Judge denies Stanford University’s General Counsel Debra Zumwalt Restraining Order

October 9, 2019

In an ongoing two years long MedWhat-Stanford-StartX Fund legal battle, San Francisco Court has denied Stanford University’s unusual attempt to create a restraining order against artificial intelligence tech startup MedWhat. MedWhat is part of StartX. StartX is a startup accelerator that makes investments via now defunct Stanford-StartX Fund LLC, which was advertised as being legally independent of Stanford University. EX PARTE APPLICATION FOR ORDER FOR TEMPORARY RESTRAINING ORDER. Stanford University, under directions of its General Counsel Debra Zumwalt, filed a restraining order in June asking the SF Court to prevent MedWhat to file any new lawsuit of any kind in any other court in state of California against Stanford University’s General Counsel Debra Zumwalt or any Stanford University board of trustees. The Court denied Stanford and Zumwalt’s attempt stating anybody has the right to use the Court to resolve legal matters. The new lawsuit was subsequently filed in the Superior Court of California against Stanford University Trustees and Debra Zumwalt for tax fraud and money laundering.

In court records, MedWhat states this was another example of alleged ruthless corruption by educational non-profit Stanford University’s General Counsel Debra Zumwalt pertaining to a tax fraud and money laundering complaint being covered up by Debra Zumwalt related to fraudulent investments made by Stanford-StartX Fund LLC into MedWhat and other StartX companies.

MedWhat stated “This is a non-profit University attempting to silence a whistle-blower, who has also suffered damages by fraud done by Zumwalt, by not letting it exercise the right of using the Courts in the state of California. This is not the move you would expect of an innocent good non-profit University, this is the move that mafioso thugs would do to silence a witness to a crime.”

The lawsuit against Ms. Zumwalt stated she ran illegally venture capital fund Stanford-StartX Fund LLC, while such fund, under Zumwalt’s order, was making investments directly from Stanford University bank accounts instead of Stanford-StartX Fund LLC bank accounts as advertised to StartX companies and regulators. Lawsuit states that Ms. Zumwalt was the officer of independent and legally separate venture fund, while in public advertising a fake fund manager to MedWhat and all StartX portfolio companies. Alleged fake Stanford-StartX Fund LLC manager was Suzanne Fletcher, an individual the lawsuit claims had no real power managing the fund and was the front of the fund in newspapers and media and at StartX to hide the Stanford University employees and Zumwalt actively and daily running operations of the fund. The lawsuit goes on to state that Stanford University’s IRS tax-exemption, IRS regulations and what tax-exempt organizations and their employees can and can’t do, is what made Stanford University’s Debra Zumwalt to organize the fund in such manner. According to the State of Delaware Division of Corporations, Debra Zumwalt, as Stanford University General Counsel, appeared as the only officer of the for-profit venture capital fund Stanford-StartX Fund LLC.

MedWhat also claims Stanford-StartX Fund LLC send it detailed investment communication guidelines that stated to never use the name Stanford University as an investor in MedWhat when advertising the fund’s investment. MedWhat states in the lawsuit the communication guidelines were despite the fact that all investments came not from Stanford-StartX Fund LLC, which had no bank accounts of its own, but directly from Stanford University and its own tax-exempt bank accounts. The lawsuit also iterates various time the misrepresentations that Suzanne Fletcher was the fund manager when in fact she wasn’t, Stanford University and Debra Zumwalt were running the show.

Eric Wright, counsel for Stanford working under Zumwalt, writes in the restraining Order filed in court:

“The Stanford Trustees are some of the most distinguished professionals in Silicon Valley and beyond. The Stanford Trustees do not receive financial compensation for the work they do as Stanford Trustees.”

However, according to court records, MedWhat states that part of the tax fraud and money laundering scheme it suffered damages in benefited many Stanford University Board of Trustees while they were breaking Federal IRS tax-exemption laws.

Felix Baker, a Stanford University Trustee, is the Director of Kodiak Sciences, a company that according to Bloomberg has as an investor Stanford-StartX Fund LLC, which means Kodiak Sciences and Felix Baker also received investments directly from Stanford University bank accounts. According to the lawsuit, this is a violation of federal tax laws and such violations damaged MedWhat through misrepresentations.

Another example MedWhat provides, using SEC filings, is Debra Zumwalt, who while General Counsel of Stanford University, is a Director for Exponent, Inc. a company that Stanford University has paid for consulting services in the past, while Zumwalt is a paid Director of Exponent. MedWhat states that the Trustees and Zumwalt do in fact receive financial compensation for their work as Stanford Trustees.

The lawsuit claims the fraud extends to numerous other Trustees at Stanford that have made personal investments to companies that the Stanford-StartX Fund LLC is also an investor, while, according to MedWhat, such companies received investments from bank accounts under the name Stanford University. Other Trustees named in lawsuit are Yerry Yang and Laurene Powell Jobs, who made personal investments while Stanford Trustees in Stanford-StartX Fund LLC portfolio companies. The Trustees’ relationship on both sides of the deal is a tax-exemption violation and the structure of the Fund illegal according to MedWhat.

MedWhat claims in the lawsuit that the illicit structure of the Stanford-StartX Fund LLC was not designed for the success of MedWhat and many of the StartX companies, but for Stanford University to illegally operate a venture capital fund direct involved without getting in trouble for breaking many IRS rules dictating the separation between a non-profit and its for-profit subsidiaries and their employees.

Lawsuit claims MedWhat suffered damages from this misrepresentation and money laundering scheme because the real identity and structure of its investor was different to that advertised to MedWhat.

MedWhat states in the lawsuit the Stanford-StartX Fund LLC is an investor in its direct competition, Sensely, without making any prior notifications while MedWhat was also sharing sensitive information about its business.

For more information and records see https://sfsuperiorcourt.org/  Case Number: CGC18565596