By Robert Haugh
49ers CEO Jed York is being sued for insider trading and securities violations for his actions as a board member of Chegg Inc., an online educational company.
This is another in a series of investigative reports from the San Francisco Chronicle, the only major news publication that is seriously looking into how the team operates as a business.
York is accused of concealing the company’s role in helping college students cheat on online exams during the pandemic.
He is also accused of selling Chegg stock at the top of the market without informing investors about the extent of the cheating scandal.
The lawsuits allege that he had inside knowledge of the cheating scandal and that he sold Chegg stock at a profit of $1.4 million before the scandal was exposed.
The lawsuits also allege that York benefited from his position on the Chegg board by using his influence to promote the company to 49ers fans and partners.
For example, in 2019, the 49ers partnered with Chegg to fund up to $100,000 in scholarships for first-generation college students from the Bay Area.
The Chronicle story written by award-winning investigative reporters Lance Williams and Ron Kroichick is behind a paywall for most readers, unfortunately. Here are some key paragraphs:
“York engaged in insider sales before the fraud was exposed,” one of the lawsuits asserts.
“The recent securities-related lawsuits against Chegg, and in certain cases (its) board of directors, are without merit and Chegg is vigorously defending itself,” a company spokesperson wrote in an email.
“In 2019, the 49ers partnered with Chegg to fund up to $100,000 in scholarships for first-generation college students from the Bay Area,” the story says.
“The lawsuits claim the company knew cheating was driving student demand for Chegg accounts — and when the pandemic ended and students returned to classrooms, the demand was likely to decline,” the story says.
“Some company officials profited by selling Chegg stock in 2020 and 2021 while the price was high and ‘before the fraud was exposed,’ the lawsuits claim,” the story says.
If York is found guilty of insider trading and securities violations, he could face significant fines and jail time. The lawsuits could also damage his reputation and make it difficult for him to serve on corporate boards in the future.