Square COO quit after sex harassment accusation

SAN FRANCISCO Fri Jan 25, 2013 6:38pm EST

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SAN FRANCISCO (Reuters) - The chief operating officer for mobile payments company Square, Keith Rabois, abruptly resigned after an employee accused him of sexual harassment and demanded "millions of dollars" to stave off a potential lawsuit, he disclosed in a Friday blog post.

The online revelation by Rabois, a well-regarded senior executive at the multibillion-dollar startup founded by Twitter Inc co-creator Jack Dorsey, caused a sensation in the close-knit Silicon Valley community and ignited a flurry of tweets.

In a lengthy Tumblr blog post, the 43 year-old executive said he had been contacted by a New York attorney for his accuser, an unidentified male with whom he had a relationship beginning in 2010. Rabois, who recommended the man for a position at Square, said he was told his accuser would file a lawsuit saying their relationship was not consensual, but did not elaborate on other allegations.

"I was told that only a payment of millions of dollars will make this go away, and that my career, my reputation, and my livelihood will be threatened if Square and I don't pay up," Rabois said in his blogpost.

A lawyer by training, Rabois detailed how he met his accuser in 2010 through mutual friends. Several months after the meeting and after they had spent time together, Rabois said he recommended his friend to the company, which hired him. It is the unclear whether the accuser still works at Square.

"I realize that continuing any physical relationship after he began working at Square was poor judgment on my part," he wrote in the blog post.

Square has retained San Francisco lawyer Richard Curiale to conduct an internal investigation into the matter. Dorsey, who accepted Rabois's resignation late on Thursday, declined to comment on Friday.

The Wall Street Journal, citing sources, identified the accuser's attorney as Steve Berger. Attempts to reach Berger on Friday were unsuccessful.

The mobile payments company is one of Silicon Valley's hottest start-ups, raising $200 million late last year in a funding round that valued the company at $3.25 billion. Rabois, a former executive at eBay Inc's (EBAY.O) PayPal who has a law degree from Harvard Law School, joined Square in 2010.

Link to Rabois' blogpost: (link.reuters.com/pek55t)

INVESTIGATION

In August, Starbucks (SBUX.O) announced a deal to use Square's technology to process debit and credit card payments at the coffee chain's stores. Starbucks CEO Howard Schultz is a Square board member.

"We took these allegations very seriously and we immediately launched a full investigation to ascertain the facts," Square spokesman Ricardo Reyes said in a statement.

The company said it has not found any evidence to support any of the claims, but added, "Keith exercised poor judgment that ultimately undermined his ability to remain an effective leader at Square."

Rabois said that the recent events were "the toughest, saddest, most frightening, and emotionally draining of my life."

The news, which followed an innocuous resignation statement the day before, caused a stir in Silicon Valley, which just a few years prior was treated to the spectacle of then Hewlett-Packard Co (HPQ.N) CEO Mark Hurd quitting over sexual harassment allegations that the company investigated and later found groundless.

DJ Patil, a data scientist at venture capital firm Greylock Partners and a former executive at LinkedIn, where Rabois once worked, tweeted: "While I may not see eye-to-eye (with) @rabois on everything. I'm fully on his side on this 1. He's always held himself to the highest standard."

Ellen Pao, who made news herself when she sued high-powered venture capital firm Kleiner Perkins Caulfield & Byers last year for sexual harassment, tweeted on Friday: "The ultimate measure of a man is ... where he stands at times of challenge and controversy - MLK keithrabois.tumblr.com/post/414631892… @rabois"

(Reporting By Alexei Oreskovic and Gerry Shih; Editing by Gary Hill, Leslie Gevirtz and Tim Dobbyn)

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