‘It Was a Frat House’: Inside the Sex Scandal That Toppled SoFi’s C.E.O.

SAN FRANCISCO — 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 the online lending start-up Social Finance. The texts were from her boss, Mike Cagney, the company’s chief executive, according to five people who spoke with Ms. Munoz or saw the messages. Given Mr. Cagney’s stature at Social Finance, known as SoFi, Ms. Munoz was at a disadvantage.

That became apparent when SoFi’s board was informed of Mr. Cagney’s communications with Ms. Munoz in late 2012. The board said it found no evidence of a sexual relationship. Ms. 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 Ms. 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 Mr. Cagney had made misstatements to them over the start-up’s student loan products, according to emails between investors, executives and the board that were obtained by The New York Times. Directors stood by Mr. Cagney in that instance, too.

The board’s support allowed Mr. Cagney to build SoFi into a fast-growing start-up 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, Mr. 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.

Mr. 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, Calif., which was the subject of a sexual harassment lawsuit filed last month.

Even as other Silicon Valley companies such as ride-hailing giant Uber have been in the spotlight this year for inappropriate treatment of women, Mr. Cagney’s case goes a step further. Although many of the issues at other firms stemmed from the actions of midlevel executives or investors, Mr. Cagney personally faces questions about his role. 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 start-up said Mr. Cagney, 46, would leave as chief executive by the end of the year and that he would step down immediately as chairman. In a statement announcing Mr. Cagney’s departure, SoFi did not explain the executive change.

The company said its business was performing well, and that SoFi was 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, Mr. Cagney also said he “vehemently denies” any improprieties at after-hours events with colleagues.

Yet Mr. 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 also 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, Mr. 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 Mr. 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 the influential hedge fund Third Point Capital, now faces questions about whether it needed more checks and balances on Mr. Cagney.

Companies like SoFi show how boards are incentivized to prioritize cash flow and growth over governance, said David F. Larcker, a professor at Stanford University’s Graduate School of Business who specializes in corporate governance. “The board now has a duty to correct for things that have gone wrong,” he said.

The board said that it found “no allegation or evidence of a romantic or sexual relationship” between Mr. Cagney and Ms. Munoz and referred all other questions to SoFi.

Workplace Pursuits

Mr. Cagney, who was born in New Jersey, started his career in finance in 1994 at Wells Fargo, where he climbed the ranks to the trading desk. He later left the giant bank to begin a financial software company, and then his own hedge fund, Cabezon, in 2005. On the side, he attended Stanford’s business school.

In 2011, Mr. Cagney began SoFi with several co-founders. The start-up, established as venture capitalists were getting excited about financial technology, raised nearly $100 million in its first year. In total, SoFi has now taken in $1.9 billion from investors including SoftBank, Discovery Capital and Baseline Ventures.

Even with other co-founders, Mr. Cagney quickly established himself as the company’s center of gravity. SoFi’s offices, with glassed-in conference rooms and cheap Ikea furniture, were set up in San Francisco’s Presidio, the park near the Golden Gate Bridge, because Mr. Cagney’s hedge fund already had its offices there. His home was less than a mile away.

Mr. Cagney exhibited an aggressive attitude at the office that he may have learned as a trader at Wells Fargo. He sometimes shouted obscenities and excoriated employees in front of others when they made mistakes.

Mr. Cagney hired deputies who had similar characteristics. One was Nino Fanlo, a former executive at Goldman Sachs and the private equity firm Kohlberg Kravis Roberts, who became SoFi’s chief financial officer in 2012.

Mr. Fanlo, 57, sometimes kicked trash cans in the office when angry. He also commented on women’s figures, including their breasts; said that women would be happier as homemakers; and once told two female employees he would give them $5,000 if they lost 30 pounds by the end of the year, according to more than a dozen people who heard the comments and witnessed the weight-loss offer.

Mr. Fanlo said it was “patently false” that he did not respect women and that his team at SoFi had many women who received promotions and professional accolades. He also attributed his shouting and kicking of trash cans to frustration about deals and start-up pressures.

“You’re under extraordinary pressures at a company that is growing that fast,” Mr. Fanlo said.

More than two dozen former SoFi employees said they were uncomfortable with Mr. Cagney’s pursuit of women in the office. In 2012, he sent the text messages to Ms. Munoz, the executive assistant, until her colleagues took the issue up with executives and the board, according to the five people who spoke with Ms. Munoz about the matter.

Even as Mr. Cagney was texting Ms. Munoz, he also chased another young female employee. Six employees said they saw Mr. Cagney and the employee holding hands and talking intimately. One day in 2013, when Mr. Cagney was flirting with her at the office in front of colleagues, she grew enraged and left, according to three employees who witnessed the episode. Soon after, she left the company.

Around that time, SoFi’s board asked Mr. Cagney to not engage in inappropriate conduct with employees, according to two people with knowledge of the conversations. The situations were awkward in the office given that Mr. Cagney’s wife, June Ou, began working at SoFi in 2012, rising to become the company’s chief technical officer. Her desk was near Mr. Cagney’s. Ms. Ou did not respond to a request for comment.

Pushing the Business

SoFi’s business works in the following way: It loans money to students, home buyers and individuals with high credit scores. The company funds those loans with money from hedge funds and banks, who buy the loans through securities or bonds that SoFi creates.

As early as 2012, Mr. Cagney ran into trouble with some of his investors. That year, the company said it had secured $90 million in debt financing for one of its loan products, called Refi A. But some investors who had bought the securities noticed their returns were not in keeping with SoFi’s estimates and voiced concerns to executives and to a board member, according to the emails obtained by The Times.

About 10 SoFi executives met to discuss the situation; it was then that some of them learned Mr. Cagney had not actually secured the $90 million for the loan product, according to people who were at the meeting. Some attendees said they were dismayed at the possibility that they had made material misstatements to investors.

In October 2012, SoFi bought back the Refi A securities from investors for what they had paid, plus the investment return they had anticipated, or gave them the option to put their money into a different product. Mr. Cagney said in an investor letter that the product had been “imperfect,” but did not offer any details about the $90 million. The SoFi spokesman said that “no consumers were harmed in the process.”

In 2015, SoFi began offering mortgages. In meetings with the compliance officer overseeing the program, Mr. Cagney was told that SoFi was not doing enough to document the income of borrowers and was rushing to offer loans more quickly than competitors did, according to a person involved in the mortgage business. A SoFi spokesman said the company complied with all laws.

Mr. Cagney also led a push into personal loans last year. To strengthen that business, he asked customer service representatives to review and approve loans, a job that had previously been done by the company’s underwriters, said two people involved in the loan business. Many employees opposed the change because customer service representatives do not have the experience of approving loans, but the move helped SoFi double the amount of loans it issued in just a few months.

That created another problem: SoFi did not have enough money to fund all the loans it was giving out. Mr. Cagney told employees that because of the funding shortfall, it could take as long as 30 days for some new customers to get the money they borrowed. But the employees who dealt with the customers were told by a supervisor to say that people would still get the money within 72 hours as promised.

“We had to lie to them and tell them that we were a little behind or that the transfer got lost — just something to keep them off our backs,” said Marie Lombard, who worked from 2014 to 2016 at SoFi’s operations center in Healdsburg.

Mr. Cagney eventually took customer service representatives off the underwriting decisions.

A SoFi spokesman said that customer service representatives did not approve loans and that the company’s proprietary software made those decisions. He added that SoFi always communicated timing changes on its loans to borrowers and that delays have never run as high as 30 days.

An Internal Toll

Mr. Cagney’s risk-taking outside of SoFi also created problems. In January 2015, his hedge fund, Cabezon, suffered big losses on a currency trade. In the aftermath, SoFi’s board agreed to buy Cabezon for $3.25 million and give the hedge fund’s employees jobs at SoFi. That caused resentment at SoFi among some workers.

A SoFi spokesman said the company bought Mr. Cagney’s hedge fund partly because the board was concerned about Mr. Cagney’s ability to focus on both companies.

At the time, SoFi was growing rapidly. Since 2011, when it had five people in a one-room office, the company has grown to 1,200 employees and lent more than $20 billion to about 350,000 customers. Earlier this year, the private equity firm Silver Lake Partners led a new round of fund-raising that gave SoFi another $500 million and valued the company at $4.3 billion.

Mr. Cagney’s co-founders nonetheless left the company one by one, and Mr. Fanlo departed this summer. (Mr. Fanlo said that he left to pursue a new opportunity.)

In 2015, an anonymous email was sent to everyone in the company, complaining in detail about the work environment and nepotism in hiring, according to five employees who received the email. SoFi said that it takes every complaint seriously.

At the start-up’s office in Healdsburg, Yulia Zamora, who worked as an underwriter there from 2015 to 2016, said it often seemed as if there were no rules. She said she was propositioned by a supervisor numerous times.

“It was a frat house,” Ms. Zamora said. “You would find people having sex in their cars and in the parking lot. It was a free-for-all.”’

SoFi has recently been taking steps to contain the damage. Earlier this month, the company started an investigation into the harassment claims in the Healdsburg satellite office. At the same time, questions over Mr. Cagney’s own behavior also surfaced.

In recent days, Mr. Cagney canceled a trip to Singapore to attend a board meeting at SoFi’s offices in San Francisco on Monday. At the meeting, Mr. Cagney argued for his job — but eventually lost out to board members who viewed him as a liability, according to two people with knowledge of the meeting.

“I want SoFi to focus on helping members, hiring the best people, and growing our company in a way consistent with our values,” Mr. Cagney wrote in a letter announcing his departure. “That can’t happen as well as it should if people are focused on me, which isn’t fair to our members, investors, or you.”

How large clients are attempting to convince Congress in order to save the ‘Dreamers’ from Trump

Trump is anticipated to phase out DACA program, although decision isn’t finalized]

Politico first reported Sunday night that Trump intends to rescind this program but delay enforcement for six several weeks to provide Congress time for you to pass legislation to exchange the Obama-era provision.

“This isn’t the finish from the story. Congress can act today,” stated Jeremy Robbins, executive director of recent American Economy within an interview Monday. “We happen to be preparing with this big fight that people hope is originating.Inches

Robbins stated the nation’s business coalition, founded by former New You are able to mayor Michael Bloomberg to advocate for immigration reform, may have greater than 100 corporate and conservative leaders arranged in a minimum of 15 states by Tuesday to start pressuring Congress to do something.

The lobbying will require the type of private conferences in Washington as well as in members’ home districts, letters to person in Congress, newspaper op-eds and public occasions, Robbins stated.

The restored pressure on Congress comes on the top of the petition which more than 400 corporate executives — from Apple, Facebook, Microsoft, Amazon . com along with other companies — have signed advocating Trump and Congress to safeguard the “Dreamers,” 97 percent who have been in school or perhaps in the workforce.

Over the past weekend, executives from the diverse variety of companies, including AT&T, Wells Fargo, Best To Buy, Ikea and Kaiser Permanente, added their names towards the letter.

On Sunday, Apple leader Tim Prepare tweeted: “250 of my Apple coworkers are #Dreamers. I stand together. They deserve our respect as equals along with a solution rooted in American values.”

At Microsoft, a minimum of 27 employees — including software engineers, finance professionals and retail associates — are beneficiaries of DACA, Kaira Cruz, Microsoft president and chief legal officer, authored within an earlier blog publish. Ending this program, he stated, will be a “step backwards for the entire nation.”

A minimum of 72 percent from the top 25 Fortune 500 companies count DACA recipients among their workers, based on FWD.us, which organized the petition.

Facebook leader Mark Zuckerberg, Microsoft founder Bill Gates along with other tech leaders co-founded FWD.us in 2013 to push for comprehensive immigration reform.

“We’re also contacting Congress to finally pass the Dream Act or any other permanent, legislative solution that Dreamers deserve,” Zuckerberg authored inside a Facebook publish a week ago publicizing the petition. “These youthful people represent the way forward for our country and our economy.”

Since Trump required office in The month of january, his administration has restored the protected status of the believed 200,000 DACA recipients. He intends to announce Tuesday that his administration would no more renew the 2-year permits — however, there remains possible that Trump could change his mind in the last second.

Trump has openly wrestled with how to handle this program, considering that most Americans, including his supporters, favor protecting Dreamers in certain form.

As they guaranteed throughout his campaign to finish the deferred-action program on his first day’s office while he stated it had been an unconstitutional abuse of executive authority, Trump on Friday told reporters within the Oblong Office, “We love the Dreamers.”

His surrogates on Sunday made the argument that ending the DACA program would benefit American workers, even while some congressional Republicans recommended for legislation to help keep it intact.

​Sen. James ​Lankford (R-Okla.) stated inside a statement​ Monday​, “Americans don’t hold children legally responsible for those things of the parents.”​

“The Legislative and Executive Branch should reserve passivity and partisanship and finally modernize our immigration laws and regulations,” Lankford stated.

Repetition. Mike Coffman (R-Colo.) stated a week ago he’d make an effort to pressure action on the bill to safeguard Dreamers when Congress returns from August recess now. House Speaker Paul D. Ryan (R-Wis.) stated Congress is focusing on a legislative solution. Sens. Shaun Flake (R-Ariz.) and Thom Tillis (R-N.C.) also have advised their colleagues to act right away to safeguard the youthful undocumented immigrants.

“It is amazingly disappointing to make use of the possibility deportation / removal of Dreamers like a pawn to create immigration legislation, but I’m sure a deadline could pressure their hands in getting to do something,Inches Robbins stated. “The second it leaked the president was leaning towards ending DACA, the dam opened up.”

Business leaders and a few economists pressed back on the concept that ending DACA is needed American workers. Many American jobs rely on the job that Dreamers do, stated David Bier, an immigration policy analyst in the Cato Institute, a libertarian think tank.

“If you are taking individuals DACA recipients away, you’ll finish track of lower wages and less jobs for Americans, no more jobs,” Bier stated. “Having more and more people adding towards the economy may be the factor that ultimately enables for greater employment for additional Americans.”

Employers would bear the price of ending DACA, which Bier estimates at $6.3 billion due to worker turnover.

“Employers will need to fire all individuals people. It doesn’t appear to become a reprieve because they are awaiting Congress to do something,Inches stated Mike Gempler, executive director from the Washington Growers League in Yakima, Wash.

Gempler stated he hopes the Trump administration leaves the job permits in position throughout the six-month window it’s giving Congress to generate a lasting fix.

Rescinding DACA would also provide lengthy-term economic effects, Bier stated, because removing work authorizations would discourage youthful immigrants from seeking greater education. That will result in decreased salaries, he stated, meaning the quantity they pay in taxes may also go lower.

FWD.us estimates that without DACA recipients within the workforce, the economy would lose $460.3 billion in the national gdp and $24.6 billion in Social Security and Medicare tax contributions.

“For a president who states he is about economic growth and job creation, the problem with immigration isn’t just a psychological argument, it’s really a fiscal one,” stated Erika Lucas, founder and leader of StitchCrew, an Oklahoma City-based firm connecting tech companies within the Midwest with investment capital investors. “He doesn’t realize that it is really an economy impacting lots of his constituents.”

That’ll be the main focus from the business community’s pitch to Congress because it views immigration legislation, she stated. Lucas stated the economical impact of rescinding DACA could be felt across industries in most geographic regions of the nation.

Without DACA, she stated, “what we’re doing goes further lower the road of making this shadow economy.”

Tech Fix: The Smartphone’s Future: It’s By pointing out Camera

Tech Fix

By John X. CHEN

Bay Area — Everyone knows the drill. During the last decade, smartphones have become thinner and faster and thinner and faster and, well, you see what i mean.

But it’s too early to create off our smartphones as boring. The gadgets continue to be evolving with technology. As well as for an idea in regards to what the smartphone for the future might seem like, turn your focus on the device’s cameras and also the software and sensors which make them tick.

Here’s a look into the way the camera may come up: Once you get your gadget, it’ll help you and know you’re the owner and unlock the screen. Overseas, you’ll be able to suggest your camera in a restaurant menu to translate products to your native language. When looking for furniture, you are able to point your phone camera at the family room floor and put an online rendering of the table lower to determine the way it looks and move about and look beneath it.

A number of this futurism has already been beginning to occur.

The following month, Apple intends to hold an occasion introducing some new iPhones, together with a premium model that may scan 3-D objects — as well as your face. Samsung, no. 1 phone maker, also lately introduced the Universe Note 8, highlighting its fast dual-lens camera because the signature feature. And rivals will quickly try to meet up with Samsung and Apple.

“2018 would be the year in which the smartphone camera requires a quantum leap in technology,” stated Philip-James Jacobowitz, an item manager for Qualcomm, a nick maker that gives components to smartphone makers.

Mr. Jacobowitz added that emerging camera technologies will be the answer to more powerful security measures and applications for thus-known as augmented reality, which utilizes data to digitally manipulate the physical world when individuals examine a smartphone lens.

Here’s a rundown on which all of this method for the way your next smartphone works.

Face Checking

During the last couple of years, we’ve become familiar with unlocking our smartphones by checking our fingerprints or entering a passcode. However when Apple shows its new iPhones the following month, together with a premium model having a beginning cost of $999, the organization will introduce infrared facial recognition like a new way of unlocking the unit.

Wouldso would the brand new iPhone do this exactly? Apple declined to comment. But Qualcomm’s Spectra, a so-known as depth-sensing camera system, is a illustration of how face checking works.

The Spectra system features a module that sprays an item with infrared dots to collect details about the depth of the object in line with the size and also the contortion from the dots. When the dots are smaller sized, then your object is farther away if they’re bigger, the item is closer. The imaging system may then stitch the patterns right into a detailed 3-D picture of the face to find out if you’re indeed who owns your smartphone before unlocking it.

“You’re seeing the contours from the mind — it isn’t only the front from the face as you’re typically considering,Inches stated Sy Choudhury, a senior director of product to safeguard Qualcomm.

Due to the uniqueness of the person’s mind shape, the probability of bypassing facial recognition using the incorrect face is one in millions of, he added. That compares having a false acceptance rate of just one in 100 for previous facial recognition systems, which in fact had inadequate security.

Older facial recognition systems labored simply by while using camera to consider a photograph of yourself and evaluating by using a picture which was stored around the device. All a crook will have to do in order to fool the machine was hold a photograph of the face while watching camera — which many people already did with Samsung’s facial-recognition feature.

You will find, however, limitations to infrared-checking technologies. For instance, objects that you simply put on, just like a hat or perhaps a scarf, might mess up your camera, based on Qualcomm. Additionally, experts stated infrared light could possibly get drowned out by vibrant sunlight outdoors, so face checking might work less reliably around the beach.

It remains seen exactly how face checking works within the next iPhone. But Apple is familar with depth-sensing camera technologies. In 2013, the iPhone maker acquired PrimeSense, a business that developed sensors for Microsoft’s Kinect, a depth-sensing camera system that allow Xbox players control games using body movements. Analysts expect some rendition of PrimeSense’s technology to look later on iPhones.

Augmented Reality

Depth-sensing cameras might be essential to enhancing augmented reality, a jargony industry term that most likely makes your vision glaze over. But bear beside me for just one moment: Augmented reality may have major implications for future mobile phone applications.

I know full well that Apple is bullish about augmented reality. Inside a recent financial earnings call, Timothy D. Prepare, Apple’s leader, known as augmented reality “big and profound,” with major implications for gaming, entertainment and business products. This fall, Apple will release iOS 11, its next mobile operating-system which includes support for applications created using ARKit, something package for application developers to simply create augmented-reality applications.

ARKit uses a mix of the iPhone’s camera and motion sensors, such as the accelerometer and gyroscope, to allow people lay digital objects on the top from the real life and communicate with all of them with precise movements.

I acquired a demo of ARKit from Ikea, the furnishings maker, using its coming application Ikea Place. I placed an Ikea bed on the ground and could move about and appear beneath it. This kind of application could be helpful to get a feeling of how a product looks and fits alongside other furniture inside a space before putting in an order.

The Ikea Place application that utilizes ARKit.

Video by vc.ru

“This is sort of a real application that real people may use to create real-existence decisions,” stated Michael Valdsgaard, the mind of digital transformation at Ikea.

However the limitations from the Ikea Place application underscore what’s missing from ARKit. For putting virtual objects, the application can identify horizontal surfaces, just like a table surface or even the ground, however it cannot yet identify walls.

Vertical planes like walls are trickier to identify since they’re less smooth as floors — with doorways, home windows and movie frames getting into the right path. Depth-sensing cameras make wall recognition much simpler for future iPhones, stated Blair MacIntyre, an investigation researcher who’s focusing on augmented reality for Mozilla, the business which makes the Firefox internet browser.

All of the tech giants are betting big on augmented reality. For a long time, Microsoft continues to be developing HoloLens, an augmented-reality headset. In April, Facebook announced Camera Effects Platform, an atmosphere for software developers to construct augmented-reality apps for Facebook. Now, Google unveiled ARCore, an augmented-reality tool package for Android devices, as a result of Apple’s ARKit.

Mr. MacIntyre stated augmented reality has huge potential if this matures. He envisioned people having the ability to have a tour of the natural-history museum, pointing their smartphone cameras in a fossil exhibit to create a dinosaur to existence.

But he stated that augmented reality on smartphones would be a stopgap towards the inevitable: putting on data before the face whatsoever occasions through some type of headset.

“If you appear at sci-fi, a variety of it has this sign of being always on and serendipitous,” he stated. “You obtain a lot nearer to that when you are getting a mind-mounted display.”

Until that occurs, smartphones have to do with to get much smarter.