They both committed fraud to their investors. I see that Adam Neumann is now wanting to buy WeWork. Why is he not in jail?
In: Technology
> They both committed fraud
I’m not sure it’s been established that he actually committed fraud. He has certainly lied and made exaggerations and been wildly incompetent and taken money that he doesn’t deserve, but fraud has specific legal definitions (depending on the type of fraud and the jurisdiction). Wealthy business people tend to be good at sailing close to the wind without actually crossing the line into fraud. Elizabeth Holmes’ problem was that her central product was built entirely on lies. WeWork wasn’t scientifically impossible, it was just badly conceived and managed.
Basically, it’s the difference between running a casino and sugggesting to your customers that they might be able to make a profit, even though the games are all openly rigged, and running a casino where you tell your customers that they will definitely make a profit even though you have secretly tampered with the slot machines so that they never pay out any money at all.
Their crimes are pretty different.
Holmes lied entirely about having a product. She didn’t have anything, at all, nothing she could sell. And she kept up that lie until it all crumbled around her.
Wework did have a working product that they got paid for. The problem with the business is it was financial unsustainable. This fact wasn’t really all that hidden though, Neumann and co certainly tried to play it down and to some degree you can get away with it by promising that much of the loss was due to trying to blitz scale and it will be profitable once scale was achieved. At the end of the day though they didn’t lie about the numbers, it was clear to everyone wework was very good at losing money and any future promises of growth aren’t fraud as they are clear speculation.
The one thing you could perhaps get Adam on and maybe he still will be caught for is self dealing, he had wework sign leases with himself on buildings he owned. However this was not covered up to investors and they approved it at the end of the day, they can’t really blame anyone but themselves for letting it happen.
At the end of the day wework’s investors knew what Neumann was doing and signed off on it. Neumann didn’t lie to them. You can’t have fraud without lying.
What fraud do you think that Neumann is guilty of? Holmes sold a product she knew to be fake. Neumann had a terrible business model, but he bought and leased real buildings, and had a real offering.
Holmes was a complete fraud. She never had a product. She didn’t even have a background in medicine or medical technology.
Neumann is a whack job but he didn’t defraud all of his investors. I mean in some ways he kinda did, spending money on crazy bullshit, but his company had a product and was able to grow, it was just never profitable.
Because masayoshi wanted to save face. If he chased a lawsuit then everyone would know he was a one hit wonder who shouldn’t be trusted with so much capital. It was the cheaper option to let Adam off the hook and to push more cash into the venture to buy him out.
The really crazy thing is the Neumann wasn’t a fraud.
He was a salesman who really upsold the potential of his company, and got paid very well for it. He convinced the board of directors – picked by the investors to represent the interests – to let him do stuff that made him lots of money at the company’s expense. But he never lied.
Holmes lied. She lied a lot. And when you lie to investors, that’s fraud.
Latest Answers