SAN JOSE, Calif. (CN) – Google shareholders lost money because directors refused to recruit better talent away from other tech giants through reciprocal, anticompetitive “handshake” agreements, according to a federal complaint filed Monday.
“The anticompetitive agreements run contrary to what has made Silicon Valley so successful: job-hopping,” says a 72-page federal complaint brought by a pension fund from Florida.
West Palm Beach Fire Pension Fund names as defendants Google’s board of directors: Larry Page, Sergey Brin, Eric Schmidt, John Doerr, Diane Greene, John Hennessy, Ann Mather, Paul Otellini, Ram Shriram, and Shirley Tilghman.
“Each of these ten directors knew of the wrongdoing and either actively orchestrated it or acquiesced in it,” the fund says in its complaint.
The lawsuit also names as defendants past Google board members Michael Moritz and Arthur Levinson, and executives Robert Eustace, Omid Kordestani, Jonathan Rosenberg, Shona Brown and Arnnon Geshuri.
“Defendants, with their colleagues at rival companies including Apple, Adobe and Intel, illegally conspired to drive down wages for over 100,000 workers in Silicon Valley,” the complaint states. “This misconduct caused significant damage to Google and its shareholders. Defendants caused and/or blindly looked away when Google entered into illegal anticompetitive hiring agreements with its rival companies. These unlawful restraint of trade agreements were intended to and did in fact reduce employee compensation and mobility for high-tech employees.”
The pensioners note that as compensation went down, so did Google’s reputation and the money the shareholders could have made.
The poaching ban started in 2005 with Apple, the pensioners claim, when an ‘irate’ Steve Jobs called Brin allegedly making threats that led Brin to institute an internal company policy that Google not hire from Apple.
“Defendant Brin understood after his call with an ‘irate’ Jobs, that his position was ‘if you hire a single one of these people that means war.’ Defendant Brin took this threat seriously and advised the executive management group not to ‘make any new offers or contact new people at Apple until we have had a chance to discuss,’ ” the complaint says.
In 2007, Google entered into an identical agreement with Intel, Intuit, Dell and eBay.
The pensioners add: “Finally, by virtue of the misconduct alleged herein, Google has lost out on many of the best and brightest high-tech employees, thereby resulting in lost opportunities for innovation in a company that is wholly dependent on such innovation.”
The pension fund’s lawsuit comes only weeks after a federal judge gave the initial nod to a $415 million settlement for a class of tech workers formerly employed by Google, Apple, Intel and Adobe, who claimed they had lost out on competitive wages because the companies agreed not to recruit from each other.
West Palm Beach cited emails dating back as early as 2005, that were only made public by the tech workers’ class action, that detail the alleged conspiracy between Google and its competitors. Google board members also sitting on other boards further complicated matters, the pensioners claim.
Google agreed to end its anticompetitive poaching ban in a 2010 settlement with the Justice Department. Both settlements cost Google, and consequently its shareholders, tens of millions of dollars, the pensioners claim.
West Palm Beach wants the directors and executives to repay Google for breaching their duty by allowing the company to violate federal securities laws.
The fund is represented by John Jasnoch with Scott and Scott of San Diego, Calif.
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