Question & Answer: Newspaper article by Peter Rudegeair " SoFi Opens Harassment Probe"…please can you…..

Background: Social Finance or SoFi is a FinTech startup centered around re-financing of student loans. It is an online personal finance company that also mortgages and personal loans.SoFi was founded in 2011 by Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady, four students from the Stanford Graduate School of Business who hoped SoFi could provide more affordable options for those taking on debt to fund their education. In May 2016, SoFi became the first startup online lender to receive a triple-A rating from Moody’s.In September 2016, SoFi launched SoFi at Work, an employee benefit program to reduce student debt and build financial wellness, and announced it has more than 600 corporate partners. However, the company has come under the scanner recently due to an alleged sexual harassment report filed by an employee terminated from SoFi, which Peter Rudegeair examines in his recent Wall Street Journal article.

Analysis:

At the end of August this year, a senior Operations Manager named Brandon Charles sued the company saying that he had been terminated wrongfully for (a) reporting sexual harassment of female colleagues by their managers, and (b) firing several managers who he claims improperly recorded loans in order to boost their bonus pay. Days later, a group of five former SoFi employees filed a separate lawsuit, alleging they weren’t given breaks or paid in accordance with California law.Interestingly, both cases were filed by the same lawyer, Robert Ottinger.

The complaint filed by Charles states that, he saw a male manager subjecting female employees to “unwanted, overtly sexual conduct” that included the interjection of “explicit sexual innuendo and statements into normal workplace communications.” The lawsuit says that Charles emailed several people in human resources about the harassment. He was told that the complaints were “devoid of merit,” and that such complaints were outside his appropriate duties to report to management, according to the complaint.The lawsuit also alleges managers were mishandling loan applications.

In response to the allegations, Mike Cagney made a statement claiming that, “……the same lawyer has been trying to collect information relating to alleged sexual harassment at the company, and that he has several people who are prepared to formally allege they were the victims of or witnesses to improper activity at our Healdsburg operations office.” implying that the plaintiffs were probably trying to buy witnesses to support their cause.

Cases of sexual harassment at the workplace are taken very seriously in the US. However, contrary to popular perspective,this is not just a case of sexual harassment. It also deals with issues like deliberate misappropriation of funds and inequality in the wage-structure of the company. Also the CEO’s attempt to trivialise the issue and question the morality of the lawyer and plaintiffs reflects a certain amount of arrogance and over-confidence in his company’s administration.

A SoFi spokesperson responded to the complaint saying, “These cases are brought by a lawyer who tells prospective clients on his YouTube channel that the facts and the law aren’t the most important factors in employment lawsuits. Apparently,” the statement continues, Ottinger “prefers to defame companies and individuals with lurid rumor and innuendo in the hope he will be paid to go away. That’s unethical and wrong. As we said when the case was filed, Mr. Charles’ claims were investigated in depth by the company and found to have no merit. We will vigorously defend ourselves against any claims otherwise.”

This is an extremely serious accusation which strips the case of its merits and questions the morality of the plaintiffs’ lawyer at one and the same time.We must note here that, sexual harassment allegations have previously brought down high-profile venture capitalists like Dave McClure. Silicon Valley companies are constantly under scrutiny in recent months for its treatment of women. Hence, it would help SoFi to tone down its arrogance and self-righteous demeanour. SoFi has raised almost $2 billion in debt and equity financing. The company has become a leader in lending and other “fintech” categories and stands to lose much if such claims are proven. Moreover, as people lay more and more emphasis on only the bit about sexual harassment, a more delicate issue is being strategically overshadowed. Please observe that, the CEO and spokesperson defend their internal investication of the harassment issue but tactfully stay away from commenting on the issue of mishandling of loan applications, which, for a FinTech company focused on lending has the potential to affect revenues. The lawsuit alleges managers of mishandling loan applications to enhance their quarterly bonuses, which could be as high as $15,000 a quarter. The managers were canceling applications that had “internal errors,” rather than reporting those issues, which would have decreased performance metrics and quarterly bonus awards, the suit says.The company has not made any public statements to counter this claim. If all allegations are baseless and the company is confident of its investigations, the reports of those investigation should be released to the public domain or submitted to the courts for judgement.