Hyperloop One, a LA-based startup developing Elon Musk's futuristic transportation system, is coming under fire for allegedly mistreating employees and abusing funds.
According to court documents obtained by CNBC, co-founder and former chief technology officer, Brogan BamBrogan, and several other employees are suing Hyperloop One on claims that company executives misused funds, breached their fiduciary duty, violated California labor code, and even assaulted at least one employee by placing a noose on his desk seat.
According to the suit, which was filed Tuesday, high-level executives used company money "to augment their personal brands, enhance their romantic lives, and line their pockets (and those of family members.)"
BamBrogan, who recently left the company, is the main plaintiff in the case.
Defendants include Shervin Pishevar, co-founder and chairman; Afshin Pishevar, Shervin's brother and the former company's chief legal officer; Joseph Lonsdale, vice-chairman; as well as Robert Lloyd, the company's CEO.
For example, the suit states that defendant Shervin Pishevar dated the company's PR vendor and raised her salary from $15,000 to $40,000 per month. However, when the engagement fell through, he "finally heeded suggestions that her work was worth little, and terminated the arrangement."
In another example cited in the suit, the plaintiffs allege that Pishevar hired his brother, Afshin Pishevar, as general counselor, even though he was a personal injury and criminal defense attorney.
According to the lawsuit, the plaintiffs are also claiming that they were mistreated at the company once they raised their concerns to top level executives about mishandled funds and nepotism.
Other plaintiffs include Knut Sauer, the company's former president of business development; David Pendergrast, the former assistant general counsel; and William Mulholland, the former vice president of finance.
The plaintiffs and seven other employees quietly approached management in a letter stating their concerns in late May. The letter was sent to Shervin, Lonsdale, and Lloyd, the suit states.
"Defendants reacted swiftly, seeking to divide-and-conquer the group of eleven employees, and ensure Defendants' continued control," the suit states.
In one particular instance cited in the suit, defendant Afshin Pishevar allegedly placed a hangman's noose on BamBrogan's chair, and the action was caught by the company's security cameras on the evening of June 14.
"Shervin became agitated when the issues were raised at the dinner," the lawsuit states. "Then, just hours after that dinner, at 11:28 p.m. California time, Shervin’s brother and Chief Legal Officer of Hyperloop One, Defendant Afshin Pishevar, strolled through HyperloopOne’s office and placed a hangman’s noose on BamBrogan’schair. Hyperloop One's security cameras captured it all."
"The message was clear, and made even more so later that day, when Hyperloop One presented its final offer in response to the group of eleven employees’ letter: no core changes would be made, and three heads would roll: Plaintiffs Pendergast and Mulholland would be fired, and BamBrogan would be demoted and forced to take a leave of absence (and would not be terminated outright only if he promised to 'behave.') If the group of eleven accepted the proposal, then Defendants promised not to 'pursue them to the ends of the earth,' threatening economic and legal warfare by millionaires with extensive networks," the suit states.
Orin Snyder, a partner at the New York City law firm Gibson Dunn, is representing Hyperloop One. Snyder told Tech Insider in a statement that the lawsuit was "delusional."
"Today’s lawsuit brought by former employees of Hyperloop One is unfortunate and delusional. These employees tried to stage a coup and failed. They knew that the company was aware of their actions, and this lawsuit is their preemptive strike. The claims are pure nonsense and will be met with a swift and potent legal response," Snyder said in the statement.
He also described the lawsuit as "frivolous," and defended Hyperloop One's business.
"Frivolous lawsuits like this one have become all too common against start-ups that achieve breakthrough success. It is almost a cliche. It is also a measure of Hyperloop's success. The company continues to recruit top talent, secure significant funding from global investors and accelerate toward its technology milestones," he said in the statement.
"Hyperloop is on track, its board and team are united and today's bogus lawsuit will have no impact on its goal of becoming the first company to bring the Hyperloop to the world."
In response to Hyperloop One's statement, Justin Berger of the law firm Cotchett, Pitre & McCarthy, who is representing the plaintiffs, gave the following statement.
“The company’s statement is long on rhetoric and short on facts. The company’s spin is belied by the facts and the chronology of events, as laid out in great detail in the Complaint," Berger said in the statement.
"Plaintiffs and seven other top employees quietly approached the Defendants in May with reasonable proposals to set the company back on the right track. They were met with hostility, threats of costly legal fights, and a noose. Defendants violated California law and they will be held accountable.”
