October 23, 2002 5:09 PM PDT

eBay execs defend IPO share grab

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eBay Chief Executive Meg Whitman in an internal e-mail to employees defended herself and other eBay executives amid an IPO share controversy, saying their actions were "legal" and "quite common."

Whitman sent the e-mail to eBay employees earlier this month to address a Congressional report. The report revealed that eBay Chairman Pierre Omidyar, Co-founder Jeff Skoll, Director Bob Kagle and Whitman received shares for various initial public offerings from investment firm Goldman Sachs.

These executives are now the subjects of several lawsuits filed on behalf of eBay shareholders. The suits allege that executives breached fiduciary responsibilities to the company by accepting and selling IPO shares.

Whitman, who gained $1.78 million from selling IPO shares, said in the e-mail that her actions and those of her fellow eBay executives were above board.

"While reasonable people can debate whether giving private banking clients preferred access to IPO shares is fair or whether policies regarding such transactions should be reformed, there is no question about the legality of this practice today," Whitman said. "When I bought and then sold my shares, I followed the law as well as Goldman Sachs' policies regarding these transactions.

"And never have my personal banking and investing practices guided any of eBay's decisions or activities associated with Goldman Sachs or any other investment banking firm," Whitman said.

eBay spokesman Kevin Pursglove said Whitman sent the e-mail to tell eBay employees her side of the story.

U.S. corporate executives have been under fire following the financial controversy and eventual collapse of energy concern Enron. Federal and state regulators have been examining the role played by executives at companies ranging from bankrupt telecommunications giant WorldCom to troubled online real estate company Homestore.com. Also, the lavish pay and lucrative perks of many executives have drawn the ire of shareholders who have seen the value of their own investments shrink.

As part of an investigation, a federal government committee revealed earlier this month that Goldman Sachs had allocated IPO shares to executives such as Whitman, Enron Chairman Kenneth Lay and WorldCom CEO John Sidgmore. Many of those IPO companies posted large first-day gains.

Whitman and others have said their receipt of shares was related to private dealings with Goldman Sachs and other investment banks. But critics have charged that such allocations were part of a quid pro quo that involved giving executives shares in exchange for investment banking business.

eBay has a longstanding relationship with Goldman Sachs. The investment bank led eBay's IPO and served as a financial adviser in its recent merger with PayPal. Whitman sits on the firm's board of directors.

Whitman noted in her e-mail that she has not purchased any IPO shares from Goldman Sachs since joining the company's board earlier this year. The gains made from selling IPO shares amounted to a "small fraction" of Whitman's total personal holdings at Goldman Sachs, she said.

"Some of you have heard me say that whatever you do in life, you should never, under any circumstances, compromise your integrity. I live by that rule and know that Pierre, Jeff and Bob do too," Whitman said in her e-mail.

"The last 24 hours have been painful for me. There is nothing worse than having your integrity questioned under circumstances where you know that you did nothing wrong and followed all the rules. Given my experience yesterday, I plan to participate in the growing national debate about corporate governance and business ethics," Whitman said.

CNET News.com's Dawn Kawamoto contributed to this report.

 

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