Judge Slams Uber for Withholding, Possibly Destroying Evidence in Waymo Trial; May Undermine Uber in Other Litigation

The Uber-Wayo trial, in which the Google unit is suing Uber over the alleged misappropriation of trade secrets in connection with Google’s self-driving car initiative, had an explosive day yesterday that put Uber in serious hot water. Uber withheld considerable, critical, and directly relevant evidence from discovery and appears to have engaged in a systematic program of hiding and possibly destroying evidence. It also looks close to certain that some Uber executives, at a minimum its associate general counsel Angela Padilla, perjured themselves in depositions.

These revelations weaken Uber’s odds of success in the Waymo trial and have the potential to put Uber in a world of legal hurt on other fronts. It isn’t just, as the understandably furious judge, William Alsup, said that he can no longer trust Uber’s attorneys and that he has delayed the trial, which was supposed to start next week, to allow Waymo to do more discovery. It’s that under the principle of spoilage of evidence, judges in some jurisdictions can instruct juries to assume that the evidence was destroyed or withheld to hide bad conduct. They can also use spoilage to bar some types of evidence from being presented. And that’s before you get to the fact that the content of the revelations are damaging and open up new paths of investigation that could be very helpful to Waymo.

To put it more simply: Uber is facing a jury trial. Juries do not like liars. Based just on the information revealed today, it will not be hard to get a jury to see Uber as a pathologically dishonest company.

Specifically, the hearing yesterday also revealed that Uber had a competitive espionage unit that sought to steal trade secrets from competitors. While any large company gathers competitor intelligence, there is a big difference between obtaining public information and misappropriating internal information. Moreover, Uber set up this unit (and one has to wonder if other units were organized along similar lines) on servers separate from Uber’s regular servers, making as heavy use as possible of communication services that did not retain message content. Uber astonishingly took the position that nothing on this parallel system was subject to disclosure.

Even more surprisingly, these revelations came about because the US attorney that has an ongoing criminal investigation into Uber tossed a letter of its own, plus a 37-page letter from the attorney for a former Uber employee, Richard Jacobs, to Judge Alsup. It is unheard of for a prosecutor to provide information from a not-completed investigation into a somewhat-related civil trial. The most logical reason is that the US attorney thought the gambit would increase pressure on Uber.

The most complete press report I have read thus far on what happened in court comes from the New York Times, which appears to have had a reporter at the hearing. I have also embedded. Even with what little you can infer, it’s devastating. But the testimony by the former employee Jacobs was also a stunner.

Jacobs was fired by Uber in April 2017 yet curiously received a $4.5 million settlement which included payouts as a consultant for his help on a supposed ongoing internal investigation. Needless to say, this is a hell of a lot of hush money. It turns out that the 37-page letter from Jacob’s attorney to Uber about what Jacobs had learned about Uber’s so-called Market Analytics group was what triggered the settlement.

From the Financial Times:

Uber has been accused of operating a sophisticated unit dedicated to “stealing trade secrets”….

Mr Jacobs, who split from Uber earlier this year and reached a confidential settlement with the company, described sophisticated techniques that Uber used to evade current and future legal discovery requests…

Mr Jacobs said he was aware that an intelligence unit at Uber was implementing “encrypted and ephemeral communications intended to both protect and destroy communications that might be considered sensitive”, and that employees were instructed to make “phone calls or video calls”, treating email as “a last resort”.

Mr Jacobs alleged that the legal director for Uber’s threat operations team had “described the need to protect sensitive information and ensure we didn’t create a paper trail that could come back to haunt the company in any potential criminal or civil litigation”.

He said that devices that could not be tied back to their users were used by the security team to communicate with third party vendors providing information about competitors, without having to store it on Uber’s network, as well as information about “protest groups and threat actors”.

Judge Alsup told Uber’s lawyer: “It turns out that the server is only for the dummies and the real stuff goes on the shadow system . . . You should have come clean with this long ago.“

More juicy detail from the New York Times:

In discussions with other Uber employees, Mr. Jacobs testified, he learned of an internal organization that gathered trade secrets, code and other information about its competitors. It was called the “marketplace analytics team,” according to the letter, which had been redacted by Uber. The group frequented the code-sharing site GitHub, searching for private material that may have been accidentally revealed by competitors.

This Uber team also led efforts “to evade, impede, obstruct, influence several ongoing lawsuits against Uber,” according to the letter. The team also tried to find out what other companies were doing. And in 2016, Uber hired a man named Ed Russo to help recruit employees of competitors to steal trade secrets, according to the letter.

This group relied on “anonymous” servers separate from the rest of the Uber network, and some employees were expected to rely on devices that encrypted or automatically deleted messages after a certain amount of time, Mr. Jacobs testified. Email was a last resort.

Remember that Jacobs is still a consultant to Uber, which also paid for his travel costs to appear at the trial. Quartz describes how Jacobs tried to discredit what his attorney had previously written:

A Waymo attorney asked Jacobs under oath: “Your lawyer sent letter that you approved alleging that Market Analytics exists solely to acquire code and trade secrets from competitors, yes?” according to McPherson. Jacobs reportedly responded: “I disagree with this now. I have no firsthand knowledge. No knowledge at all.”

And from the Times:

Mr. Jacobs said this effort focused solely on overseas competitors and that he was not aware of the unit obtaining trade secrets from Waymo or other competitors in the United States. That contradicted an assertion in his letter, which said he was aware that this team had at least stolen trade secrets from Waymo…

The letter from Mr. Jacobs’s lawyer, parts of which were read in court, also said three Uber employees had gone to Pittsburgh to instruct the company’s autonomous vehicle group, which is testing self-driving cars in the city.

Now why might Jacobs be so eager to say he wasn’t on board with what his attorney had written, which clearly had to be based on what Jacobs had told him, and Uber must have recognized as credible, otherwise they never would have made such a hefty payout? As one commentor at ars technica pointed out, “Accepting money in exchange for silence and/or perjury related to criminal activity is textbook conspiracy.” The New York Times pointed out that the FBI is investigating Uber’s conduct in its program to steal drivers from Lyft, and that the systems Jacobs described sounded similar to those used to try to sabotage Lyft.

Contrast Jacobs’ testimony with this section of Waymo’s letter about the Jacobs and US attorney letters:

Sure looks like perjury to me. And as you will see from the embedded letter, Waymo’s attorneys want to re-depose a pretty long list of people, staring with Travis Kalanick, along with other individuals whose names are redacted.

You can see that at spots, the document itemizes discovery requests, presumably ones that it is now clear were not satisfied, with big redacted sections following, and in some cases, phrases like “concealing information” are exposed.

The implications of these bombshells go beyond shifting the odds of success in this case in favor of Waymo. If the new revelations are firmed up to be facts, they have the potential to open new cans of worms other criminal and civil actions against Uber, and could even provide grounds for re-litigating old cases.

Uber’s lawyers are also in hot water. It looks like they withheld information from the court that was required to be disclosed in a big way. Unless they can persuade the court that Uber kept them in the dark, they may face sanctions, which could include disbarment.

Pass the popcorn. Couldn’t happen to a more deserving bunch.

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  1. Michael Fiorillo

    There aren’t many satisfactions to be had observing the public realm in this degenerate era, but watching Uber (which deserves to die just for its Nazi-connoted name) go down in flames will produce some exquisite schadenfreude…

    1. meher Baba Fan

      I thought they got the name from a Dead Kenndys song?
      theres certainly going to be a lot of digging for dirt going down. As someone pointed out on another forum (Schneier on Security) anyone with Uber on their CV would want to start making preparations . Softbank have not pulled out but that deal is not set in stone as yet. And I suspect they have alterior motives. Like, owning Uber outright.
      ps joking about the song. This is the most comprehensive overview I have read, thankyou Yves. A significant contribution that gets the facts out

      1. Paul D

        In “California Über Alles,” the Dead Kennedys were referencing the Nazi slogan “Deutschland Über Alles”, pulled from a (now-unused) verse of the German National Anthem.

        Read into that what you will.

        1. Pavel

          I’m old enough to remember seeing Jello Biafra and the DKs sing “California Über Alles” live at the Fab Mab in San Francisco a couple of lifetimes ago. I promise you, SF in 1980 didn’t bear any resemblance to its current incarnation.

          Thanks for the memories.

          As for Uber, each week seems to bring a new world of hurt. I personally hope it goes down in flames. In cities around the world I chat with taxi drivers (often immigrants) who have spent huge amounts on a taxi medallion or similar license and meet various regulatory requirements only to face “competition” from hundreds of people with just a car and a smartphone.

          1. MichaelSF

            Uber/Lyft ride “sharing” driver = scab

            I think in many cases it turns out that the scabs are exploited even more than the people they replace.

          2. redleg

            It’s the suede denim secret police.

            Stars and Stripes of Corruption was prophecy.

            Dead Kennedys left a peerless catalog of political left wing rants set to surf music.
            Jello 2020!

    2. TimH

      The problem if Uber goes down is that the investors will want some money back. Uber has a very valuable asset which is intimate tracking details of a heck of lot of people, likely including persons of interest to a lot of governments.

      How does that data get destroyed and no sold multiple times?

      1. nonsense factory

        Saudi Arabia’s fund invested $3.5 billion in Uber in 2016. It would serve them right to lose their whole pile. As far as their data-sharing practices, that’s a good reason to not use Uber. Or Facebook. Or most smart-phone apps.

  2. Dean

    The list of Uber’s problems is long and continues to grow. With this new revelation, more bad behavior will likely surface.

    Uber’s behavior epitomizes everything rotten about the toxic ‘bro culture’ that pervades Silicon Valley just below the surface of its shiny ‘change the world’ veneer.

    Metaphorically speaking, Uber (as a company) needs to be taken out back behind the barn and put down. I can only hope the AUSA leading the federal criminal investigation doesn’t settle for big fines and headlines.

    1. JTMcPhee

      When Disney killed “Old Yeller,” https://m.youtube.com/watch?v=28xM5Pwio9Y, everyone cried. Who will cry if one corporation, Uber, among the many, many evil ones running everything into the ground to enrich a very few, gets “put down?” Especially since there’s Lyft and others ready to infill, and Uber is a brand that can be morphed just like Blackwater->Xe->Academi into a new and likely more toxic version. These entities are collections of a certain kind of people, expressing a certain kind of culture and socialization, and unless the people who play in this sandbox are removed from the playing field somehow, there will just be more of the same, a lot more of it.

      Who’s gonna cry if Uber goes down, other than the mopes who are filling the base of the pyramid and the yuppies and other self-regarding folks (and those who actually need transport, like disabled people, who ought to be receiving public services in any decent culture?)

      There’s a nasty starfish, the Crown of Thorns, that before the mass of humans reached the point of setting the conditions that are destroying coral reefs and what they feed (including humans) was chewing its species-building way through vast areas of coral. The species has spines coated with toxins that affect humans if contacted (.e.g., into the feet of tourists or incautious hands and arms of SCUBA aficionados.

      Subsistence indigens and “helpful” tourists used to pick up the starfishes in quantity, hack them up, and toss the presumably dead pieces back in the sea. Where it was claimed that they very quickly re-grew a new entire starfish from the severed pieces, thus multiplying the predation. Turns out that “tech” is all over offering “solutions” to the overgrowth of the species (likely facilitated by other human “interventions” in the environment, including “autonomous submarines” that will circulate, “autonomously,” in the reef environment, injecting human-developed toxins into the starfish they encounter. (Turns out that injecting good old vinegar works too, but is not as profitable and toxic as Thiosulfate-citrate-bile salts-sucrose agar (TCBS, for you acronym aficionados.) The pre-tech injection program using human divers at least was a sort of “jobs program…”

      What could possibly go wrong?

      1. Arizona Slim

        Recall that Old Yeller had rabies. The dog HAD to be put down.

        Nature ain’t Disney. And rabies is NOT a nice disease.

        1. JTMcPhee

          Yes, I know the story of Old Yeller, the loyal brave dog that protected the Westward-expanding, Injun-displacing, sod-busting, pre-Dustbowl, Disney-perfect family and got rabies for his trouble, and then a musket ball in the heart.

          The Uber corporate thing shows none of those signal doggie virtues and decencies, and as I asked, who is going to cry if somehow that rabid corporate person gets the equivalent, in “legal” terms, of being put down? Other than the exceptions I mentioned that came to mind?

          And maybe if more rabid corporate cancers got similarly put down, in the way that corporations were once subject to limited franchises and somewhat “subject to the law of the land,” and in fact were dissolved, and their executives and boards actually penalized? Since corporate rabies is a threat to all our human families and the rest of the planet?

          1. Michael Fiorillo

            The problem with the analogy is that Old Yeller was a faithful friend who got rabies defending his humans.

            Uber, on the other hand, was born rabid.

            1. JTMcPhee

              My point was that everyone cries over the story of the life and death of Old Yeller, but only maybe sociopaths and the few who do get some benefit from the looting strategies of ride sharing “apps” (e.g., an Uber ride to the doctor’s office is a lot cheaper and more available than taxis and the disabled-transit services around here) are going to cry if Uber collapses and disappears, maybe causing its “investors” some small bit of financial loss. Hardly analogizing between Old Yeller and Uber. A too subtle point, I guess.

              There are lots of “conveniences” that if they disappeared, maybe the rate of decimation of the planet would at least marginally decrease. I know people who love their SUVs and Big Pickups, who when tasked about the externalities, just say “I can afford it, so what?” Same for derivatives and other leverage scams, and of course for war toys…

      2. Kevin Carhart

        They’re only one of many, so what is the wider significance? When the people screaming the loudest about disruption, and IC misclassification in particular, are shown to simultaneously have been committing endless crime, it becomes clear that for this example at least, it was self-serving. They’re heavily promoting a special, alternate way of looking at crime and “regulatory hacks” by entrepreneurs and sure enough, they are doing the full rainbow of kinds of things where that defense would be useful to themselves.
        When the example is very big and prominent – when it’s Uber who used that argument and then is shown to have been infinitely corrupt – it could mean that the stench rubs off on the disruption story more generally. Somebody else is going to be shouting about disruption in a year, and now it has gone from being perceived to be not that likely, to somewhat likely that the biggest cheerleaders for disruption are sociopathic criminals given the precedents. The future disruptor fails to get funding, decides it’s a dead end, sings “goodbye yellow brick road,” and opens a hot dog stand at Playland By the Beach.

    1. Matthew G. Saroff

      I am wondering if there are some back room machinations that are giving Softbank an even bigger discount.

      1. Yves Smith Post author

        The tender by investors has already started, ironically I think on Tuesday. But two dropped out, supposedly due to a widening of losses. From the Financial Times:

        After a litany of bad news including a major data breach and revelations about an internal spy unit, the SoftBank-led consortium has offered to buy shares from existing shareholders at $32.97 a share, a third lower than what investors paid last year.

        SoftBank is also buying $1bn of new shares at a higher price, created a blended valuation for the privately held San Francisco company of $54bn, down from $68bn in 2016, according to a spokesperson for SoftBank.

        Some shareholders are privately complaining that the price is too low and have accused the consortium of trying to “steal” a stake.

        However Uber’s poor third-quarter results, which were disclosed for the first time in documents sent to shareholders late Tuesday, indicate just how costly the clean-up act could be for the troubled company.

        Under newly appointed chief executive Dara Khosrowshahi, Uber’s adjusted third-quarter losses widened to $743m, up 14 per cent from the previous quarter, on a measure that excludes interest, tax and share-based compensation, the documents revealed.

        Including those items brings Uber’s net losses to $1.5bn for the quarter, according to generally accepted accounting principles…

        The investor consortium includes SoftBank and Dragoneer, as well as new investors TPG, Sequoia and Tencent. However, two other investors, General Atlantic and Russia’s DST, dropped out of the consortium, underscoring the growing risks associated with the San Francisco-based company


        1. Michael Fiorillo

          Having seen the Japanese get played for rubes by paying exorbitant/insane prices for NYC real estate at the peak of the ’80’s boom, I just assumed the Uber/Softbank deal is a reiteration of that.

  3. Louis Fyne

    according to some news reports, Uber hired literal ex-CIA employees to steal the trade secrets. More proof that given all the dark money floating around the US political scene, it’s a certainty both all sides use ex-spooks a la Harvey Weinstein or Fusion GPS.

    Surely ex-spooks must be need to sign some sort of non-compete :)

  4. Mark

    Is it a quirk of the US legal system that people are supposed to hurt themselves? I may be very naive here but the way in which Uber operated(s) seems expected and prudent. Keep everything encrypted, delete as much as possible, gather all the information you can and don’t reveal anything yourself sound like very good guidelines to me. Why should it be negative for Uber that they used separate servers etc. for their Intel unit?
    Perjury or actually breaking into other companies’ systems are obviously an offence, yet again why is the fact that Uber is supposed to have attempted to hide these facts a negative? It is what offenders are expected to do.

    1. Synoia

      They appear to have hid information subject to discovery requests in a civil trial.

      They cannot use criminal defenses, yet,

      It is the cover up which is potentially criminal.

    2. Norb

      Crooks and liers must be held accountable. The public acceptance of criminality can probably be traced to hollywood’s work at glorifying organized crime. As a society, we have gone from glorifying those who fought to control crime in the public interest, to siding with the criminals- or accepting excuses for their destructive behavior.

      In any event, how does is feel to be the unwilling participant in organized crime? It seems Broken Window Theory only applies to the mopes at the bottom of the social hierarchy.

    3. FriarTuck

      As a non-lawyer, the best way that I can describe discovery is as a civilized way to disclose supporting evidence from opposing parties.

      While lawyers have a duty to their client, their overall allegiance is supposed to be to the justice system, which would induce its representatives (lawyers) to reveal potentially damaging information/evidence if the right questions are asked, in pursuit of upholding the system. There are rules about the way to go about it, as to what can and can’t be disclosed, and ways to skirt those rules (such as data dumps). The rules also provide a decent latitude to lawyers, trusting that they will behave in ways to uphold the rules and thus the justice system itself.

      The big deal here is that the judge, Judge Alsip, is saying he doubts the Uber lawyer is acting in a trustful way (having allegiance to the system). When that happens, essentially the justice system begins to treat the misbehavior as an existential threat to civilized society, and all bets are off.

    4. Sid Finster

      In a suit in federal court, litigants are required to retain and disclose all relevant information, including information which hurts their case.

    5. Yves Smith Post author

      OMG, I cannot believe you wrote this.

      What about withholding evidence don’t you understand? When a court tells you to turn over records. you are required to comply and be comprehensive about it. This is such a serious abuse that Uber’s white shoe lawyers could be disbarred if they knew what Uber was up to and knowingly withheld relevant material.

      In addition, what about stealing don’t you understand? Misappropriating trade secrets and code base is theft. Uber had a unit set up with that at least one those (misappropriating code base) as among its alleged duties (Rogers confirmed going after code base in his testimony yesterday, tried to deny his attorney’s letter saying the unit also targeted trade secret material). So do you also think it’s OK for someone to break into your garage and steal your car? This is the sort of behavior you are depicting as a nothingburger.

      1. Mark

        I am not an US national and was not aware of the scope of the required disclosure requirements thank you for explaining everyone. German law does not require anyone to disclose anything that might incriminate them or members of their family. As an example this was used frequently by government employees to evade questions from MPs during the NSA-scandal hearings, which were no criminal proceedings and furthermore all witnesses had a guarantee of no future prosecution.

        @Yves Maybe I failed to make my point. I was wondering why it matters that Uber might have been somewhat clever about what they did – not about the worthiness of the deeds. To stay in your car metaphor, why does it matter that the thief unlocked the car electronically from afar, wore gloves and simply drove away instead of leaving his fingerprints all over the garage door, smashing the window and roaring off. Especially since this is not a criminal case but a civil case in which one party tries to to make good damages. If Google can prove that Uber copied their data (possibly with documents from Uber) that is good for them and will result in proper compensation. But your arcticle points to things like separate servers and self-deleting messages as if this is in itself is something nefarious or makes the alleged crime worse. In my opinion these precautions are either good business practice, for any company in a high-tech sector or in case of actual crimes committed and competitors damaged simply par for the course. I was curious whether this is a difference of personal opinion or derived from laws/legal practice.

        1. Yves Smith Post author

          You are really misrepresenting the point, as well as the law, to the degree that I have trouble seeing your comment as organic, as opposed to an effort to defend Uber.

          First, corporate officers and employees are required to comply with court orders. They are not allowed to evade them on behalf of their employers. This has absolutely nothing to do with self incrimination and I find it difficult to believe that you don’t understand that, as opposed are trying to muddy the water.

          Second, the issue with the servers is that they were, as Jacobs described them, set up deliberately so as to evade court orders and hence the evidence of crimes. This is further evidence that Uber’s intent was criminal. This is absolutely deadly in a legal context, since charges involving fraud (and securities fraud follows this pattern) requires the demonstration of intent, as in the bad conduct was deliberate, as opposed to a mistake. This has just opened the door to a raft of related fraud charges, including potentially criminal fraud.

          1. Mark

            Thank you for explaining that the setup is seen as evidence of criminal intent and therefore has weight in a legal context. That is what I wanted to work out.

            1. none

              Also in case it wasn’t clear, at least in the US, the right against self-incrimination means you don’t have to disclose info that can get you convicted of a crime (crime = an offense that they can send you to jail for). In a civil suit, you might have to pay a lot of money if you lose but you are not in danger of going to jail. That means the info is not considered incriminating, so you DO have to disclose it.

              But one of the issues raised was that Uber was using an ephemeral messaging app, and I don’t see what the problem with that is, unless they were already under an order to preserve evidence. When I’ve dealt with lawyers where I work, they usually want to use phone calls instead of email to avoid creating unnecessary records, even though we’re just doing routine stuff, not anything shady or questionable. Ephemeral messaging apps are just like phone calls in that regard as far as I can tell.

  5. voteforno6

    This seems to be very serious. Still, I’m not sure if this is the most serious problem that Uber has.

  6. Meher Baba Fan

    On revelation of Uber’s behaviour detailed above, the apropriare and necessary response is identical to that of the police detective in the film ’25thHour’ when he busts Edward Nortons character. ‘Sheeeeeeeeeeeet’.
    Helpully, he says it a couple more times in the film. Its priceless. Find it on youtube

  7. D

    Thanks for that, Michael Fiorillo, it was the first thing that came to my mind when hearing of Uber™. It immediately reminded me of that horrid US regurgitation of the word Homeland ™ in the early 2000’s.

    The fact that mainstream media had little to nothing to say (from my recollection) about either of those uses speaks volumes, of our Dark, 24/7 Surveilling Technocracy times.

    Speaking of those Dark Times, what to say about the disturbing origins of the word Google from googol/googolplex.

  8. The Rev Kev

    Back in my day what Uber did was known as “contempt of court”. For that they could send you away to share a room with a guy with 250 lbs of rippling muscles named Casper.

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