The beleaguered shared-workspace company WeWork is facing a new challenge in the form of an investigation by the New York State Attorney General, according to a new report.
Reuters reported Tuesday that WeWork has received an inquiry from the office of the New York State Attorney General and that the company is cooperating in the matter. Investigators are looking into matters including whether WeWork’s founder and former chief executive, Adam Neumann, took part in “self-dealing” to enrich himself.
The investigation comes as WeWork is expected to enact mass layoffs this week. The financially troubled company employs an estimated 12,500 individuals worldwide and the layoffs could impact as many as half the employee base.
New York-based WeWork reported $1.25 billion in losses for the third quarter as it attempts to regain its footing following a failed IPO this year.
SoftBank, the Japanese financial and tech conglomerate headed by Masayoshi Son, recently provided a lifeline to WeWork in a deal that would value the company by as much as $8 billion, a major comedown from the company’s $47 billion valuation earlier this year.
As part of the deal, WeWork’s former CEO Neumann departed the company with an approximately $1.7 billion golden parachute.
Neumann was allegedly an erratic leader who trademarked the word “We” and charged WeWork $6 million to use the word. His rocky tenure was marked by allegations of unprofessional behavior, including alleged drug use.
Reuters reported Tuesday that the impending layoffs will take place in areas that do not support WeWork’s core business goals, according to an email from executive chairman Marcelo Claure. These include administrative functions and WeWork’s venture capital arm.
Bloomberg reported separately last week that the SEC is reviewing WeWork’s business and its disclosures to investors. The review is expected to cover potential conflicts of interest and the company’s “aggressive fundraising,” according to the report.