“I was giving [ clients] to people who didn’t have their insurance license. ... Like, it was really illegal”
approved every benefits change or vacation request for hundreds of (later, more than 1,000) employees. “We have people in HR now, but they actually don’t have access to the HR system,” Conrad said in an interview at Techcrunch Disrupt last year. “I do all of it myself. I’m a little crazy.”
The problems were much deeper than a disorganized office. Insurance brokers must pass a state licensing exam before they can legally sell or advise people on insurance. Each state has a different exam and training requirements. In California, brokers had to spend at least 52 hours on an online training course. Zenefits says Conrad created a Google Chrome browser extension that allowed people to bypass the 52-hour rule by making it appear as if they were working on the course when they weren’t. The extention was called “the macro.” (Conrad declined to comment on the Chrome extension.)
Every state has a different brokerage exam. A person licensed only in California can’t legally sell insurance to a company in Kentucky unless he applies for a reciprocal license. Zenefits sold its product all over the country, and its managerial chaos seems to have kept it from properly tracking who passed their state exams or got reciprocal licenses.
Conrad worked closely with Sam Blond, Zenefits’ trim, tanned vice president for sales, who liked to party. When their team closed a big account, Blond and Conrad poured shots for everyone in the office. Zenefits had kegs in its office. In an onstage interview at a tech conference in 2015, Blond told a story about how he and Conrad once got so drunk at a San Francisco steakhouse that they wrestled each other on the restaurant floor. “Half an hour ago we were in the greenroom, and we saw two bottles of unopened drinks,” Blond said at the same tech conference while sitting onstage with Conrad. He smiled. “They’re no longer unopened.” (Blond declined to comment for this article.) Last year the management company that runs Zenefits’ office space complained about cups of beer and used condoms found in the stairwells. “Do not use the stairwells to smoke, drink, eat, or have sex,” Emily Agin, Zenefits’ director of real estate and workplace services, reminded employees in a companywide memo.
Sacks wasn’t averse to a little debauchery. A few years ago, according to multiple news reports, he hired Snoop Dogg to perform at his Marie Antoinette-themed 40th birthday party. Instead of invitations, Sacks sent little cakes. He showed up in period dress. But at Zenefits, he was different. Employees say he didn’t socialize. He stared at his phone in meetings. He sometimes even escaped to an office in a nearby building for alone time. Most of Zenefits’ problems remained internal. Investors couldn’t see them. Those they could see seemed fixable—as demonstrated when Sacks flew to Salt Lake City and stood behind the Utah governor while he signed a law allowing Zenefits to operate in the state. In May 2015, six months after Sacks joined the company, it raised $500 million in a third fundraising round, at a valuation of $4.5 billion. Zenefits also said it would quintuple annual recurring revenue, to $100 million, by the end of 2015. “They used to say they were the No. 1 supplier to Anthem for small-group business [companies with 50 or fewer employees]. It wasn’t true,” says Darrel Ng, a spokesman for Anthem Blue Cross. Zenefits says it regrets any factual exaggerations that occurred under prior leadership.
Still, Zenefits kept growing. By the middle of 2015 it was serving 14,000 businesses and in the process of hiring more than 1,000 additional employees. “They told me that they were expanding so fast that once a month had gone by, I was guaranteed to move up,” says Aaron Semaan, 28, who joined as an entry-level sales rep in April 2015, making $35,000 a year. The headquarters became a hodgepodge of disconnected office space sprawled over two, then three, then four floors of the highrise. Zenefits also opened a satellite office in Arizona that it packed with low-level sales reps who cold-called prospects. One manager in Arizona says he interviewed and hired people so quickly that when they showed up for work, he’d often forgotten who they were.
Semaan was one of the few who came to Zenefits already licensed as an insurance broker. And yet, for some reason— he still doesn’t know why—he wasn’t allowed to sell insurance. He was a coldcaller: When he found an interested company, he passed it off to the broker assigned to close the deal. But, as the company has publicly acknowledged, not all Zenefits brokers had passed their tests. “I was giving [clients] to people who didn’t have their insurance license,” Semaan says. “They were selling insurance illegally. Like, it was really illegal.” He says that one woman worked at Zenefits as an account executive for four months without passing her exam. “I had multiple talks with my boss about it. I would tell him, ‘I don’t think it’s fair or right for me to be setting people up to make these sales when they don’t even have licenses.’ ” His boss didn’t respond to interview requests.
“The company culture of pressuring and bullying employees to cut corners and do the wrong thing is over,” says Sacks.
Zenefits began courting what it calls enterprise companies— those with more than 100 employees. Unlike small businesses, bigger companies have entire HR departments that enjoy longstanding relationships with insurance brokers. Sacks says he thought it was unrealistic for Zenefits to pursue them