible for maintaining relationships across all of Asia. Alexander was the guy who knew how to connect you to other guys. He was a valuable asset in the knock-down, drag-out Asian-market transportation wars, a man who could fix things that were broken.
Over time, he became more than that—he became a friend. When Kalanick and Michael would head out for a night on the town in Korea or Southeast Asia, Alexander would inevitably join them. Like his boss, Alexander devot
ed his life to Uber, spending hours on planes every week, traveling from one country to the next.
When Uber’s rape controversy exploded in India in December 2014, Eric Alexander was one of Kalanick’s first calls. Alexander parachuted into the region and immediately did effective damage control with Indian politicians and the press. Eventually, Uber was able to settle a lawsuit the woman had initiated against the company. And though Uber’s operations were temporarily suspended in the Delhi region, Uber was back up and running in India by early 2015. The company seemed to have come through the worst of it.
In the summer of 2017, however, the tech press discovered that Alexander, as a part of the investigation into the India rape case, had been given the victim’s personal, private medical files through a law firm that had obtained them; the records detailed her examination by doctors hours after her sexual assault. Alexander brought them back to the United States with him. Kalanick and other executives were briefed on the investigation by the legal team as it was unfolding.
In the immediate aftermath of the attack, a theory was floated that the rape possibly may not have taken place at all and was in fact part of a plot against Uber perpetrated by executives at Ola, Uber’s major Indian ride-hailing competitor. According to a review conducted on the driver’s and victim’s accounts, the driver held multiple Uber accounts and the victim’s account was used by several different people. Investigators were having trouble reconciling the different identities attached to each account. They raised the possibility that they had been created to stage the attack.
There was another sticking point. According to the medical file, the young woman’s hymen was still intact—a fact that stuck in Kalanick’s head as investigators tried to verify the claims. Kalanick would occasionally raise the fact among colleagues.
In April 2017, the New York Times had approached Uber about Kalanick’s comments about the India rape incident, but the executive denied that he ever had doubts about the truth of her claims to members of their communications team. Uber’s communications team members then swatted the story down as false, and the story never ran.
