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Businesses The Almighty Buck Technology

WeWork CEO Returns $5.9 Million For 'We' Trademark To Company After Criticism (businessinsider.com) 66

Posted by msmash from the for-what-it-is-worth dept.
When WeWork filed to go public this summer, we learned an incredible detail about its cofounder Adam Neumann: He was paid a whopping $5.9 million by the company he runs for use of the word "we." From a report: The logic was laid out as such: Ahead of its initial-public-offering filing, WeWork reorganized and rebranded as The We Company. To rebrand itself around the word "We," the company paid its own CEO nearly $6 million for trademark rights. The transaction was handled through a private company that Neumann is a managing member of, We Holdings LLC, which owned the trademark rights to the word "we." Moreover, WeWork characterized the nearly $6 million payment as "fair market value." In his analysis of the company following its IPO filing, the New York University marketing professor Scott Galloway characterized the situation as such: "Adam also owned the rights to the 'We' trademark, which the firm decided they must own and paid the founder/CEO $5.9 million for the rights. The rights to a name nearly identical to the name of the firm where he's the founder/CEO and largest shareholder. YOU. CAN'T. MAKE. THIS. S---. UP." On Wednesday, in a newly filed Securities and Exchange Commission document, WeWork walked back that arrangement.
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WeWork CEO Returns $5.9 Million For 'We' Trademark To Company After Criticism More

WeWork CEO Returns $5.9 Million For 'We' Trademark To Company After Criticism

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  • This is clearly tax fraud, they just got caught. It should be prosecuted as such.

    • Actually it's WeeSorry.

    • Re:Tax Fraud (Score:4, Insightful)

      by Pascoea ( 968200 ) on Wednesday September 04, 2019 @01:20PM (#59157674)
      I don't see exactly how this is outright tax fraud? (I an definitely not a tax lawyer) But if it's reported as a business expense (legitimate, as in they can justify the high price somehow. Which I assume they did) and taxed on the receiving end, what's the problem? Giant flippin conflict of interest, and a general fleecing of investors? Absolutely. Illegal? I have no idea. Outright tax fraud? Doesn't seem as plausible. I'd love to hear a more in-depth analysis and explanation of how it would be tax fraud.

      • Re: (Score:2)

        by chrylis ( 262281 )

        Converting ordinary employment income into capital gains. Total tax rate would drop from about 45% to about 20%.

        • It was probably more about hiding this cash grab from employees, the private shareholders, and especially investors looking to buy in post-IPO. Paying yourself $6M in salary or as a bonus tends to upset these people, and if you pay it out as dividend you will have to give the other shareholders a proportional payout. So you just "sell" something you own to the company, and overcharge.
        • Selling a trademark or patent is capital gains - it is correct. Provided he owned the trademark for at least 12 months before selling it, that is. It's totally unethical, as it would probably break several ethical regulations with the SEC, but it's not tax fraud.

        • Re: (Score:2)

          by PPH ( 736903 )

          Converting ordinary employment income into capital gains.

          It depends on the timeline. If Neumann started this company on his own, the first thing he probably would have done is to secure domain names and trademarks. Now he owns them. As the company is formed and in anticipation of an IPO, IP ownership needs to be defined. Ahead of selling shares to investors, they would probably appreciate knowing that the company owns the pieces that they will be buying.

          A lot of IP is created not as an employee but as a sole proprietor/entrepreneur. It's property (hence the term

          • Re: (Score:2)

            by tepples ( 727027 )

            It's property (hence the term Intellectual Property) and taxed as such upon transfer.

            But why isn't so-called intellectual property subject to some analogue of property tax as real estate is?

            • Re: (Score:2)

              by PPH ( 736903 )

              Because, unlike real estate, intellectual property can move across borders effortlessly. And undetected. Think about a county raising its property tax rate and the next morning opening the assessor's office front door to see nothing but the vacuum of outer space.

              • Re: (Score:2)

                by tepples ( 727027 )

                intellectual property can move across borders effortlessly. And undetected.

                U.S. law encourages copyright owners to officially record transfers of copyright ownership [copyright.gov]. Some pundits have proposed a small tax on ownership of copyright in a proprietary work in order to counter term extensions' impact on use of orphan works. Under such a regime, recording a transfer would remove the tax burden from the former owner and put it on the new owner.

          • Re: (Score:2)

            by Cederic ( 9623 )

            The onus is on investors to assure that the company in which they're investing owns its intellectual property and is not beholden or at risk of a ransom demand from a third party.

            That the third party in this instance was the CEO that itself raises questions of impartiality and whether investors were intentionally misled, which is my guess for why the thing's been reversed.

        • Re: (Score:2)

          by ceoyoyo ( 59147 )

          He's a shareholder, so he could just get paid out a dividend any time he wants.

          Purchasing something might be more palatable to the board (and other shareholders) than a specialized dividend though.

    • Re: Tax Fraud (Score:4, Interesting)

      by BytePusher ( 209961 ) on Wednesday September 04, 2019 @01:35PM (#59157752) Homepage
      This might fall more under the umbrella of self-dealing. Sadly, this is business as usual in our present economic system, from Koch to Trump, the more you have the more you get. To disrupt this right would potentially turn our societies up side down.

      • Yes, Self-Dealing is a better label... which is why only an insane person would invest in this company! The amount of self-dealing that Neumann has done is simply amazing, especially where the company is renting (or sub-leasing) properties he owns (or has a master lease)!

    • Tax probably has little to do with it. It's simply siphoning off company funds into your private account, a valuable skill mastered by many foundation chairpersons, trust managers and CEOs (especially of startups). It takes many forms, but in most cases it's simply overcharging for services (other than your own employment) that you or one of your own companies provide to the business. As someone else pointed out below, the CEO also rents out a bunch of property to WeWork, and I'll put good money on it th
    • Not tax fraud. Just a creative way to burn through someone else's startup funding.

  • Let's not forget... (Score:3)

    by That YouTube Guy ( 5905468 ) on Wednesday September 04, 2019 @01:05PM (#59157604)
    The CEO also owns some of the buildings [bizjournals.com] that WeWork leases. *ka-CHING!*

    • Re: (Score:2)

      by Pascoea ( 968200 )
      Isn't it fun to catch glimpses into how the other side operates? And by "fun" I mean "sickening". Call it jealousy if you like, but the pic in that article just makes him LOOK like a douche.

    • Re: (Score:2)

      by MobyDisk ( 75490 )

      This is how wealthy people get wealthier.

      I worked for a small company and the articles of incorporation stated that the company must lease its property from "The Thusandsuch Group" which was the CEO's own company. He would form small businesses, get them financed, and it didn't matter if they succeeded or not. So long as he could keep the company alive he could siphon money from it.

      Trump is another example. His dad setup his businesses so they had to buy parts from "Some Company" (I don't know the name)

      • I worked for a small company and the articles of incorporation stated that the company must lease its property from "The Thusandsuch Group" which was the CEO's own company.

        That's a legitimate business strategy (if done right). If the corporation ever loses a lawsuit, the plaintiff will get a worthless shell company. All equipment is owned by a separate corporation. The building is owned by a separate corporation. If the plaintiff want to go after those corporations, they can pay for the privilege to convince a judge that fraud was committed. If fraud can't be proven and the corporations were properly set up, the plaintiff is so out of luck.

        • Re: (Score:3)

          by theCoder ( 23772 )

          I worked for a small company and the articles of incorporation stated that the company must lease its property from "The Thusandsuch Group" which was the CEO's own company.

          That's a legitimate business strategy (if done right). If the corporation ever loses a lawsuit, the plaintiff will get a worthless shell company.

          You and I have very different definitions of the word legitimate. It may be effective and legal, and with frivolous lawsuits always being a possibility I can understand the motivation, but it is

          • This sort of legal protection probably even encourages less than ethical behavior by the "shell" company.

            Merger and Acquisition is a perfect example. Buy an old company and saddle it with the debt to buy it. Move all the good assets from the old company into a newly created company. Take the old company into bankruptcy to purge all the debts, bad assets and employees with it. Rinse and repeat. If done properly, it's perfectly legal.

  • Not, only was this immoral, but it was ILLEGAL. This is why Elon Musk opposes MBAs and trash like this.
  • So, where are we proposing that justice for this type of financial malfeasance will come from, since it never does from our courts?

  • What is new about this?

  • Holy crap (Score:4, Insightful)

    by JustAnotherOldGuy ( 4145623 ) on Wednesday September 04, 2019 @01:21PM (#59157690) Journal

    "To rebrand itself around the word "We," the company paid its own CEO nearly $6 million for trademark rights."

    Okay, that's it. I'm now convinced that what this world needs is a bang-on meteor strike by a rock the size of Texas.

    • Okay, that's it. I'm now convinced that what this world needs is a bang-on meteor strike by a rock the size of Texas.

      This is what it took? Not the Holocaust, or the Trail of Tears, or Honey Boo-Boo?

      • This is what it took? Not the Holocaust, or the Trail of Tears, or Honey Boo-Boo?

        I'll admit, Honey Boo-Boo came close to tipping me over the edge.

    • Re: (Score:2)

      by Sark666 ( 756464 )

      And the single world 'We' can have a trademark?!

  • Let the regret start (Score:5, Insightful)

    by mcmonkey ( 96054 ) on Wednesday September 04, 2019 @01:45PM (#59157786) Homepage

    Filing for IPO was a mistake. All the self-dealing and shady deals to bleed money from the business--buying the name, the leasing of property from the founder noted above--doesn't attract as much attention in private companies. That's how a prominent American public figure has managed to retain his wealth over decades of failing and bankrupting businesses. They've all been private.

    When the business goes public, all that dirty laundry get aired.

    • Well, he already cashed out to the tune of $700M.
      Unless they acutally indict him he'll probably just raise the rent to squeeze some more money out of the company until it goes bankrupt.

  • I was still trying to understand the trademarking of the word "We". How do you get that common word trademarked.

    Nobody should invest in an company that does this type of stuff.

    • Understand that trademarks are for a specific use. In this case, the use is a brand name for:
      --
      Co-working facilities equipped with private offices, office equipment, mailroom, printing center, receptionist, kitchen, meeting rooms, telecommunications equipment and other office amenities ...
      --

      So if your company provides co-working space, you can't call your company "We"; you have to pick a different name.

      Another company has a trademark for We brand vegetarian snack foods.

      Another company makes We brand:
      --
      Down

    • Re: (Score:2)

      by Nidi62 ( 1525137 )

      I was still trying to understand the trademarking of the word "We". How do you get that common word trademarked.

      Nobody should invest in an company that does this type of stuff.

      Well, there is a State University in Ohio trying to trademark the word "The".

      • Well, there is a State University in Ohio trying to trademark the word "The".

        The University of Texas (Austin) has long used the pretentious moniker "The University." This trademark fight should get interesting, resulting in a new fleet of yachts for lawyers and greatly enlarged student loans for students. full disclosure: I'm a UT graduate - Hook 'em Horns

        • I'm a fan of the real UT. Go vols.

          • I'm a fan of universities being for higher education, not fucking sports teams.

            • Re: (Score:2)

              by Nidi62 ( 1525137 )

              I'm a fan of universities being for higher education, not fucking sports teams.

              "Fucking sports teams" can be a path to higher education for a lot of people. My grandfather was a college basketball coach for most of his career (he started out as a high school coach and actually coached the first integrated high school basketball team in the South). He had plenty of stories of going on recruiting visits to actual projects, sitting in living rooms talking to players he was recruiting while roaches were crawling across the floor. Places where he literally could have been beaten up or s

  • ehh (Score:2)

    by nomadic ( 141991 )

    I'll sell them "us" for a paltry 1 million.

  • Comment removed based on user account deletion

  • WeChat (Score:2)

    by PPH ( 736903 )

    Tencent Holdings would like a word with Mr Neumann.

  • How can you trademark the common word "We"?

  • Usually when a company goes public, they don't announce quite this clearly that their CEO is a con man who just wants to steal your money. It's very honest of them to tell us so we know not to invest in them.

  • Interesting strategy to generate buzz before an IPO. New investors will be in awe of how this company will be a superior investment option, ;/
  • "After reversing the previous plan to sell the rights to "We", Adam Neumann will instead execute two long term leases for the letters "W" and "e" in exchange for $13 million in preferred stock as well as $1 million per year in guaranteed bonus. He was quoted as saying:
    'I feel the company is in a stronger position now that they have access to two full letters as opposed to just one word'"
  • He made a typo in the name of his new company. It should have been The Wee Company. For piss-poor money draining tactics.

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