MIKE CAGNEY
Social Finance Inc. SoFi. San Francisco. Start-ups. Great ideas. Rounds of funding. IPOs. Value. Inflated value. Unfathomable value. Boards of Directors. CEOs. CFOs.
Pumped-up-peacock and entitled upper-middle management.
Bad behavior.
A Millennial sandbox. Jungle gym. The whole playground. 2017.
Story after story.
Let’s be honest. Highly questionable corporate behavior is as old as the first bunch who ever rubbed more than two nickels together. Success can either breed and feed an already oversized ego, humility or something in-between.
We don’t hear enough about the ‘humility or something in-between,’ because it’s not sensational. (Even hubris is but a blip on the screen, no longer a head-turner). It doesn’t sell in spite of its rarity.
Crudeness sells, not civility. Trump, not Obama. Somehow this is what our world has become.
Mike Cagney, CEO of personal finance company and online lending start-up Social Finance Inc. or SoFi, has stepped down effective immediately amid sexual harassment allegations, rather than at the end of the year as previously announced.
The firm’s board of directors named Tom Hutton as interim CEO (Friday 09/15/2017) until a ‘permanent’ replacement is selected.
The previous Monday co-founder Cagney, in a chest-pounding and predictable fashion, circulated this company-wide message to SoFi employees:
“All,
It is with a heavy heart that I am announcing that I will step down as CEO of SoFi by the end of this year. SoFi has been an amazing journey. From the early days with five of us in a one-room office in 2011, to 1,200 employees spread across the country today, few firms have matched our success. We have had massive impact on our members lives, lending over [1] $20 billion to our over [2] 350,000 members, saving them over [3] $1.8 billion in student loan interest and $500 million in credit-card interest, and helping them advance their careers and relationships. [‘Over’… ‘over’… ‘over.’]
The impact keeps growing. In the second quarter alone, we funded over [4] $3.1 billion in loans, producing $134 million in revenue and $61.6 million in adjusted EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization). I could not be prouder of the company’s [sic] we’ve built together.
Recently, though, the focus has shifted more toward litigation and me personally. The combination of HR-related litigation and negative press have [sic] become a distraction from the company’s core mission.
I want SoFi to focus on helping members, hiring the best people, and growing our company in a way consistent with our values. This can’t happen as well as it should if people are focused on me, which isn’t fair to our members, investors, or you….”
There’s a little more, but I can take it no longer.
CUT THE SHIT MIKE!!! Are you insane? What exactly are you on?
Whew!!
Alright, I’ll let him finish:
“I will be fully dedicated to the business through year-end, and will work closely with the Board to find the best candidate to lead us forward. SoFi has built an incredible team. While we’ve come a long way, we’re still in the early innings of what we can and will accomplish. I’m grateful to have had the opportunity to help get us to where we are today — and I look forward to seeing where all of you take SoFi in the coming years.
Thanks,
Mike”
Just a quick question Mike. While you “work closely with the Board,” undoubtedly at your multi-tasking best, whom will you be sexually harassing?
Executive assistant Laura Munoz was one unfortunate target.
When SoFi’s board was made aware of Mr. Cagney’s flirtatious and sexually explicit text messages to Ms. Munoz in late 2012, board members claimed they found no evidence of a “sexual relationship” and paid Ms. Munoz about $75,000 to leave the company.
At around the same time, SoFi’s board and executives stood by Cagney once again in the face of widespread complaints among investors that he had made misstatements and misrepresentations regarding the start-up’s student loan products.
Cagney was allowed to flit around and behave boorishly, flaunting his sexual prowess and conquests, largely because the forty-six-year-old married father of two was building the online lending, insurance and asset management concern into a behemoth organization which has been valued at a figure somewhere north of $4 billion ($4.3?).
And his behavior trickled down to create a toxic workplace culture so demeaning to women that references to a “frat house” mentality became increasingly common.
Cagney’s abhorrent conduct was described by no fewer than 30 current and former employees which puts him personally and unmistakably in the crosshairs of legal beagles everywhere.
In fact a sexual harassment lawsuit filed last month in Healdsburg, California, home of SoFi’s main satellite office, accused Cagney of “empowering other managers to engage in sexual conduct in the workplace.”
The reporting by employees of colleagues having sex with supervisors at the office or in cars in the firm’s parking expanse can understandably precipitate this kind of legal action.
Then there is the issue of Cagney’s business practices, perhaps as open to question as is his sex-fueled behavior.
But before that is addressed, consider this:
James Francis “Jimmy” Cagney, the cocky and pugnacious film legend and the screen’s top mobster who featured an explosive energy and a two-fisted vitality, lived until he was almost 87 (July 17, 1899- March 30, 1986). At the end of his life there was estrangement from his two adopted children, James Francis Cagney III who died in 1984 and Cathleen “Casey” Cagney, but never from his wife.
Cagney was married to Frances Willard “Willie” Vernon on September 28, 1922 whom he met on the show Pitter Patter in 1920, and the marriage lasted for 64 years until his death in ’86. Although Cagney was a very private man the story is that he and “Willie” were in fact good parents.
In his many roles Cagney was brutish, impish and streetwise creating a persona of an urban Irish-American with an irrepressible spirit. Will Rogers once said of Cagney, “Every time I see him work, it looks to me like a bunch of firecrackers going off all at once.”
Vincent Canby of the New York Times wrote in 1973 that Cagney was “one of the most intelligent and graceful actors [he was a Vaudevillian, a legitimate song-and-dance man of great repute] ever to be disguised as a Hollywood star.”
Yet Cagney on-screen bore little resemblance to the man in real life.
Off-screen he was a self-avowed and confirmed family man, reflective, kind and humble. He had a close and confined circle of friends, avoided the Hollywood late-night drill, didn’t smoke and rarely drank.
He was singularly unimpressed by adulation and even less so by stardom, once remarking, “One shouldn’t aspire to stardom — one should aspire to doing the job well.”
Interestingly, Cagney was ahead of his time with respect to ecological awareness. In 1958 he appealed over the radio for the populace to begin preserving the country’s resources. “Outside of my family, the prime concern of my life has been nature and its order, and how we have been savaging altering that order,” he astutely observed.
In retirement he indulged his varied interests; he read voraciously, wrote verse, painted, played classical guitar, sailed, farmed his land and limbered up by dancing a chorus or two to ragtime tunes.
“Absorption in things other than self,” he noted, “is the secret of a happy life.”
If only Mike Cagney — no relation in any way, shape or form — was capable of sharing both that sentiment and the accompanying persona of one James Cagney, American icon.
But a man who is convinced that he’s the smartest guy in the room is usually concerned with himself only. Mike Cagney’s behavioral and business problems stemmed from this kind of loathsome and resolute thinking and self-image.
For example, ignoring warnings from colleagues that he was being too aggressive with the business, he decided to assign customer service representatives the responsibility to sign off on lending determinations without a smidgen of experience in the arena.
This task had previously been handled by the company’s underwriters but by adopting this posture, SoFi was able to double the number of loans it issued in just a few months time.
Then of course the loans had to be funded.
Not so easy when you don’t have enough money to use fast enough. A funding shortfall of this or any magnitude pushes back the timetable for borrowers to get their cash. It reasonably could take as long as 30 days; supervisors were told to quote customers a turn-time of 72 hours.
Rationalized Marie Lombard, who worked from 2014–16 at the Healdsburg operations center, “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.”
Eventually Cagney decided to relieve the customer service representatives of their underwriting responsibilities.
In another instance, he told investors that SoFi had $90 million in debt financing for a particular loan product when in fact it did not.
SoFi’s board, whose members include among others representatives of Japanese conglomerate SoftBank and the influential hedge fund Third Point Capital, either had no system of checks and balances in place or chose not to use one, a gross and damaging (intentional?) oversight.
David F. Larcker, a professor at Stanford Business School acknowledges that boards are incentivized to prioritize cash flow and growth over governance but then must answer for that if and when things go awry. It is their “duty to correct for things that have gone wrong,” he says.
Mike Cagney, born in Jersey and a trader at Wells Fargo early in his career, left the global bank to begin a financial software company and then started his own hedge fund, Cabezon, in 2005.
In 2011 he and several co-founders began SoFi. At the time venture capitalists were agog over financial technology and the start-up raised almost $100 million in its first year. In total, SoFi has now taken in $1.9 billion from investors.
Cagney brought the trading floor signature hooting and hollering to new levels (depths) at SoFi, braying like a donkey and embarrassing employees in front of others when mistakes were made, snapping obscenities and excoriations around right and left like bottle-caps.
The posse he hired behaved similarly, including SoFi’s CFO Nino Fanlo who defended his kicking of trash receptacles and the sexist remarks he made to women co-workers by pointing out that his team boasted many women who had received promotions and professional accolades and recognition.
Also, he volunteered that, “you’re under extraordinary pressures at a company that is growing that fast.”
Well then, that certainly explains it.
Fanlo is gone, to pursue other opportunities he claims, and Cagney is gone too, a casualty of his own making.
He’ll probably land on his feet, all by himself. And all alone.
That would be too good for him.
[Editor’s Note: This piece was written by Mr. Kaplan in September 2017.]
