Iconiq Capital, the money manager known for catering to Silicon Valley royalty including Sheryl Sandberg and Mark Zuckerberg, has joined the growing roster of companies caught up by the #MeToo era.
The firm fired its head of real estate, John Sauter, in February after a background check by an investor uncovered a charge for sexually assaulting a woman almost three decades ago, according to people familiar with the matter. People close to Sauter say he contends the dismissal broke laws blocking employers from considering old, expunged cases. Iconiq executives worried keeping him would hurt relationships with clients, one of the people said.
Sauter, 52, declined to comment, as did Iconiq, citing a policy of not publicly discussing personnel matters.
A #MeToo march in Hollywood on Nov. 12, 2017.
Photographer: Marl Ralston/AFP via Getty Images
The situation may have implications for the financial industry and beyond. Over the past year, banks and wealth managers have gone largely unscathed as the #MeToo movement swept through Hollywood, politics, tech firms and the media, exposing powerful men for mistreating women. That’s in part because of the financial industry’s culture of secrecy, embodied in employment agreements that prevent complaints from becoming public.
Read more: Why sexual harassment on Wall Street remains hidden — for now
Yet, behind the scenes, #MeToo is pushing financial firms and their clients to ratchet up scrutiny of executives. That could include deeper background checks and more stringent requirements on employees to disclose past issues, such as encounters with law enforcement.
At the same time, Sauter’s situation also raises questions about how employers should treat decades-old convictions. California and San Francisco, where Iconiq is based, both enacted measures in recent years limiting what information companies may consider when screening employees.
Until now, big clients have shied away from asking tough questions about sexual misconduct. This month, a survey of institutional investors — including endowments, pension managers, private banks and insurers — showed almost 90 percent don’t specifically inquire about sexual harassment when allocating money.
The survey was conducted by the Investment Management Due Diligence Association, which urged investors to seek more rigorous background checks.
Sauter’s situation is unusual. He’s not being punished for recent behavior and no other cases could be found during his career.
In 1991, Sauter was charged in California for crimes alleged to have occurred the previous year, when he was 24. He was accused of sexually assaulting a woman, penetrating her with a foreign object and forcing oral sex, according to court documents.
Sauter pleaded to a single count of sexual battery. He didn’t admit wrongdoing, one of the people said. Court documents show he received a nine-month suspended sentence with five years of probation. In 1996, a not guilty plea was entered and the conviction set aside.
Yet records of the case remained available to the public because of a bureaucratic quirk: Sauter moved from Orange County, where the charge was originally brought, to Los Angeles County, causing some documents to be filed there, too. The dismissal removed his conviction from public view at one courthouse, but it could still be found at the second.
The case surfaced while an Iconiq joint venture sought to raise money from institutional clients for a fund focusing on investments in data centers. A potential client notified the firm that it had discovered a problem in Sauter’s past, said the people, who asked not to be identified because of the matter’s sensitive nature.
The investor flagged the conviction to Iconiq in early December, the people said. The company discussed the issue with him in late January and fired him in mid-February, one of the people said.
Sauter, that person said, contends his dismissal violated laws restricting what employers can ask applicants about arrest records that have been expunged. California also prevents employers from looking back more than seven years when conducting background checks.
The firing has left him scouting real estate deals for his own venture, Blue Orchid Group.
Sauter, a Duke University graduate, had gone on with his life after the conviction. He completed an MBA at the University of California Los Angeles, and according to people who know him, got married and had three children. Over the years, he built a successful career in real estate, including stints at Michael Dell’s family office and CBRE Global Investors, where he was responsible for originating, underwriting and structuring deals on the West Coast. He oversaw purchases of the Sofitel San Francisco Bay and the Irvine Marriott hotels, according to statements.
He landed at Iconiq in 2016, when the firm was just five years old but already well known in the financial and technology worlds for its roster of high-profile clients. Most of its founders had worked at Morgan Stanley and Goldman Sachs Group Inc., setting out to parlay their Silicon Valley connections into their own money manager. The firm has since expanded to offer merchant-banking and other services.
Iconiq, established in 2011 by Divesh Makan, Chad Boeding, Michael Anders and Will Griffith, is best known for managing the money of Facebook Inc. co-founder Zuckerberg, an early and longtime client. It’s also counted Sandberg, the social network’s operating chief, as another marquee client. She’s devoted herself through writing and speeches to the advancement of women.