WeWork paid over $2 million to a woman who threatened to expose claims of sex, illegal drugs and discrimination in a horrifying 50-page document
- In the spring of 2018, a woman who once worked in WeWork's real estate business sent the company a 50-page document alleging drug use, sexual harassment and pay discrimination. The document, which set out the terms of a threatened lawsuit, was obtained by Business Insider.
- The allegations risked disrupting WeWork's meteoric rise and a planned fundraising, and sparked a flurry of activity as senior leaders sought to verify which, if any, of the claims were true.
- With at least one external law firm, they launched an investigation that would later find credible evidence of sexual relations between coworkers and drug use.
- WeWork chose to settle her claim, ultimately paying her more than $2 million and forcing a senior leader in the real estate department, and her one-time boss, out of the company.
- For more WeWork stories, click here.
Adam Neumann didn't have a choice.
In the summer of 2018, the bulk of the WeWork founder's executive team - including then-chief legal officer Jen Berrent and chief growth officer Dave Fano - were pressuring him to fire his wife's cousin, Mark Lapidus.
Lapidus had been with the company since nearly the beginning. He had overseen some of WeWork's most precious real estate deals as the global head of real estate through 2016, before he moved into other roles on the team.
Now, he was in a mess.
A woman who had once reported to him and continued to work on his team had obtained a lawyer and filed a 50-page document to WeWork setting out a series of claims against the company.
The wide-ranging document, obtained by Business Insider, didn't name Lapidus directly, but it catalogued a host of allegations involving problematic sexual relations within the department he once ran, and the company more broadly. It also alleged widespread drug use on the real estate team including Molly, cocaine and Xanax at company events. It mentioned Neumann's now well-documented penchant for tequila at work.
The woman threatened to sue the company and a specific WeWork coworker, as well as file a charge of discrimination with the Equal Employment Opportunity Commission.
WeWork's leadership team reacted immediately. They launched an investigation with at least one external law firm and found credible claims of drug use and sexual relationships between employees and their bosses.
The situation risked imperiling the office company's meteoric rise, right as then-CEO Neumann was in fundraising talks with SoftBank for an eventual $3.5 billion and a $47 billion valuation. If the woman went public, it would threaten the very core of the company, which had built its reputation on offering office space in prime locations.
That couldn't happen.
Even though Lapidus was family, Neumann ultimately agreed he had to go. They worked out a mutual exit package that allowed Lapidus to keep his vested stock. WeWork settled with the woman for over $2 million in cash.
A spokesman for Neumann declined to comment.
A months-long Business Insider investigation, in which we spoke with 18 current and former executives and employees who were either involved with the company's investigation or familiar with the real estate team more broadly, revealed how the department escaped scrutiny for years. Business Insider also learned of several other WeWork settlements while investigating these claims.
The sources spoke anonymously because of their nondisclosure agreements with WeWork; Business Insider has verified their identities. Because the woman asserted she was a victim of sexual assault, a claim that Business Insider was unable to substantiate, we are withholding her name. She declined to comment.
The woman who made the claims had a consensual relationship with one of her subordinates, multiple senior executives told Business Insider.
Now, WeWork's new CEO Sandeep Mathrani must grapple with the toxic culture Neumann and former leadership left behind. His predecessors, interim CEOs Artie Minson and Sebastian Gunningham, spent much of their tenure scrambling to save the company from looming bankruptcy. With the company on stronger financial footing, lingering cultural issues must finally be addressed. The company continues to face another woman's 2018 lawsuit and a newer October 2019 complaint with the EEOC from Adam Neumann's longtime chief of staff.
Mathrani, who started on Tuesday, is drawing a line between the WeWork of old and the company he's now leading.
"At WeWork, new executive leadership has zero tolerance for such behavior or any violation of our company policies," he said in a statement to Business Insider.
Mark Lapidus, Rebekah Neumann's first cousin, seemed untouchable and regularly blew tens of thousands in expenses before the damning 50-page document dropped.
For years, Lapidus' team operated in a silo compared with other departments. Unlike groups like legal and marketing, which reported to various executives under Neumann, real estate reported directly to the CEO. One senior executive described it as Neumann's "baby."
Because of this structure, the department was slow to institute the HR framework typical of the rest of the company, allowing issues to fester.
Before Lapidus exited following the investigation into his department, he seemed untouchable. Employees felt he and another Neumann pal who helped lead the group, WeWork's co-head of real estate for United States, Canada and Israel, Arash Gohari, enjoyed favoritism.
Lapidus, who is first cousins with Neumann's wife Rebekah, enjoyed a long, forgiving leash. For years, the whole company went to his parents' campground in upstate New York for a raucous company retreat called Summer Camp.
Former colleagues characterized Lapidus as a good dealmaker who loved to schmooze and party.
His expense report offers a window into a wild lifestyle enabled by WeWork money.
In May 2017, Lapidus spent more than $5,000 for a team outing at hot London nightclub The Box, per records reviewed by Business Insider. The woman's 2018 document included a reference to a May 2017 outing with colleagues at a nightclub that fits the same description.
Later that month in Las Vegas, Lapidus paid $36,000 for a table at Encore Beach Club and another $9,000 for one dinner while he was at real estate conference International Council of Shopping Centers (ICSC). The woman's 2018 document also cited the day at Encore Beach. In a roundup of parties that day, real estate publication The Real Deal placed Lapidus at one of the "rowdier pool scenes" at the beach club.
At ICSC, Lapidus racked up $9,500 in room charges at the Wynn hotel, including more than $500 at the spa. One WeWork real estate executive recalled being shocked by Lapidus's spending, since the conference was full of people ready to shower WeWork executives - their clients - with dinners, bottle-service tables, and other gifts. But another explained that the large tab was the result of an event WeWork threw to schmooze its landlords and other groups.
The Vegas event, ICSC, has in the past been notorious for hard-partying and wild spending across the real estate industry. The woman's 2018 document included specific allegations, casting ICSC as a fertile ground for bad behavior. ICSC did not respond to requests for comment.
Gohari, meanwhile, hosted Neumann at his wedding and flaunted his connection with him, sources said. He told a colleague he could use that connection to get anyone fired, even senior executives, though people said he never actually did it. He had multiple HR complaints filed against him, though the woman didn't cite him by name in the document.
"It all came down from Adam. Adam picks his cronies; Arash was one of them," a senior WeWorker said. Gohari was let go last fall during mass leadership layoffs after Neumann's departure.
Gohari defends his time at WeWork, telling Business Insider: "During my tenure at WeWork, the company's footprint grew from 5 million to 45 million square feet as a result of the hard work put in by my colleagues and my team. Given the fast-paced growth of the company, there were demanding objectives set upon all of us, and we did everything in our power to meet them while striving to create a positive work environment for all employees."
Bosses sleeping with subordinates ran rampant at WeWork. Illegal drugs like Molly, Xanax and cocaine were seen 'regularly distributed at WeWork-sponsored events,' the document claimed.
WeWork launched an internal investigation to determine which, if any, of the claims in the 50-page document were true.
Business Insider found multiple sources who said that the real estate team was rife with problems. For instance, the probe discovered instances of managers sleeping with coworkers and subordinates, echoing an allegation from the document that a senior manager admitted to the woman that he slept "with two direct female subordinates."
Business Insider was unable to learn the identities of some of these relationships, but a former top male manager said that WeWork employees slept together, not just in the real estate team but across the company.
Lapidus, who at the time was divorced, had a relationship with an employee on the real estate team. Company founder Miguel McKelvey raised eyebrows for dating a junior employee. WeWork couples were at times celebrated. At one Summer Camp, another executive presented a couple who met at WeWork with a "member for life" key card for their baby.
The investigation also found evidence of drug use on the real estate team, echoing the woman's assertion that she saw employees "regularly distributing illegal drugs such as cocaine, Xanax, and 'Molly' at WeWork-sponsored events." Another WeWork source confirmed the repeated presence of those drugs.
Her document also claimed she saw a male executive openly smoking marijuana at the company's Summit - a mandatory all-staff event - in 2016. The executive then allegedly told the woman "'he wanted to have a go" with another female subordinate who was visibly drunk, according to the document.
WeWork's new CEO has a lot to clean up.
After the investigation into complaints about the real estate team, some executives pushed for change, eyeing a potential 2019 initial public offering that would put a spotlight on the company and require more robust HR policies.
They drafted a list of needs for WeWork, including ending mandatory arbitration for sexual harassment; no open bars at company events; adding women to the all-male board; ending Summer Camp; better parental leave; and more coaching for women executives.
Some of their ideas came to fruition: Summer Camp was nixed after 2018; there was no open bar at the 2018 Halloween party, where employees received two drink tickets and then could pay for more drinks, and WeWork expanded parental leave, eventually up to four months for all new parents. In the last year, the company also hired more seasoned legal, compliance, and HR executives and employees to professionalize those departments.
But other changes on that list never materialized. In November, the WeWorkers Coalition, an employee advocacy group, asked the company to resolve allegations of sexual harassment quickly and transparently and to end mandatory arbitration for sexual harassment, among other requests.
That same month, WeWork chairman Marcelo Claure, who asked employees to come forward with any issues, said WeWork fired 13 employees who allegedly abused vendor policies. In February, he named the first woman to WeWork's board of directors. The company also cut the free wine and beer on tap that were a symbol of its freewheeling culture.
Last week, Grant McGrail, the company's head of enterprise sales left the company, a resignation prompted by another ongoing investigation, said sources with knowledge of his departure. McGrail did not respond to a request for comment.
WeWork's new CEO, Mathrani, started Tuesday, just days after McGrail's departure. Now, it's up to the real estate veteran, who's already led a large company as CEO, to chart a path away from WeWork's tumultuous past.
Six of his former colleagues told Business Insider that Mathrani is a no-nonsense leader who doesn't drink with colleagues after work or play ping pong in the office. And unlike Neumann, who led a management team with just one woman and picked an all-male board, Mathrani has a history of women reporting to him.
"It is our highest priority to ensure our employees feel safe and respected, and this starts at the top," Mathrani said in the statement to Business Insider. "In this new chapter at WeWork we are fully invested in upholding a culture of integrity."
Have a WeWork tip? Contact this reporter via encrypted messaging app Signal at +1 (646) 768-1627 using a non-work phone, email at mmorris@businessinsider.com, or Twitter DM at @MeghanEMorris. (PR pitches by email only, please.) You can also contact Business Insider securely via SecureDrop.
