Trial in Ellen Pao suit could air Valley's dirty laundry

Elizabeth Weise | USA TODAY

SAN FRANCISCO — A trial that could air a significant amount of dirty laundry about how women are treated in Silicon Valley got underway Tuesday.

The case involves Ellen Pao, a former partner at Kleiner Perkins Caufield and Byers, one of the most powerful venture capital firms in the tech industry.

Pao is seeking $16 million in back pay and for future wage losses based on her accusations of years of sexual harassment and discrimination toward women at the firm. The actual legal claim is for gender discrimination and retaliation.

The case comes as a spotlight is being shone on Silicon Valley because of the lack of women, blacks and Hispanics at tech firms, said Kellie McElhaney, a professor at the Haas School of Business at the University of California-Berkeley.

"People are definitely talking about this case. You can't be within a stone's throw of the Valley without hearing about it," she said.

Even if Pao loses, "You can't take away the fact and the allegations that have been put out there" that give people pause, said McElhaney.

"If she wins, there's a sense that if you can win against Kleiner, the most powerful venture capitalists in the Valley, it opens up the way to other women," she said.

The pretrial conference began Tuesday in San Francisco Superior Court. Jury selection will begin on Wednesday, and opening arguments are expected to take place next Tuesday.

Pao graduated from Princeton University with a degree in electrical engineering, then went on to Harvard Law School and Harvard Business School.

Before being hired at Kleiner Perkins in 2005, she worked at multiple technology companies, including Microsoft. She became the CEO of the popular microblogging site Reddit in November.

Pao began at Kleiner Perkins as chief of staff to the Menlo Park, Calif., firm's general partner, John Doerr, in 2005.

In her suit, Pao alleges that on a business trip to Germany a married junior male partner made "inappropriate sexual approaches" to her, which she rebuffed.

He continued to pressure her to have an affair with him, falsely telling her, according to the complaint, that his wife had left him.

After nine months, Pao "succumbed" to the partner's "insistence on sexual relations on two or three occasions" but then broke it off, the complaint alleges.

The suit says that after this, she endured years of harassment by the partner, which the firm did nothing to stop.

This included attempts to subvert her ability to work, such as removing her e-mail address from e-mail discussions she had been included in and excluding her from business meetings.

When she reported the alleged retaliation, one partner suggested she find a way to engage in a "personal relationship" with the man and "even to marry him," according to court papers. It was unclear if the partner was still married at that point.

In its reply to Pao's suit, Kleiner Perkins denied she complained about unlawful harassment until late 2011. At that point, an internal company investigation determined her complaints were without merit, the firm said. In addition, Christina Lee, KPCB spokeswoman, says: "This suit is completely without merit and has no basis in the law. KPCB has a well-established record of championing women in our firm, our portfolio companies and the overall industry. We look forward to clearing our name in court."

The firm also encouraged Pao to speak up "more effectively and influentially" and to focus on her interpersonal skills.

Performance reviews of Pao characterized her as a someone who was "passive" and urged her to "speak up" and be more proactive, the Kleiner Perkins court documents said.

Discrimination against women

That's a different picture than the one given by Pao's suit, which portrays a firm with a culture of discrimination against women, one that withheld opportunities, raises and promotions from its female staff.

One example given was that while male junior partners were allowed to hold seats on multiple boards of directors of companies the firm had invested in, female junior partners were limited to just one.

In another example, women were not allowed to attend two important dinners at a partner's home because, according to her complaint, having women there would "kill the buzz."

Kleiner Perkins denied that in court papers, saying the dinners were, in fact, attended by both men and women.

In 2011, a senior partner at the firm told Pao that "because women are quiet," they don't have the type of personality that leads to success at the firm, the suit alleges.

According to Pao, she was dismissed from her position in October 2012. Kleiner Perkins says she was advised to leave based on her performance.

The case comes as Silicon Valley, and the technology industry as a whole, is wrestling with how white, Asian and male its workforce is.

The topic of how few women, African-Americans and Hispanics are involved in one of the largest wealth-generation engines of the nation is increasingly in the news.

Venture capital firms are a crucial part of that. They provide the money that keeps Silicon Valley humming by funding companies in their initial, start-up phase. Without VCs, the entire economic juggernaut would slow to a crawl.

But the firms have also long been described as old-boys clubs, even more so than the famously male tech industry. According to an analysis by Fortune in 2014, just 4.2% of partners at venture capital firms were female.

While she's not familiar with what went on in Pao's case, Telle Whitney, CEO of the Anita Borg Institute for Women and Technology, said there is a tendency in the start-up world to "pattern match."

The vast majority of the people funding and launching companies are men, she said.

"If you've always been around people who look like you, it's really easy to look around and say, 'Women don't belong here.' You many not speak it, but you believe it," she said.

The symbiosis between venture capital firms and the tech start-ups they fund and make millions off of feeds into this. With the tech world white-hot right now, venture capital firms "have one thing in mind and one thing only, and that's to make a lot of money," she said.

This has allowed some "really egregious behavior to go unchecked."

People tend to stick with people they feel comfortable around, whether it's gender or the school they went to or the color of their skin or the sports they follow, agreed Cindy Padnos, a founder and managing partner of Illuminate Ventures, one of the few VC firms with a majority of women on its roster.

While she's not familiar with Pao or the case, Padnos said that constraint of vision is damaging to companies because it doesn't allow them to see potential that might be there. Whether or not it's being done intentionally, it can "have negative consequences," she said.