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

Synopsis

Sam Altman and OpenAI secured a legal victory against Elon Musk, with a jury dismissing his lawsuit over the company's shift to a for-profit model. Despite the win, testimony from former colleagues painted a picture of Altman as untrustworthy, potentially impacting investor confidence for a future IPO.

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OpenAI Chief Executive Sam Altman beat Elon Musk in federal court on Monday, but the win came at the cost of hearing his former colleagues call him a liar - repeatedly - under oath.

A federal jury threw out former OpenAI co-founder Musk's case that the nonprofit was improperly turned into a for-profit corporation, ruling that the world's richest person waited too long to sue in a verdict that could be difficult to appeal.

That simplifies the path to an initial public offering by OpenAI. The lawsuit risked the company's being forced to pay out about $150 billion and oust its leadership. Still, the portrait of Altman could undermine the trust of investors being asked to pony up for 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 described him as an untrustworthy leader. During his cross-examination of Altman, Musk's lawyer cited comments from eight witnesses, including Musk, who said Altman misled or lied to others.

Altman defended himself in response, testifying, "I believe I am an honest and trustworthy businessperson."

"This verdict removes the single largest legal threat to a public offering," said James Rubinowitz, a trial lawyer and AI specialist. "That said, even in victory, OpenAI walks away with the worst documentary evidence about its governance now permanently in the public record. Every institutional investor reading this trial transcript is doing their own credibility analysis on Altman before they buy in."

Honesty at the center of the case

During the trial, OpenAI's lead lawyer told reporters that the Musk team had resorted to a "character assassination" of Altman rather than show evidence of their claims.

One OpenAI official, Joshua Achiam, testified of Altman: "In all of my direct ⁠experiences with ‌him, I feel that he's been honest with me."

Musk claimed that OpenAI's leaders broke their agreement to keep OpenAI a nonprofit working for the benefit of humanity.

Testimony at trial was a faceoff between billionaires. Musk was one of several former colleagues and associates to call Altman a liar, and the ⁠theme of honesty was core to his case. OpenAI went much further, portraying Musk as desiring control of the enterprise.

"Sam Altman's credibility is directly at issue in this case," Musk's lawyer, Steven Molo, said in his closing argument. "If you don't believe him, they cannot win."

Jurors needed less than two hours to reach a verdict, focusing on the timing of Musk's lawsuit.

Leadership doubts not new

While the trial was Altman's biggest, most sustained moment in the spotlight, some of the accusations were not new.

OpenAI's board ousted him in 2023, questioning his ability to lead, only to bring him back less than a week later after much of the company threatened to exit. During the trial, OpenAI's lawyers noted that the vast majority of the company signed a letter supporting his reinstatement.

Much of the trial evidence, though, was unflattering.

This included reams of documents that showed he had billions of dollars of investments in companies that worked with OpenAI, drawing ‌questions of conflict of interest.

Altman said generally he recused himself when there might be conflicts, and that he did not believe he misled people in business.

OpenAI Chairman Bret Taylor, who joined the board in late 2023 after Altman had been reinstated, testified that Altman had been forthright about his conflicts. Taylor said Altman sent a note detailing his conflicts before the ⁠board updated its conflicts of interest policy.

Internal memos revealed

In September 2022, former OpenAI Chief Technology Officer Mira Murati detailed several problems with Altman's leadership style, according to a memo released as part of the trial.

"The constant panic around our projects, people, goals etc generates chaos and churn," Murati wrote in a memo called "Feedback from Mira to Sam (only Sam had access to this)." "We talk about focus, but in practice our approach is do-everything and do it fast."

In a video deposition shown to jurors, Murati paused for a long time when asked whether by the autumn of 2023 she thought Altman was honest.

"Not always," she said. Murati added that Altman undermined her work and pitted other OpenAI executives against one another.

OpenAI co-founder and former board member Ilya Sutskever testified he had collected examples of Altman's leadership shortfalls for more than a year.

OpenAI avoided the worst outcome, Wedbush analyst Dan Ives wrote after the verdict was reached. He called the verdict a "huge win" for Altman and OpenAI "despite the scrapes and bruises on Altman's persona and leadership."

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