Gates is in crisis: after the collapse of his persona, the big steward of hundreds of billions of wealth is caught in another scandal

Scratching the surface.

1 Over the past nearly 30 years, Microsoft co-founder Gates’ fortune has soared from less than $10 billion to $130 billion, thanks largely to his wealthy steward Michael Larson.
2 By leading Cascade, Gates’ money management firm, and investing in farmland, hotels, stocks, bonds and even a bowling alley, Larson has helped Gates reap lucrative returns on his investments.
3 However, 10 former Cascade employees disclosed that Larson engaged in many inappropriate behaviors at the company, including sexual harassment of female employees, making racist remarks, and retaliating against employees.
4 Larson also showed nude photos of women to co-workers and openly talked down to female employees in front of male employees, creating a “culture of fear” at the company.
5 In response to complaints against Larson, Gates’ attitude was to pay to settle the matter, but Melinda recommended an outside review of the complaints and Cascade’s corporate culture.
6 An investigation by an outside law firm concluded that most of the allegations against Larson could not be substantiated, and he continues to run Cascade today.

Editor’s Note: For the past 27 years, fund manager Michael Larson has managed the vast fortune of Microsoft co-founder Bill Gates and overseen the endowment of his massive foundation. Through a Gates money management company called Cascade, Larson invested Gates’ money in farmland, hotels, stocks, bonds and even a bowling alley. Thanks to lucrative returns on Larson’s investments and soaring Microsoft stock prices, Gates’ fortune soared from less than $10 billion to $130 billion. But according to 10 former employees, Larson engaged in numerous acts of misconduct at Cascade, including sexual harassment of female employees, making racist remarks and retaliating against employees. Although Cascade has grown to more than 100 employees and manages more money than most Wall Street hedge funds, many believe that it was Gates’ unwavering support that gave Larson the opportunity to create a “culture of fear” at the firm.

Gates is in crisis: after the collapse of his persona, the big steward of hundreds of billions of wealth is caught in another scandal

Michael Larson, chief investment officer of Cascade Investment, a Gates wealth management and investment firm
The following is the text of the article.

For the past 27 years, Bill Gates has consistently entrusted the management of his vast fortune and the endowment of his vast foundation to one man, Michael Larson. Larson invested Gates’ money in farmland, hotels, stocks, bonds and even a bowling alley. Thanks to Larson’s investments and the soaring price of Microsoft shares, Gates’ fortune has soared from less than $10 billion to about $130 billion.

But Larson, 61, also engaged in misconduct at Cascade Investment, a Gates money management firm, according to 10 former employees and others familiar with the Gates fund. He publicly poked fun at female employees, showed nude photos of women to colleagues on the Internet and made inappropriate sexual comments on several occasions. Larson has made racist comments about black employees and sometimes even bullied them. When one employee said he was leaving Cascade, Larson retaliated against him by trying to short the stock of the new company he planned to join.

Over the years, at least six people, including four Cascade employees, complained to Gates about Larson’s misconduct, and several of them even reached out to Melinda, according to these former employees and others with direct knowledge of the complaints. Cascade made payments to at least seven people who witnessed or knew about Larson’s misconduct. In exchange, they agreed never to talk about their work experience at the company.

The former employees said that even though Cascade had grown to more than 100 employees and managed more money than most Wall Street hedge funds, it was believed that Larson had the unwavering support of Gates, which allowed him to create a “culture of fear” at the firm. Even more frustrating is that Larson is still in charge of running Cascade.

Gates’ reluctance to take decisive action within Cascade not only undermines the billionaire philanthropist’s image, but is also at odds with his image as a “global do-gooder” and “champion of women’s empowerment.

Larson and his spokesman Chris Giglio denied some of Larson’s allegations of misconduct. During his tenure, Larson managed more than 380 employees, but the total number of complaints against him was less than five,” Giglio said. Any complaints were carefully and fully investigated and addressed, though none warranted Larson’s dismissal.”

Gates is in crisis: after the collapse of his persona, the big steward of hundreds of billions of wealth is caught in another scandal

Microsoft co-founder Bill Gates and his ex-wife Melinda
Bridgitt Arnold, a spokesman for both Giglio and Gates, said Cascade has strict policies in place to handle employee complaints of executive misconduct. Giglio said, “The company takes all complaints seriously and seeks effective ways to resolve them to ensure the creation of a safe, respectful workplace.”

According to Arnold, “Cascade will never tolerate inappropriate behavior. Since the company’s inception, any complaints have been taken seriously and resolved appropriately.” Larson also refuted that “to say that Cascade is a toxic work environment is unfair to the team and the 160 professionals who work here.”

But Melinda’s spokeswoman, Courtney Wade, said, “Melinda unequivocally condemns the disrespectful and inappropriate behavior that exists in the workplace. Given her lack of ownership and control of Cascade, she was unaware of most of these allegations.”

Many former Cascade employees declined to comment because confidentiality agreements prohibit them from discussing their experiences at the company. Others asked to remain anonymous for fear of retaliation. Even several years after leaving Cascade, several find it frustrating to talk about Larson and are almost reluctant to mention past experiences.

Low profile on the job and a penchant for hiring new graduates and alumni

Before Larson, Gates’ financial adviser was his old friend Andrew Evans, who had previously served a six-month sentence for bank fraud. In 1994, Gates hired Larson, who had previously been a fund manager at Putnam Investments, but by 1993, when Evans’ criminal record was front-page news, Gates had to find a new fund manager to replace him.

Gates is in crisis: after the collapse of his persona, the big steward of hundreds of billions of wealth is caught in another scandal

Prior to being hired to manage Gates’ vast fortune, Larson was a fund manager at Putnam Investments
Cascade was incorporated in Washington state in 1995. The generic-sounding firm made no mention of the Gates, which allowed Larson to keep a low profile and run a huge investment business. Initially, Cascade’s sole function was to manage the Gateses’ money, which was closely intertwined with the broader “Gates world” that included Microsoft.

The firm is located in the same office park as Gates Ventures, the Gates’ private investment arm, in Kirkland, across the street from Melinda’s investment firm, Pivotal Ventures. Over the years, employees have moved between Cascade, the Gates Foundation, Microsoft, the Gateses’ two portfolio companies and the law firm of K&L Gates. In 2005, when Cascade needed a new human resources director, the firm hired a Microsoft veteran.

Larson often hires people fresh out of college or early in their careers, and graduates of his alma mater, Claremont McKenna College, are particularly popular. The college has several scholarships endowed by Larson.

Some employees have argued that working at Cascade is a way to make the world a better place. Because Cascade also oversees a whopping $50 billion endowment from the Gates Foundation, helping it do better means more money will go to good causes like fighting malaria and funding education. Others also say they were fascinated by the idea of working for Gates, who co-founded Microsoft with Paul Allen in 1975.

Throughout his tenure, Larson earned huge returns for Gates. He typically invested in old-fashioned stocks that were under-valued while avoiding hot tech companies. This strategy paid off handsomely when the Internet bubble burst in the late 1990s. Larson also helped protect Gates’ assets from the worst recessions of the 2008 and 2009 economic crises.

Larson expanded his investment business to include real estate and high-end hotels. He purchased a 47.5 percent stake in the Four Seasons hotel chain. He purchased large tracts of land, which by some estimates made Gates the largest private owner of farmland in the United States. During this period, the pursuit of the highest returns was not the main goal. According to one former employee, the mission was, “We didn’t want Gates’ name in the headlines.”

Creating a “culture of fear”, retaliating against departing employees, and making racist comments

In the spring of 2004, Stacy Ybarra decided to quit her job at Cascade and join the Internet company InfoSpace. ybarra, then 30, had joined Cascade three years earlier as an investor relations analyst. After she announced her plans to leave, Larson became so angry that he shorted InfoSpace’s stock, causing it to fall, according to three people familiar with the matter. Two of them said they witnessed Larson’s trades on their computer terminals.

Gates is in crisis: after the collapse of his persona, the big steward of hundreds of billions of wealth is caught in another scandal

Cascade headquarters of Gates Wealth Management
The three people familiar with the matter said Larson told Ebara and others that he was shorting InfoSpace stock out of spite. All three heard Larson’s comments at the time. Giglio confirmed Cascade’s shorting of InfoSpace stock, but denied that Larson did so to anger Ebara. At the same time, Larson repeatedly pressured Ibarra to stay at Cascade, who eventually agreed to stay under pressure.

On election day that November, Larson asked the Cascade employees in his office when the best time to vote would be. Barbara Yee, who is black of African descent, replied that she had already voted that morning and did not have to stand in line. Larson responded, “But you live in a ghetto, and everyone knows that blacks don’t vote.” Two people had witnessed the scene, and a third was later told about the incident. But Giglio denied that Larson had said this.

At least one Cascade employee has complained to Human Resources about Larson’s inappropriate comments. The complaint reached Gates and Melinda, who later spoke with Ebara as part of an internal investigation, according to people familiar with the matter. Ebara left Cascade in January 2005, received a small settlement and agreed not to talk about her experience at the company.

Gillio said, “When these complaints were filed 15 years ago, Cascade took them very seriously and hired an independent attorney to investigate.” He added that it is standard procedure at Cascade to have employees sign confidentiality agreements when they receive severance pay.

Spreading lies to slander close companies and repeatedly insulting and abusing employees

In November 2006, Gates and Melinda received another complaint about Larson. This time from Robert Sydow, a California fund manager who is a close friend of Larson’s and whose firm, Grandview Capital Management, had hired Larson to manage a $1.6 billion endowment from the foundation.

Gates is in crisis: after the collapse of his persona, the big steward of hundreds of billions of wealth is caught in another scandal

The Gates and Larson had a very close relationship
Theodore wrote a six-page letter to the Gateses accusing Larson of abruptly cutting off Cascade’s ties to Vision after an argument with Theodore. Theodore wrote that before the dispute, Theodore had warned Larson that he needed to “stop using his power to hurt others in his anger. The letter, which was reviewed by media outlets, said Larson had somehow damaged Vision’s reputation by spreading “false and defamatory” lies about Vision in the marketplace.

Sidor, who is also the godfather of one of Larson’s children, described how Larson repeatedly sought to punish employees who left Cascade and retaliate against those who cooperated with investigations into his treatment of Barbara and other incidents. Sidor warned the Gateses that Larson “has the potential to be very embarrassing to both you and the foundation.” In a statement through Giglio, Larson said, “For many reasons, sometimes we need to end agreements with third-party investment management companies.”

Following Barbara Yee’s departure, Cascade hired a new human resources executive, Kathy Berman. She had worked at Microsoft and was head of executive recruiting at Microsoft before leaving. Around that time, Larson also made an effort to keep physical distance between himself and certain Cascade employees, including moving some to different floors of Larson’s office, according to three former employees. But Gillio said employee morale remained high.

Cascade employees, including Larson, are required to undergo sexual harassment and sensitivity training. But one former employee said Larson didn’t seem to take the incident seriously. The former employee recalled Larson saying, “We don’t need that kind of training.” Giglio denied this.

The former employee said there was no change in Larson’s behavior. According to several people who saw Larson respond to e-mails, he would sometimes rebuke colleagues in e-mails as “stupid” or call their work “crap. In meetings, Larson would sometimes dismiss employee statements, commenting, “That’s the dumbest idea I’ve ever heard.”

In response, Larson said in a statement, “Several years ago, early in my career, I used harsh language that I would not use today. I deeply regret that, but I’ve done a lot to change that.”

According to one of the men, Larson was sitting outside with several male employees after dinner at a Christmas party in about 2005. Three female co-workers were standing about 6 meters away. Larson asked the male co-workers present directly, “Which one of them would you like to have sex with?”

When told about a program at Willy’s Light Body, a health and weight loss counseling organization that one female employee attended, Larson asked her, “Are you trying to lose weight for me?” Another former employee said Larson would ask male employees if certain women at Cascade were single.

On at least one occasion in recent years, Larson showed photos of naked women on his phone as employees looked on and compared them to Berman, a human resources executive, according to the person familiar with the matter. Another woman who worked at Cascade said Larson asked her if she would strip naked to get enough money. Larson denied making the comments and said “none of that is true.

Flirtation with female ex-employee, sexual harassment of female manager

About three years ago, Larson’s chief of staff, Megan Scott, complained to the Gateses that she was concerned that Larson was preparing to sign a five-year contract with a recruiting firm founded by former Cascade employee Pamela Harrington, according to three people familiar with the matter. Harrington’s attorney, Mitchell Langberg, said the proposed contract would pay Harrington’s firm an upfront retainer of just under $1.5 million a year. Over time, that retainer would be reduced to $400,000. Scott and another employee complained to the Gateses that they believed there was a close personal relationship between Larson and Harrington, people familiar with the matter said.

Gates is in crisis: after the collapse of his persona, the big steward of hundreds of billions of wealth is caught in another scandal

Despite many complaints, Larson still runs Cascade
Giglio said, “This allegation is unfair because its coming from a disgruntled former employee who has consistently worked to undermine Harrington’s reputation. And Harrington herself is a highly accomplished and successful career man.” But Gates told Larson to cancel the proposed contract with Harrington, people familiar with the matter said. Giglio said the decision was part of a broader initiative to include “many internal functions, including not outsourcing hiring.”

By 2019, that had apparently changed. In December of that year, Cascade signed an executive recruiting contract with the Harrington-based company, Lumbergh said. Since then, he said, “Harrington has consistently provided services under that contract.”

Around the time of the complaint involving Harrington, Larson also repeatedly courted the female manager of a local bike store, but was rebuffed. The bike store is majority owned by Rally Capital, a Cascade investment.

In 2017, the manager hired an attorney who sent a letter to Gates and Melinda and warned them that she would sue them if Larson did not stop the harassment. The letter stated that Larson had told the manager that he wanted to have sex with her and another woman, according to a person who read the letter.

Gates agreed to resolve the issue by paying the bike store manager. But Melinda insisted that outside investigators review the incident and Cascade’s culture, people familiar with the matter previously disclosed. in 2018, Larson took paid leave during the investigation. At the time, Gates told a Cascade employee that he doubted Larson would return.

Jessie Harris, an attorney with the Seattle law firm Williams Kastner, conducted the investigation. He concluded that the bike store manager’s complaint could not be substantiated. You should know that Larson wanted to refute the allegations throughout the investigation,” Giglio said. But it was clear that he was not the ultimate decision maker.”

Larson returned from leave in 2019. the chief operating officer at Cascade left during Larson’s absence, and Scott left shortly after he returned. To curb Larson’s influence over Cascade, Gates told him to hire a new COO, a former Cascade employee said. The process required the cooperation of a compensation committee and an outside executive search firm, Giglio said. And the person ultimately chosen was a college and business school classmate of Larson’s. (Golden Deer)

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