A Blog by Jonathan Low

 

Nov 30, 2017

Feds Investigating Allegations Uber Used Ex-CIA Agents To Steal Trade Secrets

Angering the judge in a trial where you are the defendent to the point where he says he can't trust anything you say? You might want to rethink that strategy.

But the larger question is whether this further erodes Uber's market value below the 30% cut SoftBank has already demanded. JL

Michael Liedtke reports in the Associated Press:

The hearing (has) turned into a forum raising more questions about the ethics and conduct of Uber. “I can't trust anything you say because it has been proven wrong so many times,” (Judge) Alsup told Uber attorney Arturo Gonzalez. The judge also called Uber's espionage teams “a ‘plumbers’ unit doing bad deeds.” Alsup described the allegations in the letter as “scandalous” and lashed out at Uber's legal team for not informing him about them before he was notified by the Justice Department.
Federal prosecutors are investigating allegations that Uber deployed an espionage team to plunder trade secrets from its rivals. That has triggered a delay in a high-profile trial over whether the beleaguered ride-hailing company stole self-driving car technology from Google spinoff Waymo.
The criminal investigation being conducted by the U.S. Justice Department centers on information contained in a 37-page letter describing allegations made by Richard Jacobs, Uber's former manager of global intelligence. Jacobs had the letter sent in May to an Uber lawyer. The letter contended Jacobs was wrongfully demoted and then fired for trying to stop misconduct by the company.
The investigation wasn't publicly known until Tuesday, when it surfaced in a court hearing that was supposed to set the stage for a trial pitting Uber against Waymo, a self-driving car pioneer that started within Google eight years ago and is still a subsidiary of Alphabet Inc., Google’s parent company.
The hearing instead quickly turned into a forum raising more questions about the ethics and conduct of Uber. Over the last year, the San Francisco firm has been rocked by revelations of rampant sexual harassment inside the company, technological trickery designed to thwart regulators and a yearlong cover-up of a hacking attack that stole the personal information of 57 million passengers and 600,000 drivers. Jacobs, whose lawyer wrote the letter at the center of the courtroom drama, testified Tuesday that Uber had set up a secret unit to steal trade secrets from its rivals overseas.
He didn't specify which competitors he believed Uber had been targeting, but said some of the stolen information involved drivers.
His allegations had been kept under seal since the Justice Department passed them along to U.S. District Judge William Alsup last week.
To protect itself against potential trouble, Uber frequently communicated on a service called Wickr that automatically erases messages, according to Jacobs. He also testified that the company relied on a surreptitious computer system to eliminate all digital trails, and that it dispatched its security team to train self-driving car engineers in Pittsburgh on how to conceal their electronic tracks.

Uber's espionage team also hired contractors who employed former CIA agents to help with its surveillance, Jacobs said.
Jacobs was Uber's manager of global intelligence from March 2016 until he was fired seven months ago.
Pressed under questioning, Jacobs acknowledged the letter also alleged that Uber had stolen trade secrets from Waymo and other intellectual property in the United States. But Jacobs said that his lawyer was mistaken in making that allegation. He insisted he didn't know anything about Uber's espionage team trying to steal from anything in the U.S.
Uber paid Jacobs $4.5 million as part of a confidential settlement after his firing, Jacobs said while being grilled by Waymo lawyer Charles Verhoeven. Part of that settlement can be withheld if Jacobs violates a provision requiring him not to say anything that would harm Uber.
“It is possible that he has been bought off by Uber,” Alsup said of Jacobs during Tuesday's drama.
Alsup described the allegations in the letter as “scandalous” and lashed out at Uber's legal team for not informing him about them before he was notified by the Justice Department. “I can't trust anything you say because it has been proven wrong so many times,” Alsup told Uber attorney Arturo Gonzalez. The judge also called Uber's espionage teams “a ‘plumbers’ unit doing bad deeds.”
Gonzalez repeatedly tried to convince Alsup that the allegations in Jacobs' letter had nothing to do with Waymo's case against Uber. The lawyer also argued that Uber used secretive communications channels for employee safety reasons. But the judge wasn't swayed.
“There is a 50-50 chance that this is going to turn out very bad for Uber,” Alsup said. “And there is a 50-50 chance that this will turn out to be a dry hole.”
In a statement defending itself, Uber pointed to Jacobs' testimony that he wasn't aware of the company stealing any of Waymo's trade secrets. “None of the testimony [Tuesday] changes the merits of the case,” Uber said.
Alsup postponed the scheduled Dec. 4 start of the Waymo-Uber trial to give Waymo more time to gather evidence. Waymo is alleging that Uber has been building its own fleet of self-driving cars by using some of the trade secrets taken by former Waymo engineer Anthony Levandowski. Uber paid $680 million last year to buy a self-driving vehicle startup founded by Levandowski after he left Waymo.
Alsup didn't immediately set a new trial date. He promised to make Jacobs' entire letter publicly available.
Meanwhile, a group of investors led by Japanese conglomerate SoftBank Group Corp. has offered to buy a sizable chunk of Uber — but it wants a discount. It wants to buy shares from employees and existing investors at a valuation of $48 billion, a 30% discount on Uber's most recent valuation of about $68 billion, according to a person with knowledge of the matter.

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