Owner Jed York of the San Francisco 49ers stands on the field before the 49ers play against the Los Angeles Rams in an NFL football game, Monday, Oct. 3, 2022, in Santa Clara, Calif. 49ers won 24-9. (AP Photo/Jeff Lewis)

San Francisco 49ers CEO Jed York, a Youngstown-area native, has been sued for alleged insider trading and violations of federal securities laws, according to a published report and national broadcast outlets.

The action is in connection with his service on the board of a Santa Clara-based online educational company, the San Francisco Chronicle reported. The story also was picked up by NBC Sports, ESPN and Yahoo! Sports.

In two shareholders’ lawsuits, York and other directors of Chegg Inc. stand accused of concealing the company’s role in helping college students cheat on online exams. The company’s revenue soared during the pandemic as students learned they could use a Chegg account to get real-time answers to questions on college exams administered online, the lawsuits claim.

Chegg’s revenues plunged and the stock price collapsed at the pandemic’s end, as colleges resumed in-person testing and students no longer could use the company’s products to cheat, according to the suits.

The civil suits accuse the Chegg board of “gross mismanagement,” “unjust enrichment” and making false and misleading statements in SEC filings in connection with Chegg’s “schemes” to profit from the cheating scandal, the San Francisco newspaper reported.

The lawsuits also accuse York, along with Chegg CEO Dan Rosensweig and several other company executives, of illegal insider trading for allegedly unloading Chegg stock at the top of the market without informing investors about the extent of the cheating scandal. York made $1.4 million in profit on the sale of 20,000 shares “at artificially inflated prices,” the lawsuits claim.

ALLEGED FRAUD

According to the Chronicle’s story, Chegg also is the target of a class-action lawsuit accusing the company of securities fraud, based on many of the same allegations in the shareholders’ complaints. The company has denied wrongdoing and has moved to have the class-action suit dismissed. York was not named as a defendant in that lawsuit.

In a statement to the newspaper, 49ers spokesperson Brian Brokaw said Wednesday, “The 49ers are proud of the work we accomplished with Chegg to provide scholarships for first-generation students.” Brokaw didn’t address the Chronicle’s questions about the lawsuits against York.

“The recent securities-related lawsuits against Chegg, and in certain cases (its) board of directors, are without merit and Chegg is vigorously defending itself,” a company spokesperson wrote in an email. “Chegg takes academic integrity very seriously and has invested significant resources to protect it. Chegg has been helping millions of students learn and thrive for many years, including during the pandemic, creating a transformative digital learning platform to improve outcomes.”

In 10 years on the Chegg board, York has been paid cash and stock worth about $2 million for his part-time work, and he has turned a profit of $4.9 million on sales of company stock, records show.

The suits, consolidated in February and pending in U.S. District Court in Northern California, ask a judge to overhaul Chegg’s board and force it to comply with securities laws. Directors themselves should be forced to pay restitution and damages in an unspecified amount out of their own pockets, the suits say.

BUSINESS VENTURES

York studied finance at Notre Dame and worked on Wall Street before the 49ers, owned by his parents, hired him as vice president in 2005. The team does not disclose his pay as CEO. York has many other business interests in addition to his job as the team’s top executive, according to records reviewed by the Chronicle.

He is general manager of a venture capital firm called Aurum Partners and is manager of a dozen limited liability corporations involved in investment services, sports consulting and property development, according to state filings.

In addition, he’s a director of six nonprofits, including the 49ers Foundation, and serves on the boards of Chegg and Elevate Sports Ventures, a marketing firm run by 49ers President Al Guido.

Chegg was founded in 2005 by two Iowa State University students as an affordable textbook rental company. Seven years later, Chegg had moved to California and gone digital, launching an eReader that allowed students to “easily read, search, navigate, highlight and bookmark eTextbooks anytime on any connected device,” according to the company’s website.

In 2013, not long after York was promoted to 49ers CEO, he was invited to join Chegg’s board. Months later, Chegg went public with an IPO of 15 million shares of common stock at $12.50 per share.

Since then, York has served as chair of the company’s compensation committee (which sets executive pay) and on its governance committee. His pay package of cash and stock is valued at more than $250,000 per year.

Chegg benefits from York’s “extensive leadership experience and strong corporate development background,” according to his biography on the company’s website.

The Chronicle reported that, in 2019, the 49ers partnered with Chegg to fund up to $100,000 in scholarships for first-generation college students from the Bay Area.

THE TWEET

On Sept. 24, 2019, two days after the 49ers beat Pittsburgh in their home opener, York retweeted a Chegg tweet touting the scholarship fund and encouraging students to apply. York added the message, “Love how @Chegg is changing the game in education!”

The Chronicle story states records show Chegg has struggled to turn a profit. But during the pandemic, revenue from its $19.95-per-month online learning accounts skyrocketed, driving the stock price up.

Rosensweig, the CEO, told prospective investors that college students were turning to Chegg because they realized they needed more academic help than colleges could provide, according to the lawsuits.

In SEC filings, the company also attributed revenue growth to a sharp increase in international student enrollments and the company’s success in blocking students from “stealing and reselling” account logins.

The lawsuits allege that the real reason for the company’s growth was a surge in academic cheating, facilitated during the pandemic by Chegg.

Chegg denied widespread cheating, saying special software prevented it.

Some company officials profited by selling Chegg stock in 2020 and 2021 while the price was high and “before the fraud was exposed,” the lawsuits claim.