Snapchat showed investors false user statistics, ex-employee alleges in lawsuit

A former Snapchat employee alleged in a lawsuit that the company misrepresented its financial state while recruiting him and then pressured him to spill secrets about his time at Facebook.

Anthony Pompliano worked in Snapchat’s business operations department for three weeks before his firing in September 2015. He alleged in court papers Wednesday that the company has lied about the reason for his termination since then, hindering his ability to land another job in the social media industry.

"Mr. Pompliano was terminated because he refused to participate in a scheme to deceive the public and artificially inflate Snapchat's valuation in anticipation of its” initial public stock offering, the lawsuit states.

Company spokeswoman Mary Ritti said the complaint was meritless.

“It is totally made up by a disgruntled former employee,” she said in a statement.

Snap Inc., the company behind the popular chat app Snapchat, recently began talking to investors about its plans to publicly list shares as early as March. The IPO could value Snap at more than $25 billion while raising around $4 billion for the Venice firm to invest in hiring, product research and other initiatives, sources have said. But concerns about the lawsuit could become a distraction, particularly because it calls into question the data the company shares about itself.

“Snapchat will not let anything stand in its way of an IPO, including obligations to represent material facts accurately,” the suit says.

DOCUMENT: Read the full complaint in Pompliano v. Snap »

Seven full pages and other portions of the 21-page filing in Los Angeles County Superior Court are blacked out. Pompliano’s attorney, David Michaels, said the redactions protect information possibly subject to a confidentiality agreement between his client and Snap. The company has 10 days to file a motion to maintain the redactions. 

Among the statements unavailable are two statistics that Snap provided to Pompliano during the recruiting process that he claims are false. Similar data was provided to prospective Snap investors, including Chinese technology giant Alibaba, according to the lawsuit. Alibaba and several venture capital firms that own Snap shares didn’t offer comment on the lawsuit.

Last year, Snap added about 1,000 employees worldwide and reached deals with vendors to measure certain operations on the app, so it’s possible alleged deficiencies may now be rectified.

Snap has said 150 million people use its mobile app each day, producing more than 10 billion daily views of short videos. Analysts estimate that the company generated close to $400 million in ad revenue in 2016.

But Pompliano alleged through the lawsuit that Snap lacked sophisticated methods of verifying user statistics because its chief executive, Evan Spiegel, “did not care” for numbers.

Pompliano raised concerns about misrepresentations to three superiors to no avail, according to the filing. He also claims to have angered Snap executives by refusing to divulge information about Facebook, where he had worked for the previous year.

Snap and Facebook are locked in battle for the attention of consumers and advertisers. Facebook and its separate Messenger and Instagram apps have added several features popular on Snapchat, including the ability to decorate images with whimsical doodles and send disappearing messages. Likewise, Snapchat has added options such as group messaging that help it match what Facebook offers. Snapchat rejected a multibillion-dollar acquisition offer from Facebook in 2013.

Pompliano is seeking an injunction that would bar Snap from misrepresenting the reason for his firing. He said Snap has told employees and others in the industry that he was incompetent. Separately, he has filed an arbitration claim — that is in the early stages — seeking lost wages and other damages for his allegedly wrongful firing.

Pompliano founded and sold a small start-up that analyzed social media posts before becoming a product manager at Facebook. Facebook declined to comment beyond confirming his role there. Pompliano abruptly left for Snapchat to help the app add new users.

This year, Pompliano opened a North Carolina venture capital firm, Full Tilt Capital. It’s unclear from where the fund raised money. But among its investments are mobile app research firm Apptopia, college housing search service LoftSmart and charter bus service Skedaddle, according to Pompliano’s blog posts.

Snap has other legal issues outstanding, including a lawsuit filed by two women who say they weren’t appropriately compensated for appearing in the company’s early marketing materials. A jury trial in that Los Angeles County case is scheduled for October.

Snap also has denied patent infringement allegations lodged in a Texas federal court by Uniloc, a firm notorious for making intellectual property claims. In Canada’s federal court, Snap has countersued in a case brought by investment group Investel, which says Snapchat’s location-based image filters infringe on patents for its iFramed app.

paresh.dave@latimes.com / PGP

Twitter: @peard33


UPDATES:

12:40 p.m., Jan. 5: This article was updated with responses from Alibaba and Facebook, details about other lawsuits against Snap and details about redaction procedures.

This article was originally published at 7:45 p.m., Jan. 4.

Copyright © 2017, Los Angeles Times
44°