In 2019, Erica Johnson listened to her close friend and cofounder, Alyson Friedensohn, read a statement Friedensohn wrote on her phone saying that Johnson’s performance was lagging and asking her to give up a portion of her company shares.
Modern Health sells mental health services like virtual therapy and meditation as an employee benefit, a booming business as companies look for ways to help their workers deal with the chaos and confusion of today’s world.
Johnson refused the request to sell her shares and a few days later, she met separately with the company’s only other board director, Mamoon Hamid, an investor from Kleiner Perkins, to address her concerns around her cofounder’s behavior. Soon after, Johnson was fired.
In November, Johnson sued the company and its CEO, Friedensohn, for breach of contract and wrongful termination. The company now says its board has finished an internal investigation into her claims and found the suit has no merit.
Two newly installed directors, Dick Costolo, who has a small company stake, and serial entrepreneur Penny Herscher, hired outside counsel in July to interview witnesses and review “thousands of relevant documents,” according to a 102-page report that Business Insider obtained.
The board concluded that the lawsuit is a byproduct of Johnson’s “personal vendetta” against Friedensohn, after the CEO wanted to demote her and dock her shares, according to the report.
The report says that Johnson only raised issues about Friedensohn after their conversation, and “not at any point during her prior two years with the company.” It suggests a plot in which the ousted cofounder wanted to remove the CEO from her position and “starve the company of the necessary capital to grow” by scaring off potential investors.
But Johnson’s legal team raises questions around how impartial the investigation was.
Her attorney, Harmeet Dhillon, said the company tapped a pair of tech insiders, aka new board members Costolo and Herscher, “neither of whom have any healthcare experience,” to look into the claims in Johnson’s suit. The board of directors and their attorneys refused interviews with “all the relevant witnesses,” Dhillon said, and declined to review numerous key documents and other evidence.
