Musk’s failed court attack on OpenAI could leave lasting scars on CEO’s reputation

Author: Deepa Sitharaman

OAKLAND, Calif., May 19 (Reuters) – OpenAI Chief Executive Sam Altman defeated Elon Musk in federal court on Monday, but the victory came at the cost of his former colleagues repeatedly calling him a liar under oath.

A federal jury rejected claims by former OpenAI co-founder Musk that the nonprofit was improperly converted into a for-profit company, ruling that the world’s richest man waited too long to sue in a ruling that may be difficult to appeal.

This simplifies OpenAI’s path to an IPO. The lawsuit could force the company to pay about $150 billion and oust its leadership. Still, Altman’s likeness could damage the trust of investors who are being asked to fund a potential $1 trillion initial public offering.

Altman, the public face of the ChatGPT maker, endured days of testimony from former colleagues and other witnesses who called him an untrustworthy leader. During cross-examination of Altman, Musk’s lawyers cited comments from eight witnesses, including Musk, who said Altman had misled or deceived others.

Altman responded, “I believe I am an honest, trustworthy businessman.”

“This ruling eliminates the biggest legal threat to a public offering,” said trial lawyer and artificial intelligence expert James Rubinowitz. “That said, even with a victory, OpenAI has left the worst paper trail about its governance, now permanently in the public record. Every institutional investor reading this trial transcript will be doing a credibility analysis on Altman before buying.”

Honesty is at the center of the case

During the trial, OpenAI’s lead attorney told reporters that Musk’s team resorted to “character assassination” of Altman rather than present evidence for their claims.

Joshua Achiam, an official at OpenAI, testified for Altman: “In all my direct experiences with him, I felt he was honest with me.”

Musk claimed that OpenAI’s leaders violated their agreement to make OpenAI a non-profit organization that benefits humanity.

Testimony in the trial pitted billionaires against each other. Musk is one of several former colleagues and colleagues who have called Altman a liar, with the theme of honesty at the heart of his case. OpenAI goes further, portraying Musk as “eager” to take control of the business.

“Sam Altman’s credibility is directly called into question in this case,” Musk’s attorney Steven Morrow said in closing arguments. “If you don’t believe in him, they can’t win.”

The jury took less than two hours to reach its verdict, focusing on the timing of Musk’s lawsuit.

Leadership skepticism is not new

While the trial is Altman’s most high-profile and lasting moment, some of the accusations are not new.

The OpenAI board ousted him in 2023, questioning his leadership, but brought him back less than a week later after much of the company threatened to quit. During the trial, OpenAI’s lawyers noted that an overwhelming majority of the company signed a letter supporting his reinstatement.

However, much of the trial evidence was unconvincing.

They include a trove of documents showing he made billions of dollars in investments in companies working with OpenAI, raising questions of conflicts of interest.

Altman said that generally he recuses himself when there is a potential for conflict and that he does not believe he has misled people commercially.

OpenAI chairman Bret Taylor, who joined the board in late 2023 following Altman’s reinstatement, testified that Altman was forthright about his conflicts. Taylor said Altman sent a note detailing his conflicts before the board updated its conflict-of-interest policy.

Internal memo disclosure

In September 2022, former OpenAI chief technology officer Mira Murati detailed several issues with Altman’s leadership style, according to a memo released during the trial.

“Continued panic surrounding our projects, people, goals, etc. creates confusion and attrition,” Murati wrote in a memo titled “Feedback from Mira to Sam (Only Sam has access to this information).” “We talk about focus, but really our approach is to go all out and do it fast.”

In video testimony shown to jurors, Mulati took a long pause when asked whether she thought Altman would be honest by the fall of 2023.

“That’s not always the case,” she said. Murati added that Altman sabotaged her job and pitted other OpenAI executives against each other.

Ilya ‌Sutskever, OpenAI co-founder and former board member, testified that he collected examples of Altman’s leadership deficiencies over more than a year.

Wedbush analyst Dan Ives wrote after the verdict that OpenAI avoided the worst outcome. He called the verdict a “huge victory” for Altman and OpenAI, “despite the damage to Altman’s character and leadership.”

(Reporting by Deepa Setharama in Oakland, California; Additional reporting by Juby Babu in Mexico City; Editing by Peter Henderson and Matthew Lewis)