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Uber lawyer says the ex-employee who made allegations about security practices was trying to extort the company

However, Uber went on to pay the employee, Richard Jacobs, to be a consultant.

Uber app on a mobile phone NurPhoto / Getty

Uber’s deputy general counsel Angela Padilla took the stand on Wednesday to respond to a damning 37-page letter that outlined a litany of questionable security practices alleged by a former employee.

In her testimony, Padilla said the employee, Richard Jacobs, was trying to extort money from the company and there was no merit to his claims. Padilla and Jacobs were ordered by a judge presiding over Alphabet’s lawsuit against Uber to testify in court after the judge was notified about the letter.

As a result of this new evidence, Judge Alsup granted Waymo’s request for a delay in the trial. The trial, which originally set for December 4, will begin February 5.

In it, Jacobs claimed Uber’s security team advised staffers to use ephemeral messaging systems, like Wickr, and non-attributable devices to avoid creating paper trails that may serve to hurt the company in the event of a lawsuit.

In a tweet, Uber’s new CEO Dara Khosrowshahi confirmed that the company used Wickr and Telegram before he joined and he instructed them to stop when he joined.

The letter — submitted to the court just days before the companies were expected to begin the trial — may be doubly problematic for Uber.

For one, Alphabet’s self-driving arm Waymo is already asking a judge to instruct the jury that Uber withholding evidence can be used against the company as it decides its verdict. The jury has yet to be selected. Both the delay in disclosing the letter to the court and the contents of the letter, if true, may serve to bolster that request.

Padilla, however, said the company hired an outside investigator, WilmerHale, to look into the letter, and said she would have disclosed it to the court if that investigation had revealed anything relevant to the suit.

Alphabet is suing Uber for allegedly misappropriating self-driving trade secrets. The company discovered a former engineer, Anthony Levandowski, had downloaded 14,000 files days before he left to start a company called Otto. Uber later acquired that company.

While Uber contends Jacobs’ letter is both meritless and unrelated to Waymo’s case, company security officer Mat Henley later testified that Levandowski and his co-founder Lior Ron both used Wickr to communicate.

"Today's hearing changed nothing about the facts of Waymo's case, and did nothing to support their claims that Uber is using their alleged trade secrets,” an Uber spokesperson said. “We look forward to our day in court and are as confident in the merits of our case as ever."

Oddly, Uber settled with Jacobs for $4.5 million, according to his testimony on Tuesday. One million dollars of that sum was paid to Jacobs as a consulting fee for aiding in an internal investigation at Uber. Jacobs’s lawyer, Padilla later testified, also received $3 million in addition to the $4.5 million sum.

Padilla said the company chose to settle with Jacobs in order to avoid the cost of litigation as well as any additional distraction it would cause for the company. The cost of discovery alone in that case would have cost $4 million to $5 million, Padilla testified.

“You saw it was a fantastic BS letter ... and yet you paid $4.5 million,” Judge Alsup said to Padilla, interrupting the Waymo attorney’s questioning of the witness to offer his own. “To someone like me, an ordinary mortal ... that’s a lot of money. ... People don’t pay that kind of money for BS. That’s one point. And you certainly don’t hire them as consultants if you think everything they’ve got to contribute is BS.”

“We had to continue an entire trial because of your decision,” Alsup continued. “You wanted this case to go to trial so that they didn’t have the benefit of this document, that’s how it looks."

Padilla responded the company escalated it to executives and board members, including Uber’s ousted CEO Travis Kalanick and former chief legal counsel Salle Yoo, as well as current and former board members Garrett Camp, Ryan Graves, David Bonderman, Bill Gurley and Arianna Huffington.

Alsup said, however, it still should have been produced to Waymo’s lawyers. Padilla conceded the point and said she “would take full responsibility for that.”

The company, Padilla said, also voluntarily disclosed the letter to the U.S. attorney of the Northern District of California and several federal state prosecutors because she thought they were being extorted.

Jacobs’ attorney wrote the letter after the company saw that he was downloading Uber documents to his personal computer, Padilla said. When the company asked him about it, he resigned.

Henley, who was also Jacobs’ supervisor, says he was a poor performer and had to be demoted, during his testimony on Wednesday. That’s contrary to Jacobs’ Tuesday testimony wherein he said he was demoted after Henley claimed he wasn’t working with the legal enough to protect company information from being submitted into court.

Jacobs’ letter read:

"Jacobs experienced this review and demotion as pure retaliation for his refusal to buy into the Threat Ops culture of achieving business goals through illegal conduct, even though equally aggressive legal means were available to achieve the same end."

Henley went on to say that the company does not currently do technical surveillance of competitors and has discontinued use of Wickr. Questions over the validity of Jacobs’ claims continue to loom as both Uber executives have disputed many of the allegations in his letter and Jacobs himself walked back some of them during his testimony on Tuesday.

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