Former Silicon Valley Venture Capital Partner Wants 'Justice' in Sex Discrimination Suit

PHOTO: Ellen Pao outside Menlo Park, Calif., in this April 4, 2006 file photo.

A former partner of a venture capital firm who filed a sex discrimination lawsuit wants "justice to be served" in court, exposing what she says is the exclusive, often male-dominated world of Silicon Valley finance at Kleiner Perkins Caufield and Byers.

Ellen Pao, 43, a former investment partner with Kleiner Perkins Caufield and Byers, filed a lawsuit against the company in May 2012, alleging the firm engaged in sex discrimination against her and other female employees. She said she faced retaliation when she complained of multiple instances of sexual harassment, which included being pressured by a junior partner to have a sexual relationship and being given a book that had "sexual drawings" and poems with "strong sexual content."

"Kleiner Perkins has been really dragging its feet," Pao told ABC News. "It has lost twice in Superior Court and has been delaying and extending the date for every single step of the process. I'm excited to move forward and have my day in court and for justice to be served."

She seeks unspecified compensatory damages, punitive damages, and other forms of relief.

Kleiner Perkins, based in Menlo Park, Calif., is seven miles away from Facebook's headquarters, one of the many tech firms in which it has invested in its 40-year history. Google, Zynga and Groupon are among other beneficiaries of Kleiner Perkins' investments, which range from $100,000 to $50 million, the suit states.

Pao, of San Francisco, was hired by Kleiner Perkins in June 2005 as a junior partner after working at several other technology firms and one law firm. She studied electrical engineering at Princeton and went to Harvard Law School and Harvard Business School.

She was fired in October and currently works at social media site Reddit.

In a statement to ABC News, Kleiner Perkins Caufield and Byers, which has denied Pao's allegations, said the matter should be resolved through arbitration.

On Wednesday, a lawyer for the venture capital firm argued before California state court appellate justices that the firm preferred arbitration to avoid disclosing the relative compensation of Kleiner's partners and to spare embarrassment to Pao. The justices have up to 90 days to make a decision, as first reported by the San Jose Mercury News.

"The issues Pao is litigating involve economics of the funds she was involved with, including carry, investment decisions, appointments to boards, voting rights among others," the firm said in its statement to ABC News. "All of those economic issues are governed by the Managing LLC agreements, which require that disputes be resolved through arbitration."

In 2012, the California Superior Court ruled that the case should go to trial and not arbitration. Kleiner appealed the decision.

Teresa Nelson, a professor at Simmons School of Management in Boston and faculty affiliate at the Center for Gender in Organizations, said women are as rare as partners in venture capital firms as they are recipients of venture capital funding.

Without commenting specifically about Pao's case, Nelson said professional partnerships like those of venture capital firms have a distinct organizational style than corporations, which are large and run by a board of directors.

"How decisions get made, how people participate, how they're recruited" are usually through a "tight funnel" in the world of venture capital, she said.

In the most recent census survey conducted by the National Venture Capital Association, 21 percent of people in the venture capital industry, including CFOs and administrative professionals, were women in 2011, but only 11 percent of investors in the industry were women. In Forbes' most recent list of the top technology investors, the Midas List, three out of the ten are women, the magazine said last month.

Pao alleges the firm boosted male positions and compensation while excluding the company's female employees. In the suit, she describes instances of gender exclusion, including an all-male dinners and being disinvited from a semi-annual CIO meeting after complaining about being excluded. In December 2011, Pao said a senior partner told her "that the personalities of women do not lead to success at KPCB, because women are quiet."

Last year, Kleiner Perkins said it had 49 partners, 12 of whom are women. The firm claimed it is one of the most gender-balanced venture capital firms based on those figures. According to the firm's figures last year, of the 12 female partners in the firm, nine are investing partners and three are operating partners.

Pao alleges that she repeatedly complained to superiors about discriminatory treatment based on gender but was told "that she should just accept it," the suit said. She also alleges "inappropriate" behavior by male employees.

In the company's legal response, filed in June 2012, the firm said it denies Pao "ever complained to KPCB that any co-worker or supervisor subjected her to unlawful harassment in 2007 or at any time during the five year period prior to late 2011/early 2012." When she did raise concerns in late 2011/early 2012, she was "already represented by legal counsel and in the process of asserting claims against KPCB," the firm said.

Among the incidents that Pao cites in the complaint is an event that took place on Valentine's Day 2007, when a senior partner came into Pao's office, the lawsuit states. He gave her a book called "The Book of Longing" by Leonard Cohen, which contained sexual drawings and poems with "strong sexual content," and invited her to dinner, explaining that his wife would be out of town, the suit states.

In the company's legal response, it claims Pao "has twisted the facts," saying the partner is a practicing Buddhist and the gift was given after Pao gave him a book and a Buddha statue as holiday gifts, "following discussions the two had about Buddhism."

Pao's suit said that she believed "retaliation and gender discrimination were affecting her compensation at KPCB, because women generally were not treated equivalently or promoted to senior partner based on their gender." However, male junior partners "were allowed to add multiple boards of director positions and investment sponsorships each year, while female junior partners were limited to just one," the suit described.

Among other claims, Pao said the firm didn't give her an annual performance review in 2008 as a junior partner, which is used to determine bonus, raise and promotion status. In 2007, she was told she was a "top performer of the junior partners." She said the company's "refusal" to give her a performance review before or after her three-month maternity leave in mid-July 2008 was "retaliation" for her multiple complaints about sexual harassment by a colleague.

The firm denies it engaged in retaliation "whatsoever through [Pao's] performance reviews," according to its legal response.

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