Kathryn Minshew finally felt like a weight had lifted. It was September of 2013, and after months of back-and-forth, Michael Ferro, then-chairman of investment firm Wrapports, had at last signed a term sheet promising her career-advice startup, The Muse, the $750,000 infusion of capital it needed to make it past the end of the year. Now, at Ferro’s suggestion, the two were headed to his company’s corporate apartment in downtown Chicago for an evening of takeout and discussion of how The Muse might go on to a land a much bigger round of funding.
But once they stepped into the apartment, Ferro seemed to forget about their plans to strategize. He poured two glasses of bourbon and, giving one to Minshew, put his hand on the back of her head and pulled her face in for a kiss, she says. Although the move was forceful enough that she couldn’t pull away, she says she was able to turn her head so that Ferro’s lips landed on her cheek.
“I stopped thinking in complete thoughts. My whole body felt like ice,” recalls Minshew. “I suddenly realized that I was alone in this apartment with him and that it might not be very easy to leave.”
Less than three years later in Las Vegas during the 2016 Consumer Electronics Show, Hagan Kappler says she found herself in a similar position—at a private dinner in Ferro’s Aria hotel suite under the pretense of doing business. Kappler, then an executive at manufacturing giant Ingersoll Rand, thought she was there to talk thermostats with Ferro, who had recently sold his healthcare startup to IBM. Instead, Kappler says he repeatedly wrapped his arms around her from behind. She told him he was in her space and that she didn’t like it. Then he did it again, this time groping her breast.
Kappler, who was nine weeks pregnant at the time, says she was plagued by nightmares and had trouble concentrating. She started working from home. “I just saw myself differently so I felt for sure everybody else did, too,” Kappler says.
Both women say they were drawn to these late night meetings by the promise of financial reward—further investment and connections for Minshew; a potential partnership and possibly even a lucrative job for Kappler. After these encounters, both described being frightened and taken by surprise, as well as fearing that their business ventures were in jeopardy.
Minshew and Kappler, who are now speaking about their experiences on the record for the first time, encountered Ferro through his work as an investor and dealmaker. But his sphere of influence and power increased over the past couple of years after he became the non-executive chairman and largest shareholder of Tronc, the publishing powerhouse that includes iconic titles like the Chicago Tribune, the New York Daily News, and the Baltimore Sun.
On Monday, Ferro announced that he was retiring from the board of directors of Tronc, and that CEO Justin Dearborn would succeed him as chairman. Ferro will still be paid $5 million-per-year by Tronc through Dec. 31, 2020, to serve as a consultant.
Fortune reached out to Ferro last week with the details of both women’s accounts. Through a spokesman, he declined to be interviewed and did not address or dispute any of the specific allegations made by Minshew and Kappler or others in this story.
Today Ferro’s spokesman provided this statement to Fortune: “Over more than 20 years of leading public companies and other enterprises, Michael Ferro has never had a claim filed against him nor a settlement made on his behalf. Your on-the-record allegations appear to involve private conduct with private individuals who were not employees of tronc or any other company he ran. As recently announced, Mr. Ferro has retired back to private life after leading a financial turnaround of tronc as the non-executive chairman. There will, therefore, be no other comment.”
A serial entrepreneur, Ferro made the bulk of his fortune on a pair of digital startups—Click Commerce (sold in 2006 for $292 million to Illinois Tool Works) and Merge Healthcare (sold to IBM for $1 billion in 2015). He’s used the proceeds to fund two investment vehicles that have backed an array of businesses—including the 2011 purchase of the Chicago Sun-Times, the beginning of Ferro’s aspirations to create a media empire. In 2016, he purchased his stake in the Tribune Company and renamed it Tronc, which he’s grown into a $1.52 billion-in-revenue operation.
The accusations against Ferro, 51, emerge at a tumultuous period for Tronc—and at a moment when the #MeToo movement is reshaping corporate culture. In February, Tronc agreed to sell the Los Angeles Times and other California titles for $500 million to healthcare tycoon Patrick Soon-Shiong, who will also assume $90 million in pension liabilities. The deal came amid a backlash from the newsroom over Tronc’s efforts to install new management and quell the paper’s unionization efforts. In January, Los Angeles Times CEO and publisher Ross Levinsohn took a voluntary unpaid leave after NPR reported that he had been a defendant in two sexual harassment lawsuits and had fostered “frat house” behavior at previous workplaces. (Levinsohn called the allegations “lies” in a call with NPR’s CEO and has since been given a new job at Tronc after it said an investigation cleared him of wrongdoing.) Only a few weeks later, two New York Daily News top editors—whose tenure pre-dated Tronc’s 2017 acquisition of the paper—were fired over multiple accusations of sexual harassment.
Allegations of questionable behavior by Ferro come as little surprise to some who previously worked with him in his media ventures. Fortune spoke with nine former staffers at the magazines Splash and Grid, who were employed by the Sun-Times publications during Ferro’s ownership of the paper (Ferro ceded control of the Sun-Times in 2016). These former employees say Ferro was heavily involved with both magazines and the encounters they describe with him suggest an uncomfortable workplace for women.
Ferro would regularly make sexual comments about women’s clothing and appearances, the former employees say, telling female staffers they looked “hot” or that he liked it when they wore short skirts. He once grabbed the bottom of a woman’s leg to more closely examine what he described as her “sexy” high heels. And he hired young women as his assistants—dubbed “Ferro’s Angels” by some employees.
Matt Present, the former editor of Grid, says Ferro instructed him to stop assigning the satire column in the back of the magazine to female writers because Ferro didn’t think women were funny. “He operates under the assumption that women are meant to be looked at, that boys will be boys,” says Present.
Ferro has seen his profile rise nationally since taking over as chairman of Tronc in 2016. But in his home city of Chicago he’s long been a force: a mainstay of the startup community, a media gatekeeper, and a regular on the benefit circuit. He has cultivated an image as a player—in every sense of the word. His startup Click occupied the same space in the Palmolive building that once housed Playboy Enterprises, with Ferro holding court in Hugh Hefner’s old office. His mostly all-male birthday parties are an annual fixture of the Chicago gossip pages, drawing boldfaced names including Abbott Laboratories CEO Miles White, former Wrigley CEO Bill “Beau” Wrigley, and Mayor Rahm Emanuel. Crain’s Chicago Business has reported that actress Jenny McCarthy, a Chicago-area native who Ferro made a Sun-Times columnist, once showed up to sing him happy birthday.
Minshew has told her story twice previously in the media without mentioning Ferro. This is the first time she has named him publicly. Fortune talked to four people close to Minshew, whom she told in the immediate aftermath of her encounter, and reviewed emails in which she relayed the story to investors. In the case of Kappler, Fortune spoke to 12 people to whom she has described her experience with Ferro, including her manager at the time.
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Both women’s stories unfold where so much of business and deal-making takes place: that murky area outside the 9-to-5 that includes late-night dinners and after-work drinks. It is an arena that is more difficult to navigate, more complicated, and has fewer rules—and one that, for decades, largely excluded women.
These venues and networks are gradually becoming more inclusive, but while women are now venturing into the rooms where alliances are struck and money is promised, that doesn’t mean they stand on equal ground. Women who infiltrate the old boys network must often weigh a set of questions that would never occur to their male counterparts: How do I respond to that suggestive remark? Could he think this is a date? Does this man really believe in my business—or does he just want to have sex with me?
To reject this treacherous terrain closes women off from so much of what really drives the world of business—connections, mentorship, capital. Yet to enter it opens them up to the possibility of unwanted attention, harassment, and even assault. There is inherent risk no matter the decision. This was the calculation that Minshew and Kappler faced in their encounters with Ferro. Both ended up with their confidence rocked, doubting themselves and their judgment.
Minshew and Kappler have never met but both voiced similar reasons for wanting to come forward with their stories now. “A big piece of it was the realization that people who do this never just do this once,” Minshew says, “and every time it happens to a new person, I could have prevented that.”
Kappler says she’s committed to helping women so they don’t have to experience what she went through. “I didn’t think this could ever happen to someone like me,” she says. “I don’t think people who know me would assume something like this would happen to me.”
*****
The Muse is now an established company, with 50 million annual users and a fundraising total of nearly $30 million. But in 2012 it was just another young startup, and trying, and often failing, to raise relatively small amounts of capital. What Minshew, then 26 years old, really wanted was to be treated—and funded—like a serious entrepreneur.
Michael Ferro, whom she first encountered at a conference in July of that year, seemed to offer just that. Weeks after their chance meeting, Ferro agreed to join the company’s $1.2 million seed round, which also included Great Oaks Ventures, Gordon Crawford, and Cathie Black. He invested $100,000, making him one of The Muse’s largest funders. Minshew, who is based in New York City, says she began making an effort to meet with Ferro whenever she was in Chicago and, at his suggestion, appeared in several of his publications.
In May of 2013, she and Ferro met for lunch while she was in town. Minshew presented him with her current quandary: She was unsatisfied with the funding offers she’d received while attempting to raise a Series A, but she also didn’t want to be acquired. She says Ferro had a solution. Wrapports would invest additional seed money in the company, setting it up to put together a bigger, splashier round later. “I was like, ‘Oh my god, that would be perfect,’ ” she recalls. “In my mind, it was like, this guy really seems to believe in me.”
But the deal, which Ferro was running through Wrapports—one of the two investment firms he’s founded— dragged. Minshew grew increasingly frustrated as the summer months slipped by, all too aware that her company was on track to run out of funding by the end of the year. Finally, Wrapports signed the term sheet, and on Sept. 18, 2013, Minshew flew to Chicago to work out the final details. After the meeting, she called her co-founder Alex Cavoulacos, triumphant: “We’re all set. The deal’s going through.”
Deal done, Minshew says Ferro proposed a plan for the evening: she should join him for drinks with a group of his friends at a nearby restaurant—“He very much made it clear that these are big money guys, power players”—and then the two of them would go to his company’s corporate apartment, where they would order dinner and, as Minshew describes it, “really jam—just get into the business.” Ferro also told Minshew that the apartment would be empty that night, and invited her to stay there, knowing that The Muse was in startup mode, saving money wherever it could.
Walking into the apartment building, Minshew remembers feeling the first pangs of uncertainty. “I thought, ‘Oh man, this looks weird. I’m 27 and I’m with this guy.’” But she reminded herself that she’d met his wife, that he knew she was in a relationship—and that he’d just bet $750,000 on her skill as an entrepreneur. “It’s not weird, it just looks weird,” she told herself. “It’s fine. It’s fine.”
But when they entered the apartment, she says, it quickly became clear to her that it was not, in fact, fine. Minshew recalls looking out at the city skyline through the floor-to-ceiling windows when Ferro approached her bearing the glasses of bourbon. That’s when she says he forcefully placed his hand on the back of her head and tried to kiss her.
“My whole world froze,” she says of that moment. “I felt fear—partially for my physical safety, but mostly the fear that if I didn’t handle this encounter exactly perfectly, it would ruin this deal that was so important to the business.”
Minshew pulled away, saying, “I’m a one man at a time kind of girl.” She recalls Ferro stepping back and taking a seat. She says he looked her up and down, saying: “I’m glad I didn’t take you to a restaurant, because people would think we’re sleeping together and we’re not. I’d much rather actually be having sex with you and have no one know it.” But he didn’t try to touch her again.
According to Minshew, Ferro seemed to lose interest in the face of her rejection. He told her that one of the men she’d met at drinks earlier, a prominent Chicago investor, was downstairs and would like to have dinner with her and talk more about The Muse. She jumped at the chance to get out of the apartment.
After dinner, she returned to the now vacant apartment, and once again called her co-founder, this time with very different news: “The deal that was totally on? I don’t know if it’s on.” Worried that the apartment might be bugged or that there could be a hidden camera, she told Cavoulacos that something bad had happened, but didn’t share the full details until she was back in New York the following afternoon. That night, she says she slept in her clothes.
Fortune spoke to Cavoulacos, who confirms the account. We also talked with three other people Minshew told about the encounter in the days and weeks following her trip to Chicago and reviewed emails in which she told at least 13 of the company’s early investors about an incident with a lead investor who made “extremely inappropriate verbal and physical advances.” In one case, Minshew followed up, naming Ferro.
Back in New York, she spent a couple of days in a fog, “completely disassociated from myself.” But with her business in peril, there was no time to fully process what had happened—instead, she and Cavoulacos had to address what were for The Muse a pair of urgent and existential questions: Was Ferro’s money still on the table, and if so, would they need to take it? The co-founders spent hours gaming out possible scenarios, including one where Minshew gave up her apartment and moved onto her co-founders couch. “We made a list of our employees in the order that we would have to let them go,” Minshew says.
They decided to “slow roll” the Wrapports deal and scramble to see if they could find funding elsewhere. Despite the fact that there was a signed term sheet on the line, Wrapports did not appear to object, doing little to move the agreement forward. Minshew and Cavoulacos were able to find replacement investors, raising $750,000 in less than two months. The deal Minshew had flown to Chicago to close quietly evaporated.
In April of 2015, The Muse was preparing for its next round of funding, which required the founders get sign-off from their largest seed investors—including Wrapports. (Wrapports remains an investor in The Muse today.) Cavoulacos made the call, with Minshew in the room. Ferro took the opportunity to raise the specter of the previous deal. “He was like, ‘Yeah, weren’t we going to invest more?’” recalls Minshew. “’Why didn’t that ever happen?’”
*****
The Williams alumna with an MBA from the University of Virginia’s Darden School had the kind of resume headhunters yearn for: McKinsey, Starbucks, Goldman Sachs, United Technologies. At the age of 37 she was already an executive at Ingersoll Rand, a $14.2 billion global manufacturing multinational.
But then she met Michael Ferro and for a long time after that her life would feel like it had been divided into two—the Hagan Kappler before the night of Jan. 5, 2016, and the one the day after.
The following is Kappler’s account of her interactions with Ferro between September 2015 and January 2016. She recounted the events to her husband, brother, father, and manager in the immediate aftermath of each encounter with Ferro—all of whom spoke to Fortune. She also told at least five close friends, a lawyer, her obstetrician, and a therapist about what she says happened in that Las Vegas hotel suite in varying degrees of detail. All of them also spoke to Fortune.
Over the course of that initial two-hour meeting in the Chicago Sun-Times building, Kappler says Ferro talked about topics ranging from strippers and prostitutes to his beliefs that women in technology have to get ahead by using their looks and sexuality. He mixed compliments with criticisms, telling her she was attractive but that she also needed a makeover. She says he asked that she send him her resume, and told her that she should always include her photo.
But during the meeting Ferro also had real ideas and leads for Kappler—the most promising being a partnership between Ingersoll Rand and IBM that he said he could broker. Kappler says Ferro also raised the possibility of hiring her himself, and at the end of the meeting he told her that the discussion had been his way of interviewing her to be either his personal chief of staff or the CEO of his private equity firm Merrick Ventures—roles that would come with big salaries. He said he liked her looks, as well as her credentials and that she was buttoned up, something that would help give his operation more credibility.
The next day, Kappler reported back to her then-manager, Dion Persson, telling him that she didn’t know it was possible to be both so flattered and insulted at the same time. Persson remembers telling her that he didn’t seem like the type of guy you want to work with. “She kind of realized that,” he says, “but he was offering so much that it became very important to her.”
The interaction with Ferro left a mark on Kappler—she remembers thinking it was one of the most influential meetings of her career. “I’d been in these very safe, nice companies, protective wonderful places and suddenly I’m thinking I didn’t know that women are supposed to…” she trails off. “It sounds ridiculous, but I thought maybe there was something to that.” She ended up sending Ferro her resume—professional headshot included.
Kappler and Ferro exchanged a few emails and phone calls after that initial meeting, and she invited him to be a judge at an innovation competition she was organizing for Ingersoll Rand’s leadership conference. On Dec. 21, 2015, she flew to Chicago to meet with Ferro again, this time bringing along Persson—Kappler had wanted someone else from Ingersoll Rand to make sure Ferro would be appropriate for the conference.
Ferro started this meeting by saying that his wife had asked why he was going into the office the week of Christmas. Kappler and Persson say he recounted that he had told his wife that obviously it was because he was having an affair with Kappler. Persson told Fortune that some of the references Ferro made during the meeting, including that one, made him cringe. “I saw some of these signs and I didn’t stop it,” Persson says, “and I still feel horrible about it.”
But again Ferro shared some compelling ideas, including creating a separate entity that partnered IBM’s Watson with Ingersoll Rand’s thermostat business. Persson suggested that Kappler run it, and Ferro said in that case she would need a makeover. In a follow up phone call with Kappler the next night, Ferro joked that he had done a good job not sexually harassing her too much in front of her boss. On a later call, they planned to meet up at the Consumer Electronics Show; Kappler would gather data on the thermostat market and together they would flesh out the business idea. “He told me to remember it was Vegas and dress like it,” Kappler recalls.
According to Kappler, Ferro called her six times after that, asking where she was and when she would be there. “I kept saying I think it’s too late and he kept insisting he wanted to meet that night,” she says. On the way there, she remembers thinking it didn’t feel right but decided she’d be able power through it.
Kappler started to relay some of the details of the thermostat market, and Ferro asked a few questions but didn’t really engage. He commented on her outfit and asked her if she had ever done anything bad—she told him no and tried to get the conversation back to business. That’s when he first came up behind Kappler, who was sitting at the bar, and put his arms around her, she says. She squirmed away and he started rubbing her shoulders. According to Kappler, he soon tried to wrap his arms around her again, and this time after she wriggled free he held onto her hand.
At that point, room service arrived and, not knowing what else to do, Kappler got up from her chair. She poured herself a glass of water from the bar, and then suddenly Ferro was behind her again. She says he put his arms around her and then his hand was on her breast. She remembers saying that now they had a witness—referring to the man from room service who was setting up the table. Kappler says Ferro told her that no one sees anything in Vegas.
She walked away, and at this point she believes it sunk in for Ferro that she was not going to acquiesce. He started ignoring her and playing poker on his phone. According to Kappler, Ferro told her that his friends down in the high roller room had asked if he was going to come back and that he had told them, “Why would I play poker when I can poke her?”
They sat down to eat, and over dinner Ferro made a point to say he had been helping Kappler and hadn’t asked for anything in return. He added, she says, that he’d ordered her a nice dinner and the nicest bottle of wine on the menu. Kappler remembers trying to keep it light and play the role of the mentee. Kappler says Ferro told her that she didn’t need to sleep with people, but she did need to flirt and “suck dick.” In the moment, she didn’t feel like she could get up and leave. “I felt obligated to have this dinner with him,” she says. “He had made that comment that he had never asked for anything from me.”
But the next morning in the shower she couldn’t stop crying. She texted Persson and told him Ferro couldn’t go to the leadership conference. Persson wrote back that it was no problem and that he hoped she was alright. “I just knew something had happened,” Persson says. Kappler walked around CES in a daze, afraid that she was going to bump into Ferro.
The day she got back to the office, she cried when she told Persson what had happened. “I could barely spit it out,” she says. In the days after, they strategized what to do. (An Ingersoll Rand spokeswoman said in a statement to Fortune, “Sexual misconduct of any kind is inconsistent with our policies and company values. We take it seriously.”)
Persson wrote a letter to Ferro, disinviting him to the conference and cutting off ties. Ferro immediately sent Kappler a text and left her a voicemail, telling her he had gotten a strange letter from her boss and asking if everything was okay. Persson then followed up with another letter, this time telling Ferro to never contact Kappler again. He never did.
More than four years later, Minshew still vividly recalls the shame and humiliation she felt leaving the Chicago apartment. “Those feelings have not completely stopped,” she admits. The experience led her to doubt herself and question her judgment. For a time, it also compromised her ability to form trusting business relationships with certain types of men. She tends to be cautious about attending small private gatherings—despite knowing that that’s where important networking and dealmaking often gets done. Kappler can relate; when she attends conferences she now heads straight back to her room rather than socialize at happy hours.
She’s coming forward now because she believes that’s beginning to change. Says Minshew: “Do I think the venture community now is fully embracing this? No. But there is a substantial minority of investors who are genuinely committed to resolving the issue and some of them are powerful enough that they’re starting to have real impact.”
“It just changed everything for me,” she says. Like Minshew, she felt shame. “If I had been watching this movie and seeing this woman being treated like this, I would have been like, ‘Get out of that office. Don’t call him back,’ ” she says. “I felt like it was my fault.”
Therapy helped Kappler, and so did time. She moved up the ranks at work and recently accepted a job to run digital innovation at a new company.
She’s now pregnant with her fourth child. “I just felt like I was unprepared for the situation, and now I’m prepared,” she says. “I’m stronger now.”
Minshew thinks that Ferro did what he did simply because he could. “And I couldn’t really do anything about it,” she says. “There are some acts of misogyny and harassment that are just as much about reminding women what they can and can’t do than they are about sex.”
To her it felt incredibly cavalier. “Like he didn’t even care so much about me or about the situation,” says Minshew. “He was just going to see if I would have sex with him. But it was my company and the fate of 14 employees or so was hanging in the balance, as well as my career to some extent. And to him it was just worth a pass.”
Kristen Bellstrom: kristen.bellstrom@fortune.com
Beth Kowitt: beth_kowitt@fortune.com
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