An employee who exposed Rothenberg Ventures to the SEC(bloomberg.com)
bloomberg.com
An employee who exposed Rothenberg Ventures to the SEC
https://www.bloomberg.com/news/articles/2017-05-09/he-blew-the-whistle-on-a-silicon-valley-highflier-then-came-the-blowback
58 comments
I don't see anything coming out of this or the earlier exposes. They seem to be doing fine, and will continue to thrive. Viva Tech-Bros!
If I found out that someone I know (friend, family member, ...) were being deceived by the company, I'd pass the info on to that person (not the government).
Otherwise, none of my business.
Of course, unless I'm in a position where I'm legally required, like an officer of the company, or accountant or whatever. As someone just doing in-house development or IT work or whatever, no way.
The litmus test for whistling is: is it my business to know this information? And if so, do I face penalties or a jail time if I don't report it?
That guy shouldn't even have been reading those e-mails, which were not for his eyes. Of course someone might not want to hire him; he sticks his nose where it doesn't belong.
Suppose the company hadn't done anything wrong? Will he reveal in future interviews, "I was an almost-whistleblower at my former employer; working a simple web developer, I got into private executive memos that weren't CC'd to me and luckily found no evidence of wrongdoing".
Otherwise, none of my business.
Of course, unless I'm in a position where I'm legally required, like an officer of the company, or accountant or whatever. As someone just doing in-house development or IT work or whatever, no way.
The litmus test for whistling is: is it my business to know this information? And if so, do I face penalties or a jail time if I don't report it?
That guy shouldn't even have been reading those e-mails, which were not for his eyes. Of course someone might not want to hire him; he sticks his nose where it doesn't belong.
Suppose the company hadn't done anything wrong? Will he reveal in future interviews, "I was an almost-whistleblower at my former employer; working a simple web developer, I got into private executive memos that weren't CC'd to me and luckily found no evidence of wrongdoing".
I think you've kind of missed the point of ethics entirely.
Reading confidential e-mails is unethical, full stop.
Unethical actions which uncover crime are still unethical.
That is why we have warrants, and wiretap laws and all that; how information is obtained matters.
"Any way to nail a criminal" is end-justifies-the-means questionable ethics.
Unethical actions which uncover crime are still unethical.
That is why we have warrants, and wiretap laws and all that; how information is obtained matters.
"Any way to nail a criminal" is end-justifies-the-means questionable ethics.
[deleted]
[deleted]
[deleted]
So, where's the blowback? I feel like half of the story is missing...
From the article:
> Riordan is trying to start a company that improves email security. Partly, he says, that’s because blowing the whistle on Rothenberg dinged his career prospects. After once telling a job interviewer he was a whistleblower, he didn’t get a call back. Still, he says, the cost was worth it. “I knew that to some extent I would be damaging my career,” he says. “I was just so sure that it was the right thing to do.”
> Riordan is trying to start a company that improves email security. Partly, he says, that’s because blowing the whistle on Rothenberg dinged his career prospects. After once telling a job interviewer he was a whistleblower, he didn’t get a call back. Still, he says, the cost was worth it. “I knew that to some extent I would be damaging my career,” he says. “I was just so sure that it was the right thing to do.”
Doesn't really explain how he knows the mention of being a whistleblower is the reason he wasn't called back.
Of course not, companies let the hiring process be opaque for a reason. Common sense would tell us that blowing the whistle is not going to endear you to future employers.
As an employer, whistleblowers are not something to fear unless you have something to hide. What exactly is he going to expose if everything is legit? Better to have honest employees than those would do otherwise without question.
>As an employer, whistleblowers are not something to fear unless you have something to hide.
We don't let that logic slide when it comes to individual privacy and I'm not sure we should for corporate privacy. Even a company completely on the up and up may have privacy concerns that deter them from hiring someone like this.
We don't let that logic slide when it comes to individual privacy and I'm not sure we should for corporate privacy. Even a company completely on the up and up may have privacy concerns that deter them from hiring someone like this.
Illegal vs private is a different discussion. Some companies like transparency, some don't, and that's fine.
Proper security protocols are probably a better model for that since everyone is naturally curious and info tends to spread at even the most secret of companies.
Proper security protocols are probably a better model for that since everyone is naturally curious and info tends to spread at even the most secret of companies.
Really? Common sense tells me some types of companies will see it as a negative (what if he does it to us!), and others will see is as neutral (we asked why he left his last job, he answered, not the worst reason, not the best), and some will see it as a positive (someone willing to step up and put their neck on the line for what's right).
Do I think there are a lot of companies in the first category? Yes (I also think there are a lot in the other two though).
Do I think it's remotely reasonable to automatically assume every place that doesn't call you back after you mention being a whistleblower isn't calling back because you mentioned that? Not at all.
Do I think there are a lot of companies in the first category? Yes (I also think there are a lot in the other two though).
Do I think it's remotely reasonable to automatically assume every place that doesn't call you back after you mention being a whistleblower isn't calling back because you mentioned that? Not at all.
My point was that those events are positively minor, compared to what others have experienced. I think the term "blowback" is severely out of place here.
Did you talk to the government? Won't answer that question. You're fired.
Of course the SEC is mostly a toothless worm so while he did the right thing, I doubt much will ever happen to the company or its founder.
Of course the SEC is mostly a toothless worm so while he did the right thing, I doubt much will ever happen to the company or its founder.
The SEC is mostly a toothless worm? Really? Can you back that up with some examples of the SEC giving a free pass to companies that defraud investors?
2008 how many company and bank CEOs were convicted of wrong doing?
Article doesn't really support the headline. The sole argument they provide that there was any "blowback" was that one time he brought it up in a job interview and didn't get a call back. Hardly enough to say your career prospects are some how wrecked because you exposed a blatant fraud.
It also says he was allegedly fired when the SEC cooperation was discovered.
Is getting fired from a fraudulent company really a net negative?
Even being associated with one is. Then, being a whistleblower is a major risk to HR since most will assume the person might publish just anything as opposed to worst stuff. He already claims to have been rejected for a job being a whistleblower but rejections happen for a lot of reasons.
It's a pretty thin piece. I'd like to read more.
In all seriousness, isn't it best to secure your next position before going to the government or the investors? You have to assume that your job is over as you know it.
> even renting out San Francisco’s AT&T Park
Now I get the opening scene in Silicon Valley Season 2 Episode 1 where they're at the baseball stadium.
Now I get the opening scene in Silicon Valley Season 2 Episode 1 where they're at the baseball stadium.
Good for him. That's why we have whistleblower laws in the first place. Most of us have a lot to lose by doing the right thing: damaged job prospects may equate to a large future loss of earnings over your career. Still, history shows plenty of people have paid (and continue to pay) a far higher price than that.
Yup. Whistleblowers are severely disadvantaged.
The Theranos whistleblower has had to endure about 400k in legal fees.
I also recall reading a story about two police officers (can't remember the city) who tried to reveal corruption in their department, only to be vilified by superiors/fellow officers, have their career trajectory torpedoed, and see people who treated them like garbage eventually elevated in various forms of government.
And of course, there's Snowden who basically had to flee the country to reveal his findings, lest he suffer the consequences of prosecutorial abuse of the Espionage Act in the United States.
The Theranos whistleblower has had to endure about 400k in legal fees.
I also recall reading a story about two police officers (can't remember the city) who tried to reveal corruption in their department, only to be vilified by superiors/fellow officers, have their career trajectory torpedoed, and see people who treated them like garbage eventually elevated in various forms of government.
And of course, there's Snowden who basically had to flee the country to reveal his findings, lest he suffer the consequences of prosecutorial abuse of the Espionage Act in the United States.
For the Police whisleblower I'm not sure if it's the same one, but Adrian Schoolcraft's[1] case was pretty awful. He was mostly documenting relatively mundane (but still nasty) things like being given targets for the amount of littering, jaywalking, open-container etc arrests by the superior officers. However things took a bit of a weird turn, and he ended up with some recordings of the Police harrassing him at his home (including them basically abducting him under false mental health issues, and destroying what they thought was the only mic recording them doing so) are pretty awful - This American Life did a piece on this [2].
[1] = https://www.nytimes.com/2015/09/30/nyregion/officer-who-disc...
[2] = https://www.thisamericanlife.org/radio-archives/episode/414/...
[1] = https://www.nytimes.com/2015/09/30/nyregion/officer-who-disc...
[2] = https://www.thisamericanlife.org/radio-archives/episode/414/...
That's Chicago based. They were actually secretly working for CPD Internal Affairs, and their CO (who knew of their side work for IA, but not who the subject of the investigation was) leaked it to everyone, which made it nearly impossible for them to actually investigate the particular officer who was suspected of being a local drug kingpin / murderer (convicted much later of a small fraction of the stuff he's alleged to have done). The Intercept ran one of their big series on it. It's definitely an interesting read, but it's lengthy.
https://theintercept.com/series/code-of-silence/
https://theintercept.com/series/code-of-silence/
> The Theranos whistleblower has had to endure about 400k in legal fees.
Shouldn't the SEC or whichever agency they came clean to foot those bills?
Shouldn't the SEC or whichever agency they came clean to foot those bills?
"That was February 2016. By July, Riordan says, he’d downloaded emails, financial reports, and other records from the network that he says showed the company’s namesake, Chief Executive Officer Mike Rothenberg, was using investor money to fund other projects he owned"
That's kind of troubling, depending upon the details.
If I hire someone and he starts fishing around on the servers that he has access to, looking to put together a case, that could easily be a violation of trust. I could maybe even see if the SEC had contacted him and asked him for information as an informant in something ongoing. But Riordan initiated this - and it wasn't like the Uber example where Susan Fowler was exposing company culture information that was more public in the first place.
Granted, Rothenberg looks pretty dirty and I have personal experience with a CEO diverting company funds and priorities away from the supposed corporate mission. It's no fun and I have sympathy for stopping him.
If I hire someone to do some server work, I want him to do the job I'm paying for - not spend my money trying to build a case against me.
That's kind of troubling, depending upon the details.
If I hire someone and he starts fishing around on the servers that he has access to, looking to put together a case, that could easily be a violation of trust. I could maybe even see if the SEC had contacted him and asked him for information as an informant in something ongoing. But Riordan initiated this - and it wasn't like the Uber example where Susan Fowler was exposing company culture information that was more public in the first place.
Granted, Rothenberg looks pretty dirty and I have personal experience with a CEO diverting company funds and priorities away from the supposed corporate mission. It's no fun and I have sympathy for stopping him.
If I hire someone to do some server work, I want him to do the job I'm paying for - not spend my money trying to build a case against me.
Why are you assuming he was "fishing around?" He suspected illegal activity, found evidence, and reported it.
I don't care how much you're paying me; if I see you punch a guy in the break room, I'm calling the police. This is more like that than it is an employee shirking his duties.
I don't care how much you're paying me; if I see you punch a guy in the break room, I'm calling the police. This is more like that than it is an employee shirking his duties.
It wasn't punching a guy in the break room. If he was working on the web server or something like that but turned up email and financial records, there was digging involved.
I'd agree with you if Riordan had e.g. taken to Twitter or vented on a blog post. But he went to the Securities and Exchange Commission (SEC). They have a legal mandate around securities-related whistleblowing [1].
[1] https://www.sec.gov/whistleblower
[1] https://www.sec.gov/whistleblower
> "If I hire someone to do some server work, I want him to do the job I'm paying for"
Who's the "I" here though, the CEO or the investors? Fundamentally it's their money. Would you also want an employee that turned a blind eye to other employees stealing from the company?
Who's the "I" here though, the CEO or the investors? Fundamentally it's their money. Would you also want an employee that turned a blind eye to other employees stealing from the company?
I reckon most folks engaged in illegal activity would rather not pay for work to expose them.
GrumpyNl(2)
This article didn't do this person any favors.
Hired for web development, they go trawling through the network finding any insufficiently secured material they can access to appease their sense of justice (and have since used various emails of other people's for media discussions to bolster their case, while ironically talking about email security -- ala "defend against me"). Then they continue working while acting as an agent of the government. Or such is what I take from this article.
As good as it seems that the company and "frat" brothers (always a wonderful word in these articles to prejudice the reader) were brought down, does this article give anyone any comfort about hiring this person?
To make it even worse (regarding the "side with criminals" nonsense), thus far nothing criminal has even been demonstrated. For instance a core contention is that they used management fees for separate investments. There is nothing illegal about that. Investors are partners of specific funds, and management fees are the fees and profit to the management company for running that fund. It just sounds like a shitty company shittily run, but running around exposing various emails that were arguably criminally accessed just smells really stinky.
Hired for web development, they go trawling through the network finding any insufficiently secured material they can access to appease their sense of justice (and have since used various emails of other people's for media discussions to bolster their case, while ironically talking about email security -- ala "defend against me"). Then they continue working while acting as an agent of the government. Or such is what I take from this article.
As good as it seems that the company and "frat" brothers (always a wonderful word in these articles to prejudice the reader) were brought down, does this article give anyone any comfort about hiring this person?
To make it even worse (regarding the "side with criminals" nonsense), thus far nothing criminal has even been demonstrated. For instance a core contention is that they used management fees for separate investments. There is nothing illegal about that. Investors are partners of specific funds, and management fees are the fees and profit to the management company for running that fund. It just sounds like a shitty company shittily run, but running around exposing various emails that were arguably criminally accessed just smells really stinky.
Just to be clear, in this case your siding with the criminals?
Against the hypocrite isn't at all the same thing, as 'for the criminals'. Its that 'you're with me or against me' thinking that plagues the internet lately.
Where's the hypocrisy?
I'm not "siding" with anyone. I'm pointing out how this story leads organizations -- including organizations that have no desire to be criminal -- to steer clear of this individual. Cheap rhetoric by the peanut gallery about how eager they would be to hire this person rings incredibly hollow. So I guess their job problems are solved.
Quite aside from what looks like a gross abuse of access (again, and maybe the article is representing it wrong, but I'm pointing out why the article does them no favors), which itself is ironically criminal, society in general looks unfavorably on "tattle tales" for a reason.
If you didn't cross all t's and dot all i's when creating your DR strategy, will they call the BSA on you? If a painter's van partly blocks a handicap space, will they report you to the city? Etc.
Everyone breaks the law to some degree. If this person were your passenger on a commute and they called 911 to report that you were 10 over, would you say "Well that's fair. I understand why they don't side with the criminal.".
Again, my core point is how this article does them no favors.
Quite aside from what looks like a gross abuse of access (again, and maybe the article is representing it wrong, but I'm pointing out why the article does them no favors), which itself is ironically criminal, society in general looks unfavorably on "tattle tales" for a reason.
If you didn't cross all t's and dot all i's when creating your DR strategy, will they call the BSA on you? If a painter's van partly blocks a handicap space, will they report you to the city? Etc.
Everyone breaks the law to some degree. If this person were your passenger on a commute and they called 911 to report that you were 10 over, would you say "Well that's fair. I understand why they don't side with the criminal.".
Again, my core point is how this article does them no favors.
Yes, I would hire him, and not you.
Interesting timing, I had just finished reading this Backchannel article regarding Rothenberg Ventures from September: https://backchannel.com/mike-rothenbergs-vc-firm-was-young-s...
Just an excerpt, an example of what I'd imagine some of the unwise personal projects regard:
"Most troublesome are questions about how Rothenberg managed investors’ money. Specifically, in 2015 he founded a virtual reality production company called River Studios to create virtual reality videos for the likes of Coldplay and Björk, funding it with $5 million from Rothenberg Ventures. Many investors say they did not know — nor was it disclosed in annual reports — that he was founding and funding his own business with their dollars, despite the fact that the investment was roughly 50 times the size of the seed investments the firm normally makes."
Just an excerpt, an example of what I'd imagine some of the unwise personal projects regard:
"Most troublesome are questions about how Rothenberg managed investors’ money. Specifically, in 2015 he founded a virtual reality production company called River Studios to create virtual reality videos for the likes of Coldplay and Björk, funding it with $5 million from Rothenberg Ventures. Many investors say they did not know — nor was it disclosed in annual reports — that he was founding and funding his own business with their dollars, despite the fact that the investment was roughly 50 times the size of the seed investments the firm normally makes."
I'm taking a beating in another comment (it's one of those ridiculous discussions where everyone can demonstrate how righteous they are), but I listened to the podcast and the argument was that the management company (e.g. not the actual funds) used management fees to pay for their own investments.
Ala the frat bros owned A. A had funds B, C, and D. Investers are LPs of B, C and D. Management fees flowed from B, C and D to A, where it was used for nonsensical stuff.
There's nothing at all illegal about that. If a fund has a 10% of holdings management fee, the fund has zero obligation or "fiduciary duty" to the charged fund holders in how they use that money. They can use it on a mountain of blow, or a room of strippers. Or they can invest in dubious investments. Whatever. If investors don't like the returns relative to the management fees, they redeem.
This whole story is very offputting. The individual is talking about various completely uncriminal emails that he read in podcasts, itself arguably criminal and with profound civil liability. And that's the hero of the story? Eh.
Ala the frat bros owned A. A had funds B, C, and D. Investers are LPs of B, C and D. Management fees flowed from B, C and D to A, where it was used for nonsensical stuff.
There's nothing at all illegal about that. If a fund has a 10% of holdings management fee, the fund has zero obligation or "fiduciary duty" to the charged fund holders in how they use that money. They can use it on a mountain of blow, or a room of strippers. Or they can invest in dubious investments. Whatever. If investors don't like the returns relative to the management fees, they redeem.
This whole story is very offputting. The individual is talking about various completely uncriminal emails that he read in podcasts, itself arguably criminal and with profound civil liability. And that's the hero of the story? Eh.
I haven't listened to the podcast, but according to the backchannel article linked above, the money came from the funds themselves
> The $5 million that went into launching River Studios came from Rothenberg Ventures’ second and third funds...One LP says that in a phone call with investors in August after Rothenberg had told them about the River Studios investment in an email, one grilled him on why River Studios wasn’t in the annual reports, and says Rothenberg responded that he was still getting around to the disclosures. Rothenberg’s employees also say they were kept in the dark. Two former employees tell Backchannel that when they asked Rothenberg how River Studios was funded, he told them only that there were outside investors. Another recalls Rothenberg saying he paid for it himself. Rothenberg disputes this, saying that all investors had been made aware, adding, “We’ve been very public about it.”
[https://backchannel.com/mike-rothenbergs-vc-firm-was-young-s...]
> The $5 million that went into launching River Studios came from Rothenberg Ventures’ second and third funds...One LP says that in a phone call with investors in August after Rothenberg had told them about the River Studios investment in an email, one grilled him on why River Studios wasn’t in the annual reports, and says Rothenberg responded that he was still getting around to the disclosures. Rothenberg’s employees also say they were kept in the dark. Two former employees tell Backchannel that when they asked Rothenberg how River Studios was funded, he told them only that there were outside investors. Another recalls Rothenberg saying he paid for it himself. Rothenberg disputes this, saying that all investors had been made aware, adding, “We’ve been very public about it.”
[https://backchannel.com/mike-rothenbergs-vc-firm-was-young-s...]
Later information is much more vague about this, and one of the core complaints is that he used the management fees of his funds to sponsor companies that arguably competed with holdings of the funds - a serious conflict of interest.
This fund was started with a ridiculous fee structure of 17.5% of total investment upfront, and then apparently no going forward fees. Like a "lifetime VPN" subscription, the economics don't make sense and it is a folly arrangement for all sides.
This fund was started with a ridiculous fee structure of 17.5% of total investment upfront, and then apparently no going forward fees. Like a "lifetime VPN" subscription, the economics don't make sense and it is a folly arrangement for all sides.
Also from the Backchannel article:
"Several former Rothenberg Ventures and River Studios employees now say they didn’t understand why River Studios was green-lit. One former employee noted that River Studios also competed for clients and market share with at least two of Rothenberg Ventures’ portfolio companies that were already in VR film production, Triggar and vantage.tv. (Triggar didn’t respond to requests for comment, and vantage.tv’s CEO Juan Santillan wrote in an email, “I don’t agree with many of the things that were going on at RV…” but added, “RV[’s] extended team has been great to us.”)"
"Several former Rothenberg Ventures and River Studios employees now say they didn’t understand why River Studios was green-lit. One former employee noted that River Studios also competed for clients and market share with at least two of Rothenberg Ventures’ portfolio companies that were already in VR film production, Triggar and vantage.tv. (Triggar didn’t respond to requests for comment, and vantage.tv’s CEO Juan Santillan wrote in an email, “I don’t agree with many of the things that were going on at RV…” but added, “RV[’s] extended team has been great to us.”)"
Well, if the management company didn't use any of the fees to pay employees, credit card companies, other vendors, etc. and instead used the fees to buy a "mountain of blow", I think that qualifies as an issue.
In the wake of controversy they saw mass redemptions, fees obviously collapsed, and the company became essentially insolvent. There is nothing criminal about that, and it happens to funds as a regular event, and it came much later than the events around this purported whistleblowing.
I have to say this isn't surprising from my personal experience with Rothenberg. I attended their "Founders Field Day" event last year and it was the most surreal, over the top, "Silicon Valley" thing I have ever witnessed. They must not be in too hot of water though, as they're holding another puppy petting/VR party in the city this Friday.
Mike Rothenberg is one of the executive producers of Silicon Valley!!