Former Executive Sues Better.com CEO Vishal Garg for Allegedly Misleading Investors
- Garg, who founded the online mortgage company in 2016, fired 900 employees on a Zoom call, just before the Christmas holidays last year.
Vishal Garg is back in the news. The Indian American CEO of Better.com, who fired 900 employees over Zoom just before Christmas, has been sued by a former executive for allegedly misleading investors. The lawsuit, filed by Sarah Pierce, the online mortgage company’s former executive vice president for sales and operations, claims that Garg’s “public controversy and surging mortgage rates have hurt the company’s image and business,” as reported by CNN.
According to CNN, Pierce says in the lawsuit that Garg misrepresented the company’s statements to ensure a SPAC merger moved forward. She claims that “Garg made several miscalculations about the looming interest rate environment, pushing Pierce to hire hundreds more staff. He feared investors would withdraw the merger agreement because of Better.com’s deteriorating financial condition, Pierce alleged. He allegedly said mortgage rates would fall and sales would grow because “President Biden will die of Covid.”
In the lawsuit, Pierce claims that she was pushed out of her role in February. She is suing both Garg and the company and is seeking financial compensation.
Meanwhile, a company lawyer told CNN that the claims were “without merit.” In a statement sent to the news media outlet, the lawyer said that
the company is confident in our financial and accounting practices, and we will vigorously defend this lawsuit.”
Garg, 43, founded Better.com in 2016. It is backed by Japanese conglomerate Softbank, among others, and “received a $750 million cash infusion from investors last week and was recently valued at around $7 billion,” according to a Forbes report.
Last December, he fired 900 employees on a Zoom call, just before the Christmas holidays. In a video, which went viral, the Indian American is heard telling his employees right at the onset that he comes to them with “not great news.” He continued: “If you’re on this call, you are part of the unlucky group being laid off,” adding that their “employment here is terminated effective immediately.”
He said changes in the market, “efficiency” and “productivity” were the reasons behind the mass termination. “The market has changed … we have to move with it in order to survive,” he said in the mass Zoom call. He told the employees that letting them go was “ultimately” his decision and he wanted them to hear it from him. Confessing that he didn’t want to do this, Garg said during the call that the last time he fired employees he cried. “This time I hope to be stronger.”
Almost a week later, after facing severe backlash, Garg apologized “for the way he handled the layoffs.” In a letter he sent to his employees, posted on the company’s website, he wrote: “I own the decision to do the layoffs, but in communicating it I blundered the execution. In doing so, I embarrassed you.” Adding that the way he “communicated this news made a difficult situation worse,” he said he is “committed to learning from this situation and doing more to be the leader that you expect me to be.”
A day after the mass termination, Garg reportedly vented out on a professional network Blind. Garg confirmed to Fortune that he wrote under the username “uneducated,” and informed his employees that “at least 250 of the people terminated were working an average of two hours a day while clocking in 8 hours+ a day in the payroll system. They were stealing from you and stealing from our customers who pay the bills that pay our bills. Get educated.” He further told the magazine that while he stood by his comments, he thinks “they could have been phrased differently, but honestly the sentiment is there.”
While he expressed regret about the layoffs and said he would have liked to retrain everyone for other roles, Garg emphasized that it’s a difficult time in the mortgage industry and that it’s overstaffed. The number of mortgage applications is falling as interest rates slowly rise.