Mike Cagney opens up about sexual affairs with staff as he seeks a fresh start

Seeking a fresh start with his wife, tech founder Mike Cagney admits sex with subordinates was behind his abrupt departure.

Former Social Finance Inc. chief and co-founder Mike Cagney has admitted having sex with subordinates.

Seeking a fresh start in Silicon Valley, former Social Finance Inc. chief and co-founder Mike Cagney now admits that an affair with a subordinate was a reason for his abrupt departure last year from the firm.

Mr. Cagney resigned last September from the financial-technology company following accusations and lawsuits from former employees that managers sexually harassed female employees without repercussions. In a farewell note to employees, Mr. Cagney cast his departure as a way to refocus attention on SoFi’s mission of saving consumers money on their student loans.

Now, Mr. Cagney is adding another reason for deciding to leave a start-up he led for six years. In an interview with The Wall Street Journal, he said that he had consensual sexual relationships with female subordinates, something he had previously denied publicly. He also said he had misled SoFi’s board of directors about one of the affairs.

“I made a regrettable mistake,” Mr. Cagney said. “I wasn’t forthright with the board, and it’s part of why I stepped down.” A SoFi spokesman declined to comment.

Mr. Cagney is opening up as he debuts his latest venture: Figure Technologies Inc., a financial-technology start-up focused on home-equity lending that made its first loan this week. It has hired around 90 employees and raised $US58 million in venture capital, a process that involved persuading potential investors and recruits that he has learned from his leadership shortcomings at SoFi.

“He deserves a second chance,” said David Chao, a general partner at DCM Ventures who invested in Figure and was on SoFi’s board when Mr. Cagney left. Mr. Cagney “did a lot of soul searching and learned a lot from those mistakes,” Mr. Chao said.

Mr. Cagney was one of several Silicon Valley executives who have relinquished their jobs since last year as part of a wider reckoning of the treatment of women in the technology industry and beyond. Uber Technologies Inc. faced months of turmoil last year after a former engineer accused a manager of sexism and sexual harassment, which along with a string of other scandals culminated in the resignation of CEO Travis Kalanick last June.

Over a span of six years, SoFi went from an idea Mr. Cagney cooked up with classmates from Stanford University’s business school to a start-up valued at more than $4 billion that had extended more than $20 billion in loans. As recently as last August, it was marching toward an initial public offering.

Around that time, a former employee in a SoFi operations centre in Healdsburg, Calif., filed a lawsuit against SoFi, claiming he was fired for reporting that a manager made sexual or inappropriate comments to female colleagues. The employee, Brandon Charles, accused Mr. Cagney of allowing male employees to “engage in inappropriate sexual conduct.”

The lawsuits filed against SoFi related to harassment or work culture have either been settled or are in the process of having settlements finalised. Mr. Charles dropped Mr. Cagney as a defendant and in May the parties settled the case, according to court filings and a SoFi spokesman. Mr. Charles’s lawyer and SoFi declined to discuss the settlement, saying its terms were confidential.

Mr. Cagney said he never witnessed any incidents of sexual harassment in the office but was aware that the human-resources department had addressed some issues. He added that he “should have taken a harder line” on one incident involving a top executive’s inappropriate banter.

After Mr. Charles’s lawsuit was filed, the Journal reported that in 2012 SoFi’s board had authorised a payment to a lower-level employee to settle a dispute she had with Mr. Cagney. At the time the board said “there was no allegation or evidence of a romantic or sexual relationship between Mr. Cagney and the employee.” Mr. Cagney and the board haven’t discussed the nature of the dispute.

Mr. Cagney said in the interview his sexual relationships weren’t with the employee involved in the dispute.

SoFi’s cultural issues weren’t limited to how women were treated. An intense focus on growth created an environment where some employees felt pressure to work extra hours at night and on holidays to avoid being fired and where executives would break furniture and throw telephones out of anger, the Journal previously reported last September.

“The culture [at SoFi] was very results-oriented,” Mr. Cagney said in the interview. “What that does is create a structure where you can look past bad behaviour when results are delivered.”

He said he’s doing things differently at Figure. He brought in a mostly female executive team, including its chief risk officer and its general counsel. His wife and co-founder, June Ou, serves as the company’s chief technology officer, a role she previously held at SoFi. She declined to comment on Mr. Cagney’s sexual relationships.

He’s also giving any employee who meets recruits a chance to a chance to weigh in on how the hire would affect Figure’s culture, said Alana Ackerson, a former vice president of SoFi and Figure’s chief people officer. While at SoFi, Mr. Cagney said he didn’t prioritise cultural fit in hiring decisions.

SoFi has continued to expand its lending in Mr. Cagney’s absence. The company extended a record $3.6 billion in student, personal and mortgage loans in the first quarter. Its financial performance has slipped, however, as higher-than-expected delinquencies led SoFi to miss its earnings projection for the fourth quarter. Many of those delinquent loans were made on Mr. Cagney’s watch.

Meanwhile, investors in Figure are expecting Mr. Cagney can generate earnings before interest, taxes, depreciation and amortisation of $US150 million in 2020, according to a document reviewed by the Journal. Figure is launching its own blockchain to host loan-related documents and planning to offer its own virtual currency to investors later this year, Mr. Cagney said.

- Wall Street Journal