!!! Friday Night Surprise. Plaintiffs just filed their response to Facebook in my favorite case - what I call the mother of all lawsuits - in Delaware where it's incorporated. It's a tight but absolutely delicious 120 pages so I'll break down the allegations here for you. /1
as background, this is a massive shareholder lawsuit by pension funds including the second largest in existence. It came after funds successfully sued to see Facebook's board-level documents and messages around the $5 billion settlement after a cover-up was exposed. /2
Shareholders are able to sue by claiming a demand to the board was futile. You can be the judge of the allegations but they need to successfully argue a majority of directors received material benefit, faced liability and lacked independence from someone (Zuckerberg). /3
First, let me walk through the claims. Count one is that Zuckerberg, Sandberg and one other executive led allegedly illegal business practices breaking their fiduciary duties. More on that in a minute. /4
Count two is an allegation that the directors breached their duty of loyalty to the company by overpaying the FTC in order to shield one executive (Zuckerberg) who controls the board, company and committees. Again, more on that in a minute. /5
It alleged that this loyalty breach was clear because the board should have been on notice to Facebook's misconduct due to the 20-year consent decree they were already under from previous wrongdoings settled in 2012. A red flag. /6
Finally, the third count is a series of allegations of insider trading due to individuals stock sales during the relevant period of the claims amounting to over $20 billion in gains according to the allegations. More on that in a minute, too. /7
So back to the first count which stems from allegations Facebook illegally leveraged its immense personal data on its users by overriding their privacy settings and trading it out to companies for growth and profits. These allegations are in antitrust suits, too. /8
The snowball of problems and now shareholder suits was indeed Cambridge Analytica which many wrongly wrote off as snake oil when in fact it's just one example of the allegedly illegal practice that allowed companies access to non-app friends ("NAFs") personal data. /9
It's an antitrust issue, too, as Facebook allowed companies to still have access to this data through "whitelisting" beyond a period where it also was shutting down access for competitive threats. Data sold to Cambridge Analytica also reportedly happened due to an extension. /10
footnote 89 apparently includes evidence Facebook's engineers even assisted with the data transfer back in 2014 that was then sold to Cambridge Analytica. The researcher that sold the data testified this to Senate but we never saw Facebook get asked under oath about it. /11
OK, this is new and a BIG deal - you'll see why shortly. This appears to include evidence Sandberg and Zuckerberg were updated on Cambridge Analytica issue in 2015. This is relevant to Zuckerberg's Congressional testimony including answers to AOC (see next tweet). /12
Here, stop and watch this again and compare to the previous tweet allegation. Zuckerberg also dodged Parliament, Senator (now VP) Harris and other members on the timeline question so very relevant. /13
Why does the timeline matter? Let's get into it. There was clearly a reason Facebook was willing to pay $5 billion in exchange for dropping the claims against Zuckerberg personally. They even allegedly created a "special committee" late in the process to approve it. /14
How do we know they were truly doing to name CEO Zuckerberg personally? Well these shareholders won the right to inspect the documents and the preliminary complaint apparently named him. /15
Many, many people comment on how $5 billion was a parking ticket for Facebook (true) so why was it considered "overpaying?" Well, I'll again let you judge for yourself whether Facebook was juicing it to protect Zuckerberg. /16
Something else very quietly happened on same day Facebook settled for $5 billion with the FTC - they very quietly settled with the SEC. You know...because signing risk disclosures to the public when you know the risk has already happened would be bad if true. /17
and overpaying by billions of the companies' money to protect a "single, deeply compromised controlling shareholder is the essence of bad faith." But you judge. /18
I mean, was it that big of a deal? Facebook lost $36 billion in value in a single day while insiders had personally banked over $20 billion in stock ahead of it. That's the allegation at least. /19
The insiders involved have pointed to SEC Rule 10b5-1 automated sales as their protection but the complaint points out it only protects you if you're not actually trading on inside information. /20
The lawsuit alleges a series of individuals had inside information on a whole range of risks which were already playing out privately and yet continued to bank sales of the stock while the value was inflated. /21
Numero uno being Mark Zuckerberg. The allegation in the complaint response is that he banked nearly $10 billion even accelerating his sales once he learned of Cambridge Analytica issues. /22
I know what you're saying. $10 billion isn't that much to a guy like Mark Zuckerberg? Well recognize it was nearly 20% of his holdings at that time period according to the complaint. Again, while allegedly lying to users, the market and even Congress. /23
In fact, the complaint has a whopping stat that Zuckerberg sold more stock than any insider at any other company during the three month period PRIOR to the Cambridge Analytica disclosure. That's how you get attention from an SEC. /24
Zuckerberg isn't alone in the allegations as COO Sheryl Sandberg also sold a ton of stock during the same key period. She runs nearly everything and never had to testify under oath to the facts of the timeline because it was "off limits" at her one hearing. /25
Finally, let's not forget about Marc Andreessen and Peter Thiel. Both have received considerable benefits by serving on the Facebook board ...and also sold a ton of their stock during the relevant period according to the allegations of the complaint. /26
about those other benefits, the lawsuit also covers them. The value of sitting on the board of Facebook would be off the charts for a celebrated investment group very closely tied to it. Not so independent, eh? /27
Much the same for Peter Thiel. The lawsuit also mentions the access to data that was alleged to have been provided to Thiel-funded companies. /28
on that note, I would also be remiss if I didn't go down memory lane to the other very awkward testimony from Zuckerberg when he was asked under oath about Thiel and his Palantir. It's worth watching again. You be the judge. /29
Lastly, I should note the complaint response also cites the CEO of Netflix who was a Facebook director during the relevant period and... you guessed it... was one of three companies with certain access. This is also in the private antitrust lawsuits. Independent? /30
It's my favorite case and this response runs 110 pages. A reminder, the SEC is also set to unseal a deposition transcript with Zuckerberg we recently learned about. My guess it was a formality with the above settlements but we'll see. /31
I'll close by adding thread from when this lawsuit originally filed. And a reminder - these are the allegations. They come after the 2nd largest pension fund in existence was able to inspect the books...but they're still only allegations until proven. /32
Since this is getting read and some people noted /29/ doesn’t include the awkward testimony about Thiel and Palantir, here it is as I grabbed the wrong clip. Apologies. /edit/
And I’ll add to the end of this - another thread how the news story broke globally leading to a lot of unanswered questions and the $5 billion settlement. Cheers.
Woah. Exhibit list just posted for Facebook trial in DE starting in a few weeks. We finally have confirmation Sheryl Sandberg was deposed by the SEC - one week prior to Zuckerberg which also kept secret until a lawsuit unsealed it. Sandberg was also sanctioned in this case. /1
This matters as it gets at Who Knew What When at FB ahead of the world finding out its platform was leaking personal data for years. Zuckerberg was dodgy at best under oath to Congress, FB responses to Parliaments focused on 2018 news. But exhibits include Jan 2017 MZ emails. /2
The DE lawsuit claims Facebook's $5 billion record settlement was inflated in order to protect its CEO, Zuckerberg, and also includes (civil) insider trading claims. Zuckerberg was ordered to sit for multiple day depo this year, will have to testify live. /3
Scanning front pages across America this morning. Still today, the local A1 best captures the biggest story of the day. The majors from NY to LA to Detroit to even Arkansas. /1
From Washington DC all of the way up to the major newspapers in Alaska… the No Kings protest images are everywhere capturing the moment. /2
All of them capture peaceful protest, democracy in action, and what America is all about at a time when social media algorithms may distort what the day was all about. Illinois to Colorado. /3
Incredible work being done by the press to keep facts building on facts. Grateful. This entire WSJ report overnight starting with this lede on how White House orders sparked LA crackdown is both chilling and informative. /1
This statement. “We came to the United States for protection of what we encountered in Russia. It seems that we are encountering here what we fled.” /2
WSJ separating out cases of targeting groups who have not committed crimes but even noting here incredible resources being used against what appears to be clear, First Amendment protected activity alerted the community. Here is the must-read report. /3 wsj.com/us-news/protes…
Confession. Having watched Scott Pelley's outstanding work over nearly three decades, I almost didn't take the time to watch his W.F. commencement speech thinking the news reports told me enough of the facts. Frankly, that would have been a huge mistake on my part. Huge. 1/5
Disclosure: I'm a 60 Minutes fan. In fact, I read Don Hewitt's "Tell Me a Story" after nearly a decade in sports media and it likely tipped the scale in 2007 when I decided to jump to work at CBS. I find Pelley and team brilliant in telling stories in barely 15 min segments. 2/5
“If liberty means anything at all, it means telling someone something that they don’t want to hear. I fear there may be some people in the audience who don’t want to hear what I have to say today but I appreciate your forbearance in this small act of liberty.” - Scott Pelley 3/5
wow, another order for Mark Zuckerberg to sit for another court deposition. This time in a case involving privacy violations with ingesting web-wide health data. Remember they paid billions in cases to try to avoid this. Data and privacy issues are especially sensitive. /1
Zuckerberg depositions are interesting as they often go on for hours with highly informed attorneys driving for answers. And those answers may be put up against the often questioned veracity of his answers to Congress. Yes, as a CEO, he has testified to Congress A LOT. /2
I think his first real depo was SEC on very sensitive data scandal leading to $5B+ settlements with FTC+SEC. That scandal is still playing out in courts (did he overpay to protect himself?) It took 3yrs to get unsealed after I caught it in a footnote. /3
The Verge comes in with a massive scoop on the backstory reporting it was Musk - and Sacks - behind the scenes trying to blow up IP to train AI on behalf of his allies. This wouldn't be a surprise to anyone. /1
they have reports and details on the carnage and firing of the leadership and on the possible incorrect assumption that the new people in charge were running their playbook. /2
It may be rare that @mrddmia is in agreement with Dems but in the world of accountability for big tech abuse whether over data, monetization, IP, censorship, privacy, you name it, these aren't partisan issues. appreciate the shared voice from advocates all around. /3