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Uber confirms Dara Khosrowshahi as new CEO amid fresh legal trouble

The ride-hailing company has appointed the Expedia CEO as its new chief, confirming the decision in a note to employees and amid news of a federal investigation into alleged violations of bribery laws.

The appointment of Dara Khosrowshahi, previously chief executive of online travel site Expedia, was announced to Uber employees late on Tuesday and came two days after the company's board voted unanimously to offer him the job.

In an email to Expedia staff, Khosrowshahi said he had accepted the position. "I have to tell you I am scared. This has been one of the toughest decisions of my life," he wrote.

Uber's board said it was "confident that Dara is the best person to lead Uber into the future, building world-class products, transforming cities, and adding value to the lives of drivers and riders."

Abundant trouble

As he takes the job as Uber's new chief executive, fresh challenges confront Khosrowshahi, with news of a federal bribery probe into Uber and public disagreement over how the board's decision to hire him unfolded.

The US Justice Department (DOJ) has launched a preliminary investigation into whether managers at Uber violated US laws against bribery of foreign officials, specifically the Foreign Corrupt Practices Act. It is unclear whether authorities are focused on one country or multiple countries where the company operates.

In June, reports surfaced that Uber had hired a law firm to investigate how it obtained the medical records of an Indian woman who was raped by an Uber driver in 2014. The review was to focus on accusations from some current and former employees that bribes were involved. A spokesman for the company confirmed the existence of a "preliminary investigation," saying the company was cooperating with the DOJ.

In his first public comments after his appointment, Khosrowshahi said about Uber: "Are there difficulties? Are there complexities? Are there challenges? Absolutely, but that's also what makes it fun."

Internet deal-maker

Dara Khosrowshahi has been Expedia's chief executive (CEO) since 2005, leading the company through a period of double-digit revenue growth despite fierce competition from travel industry startups such as Airbnb.

But on Sunday, Uber's board voted to appoint Khosrowshahi as its new CEO, replacing the ride-sharing company's co-founder Travis Kalanick who was ousted by investors in late June.

Khosrowshahi was born in Iran but grew up in the state of New York. He has a degree in electrical engineering from Brown University. Prior to running Expedia, he was the chief financial officer (CFO) at IAC, the internet and media conglomerate chaired by Barry Diller. IAC bought Expedia in 2003, and then spun it out into Khosrowshahi's hands in 2005.  

The Expedia chief was one of three finalists for the role of Uber CEO, along with Meg Whitman of Hewlett Packard Enterprise and Jeff Immelt of General Electric. Immelt removed himself from consideration on Sunday morning, in what a person familiar with the matter described as a "face-saving move" after he had been told he would not get the votes necessary to be elected.

Whitman's candidacy was a source of bitter fighting among directors after she stated publicly in July she wasn't interested in the position. Some directors felt her re-emergence was being pushed by Uber investor Benchmark Capital, which has had a close relationship with her since her time as eBay CEO.

In 2015, Khosrowshahi was one of the most highly compensated US chief executives, receiving a pay package valued at as much as $94.6 million (79 million euros) in mostly long-term stock options designed to get him to stay for several years. He now stands to make a fortune at Uber if he can steer the company to a successful initial public offering (IPO) - valued by investors at around $68 billion.

Mammoth task

The decision comes after months of infighting, leaks and divisions on Uber's eight-person board. Benchmark Capital, one of Uber's biggest and earliest investors, first led the ouster in June of co-founder Travis Kalanick, then sued him to try to force him off the board. Other investors chose sides, exchanging accusations and counterclaims that remain unresolved.

Moreover, the company is grappling with the fallout from allegations of sexism and sexual harassment, as well as a lawsuit by Google parent Alphabet alleging that Uber used design secrets for its self-driving program.

Khosrowshahi will have to contend with a deeply divided board and shareholder base over the future of the company. Moreover, his predecessor, Travis Kalanick, still sits on the company's board and wants to have strong input into the company's direction. And on top of this, Khosrowshahi needs to find new executives in a number of top jobs, including chiefs of finance, marketing and operations, as well as a new independent chairman.

Currently, Uber employs 15,000 people worldwide and is still deeply unprofitable. Last year, it reported losses of more than $3 billion on the back of sales to the tune of $6.5 billion. By contrast, Expedia had sales of $8.77 billion in 2016 - up 31 percent from the year before - with net income of $281.8 million.

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uhe/tr (Reuters, AFP, dpa, AP)

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