Two top executives at Hyperloop One are reportedly relinquishing control after a lawsuit was filed against them for harassment and mismanaging funds.
Co-founder and chairman Shervin Pishevar and vice chairman Joseph Lonsdale are reducing their voting shares to 40% combined, down from 78% combined, according to a Bloomberg report.
According to the article, Pishevar and Lonsdale are scaling down their control over the company in an effort to appease current employees.
Pishevar and Lonsdale are both defendants in a recent lawsuit brought against them by the company’s former chief technology officer and co-founder Brogan BamBrogan and other former employees.
The lawsuit accuses a handful of top executives, including Pishevar and Lonsdale, of breaching their fiduciary duties, misusing funds, and violating California labour code.
According to the suit, which was filed Tuesday, high-level executives used company money “to augment their personal brands, enhance their romantic lives, and line their pockets (and those of family members).”
The lawsuit also names Shervin’s brother, Afshin Pishevar, who is the company’s former legal counsel, as a defendant.
According to the lawsuit, Afshin also allegedly assaulted BamBrogan by placing a hangman’s noose on his desk after BamBrogan raised his concerns about mismanaged funds with executives.
Tensions at the company had been brewing for sometime, according to the lawsuit.
BamBrogan and other executives brought their concerns to CEO Rob Lloyd, Shervin, and Lonsdale in a letter on May 26.
The letter was signed by 11 Hyperloop employees in total, which included heads of engineering, finance, business, and operation.
One of the primary concerns raised in the letter related to how much power Shervin had over the company.
“Primarily, we feel that a significant problem exists in the disparity between the outsized control and equity owned by Shervin Pishevar and the limited collective control and ownership by the team. Also, we don’t believe that venture capitalists should have voting control of a company which is engaged in the development of technology and deployment of infrastructure that they do not fully understand,” the employees stated in the letter.
Employees also stated in the letter that they were concerned about the “misuse of company resources and corporate waste by both Shervin and Joe.”
For example, the suit states that defendant Shervin Pishevar dated the company’s PR vendor and raised her salary from $15,000 to $40,000 per month. However, when the engagement fell through, he “finally heeded suggestions that her work was worth little, and terminated the arrangement.”
After receiving the letter, the lawsuit claims that the executives took swift action against employees who had signed.
According to the lawsuit, BamBrogam was allegedly forced to resign and two other people who had signed were fired.