Better.com CEO Garg misled investors, fired exec claims

Better.com founder and CEO Vishal Garg misled investors about the lender’s performance amid efforts to go public and ran roughshod in handling the firm’s first mass layoff and fallout, a new whistleblower suit claims.

The New York company’s former second-in-command Sarah Pierce claims she was fired in retaliation for raising concerns over Garg’s behavior, according to a complaint filed Tuesday in the U.S. District Court for the Southern District of New York. Pierce, the firm’s former head of sales, operations and customer experience, is accusing Garg, Better and general counsel Nicholas Calamari of defamation and breach of fiduciary duty, among other counts.

Better, in a statement from an attorney, said it doesn’t comment on ongoing litigation and offered a brief response.

“We have reviewed the claims in the complaint and strongly believe them to be without merit,” the statement said. “The company is confident in our financial and accounting practices, and we will vigorously defend this lawsuit.”  

The SoftBank-backed lender’s merger with Novator Capital-sponsored Aurora Acquisition Corp. is still pending over a year after its announcement and while Aurora said it expects to finalize the arrangement this quarter, it has yet to announce a specific date when it will occur.

Pierce’s lawsuit paints a picture of Better’s chaotic inner workings around the time of Garg’s December firing of 900 workers in a Zoom call, which drew widespread negative media coverage and impacted the company’s bottom line. Better lost $303.8 million in 2021, which it attributed to the shrinking refinance market, and has spent up to $84.1 million in layoff expenses as it cut over a third of its workforce since the beginning of the year.

Vishal Garg.

The complaint alleges Better misrepresented information in a Securities and Exchange Commission filing last summer when it said approximately 30% of its direct-to-consumer loans were generated from organic internet traffic. Pierce claims no more than 12% of Better’s direct-to-consumer funded loans were generated from customers visiting the firm’s website directly.

“Ms. Pierce expressly raised her concerns about these misrepresentations to CEO Garg and General Counsel Calamari,” the suit reads. “They ignored her concerns and proceeded to publish the false and misleading data.”

Garg last December allegedly told the Board of Directors that the company would achieve profitability in the first quarter of this year, despite Pierce and other senior leaders warning him it was not possible. The CEO, according to the suit, told the board the metrics of the company were a “black box”.

“We have known the refinance market is changing, yet Vishal continued to make decisions that got us here,” Pierce allegedly said to the Board following Garg’s comments. “If you as a board are not aware of the Company’s metrics and financials, it is because VIshal did not communicate them to you.”

Garg ramped up hiring through 2021 and allegedly repeated to Pierce and other executives that sales would increase because “President Biden will die of Covid” causing interest rates to fall and volume to rise. The lawsuit claims once Garg realized the company had overhired, he wanted to cut 20% of Better’s workforce, or 2,000 employees, last November. 

Executives coordinated with Garg on the December layoff, but Garg repeatedly dismissed concerns about legal compliance, the suit states, including failing to file a notice per California’s Worker Adjustment and Retraining Notification law. Garg rejected suggestions to pay impacted workers more severance and went off-script during the now-infamous Zoom call, the lawsuit claims.

The Zoom fallout included thousands of customers filing complaints and Progressive Insurance withdrawing from a pending arrangement with the company, the complaint reads. The company’s major investor in a private meeting allegedly called Garg “an embarrassment.”

In the following weeks, Garg deflected blame for the handling of the incident on others including Pierce, who was outspoken in her criticism of his behavior, the lawsuit states. Pierce was eventually placed on leave and terminated on Feb. 4  without reason, severance or benefits. 

“I cannot believe that a company I gave 5.5 years of my life to has treated me with such lack of human decency,” Pierce allegedly told a general counsel for Better.

Pierce also said she filed a claim with the Occupational Safety and Health Administration against Better over the retaliation, which she intends to add to the suit. She filed requests for issuances of summons for Better, Calamari and Garg Tuesday.