Legal Special: Feeling the 'Ellen Pao' effect

The private equity industry could be forgiven for feeling a sense of déjà vu when it heard that a former CVC Capital Partners managing director was suing the firm over sexual discrimination and harassment.

In a lawsuit filed at the US District Court of Southern New York in January, Lisa Lee claims male supervisors and colleagues subjected her and other women to unwanted physical contact and “demeaning and denigrating” comments.

Lee, who worked at CVC from October 2009 to February 2015, also alleges that she was denied promotions and opportunities that were given instead to male colleagues.

CVC denies the claims.

The case bears a strong resemblance to that between Ellen Pao and Kleiner Perkins Caufield & Byers, in which the former VC firm's partner alleged that she was the victim of discrimination and unwanted sexual advances.

The case came to a close last September after Pao dropped her appeal following a court case that ruled against her. However, she has said she will continue to make her case in other ways.

“I refuse to be silent on these important issues,” the Financial Times reported her as saying.

Employment lawyers now speak of the “Pao effect” that has paved the way for other similar cases in Silicon Valley involving the likes of Facebook, Microsoft and Twitter.

Lee will have to provide evidence that a systemic gender bias existed at CVC and that her gender was the main reason for the denial of higher compensation or promotions.

Lawyers say a claimant's biggest negotiation tool is the threat of exposing firms to public scrutiny and, as a result, such cases in the private funds world are generally settled out of court.

Last year, Goldman Sachs settled a discrimination lawsuit in a London court hours before testimony from an analyst who was set to claim she had been deprived of pay, bonuses and a promotion because of her gender.

The Lee case appears to have passed that stage. She alleges that when she took maternity leave in 2012 the firm tried to strip her of her accounts and redistribute them to her male colleagues.

Then, when she started her new position as managing director of business development at Providence Equity Partners six months after leaving CVC, her former employer called her a “bad leaver” for breaching her non-compete agreement.


“I refuse to be silent”

Ellen Pao

According to Lee, this resulted in her involuntary forfeiture of over $10 million in equity compensation, deferred compensation and commissions.

CVC is fighting the allegations. A spokesman told Private Equity International's sister publication pfm in January: “The claims by this former employee are without merit, and we will defend our position vigorously.”

Meanwhile, according to court documents, last month Lee terminated a lawsuit against one of the five CVC entities she sued – CVC Investments SARL.

The CVC spokesman told PEI that since this was against just one defendant, “not much has changed”.

A pre-trial conference is set for 14 April. 

Photograph: Josh Edelson/Bloomberg