In closed-door meetings and statements to the Securities and Exchange Commission, Better CEO Vishal Garg inflated information about the company’s finances and predicted President Joe Biden would succumb to COVID, a scenario he surmised would lead to lower interest rates and sunnier prospects for the lending company, according to a new whistleblower lawsuit.
But perhaps the most startling statement Garg made was to at least 50 executives on multiple occasions. With rising interest rates threatening future business, the CEO predicted a scenario he believed would turn the company’s finances around, according to the suit, filed in a federal court in New York by a former executive who claims Garg forced her out after she confronted him about misleading statements to investors and the board of directors.
“President Biden will die of COVID,” Garg told colleagues, according to the fired worker, Sarah Pierce, who served as chief operating officer before being pushed out in February after she claims to have attempted to correct several of Garg’s misstatements to investors and confronted him on a number of occasions.
Garg, a prolific donor to Democratic candidates and causes, believed the president’s death would cause interest rates to fall, saving the company from its dire financial situation, according to the suit, filed late Tuesday.
Pierce said Garg instructed Pierce and other executives to hire hundreds of employees despite their warnings that rising interest rates and other market conditions would soften business.
“CEO Garg overruled Pierce,” the lawsuit alleges. “CEO Garg’s decision to ramp up hiring based on his belief that President Biden would die of COVID was repeated on several occasions over a period of several weeks to at least 50 other executives and senior employees of the Company and to the Board of Directors.”
The company’s workforce ballooned to more than 10,000 employees in the U.S., United Kingdom and India during a year when the company would proceed to lose nearly $304 million. It has since shed nearly 60 percent of its workforce in multiple rounds of layoffs following the rampant hiring spree and no event that would prevent rates from rising.
Among other misstatements alleged in the lawsuit was Garg’s claim to the Securities and Exchange Commission that 30 percent of the company’s loans originated from organic traffic rather than customers who landed on the site through paid platforms and affiliates.
The real portion of customers going to Better.com on their own, according to Pierce, was no more than 12 percent.
“Pierce repeatedly spoke directly to CEO Garg…and the Board of Directors about misleading statements CEO Garg made regarding the company’s financial prospects and performance,” Pierce alleges in the lawsuit.
In a statement to Inman, a lawyer for Better categorically dismissed the allegations.
“We have reviewed the claims in the complaint and strongly believe them to be without merit,” the lawyer said. “The company is confident in our financial and accounting practices, and we will vigorously defend this lawsuit.”
An eye on going public
Pierce claims Garg’s various statements to investors and the board of directors were “all aimed at duping investors and shareholders” and keeping the company’s attempts to go public on the rails despite the company’s struggling financial situation.
Pierce was a big name to depart from the company following a round of layoffs in December that went viral largely due to the way Garg notified employees and the fact that it happened just days before Christmas.
The company has been working for more than a year to go public through what’s known as a Special Purpose Acquisition Company — or SPAC merger — effectively a fast-tracked way to become a publicly traded company.
That deal was announced in May 2021 but delayed on Nov. 30. A new date for the closure hasn’t been set.
Since May 2021, “CEO Garg has engaged in inappropriate, and potentially illegal, conduct…intended to ensure that the SPAC Transaction closes” and that investors don’t pull out, according to the lawsuit.
Better had a meteoric rise during the past few years, reaching the point where investors sought to take it public at a $6 billion valuation.
Originally an online mortgage lender, the company expanded to include a full slate of real estate, title and insurance services.
The lawsuit sheds light on what Pierce says happened during the now-infamous layoff of 900 employees on a pre-holiday Zoom call that quickly went viral and sent the company into a bad public relations tailspin.
In the months leading up to the layoff, and over the objections of executives, Garg instructed the company to hire hundreds of more employees, Pierce said. When the company’s struggling finances became clear to him, Garg put in motion the layoffs.
Pierce says she told Garg it would be a “public relations nightmare” to fire employees between Thanksgiving and Christmas.
“I don’t give a shit, I will fire them on Christmas if I have to,” Garg said, according to the lawsuit. He conducted the layoffs Dec. 1 in a manner that continues to weigh on the company.
Because of the size of the layoffs, the lawsuit says, it may have violated state or federal laws around notifying workers of an impending mass layoff. Garg dismissed advice that the process and severance could violate at least a California law.
“Who cares,” he said, according to the lawsuit, “these people will never sue us.”