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Uber CEO Testifies at Fraud Trial of Security Chief He Fired

(Bloomberg) -- Uber Technologies Inc. Chief Executive Officer Dara Khosrowshahi testified that he fired the company’s chief security officer soon after taking the helm in 2017 “because I couldn’t trust his judgment anymore.”

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Khosrowshahi was called by prosecutors Friday as a witness against Joe Sullivan, who’s charged with concealing a 2016 hack into company servers that compromised the personal data of 50 million customers and 7 million drivers.

The CEO said he learned early in his new job of inconsistencies in what Sullivan reported about the incident and why it hadn’t been disclosed to regulators.

“I thought the decision not to disclose at the time was the wrong decision that led me to conclude that I needed to bring in a different head of security,” Khosrowshahi told jurors. “I need to trust my direct reports.”

Sullivan claims the company made him a scapegoat for its tardy public disclosure of the breach.

David Angeli, a lawyer for Sullivan, told jurors in opening arguments that the former security chief was targeted by new management at Uber as part of Khosrowshahi’s campaign to make a clean break from the company’s problematic past.

“His mantra was Uber 2.0,” Angeli said. “He wanted to turn the page of what Uber was doing.”

Read More: Uber’s Old Problems Deserve New Self-Reflection After Techlash

Sullivan claims Uber’s legal department and other managers were aware of the data breach before it blew up publicly. In legal filings and pretrial arguments he has also said that his firing was calculated by Khosrowshahi to help to close a $9 billion investment deal with SoftBank Group Corp.

Uber was in negotiations with SoftBank at the time and hadn’t yet determined whether it was required to disclose the 2016 hack -- until the investment company learned some details and demanded it, according to court filings by Sullivan.

“We are changing the way we do business,” the new CEO wrote in a November 2017 blog post disclosing the breach, the same week Uber fired Sullivan and another executive.

Khosrowshahi was asked by a prosecutor why there was a “delay” on the disclosure after he discovered discrepancies in Sullivan’s account of events.

Read More: Uber Hacks Past and Present Hang Over Ex-Security Chief’s Trial

The CEO said the company “moved quickly as we thought was responsible” to learn the truth and publicly disclose it.

“I wouldn’t characterize it as a delay,” he testified.

Uber has cooperated with US prosecutors; the company and the government has been aligned in arguing Sullivan was a rogue employee. Uber’s lawyer has accused Sullivan’s legal team of manufacturing a “conspiracy theory” about the company serving him up to the US Justice Department.

Sullivan, a former federal prosecutor and longtime Silicon Valley fixture who previously headed security for Facebook, is charged with obstructing a government investigation and defrauding drivers in addition to hiding the data breach. He faces as long as 20 years in prison if convicted of the most serious charges against him -- though his sentence would likely be far less.

He spent 2 1/2 years at Uber as one of then-CEO Travis Kalanick’s top lieutenants before a series of scandals drove the co-founder out of his job. Sullivan most recently worked as chief security officer for Cloudflare Inc.

In an odd twist, Uber disclosed late Thursday that the company was investigating a new breach by a hacker who claimed to have penetrated its internal databases.

The case is U.S. v. Sullivan, 20-cr-00337, U.S. District Court, Northern District of California (San Francisco).

(Updates with CEO’s testimony)

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