It was just seven months ago when the small team at Parity, an algorithmic auditing tech company founded by Rumman Chowdhury, the current director of Twitter’s ML Ethics, Transparency and Accountability team, said its members would treat one another with “more than just respect” and even approach disagreements “with compassion and mutual admiration.”
Now, amid a possible acquisition, they are embroiled in a fast-moving legal battle over leadership rights and shareholder voting power.
An influential AI ethics researcher and practitioner, Chowdhury handed the reins to her fledgling startup in June 2021 to Liz O’Sullivan, another well-known figure in the AI ethics community. Less than a year later, on May 16, O’Sullivan was temporarily removed from her CEO post. Informed of the decision in an email, O’Sullivan promptly lost access to her company email, files and the corporate bank account.
O’Sullivan filed a legal complaint in a Delaware court on May 27 against Chowdhury, along with Parity’s investment firm Propell Group; Propell Group’s founder and chairman Anders Lier; Parity’s CTO Jiahao Chen; and director of Data Science Michael McKenna. In the complaint, O’Sullivan said the defendants used “strong-arm and intimidation tactics” to “seize control of the company and its assets,” and claimed the actions they took to remove her from her position as CEO were “improper and void.”
Whether the legal dispute is simply a matter of a CEO looking for a fair exit without losing equity in a company that was on the verge of being acquired or a necessary action taken by company stakeholders who saw no other way to wrest power from a CEO blocking the acquisition process from moving forward remains to be seen. And it’s quite possible the answer lies somewhere in the middle.
But if anything, the lawsuit is an unfortunate distraction for a community and emerging tech sector that aims to integrate much-needed ethical principles of accountability, transparency, trust and responsibility into a largely unaccountable and freewheeling AI industry.
This could ‘get ugly very quickly’
Documents associated with the Parity suit show a flurry of aggressive actions from both sides. After O’Sullivan was removed from her post on May 16, she demanded that Parity CTO Jiahao Chen restore her access to her company accounts. Chen refused, and O’Sullivan fired him the next day.
Chen attempted on May 19 to move Parity’s corporate funds into a different bank account. According to O’Sullivan’s complaint, the transfer was blocked because it was unauthorized.
It would be a clear signal that you intend to remove me ASAP.
O’Sullivan and Chen both remain in their original positions today, but who’s actually in charge is not clear. A primary point of contention in the dispute is who was on the company’s board and when, and how many controlling shares they own.
In recent months, in preparation for a possible acquisition of Parity by an unnamed company, case documents show that Chen, Chowdhury, Lier and O’Sullivan discussed a potential reorganization of Parity and a related shareholder adjustment that would reduce O’Sullivan’s voting shares while increasing Chen’s.
But O’Sullivan never signed the reorganization agreement. In a counterargument, the defendants claimed that “when the time came for Ms. O’Sullivan to actually sign those agreements, she refused until the company offered her [a] ‘pre-negotiated’ severance package. This is not the type of person who should be in control of a company.”
Communications sent on May 16 by O'Sullivan to the defendants stated, "We will need this contract in place before I can comfortably sign the documents we need to reallocate shares, expand the board, and accept the funding we anticipate receiving soon. If not, it would be a clear signal that you intend to remove me ASAP” and could “get ugly very quickly,” she wrote.
O’Sullivan argued that the defendants did not have authority to remove her from her post in part because they did not represent a majority of the voting shares of Parity. But the defendants argued that it was O’Sullivan’s refusal to sign the equity restructuring agreement that prevented them from taking a more standard route to preparing for the possible acquisition.
‘Rocky’ tenure and a company-funded life coach
In their counterargument, Chowdhury and the other defendants described O’Sullivan as a poor-performing leader with a “rocky” tenure as CEO.
They pointed to her failure to invoice a key client, recruitment tech company Beamery, for $62,500. They also mentioned her failure to pay a Delaware corporate tax and said an excessive time lapse held up expense reimbursement funds for the company’s director of Engineering. In addition, the defendants claimed that O’Sullivan used Parity funds to pay for her personal life coach despite suggestions by Chowdhury and Chen that it was not an appropriate use of company money.
Before joining Parity, O’Sullivan co-founded and served as VP of Commercial Operations at Arthur, which provides machine-learning monitoring software, and also served as the first technology director of anti-surveillance group Surveillance Technology Oversight Project.
A May 27 ruling by the same Delaware court reinstated both O’Sullivan and Chen to their posts, including re-establishing O’Sullivan as sole director of the company’s board. Key questions remain regarding who actually controlled Parity’s board at the time defendants attempted to remove O’Sullivan.
While the tactics involved on both sides of the Parity suit may be unorthodox, founder disputes are not. Similar activities have occurred inside Facebook, Epinions and at lesser-known startups.
‘A friend and business partner’
Parity has already gone through some complex leadership changes since it was first founded in 2020 by Chowdhury. The company was acqui-hired by Twitter in 2021, at which point O’Sullivan and Chen reincorporated the company, using Chowdhury’s original intellectual property to create its software intended to identify and reduce risks in AI models.
Chowdhury went on to join Twitter’s META team, and has since worked to establish internal checks and balances on the social site’s machine-learning algorithms, assessing their likelihood to create harm and incorporating ways to make them more explainable. When she announced the move, Chowdhury tweeted: “It was no easy decision to leave Parity, but what I saw in this role was the ability to have direct, immediate, positive impact at a global scale.”
A New York Times article about Parity that coincided with the news of O’Sullivan’s appointment as CEO prominently featured O’Sullivan, unsettling Chowdhury and leading O’Sullivan to call for the paper to issue a correction. “I did not found Parity,” O’Sullivan wrote in a Medium post, in which she explained that the article did not give Chowdhury proper credit.
Because, mark my words, Parity is going to change an already stagnating industry by introducing new ideas and new modes of working.
It is the @nytimes that will be left behind in the dust. 6/
— Rumman Chowdhury (@ruchowdh) June 30, 2021
O’Sullivan’s effusively laudatory post was construed by some as a public attempt to assuage what may have been an internal spat between Chowdhury and O’Sullivan over the article’s focus on O’Sullivan and Chowdhury’s lack of inclusion. In her Medium post, O’Sullivan called Chowdhury a “friend and business partner” and an “inventor and leader” who “deserved just as much (if not more) space for her story to be told.”
An expedited trial in the Parity case will begin August 1.
