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Employees of Fintech Firm SoFi Allege Women Are Treated Improperly

10 Sep 2017 4:49 pm
By Peter Rudegeair 

Social Finance Inc., a fintech company whose hard-charging ethos propelled it to success, is ensnared in the controversy over workplace culture and the treatment of women at Silicon Valley technology startups.

In interviews, nearly a dozen current and former employees working in various departments told The Wall Street Journal that some executives, including the company's former finance chief, engaged in or tolerated what they described as improper behavior toward women in recent years.

Nino Fanlo, who served as SoFi's chief financial officer until the end of May, said he occasionally complimented both men and women's outfits and touched both men and women's shoulders to try to be friendly. "It wasn't sexual," he said.

SoFi's board said in a statement that Mr. Fanlo "left the company in May 2017 to pursue another executive opportunity. He no longer has any relationship with the company."

Separately, SoFi's board disclosed after questioning from the Journal that in 2012 it paid money to settle a dispute between a lower-level employee and Chief Executive Michael Cagney. The nature of the dispute isn't known, but the board said it didn't involve a sexual relationship.

The allegations levied against SoFi occur against a backdrop of debate within Silicon Valley about the culture of startups. Numerous companies in recent years have been the subject of accusations of improper conduct or hostile work environments. One of the industry's leading players, Uber Technologies Inc., has been criticized for its treatment of women in the workplace, which was one factor in the resignation of Travis Kalanick. its high-profile chief executive and founder.

SoFi was started six years ago and found success in refinancing student loans. The San Francisco company has raised nearly $2 billion from investors, including a $500 million funding round earlier this year, and recently signaled it was moving closer to an initial public offering.

Like most Silicon Valley startups, SoFi was focused on growth, and under the leadership of 46-year-old Mr. Cagney, the company thrived as it courted money managers into funding the loans it made to graduates of top-ranked universities.

Employees describe a culture inside its headquarters in the Presidio neighborhood in San Francisco and a call center in nearby Healdsburg, Calif., where they felt pressure to work extra hours at night and on holidays to avoid being fired. Mr. Cagney used to tell SoFi staff that if they weren't waking up twice a week in a cold sweat, they weren't working hard enough, according to a former staffer.

Some of those employees said that the culture veered out of control at times, with executives breaking furniture and throwing telephones out of anger.

A SoFi spokesman said that the company had experienced strong growth and that it has been adding staff "to make sure we deliver the experience SoFi members and applicants expect while creating the internal culture we want."

On Aug. 11, a former operations manager, Brandon Charles, sued the company in a wrongful-termination claim, adding that a fellow manager had harassed female employees by making sexual or inappropriate comments.

SoFi has said it investigated Mr. Charles's claims and found them to be meritless.

Less than 24 hours after Mr. Charles amended his lawsuit on Aug. 31, a companywide note sent by Mr. Cagney said that SoFi had launched an investigation into sexual-harassment claims.

Mr. Charles's lawsuit claimed that Mr. Cagney fostered a culture of "male bravado" where sexual harassment was permitted.

A separate lawsuit was filed last month by a group of former employees that accused the company of pushing staff to work long hours without proper compensation. SoFi said that it takes any allegations of unfair treatment seriously and that it is reserving further comment until it responds to the complaint in court.

Mr. Cagney wrote to employees in his note that outside attorneys would look into other sexual-harassment claims. The investigation Cagney alluded to isn't into claims made in Mr. Charles's lawsuit or the other lawsuit. He said in the companywide note that as SoFi was preparing its response to Mr. Charles's lawsuit, it discovered several people were prepared to "formally allege" they were witnesses to or victims of "improper activity" at the company's operations center in Healdsburg, Calif.

Although the company is growing fast, "Our rapid expansion is no excuse for bad behavior in the workplace," Mr. Cagney wrote.

In the past year, SoFi's staff has doubled to more than 1,200 people, a company representative said.

In 2012, a dispute between Mr. Cagney and an employee led to an investigation by the company's board, which hadn't been previously reported.

Last week, SoFi's board issued a statement to the Journal saying outside counsel conducted the investigation into the 2012 dispute for the board. "The board concluded that it was in the best interests of all parties to reach a settlement," the statement said. It added, "There was no allegation or evidence of a romantic or sexual relationship between Mr. Cagney and the employee."

The employee is no longer with the company and declined to comment.

Mr. Cagney, in an interview, said he never had any relationship with a current or former SoFi employee, except for his wife, who is also employed by SoFi.

Neither Mr. Cagney nor the company would discuss the nature of the dispute that led to the settlement, citing confidentiality agreements.

More than half a dozen former employees told the Journal that there were workplace issues involving Mr. Fanlo. The former finance chief would commonly make comments about the physical appearance of female employees and touch their shoulders in ways that made them uneasy, according to former workers who experienced both behaviors.

Mr. Charles's lawsuit said Mr. Fanlo "touched women inappropriately, and made them feel uncomfortable."

Mr. Fanlo said that no one raised complaints about it with him and that he would have stopped had he known it made employees uncomfortable.

"I would have said, 'Geez, I'm sorry,'" had those gestures been interpreted in that way.

Another former employee described a loan-review meeting that Mr. Fanlo attended along with the former employee, alleging that he made comments about a female applicant's breasts in front of other staff members. Mr. Fanlo said he didn't recall any such meeting.

SoFi has produced solid financial results. In the second quarter, SoFi reported record revenue of over $143 million and adjusted profit of $61.6 million, according to a letter to investors that was reviewed by the Journal.

SoFi is also experiencing some growing pains as it moves to expand its business into mortgages, life insurance, wealth management, and digital-banking applications. Among its other expansion plans, SoFi plans to take its business to foreign countries and roll out a family of funds it would manage for investors.

The company is also trying to open a bank in Utah. That move has drawn opposition from consumer-advocacy groups that question its commitment to lower-income borrowers, as well as questions from a powerful member of Congress.

SoFi's plans to branch out beyond its original student-loan refinancing business have hit snags. Efforts to move into the U.K. and Australia have been delayed.

The company has fallen short of its goal to have $287 million in assets under management by 2016 in its fledgling wealth-advisory business, according to presentations and filings reviewed by the Journal. As of September, the latest figure was $12 million.

The company is also trying to build an asset-management business, a project that gained steam after SoFi acquired Mr. Cagney's hedge-fund firm, Cabezon Investment Group LLC, last year in a deal valued at $3.25 million. Former Cabezon employees are working on plans to offer funds that would hold the riskier parts of bonds backed by SoFi's consumer loans, according to the filings and documents.

Some SoFi shareholders had worried that Cabezon had become a distraction to Mr. Cagney. In early 2015, when SoFi was previously considering whether it should file for a public offering, Cabezon suffered a deep loss after it bet wrong on a move in the Swiss franc.

A SoFi spokesman said Mr. Cagney "recused himself from all board discussions and decisions related to the acquisition" of Cabezon, which has $200 million in assets and generates annual fees including $1 million in management fees and "performance fees that have historically been many multiples of that."

Telis Demos contributed to this article.

Write to Peter Rudegeair at Peter.Rudegeair@wsj.com

(END) Dow Jones Newswires

September 10, 2017 12:49 ET (16:49 GMT)

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