Vendettas, toxic relations and €850 jumpers: new claims from Web Summit’s legal battle

On February 24th, 2021, the Web Summit co-founder David Kelly was growing increasingly uncomfortable about the activities of Paddy Cosgrave, his fellow co-founder and partner in the technology and business events company, and what he was posting on social media.

“I just don’t enjoy it all,” Kelly said in a text to Cosgrave.

Cosgrave replied: “Ah jaysus. What’s the concern. How does it even impact you. That just maybe a deal slips through the cracks.”

Kelly cites the text exchange as an example of what he claims is Cosgrave being “recklessly indifferent” to him, the company and its minority shareholders and the potential impact that the loss of a deal could have on their interests in the business they co-own.

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The exchange is just one of many examples cited by Kelly in a 74-page affidavit that he has submitted in a legal action in the High Court he has taken against Cosgrave.

He is claiming he has been oppressed as a minority shareholder in Web Summit.

The sworn statement is filled with allegations made by Kelly which, he argues, show how Cosgrave treated Web Summit as his “personal fiefdom, as if he owned it outright himself” when Kelly owned 12 per cent of the business.

This is the second legal skirmish between the sides: Cosgrave has begun a separate legal case, in Ireland and the US, claiming that Kelly breached his duty to the company by secretly attempting to use Web Summit's resources to establish an investment fund for his personal gain.

Kelly has dismissed that action as “meritless”, while Cosgrave’s Web Summit has dismissed Kelly’s new case as “rehashing old claims and piling up new ones in an attempt to deflect from the legal case Web Summit has taken against him in Ireland for breach of fiduciary duty”.

A Web Summit spokeswoman told The Irish Times that it looked forward to “future hearings when matters of fact will be given due consideration”.

The two sides look set for an ugly clash in court given the nature of the claims. This is a summary of Kelly’s claims against his former long-time business partner and one-time schoolmate - a relationship that he says has now “completely broken down” and is “irremediably toxic”.

Cosgrave’s use of Web Summit resources for political purposes

At the heart of Kelly’s legal action is his claim that Cosgrave used Web Summit’s social media accounts and resources to fund and pursue personal interests that damaged the company’s brand and drew adverse publicity, without consulting his fellow shareholders.

Among Cosgrave's targets was Tánaiste Leo Varadkar, "on whom Mr Cosgrave sought to inflict serious political damage for at least the past 12 months", Kelly claims.

Among the incidents Kelly refers to in his case is Village magazine's publication of an article in October 2020 about Mr Varadkar's leaking of a confidential copy of a proposed new contract for GPs to his friend Dr Maitiú Ó Tuathail the previous year. The contract contained details of the deal the Government had provisionally agreed with the Irish Medical Organisation. Dr Ó Tuathail was president of the National Association of GPs, a now defunct rival organisation to the IMO.

Cosgrave had introduced healthcare entrepreneur Chay Bowes, the original source for the Village’s story on the leak, to the magazine. Kelly claims Cosgrave had been working on the story with Bowes and two employees of Web Summit, Eoghan McNeill and Dargan Crowley-Long.

Kelly texted his concerns about the involvement of Web Summit's staff in Cosgrave's activities to the company's chief financial officer Patrick Kirwan saying: "There is a risk Leo sues him."

Kirwan replied, noting the importance of separating Web Summit’s interests and Cosgrave’s interests. There was a need to “keep church and state completely separate”, he texted Kelly, but it was “hard at times when PC links directly with the people.”

In November 2020, it was announced from Web Summit's Twitter account that Bowes, Village magazine editor Michael Smith and the founder of a whistleblower legal support organisation would be speaking at the company's flagship conference .

Web Summit's chief marketing and technology officer Mike Sexton later called Kelly to express concern that Cosgrave was using the business "to promote his personal vendettas".

When Kelly confronted Cosgrave about this, he got a “tirade” in which Cosgrave said that Web Summit was “his company and that he could choose who he wanted to speak at Web Summit”.

“Toxic treatment” of the IDA

In his affidavit, Kelly takes issue with Cosgrave's treatment of Government business agency IDA, one of the earliest partners of Web Summit. He claims he behaved "in a needlessly aggressive and damaging manner" towards the IDA and another State agency, Enterprise Ireland.

In April 2018, at a Web Summit event, Collision in New Orleans, Kelly says that when a senior IDA executive addressed a gathering in a welcome speech, Cosgrave stood beside her and "began slow clapping while she continued to speak". When she finished, Cosgrave told the audience that it would be the last time that the IDA would be allowed to sponsor a Web Summit event.

Cosgrave later told Kelly by email that he would get someone to write to Enterprise Ireland to say Web Summit would no longer work with them. Kelly said he resisted “Mr Cosgrave’s attempts to destroy Web Summit’s relationship with both the IDA and Enterprise Ireland”, which was “fortuitous” because the business received €500,000 in grants from Enterprise Ireland in 2020.

Kelly claims that Mr Cosgrave’s engagement with the IDA was in “complete disregard of the interests of the minority shareholders of the company”.

The “fictitious” Irish Tax Agency

Kelly claims Cosgrave spent Web Summit money promoting the Facebook page of a fictitious entity called The Irish Tax Agency that was highly critical of Ireland's corporate tax policy and Cosgrave's "animus" towards the IDA and Enterprise Ireland was his motivation behind this.

The €1 million charitable donation

Kelly claims that Cosgrave donated €1 million of the company’s money to charity in March 2020 without consulting the other directors or senior management of Web Summit at what was an “extraordinarily precarious” time for the company during the Covid-19 pandemic.

The donation was made after HSE chief executive Paul Reid criticised a tweet by Cosgrave in which he claimed that the State's response to the Covid-19 pandemic was a "catastrophic failure to plan". Reid's tweet, condemning Cosgrave for "throwing rocks from the sideline", received in excess of 9,000 likes. Kelly claims that Web Summit board minutes were fabricated to retrospectively approve a donation that was "grossly oppressive" of minority shareholders.

Kelly also alleges that Cosgrave potentially misused Web Summit resources in February 2021 when the business set up Health Reform Ireland, an entity whose publicly-stated objective was to critique the healthcare system. Cosgrave told Kelly that it would produce podcasts and documentaries made by former RTE producers and broadcasters.

He refers to Cosgrave setting up a website called On The Ditch with Bowes and two employees of Web Summit that published political content, including an article alleging that Taoiseach Micheál Martin breached public health guidelines at an event held in honour of his late father in Cork.

Kelly claims this was “a scandalous and abusive misuse of Web Summit’s resources”.

€850 Aran-style jumpers

Kelly claims that in November 2019 Web Summit's website began selling clothing on behalf of Cosgrave's wife Faye Dinsmore, which included a hand knit sweater for €850, a jumper for €780 and a children's hoodie for €240. The sale of these items attracted adverse publicity, he claims.

Damaging tweets

Kelly refers to Cosgrave using Web Summit’s Twitter account to promote his own personal political tweets to users. This included a series of tweets in which he accused The Irish Times of political bias. Kelly claims that this was “a waste of valuable company resources on activities which have nothing to do with Web Summit business”, could expose Web Summit to defamation and could result in Web Summit’s Twitter and Facebook accounts being suspended. He argues that the effect that this would have on Web Summit would be “catastrophic”.

One of Cosgrave’s tweets, posted amid frequent public commentary on Twitter during the pandemic, resulted in a charitable payment of €10,000 being made in settlement of a defamation action taken by Dr Maitiú Ó Tuathail. Kelly claims this was paid by Web Summit because it was more tax efficient for Cosgrave, even though he was sued “in a personal capacity for a personal tweet”. Kelly believes Cosgrave is paid about €275,000 a year as Web Summit chief executive.

Breakdown in relations, attempted blackmail and “toxic conduct”

Running through Kelly’s claims are his objections to how Cosgrave was treating fellow staff and shareholders, how he ran the company and his unwillingness to put in place an independent board because it “would have created levels of oversight he was not prepared to tolerate”.

He has claimed Cosgrave "harboured an intense animus" towards Daire Hickey, a former director of Web Summit and 7 per cent shareholder, and was pursuing a vendetta against him to remove him from the business. Kelly claims that Cosgrave has "repeatedly attempted to enlist me in attempts to coerce Mr Hickey to surrender his beneficial shareholding in the company".

Kelly claimed at one point that Cosgrave maintained there was “kompromat” - damaging material - on Kelly. It later emerged from texts with Cosgrave that this related to photographs allegedly taken by Hickey during Kelly’s stag weekend, according to the affidavit, but Kelly claims this was “a fabrication.” In his affidavit, Kelly claims Cosgrave behaved in an “oppressive, aggressive, coercive [including attempted blackmail]\ and toxic conduct towards me.”