Legal and Image Woes Mount For Uber in California

A rare order from a federal judge alerting prosecutors to possible criminal misconduct by Uber or a key executive deepens the turmoil swirling around the ridesharing company at a time when it’s grappling with other legal and image problems.

District Judge William Alsup in San Francisco referred a civil case filed against Uber by Waymo to the U.S. Attorney’s Office “for investigation of possible theft of trade secrets.” It threatens to trigger a second U.S. government investigation of a company that has pushed the legal boundaries through most of its eight-year history.

At stake is Uber’s estimated $68 billion valuation, a possible public stock offering and the future of its self-driving car program, which its CEO has said is the key to the company’s future.

Waymo, a self-driving car company owned by Google parent Alphabet Inc., sued Uber in February alleging that Uber is using stolen self-driving technology to build its own fleet of autonomous cars.

The U.S. Attorney’s Office in San Francisco didn’t respond to requests for comment.

Experts say prosecutors are likely to follow up on Alsup’s order and launch an investigation. The probe, combined with other legal and image woes, will reduce Uber’s value and in the worst case could threaten the San Francisco company’s existence if investors leave, criminal charges bring huge fines and legal action stalls autonomous car research, the experts say.

Uber wouldn’t comment Friday on a possible criminal probe. Federal prosecutors already have requested information from at least two cities about use of phony software to thwart city officials looking at whether Uber was following local regulations.

Alsup wrote in his order that he wasn’t taking a position on whether prosecution was warranted.

Alsup, 71, has gained a reputation as a no-nonsense judge since he was appointed to the bench in 1999 by President Bill Clinton. The Harvard Law graduate has experience in trials involving high-profile technology companies, including a 2012 patent and copyright infringement case pitting Oracle against Google.

For a judge to take such a public step, he must have more than just a whiff of criminal activity, legal experts say. Prosecutors get many tips, but rarely do they come from a judge who is familiar with evidence and the legal elements of what is a crime.

“This is not some private informant that slipped an envelope under the door at midnight. This is public and it’s a judge,” said Erik Gordon, a law and business professor at the University of Michigan.

An investigation would siphon executive resources at Uber just as CEO Travis Kalanick faces many other challenges, said John Coffee, a Columbia University law professor who specializes in white-collar crime and corporate governance. “The possibility that you could get criminally indicted would be exactly the wrong thing for Uber,” Coffee said.

In addition to the apparent inquiry into the software called “Greyball” to impede city inspectors, Uber still has to deal with Waymo’s high-stakes espionage lawsuit. It alleges that Uber is using trade secrets stolen by a former Google engineer, Anthony Levandowski, who formed his own company which was bought by Uber $680 million.

After that deal, Levandowski began to oversee Uber’s self-driving car division.

Waymo contends that before leaving Google early last year, Levandowski downloaded 14,000 documents with details of a navigational tool called Lidar that robotic cars need to see what’s around them.

Uber has vehemently denied using Waymo’s ideas, maintaining that its Lidar is radically different. Meanwhile, Levandowski has refused to answer most questions posed by Waymo’s lawyers while asserting his Fifth Amendment right against self-incrimination. He recently agreed to step down as Uber’s top self-driving car executive, though he still works at the company.

Beyond the possible criminal cases, Kalanick in February was forced to quit President Donald Trump’s council of business leaders after Uber was boycotted by some customers. A female former engineer made a series of sexual harassment allegations about her boss, and a video of Kalanick berating an Uber driver went viral, forcing him to concede he needs leadership help.

Last week, Uber suffered a huge legal setback when a European Union judge ruled that it was a transport company and could be required to get licenses and permits in the 28 EU nations.

Uber had sought to persuade Alsup to send the dispute between Waymo and Levandowski to private arbitration hearings. But the judge rejected that request, meaning the case will play out in a public court, risking further image damage for Uber.

Just months ago Uber was discussing what could have been the largest public stock offering in history, but its troubles now make that all but impossible, Gordon said.

Uber can survive the troubles, but it has an uphill fight, said Gordon. If the court finds that Uber used Google’s Lidar technology, that will slow Uber’s autonomous car research, leaving it behind competitors. The company would either have to pay Alphabet to use it or buy it from a supplier, both expensive options, Gordon said.

The company’s strategy of fostering rapid growth by flouting laws may wind up being its undoing, Gordon said. “The empire is striking back.”

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