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

by jtraffic • 9 years ago

112 51 9 years ago

bloomberg.com

tremon2• 9 years ago

So, where's the blowback? I feel like half of the story is missing...

mnw21cam• 9 years ago

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.”

BoorishBears2• 9 years ago

Doesn't really explain how he knows the mention of being a whistleblower is the reason he wasn't called back.

tremon2• 9 years ago

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.

coldcode2• 9 years ago

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.

winter_blue• 9 years ago

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?

pmorici2• 9 years ago

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.

humanrebar• 9 years ago

It also says he was allegedly fired when the SEC cooperation was discovered.

lightbyte• 9 years ago

They are claiming he already gave notice he was leaving before then so they just accelerated the process.

pmorici2• 9 years ago

Is getting fired from a fraudulent company really a net negative?

fullshark• 9 years ago

It's a pretty thin piece. I'd like to read more.

tcbawo• 9 years ago

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.

chiph• 9 years ago

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.

ghc• 9 years ago

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.

colmvp• 9 years ago

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.

smcl• 9 years ago

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/...

cavanasm• 9 years ago

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/

antihero2• 9 years ago

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?

crusso2• 9 years ago

"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.

ivraatiems• 9 years ago

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.

crusso2• 9 years ago

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.

sidlls• 9 years ago

I reckon most folks engaged in illegal activity would rather not pay for work to expose them.

pjc50• 9 years ago

"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?

JumpCrisscross• 9 years ago

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

endorphone5• 9 years ago

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.

jackmott• 9 years ago

Yes, I would hire him, and not you.

BEEdwards• 9 years ago

Just to be clear, in this case your siding with the criminals?

JoeAltmaier• 9 years ago

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.

endorphone5• 9 years ago

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.

dmschulman2• 9 years ago

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."

endorphone5• 9 years ago

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.

jartelt• 9 years ago

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.

gregshap• 9 years ago

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...]

aphextron• 9 years ago

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.

obiefernandez• 9 years ago

Mike Rothenberg is one of the executive producers of Silicon Valley!!

kazinator2• 9 years ago

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".

antihero2• 9 years ago

I think you've kind of missed the point of ethics entirely.

kazinator2• 9 years ago

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.

kwisatzh• 9 years ago

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!

An employee who exposed Rothenberg Ventures to the SEC

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