CEO woes put cloud over SoFi
For months, the text messages came. Some were flirtatious, asking her to meet him late at night. Sometimes, the texts were sexually explicit.
The messages were directed at Laura Munoz, an executive assistant at online lending startup Social Finance. The texts were from her boss, Mike Cagney, the San Francisco company’s CEO, according to five people who spoke with Munoz or saw the messages. Given Cagney’s stature at Social Finance, known as SoFi, Munoz was at a disadvantage.
That became apparent when SoFi’s board was informed of Cagney’s communications with Munoz in late 2012. The board said it found no evidence of a sexual relationship. Munoz was then paid about $75,000 to leave the company, according to three people familiar with the proceedings who spoke on the condition of anonymity because they were not authorized to talk publicly. Ivo Labar, a lawyer representing Munoz, said matters were resolved between his client and SoFi.
Around the same time, SoFi’s board and executives also heard complaints from investors that Cagney had made misstatements to them over the startup’s student loan products, according to emails between investors, executives and the board that were obtained by the New York Times. Directors stood by Cagney in that instance, too.
The board’s support allowed Cagney to build SoFi into a fast-growing startup that is trying to take on the big banks
by offering lending, insurance and asset management online. The company has been valued at more than $4 billion.
But within SoFi, Cagney, a married father of two, continued to raise questions among employees with his behavior. He was seen holding hands and having intimate conversations with another young female employee, according to six employees who saw the two together. At late-night, wine-soaked gatherings with colleagues, he bragged about his sexual conquests and the size of his genitalia, said employees who heard the comments.
Cagney’s actions were echoed in other parts of SoFi. The company’s chief financial officer talked openly about women’s breasts and once offered female employees bonuses for losing weight, according to more than a dozen people who heard his comments. Some employees said on a few instances, they caught colleagues having sex with supervisors at SoFi’s main satellite office in Healdsburg. That was the subject of a sexual harassment lawsuit filed last month.
Even as other tech companies such as Uber have been in the spotlight this year for inappropriate treatment of women, Cagney’s case goes further. Although many of the issues at other firms stemmed from the actions of midlevel executives or investors, Cagney personally faces questions. His conduct was described by more than 30 current and former employees, most of whom asked to remain anonymous for fear of retribution.
The behavior went largely unchecked until Monday, when SoFi’s board acted after weeks of growing scrutiny of the company. The startup said Cagney, 46, will leave as CEO by the end of the year and step down immediately as chairman. SoFi did not explain the executive change.
The company said its business is performing well, and that SoFi is becoming a “major, innovative player in consumer finance.” A SoFi spokesman said the company did not comment on personnel matters and disputed that its business had taken on too much risk. Through the spokesman, Cagney also said he “vehemently denies” any improprieties at afterhours events with colleagues.
Yet Cagney’s position had become increasingly delicate after the filing of the sexual harassment suit, which accused him of “empowering other managers to engage in sexual conduct in the workplace.”
His situation was exacerbated by claims about his approach to SoFi’s business, which uses money from Wall Street investors to fund student loans, personal loans and mortgages. At several points, Cagney ignored warnings from colleagues that he was being too aggressive with the business, according to more than a dozen employees who were involved in the conversations.
That included a time when Cagney decided to put customer service representatives in charge of lending determinations, despite them having no experience in the area. Another time, he told investors that SoFi had $90 million in debt financing for a loan product; the company did not in fact have the money, according to the internal emails reviewed by the Times.
SoFi’s board, which includes representatives of Japanese conglomerate SoftBank and influential hedge fund Third Point Capital, now faces questions about whether it needed more checks and balances on Cagney.
The board said that it found “no allegation or evidence of a romantic or sexual relationship” between Cagney and Munoz and referred all other questions to SoFi.