In her autobiography, “The Power of Many,” Meg Whitman discusses the charges against her for “spinning” initial public offerings that Goldman Sachs made available for her personal portfolio when she was CEO of eBay. It’s in a chapter titled “Results matter. Be accountable.”
Comparing what she wrote about her entanglement with Goldman Sachs and what she told the Associated Press on Tuesday, however, we wonder what exactly eMeg means – if anything — by accountability.
Since this has become a big deal both nationally and in the California governor’s race, we’re reprinting some extended quotations from Whitman’s account of the affair, to see how they stack up against her more recent statements. We pick up her narrative on Page 148 (emphasis, ours):
After we [eBay] went public and Griff [her husband] and I needed professional help handling our investment portfolio, we decided to invest some of our personal funds with a completely separate group at Goldman Sachs, the Private Wealth Management group. As a wealth management client, I was indeed given access to IPO shares of other companies, which my private broker bought and sold for my account . . . However, the implication that there was a connection between eBay using Goldman Sachs as its banker on an ongoing basis and any benefit to my personal account investments was totally false;
I had never let my personal financial benefit influence my input on eBay’s banking choices. There was nothing illegal about IPO transactions my wealth manager made on my behalf. Such investment opportunities were common at the time, and I had never seen anyone in government, the media, or anywhere else raise the idea that th
is practice was a conflict of interest. . . .
When I learned I was on a list under scrutiny, I was surprised. The IPO investments made by Goldman Sachs on my behalf were a very small fraction of my personal investment portfolio. Given that I was a major individual eBay shareholder, I had far more to gain by working to make sure eBay used the most competent investment banking we could find. Anything that benefited eBay shareholders benefited me. . . .
Despite the inflammatory language of the investigation, these transactions were legal. No one ever suggested that they were not. . . . My board stood behind me and urged me to fight these [law]suits because they knew I had done nothing wrong and was deeply upset at the assault on my personal reputation and aghast at having eBay dragged into these stories about corporate greed. . . .
There was no conflict of interest, but when I look back I can see why the [congressional] committee pounced on the appearance of one. As I said earlier, [where she described how Goldman CEO Hank Paulson ran board meetings] I was not a good fit for the Goldman board which was the primary reason I resigned from it in December 2002.
In an interview Tuesday with the AP, Whitman repeated her statement that she resigned from the Goldman Sachs board of directors because it “wasn’t a good fit.”
“There was no link between accepting these IPO shares and funneling business to Goldman,” she insisted.
“The lesson learned about it is you have to be extra vigilant about seeing any actual or perceived conflict of interest. I missed the signposts here,” she said. “As I look back on it, would I do it again? No.”
There you have it: eMeg says she would not do the same thing over again — not because it was so unethical that it was later made illegal — but because she would want to avoid the appearance of a conflict of interest. In other words, she seems to be saying, “spinning” may have been outlawed later, but “It was legal when I did it, so what’s the problem?”
The only reason she acknowledges settling the lawsuit against her and other eBay board members for $3 million – including her share of $1.78 million – appears, at least in her book, to have been because it was an annoyance:
The lawsuit remained a distraction and there was so much to do to run eBay and keep it growing that eventually I huddled with our lawyers and with Pierre [Omidyar] and Jeff [Skoll], who were also named in the suits, and we three decided to personally settle the suit with our own funds.
As Lance Williams noted, Whitman in the AP interview “didn’t address her service on Goldman’s compensation committee, where in two annual pay cycles she signed off on $79 million in bonuses for five top Goldman executives, including then-vice chairman Lloyd Blankfein, now the CEO.” (SEE BELOW)
In her book, Whitman said she put the story of Goldman Sachs in the chapter about accountability because, “. . . the fact is, there was the appearance of a conflict and it bloodied our noses – mine in particular. . . . Those of us fortunate to hold any kind of leadership position in business must reject any appearance of a conflict even when we know that one does not exist . . . we have to be willing to be held to a higher standard.”
Um, how about just the standard we demand of our children, friends and mates: admit that you did something wrong and apologize. Whitman’s responses don’t even come close.
As Sterling Clifford, spokesman for Attorney General Jerry Brown put it, “Does she regret it because it was wrong or because it’s become an issue in her race for governor?”
Said Jarrod Agen, communications director for Whitman’s Republican rival, Insurance Commissioner Steve Poizner: “I’m sure there are several convicts that regret their crimes, but it doesn’t make them any less guilty.”
It’s worth noting that it was AP’s Juliet Williams who actually used the word “regret.” If Whitman said it, there was no quote to that effect. And let’s be clear what it was that got settled.
“In effect, the plaintiff shareholders allege that Goldman Sachs bribed certain eBay insiders, using the currency of highly profitable investment opportunities,” wrote Delaware Judge William Chandler, who presided over the case
As Lance Williams reported, the executives “were able to flip these investments into instant profit,” the judge also wrote. “Whitman sold these equities in the open market and reaped millions of dollars in profit.”
But Whitman’s take on the whole affair is quite different. As she said in her book: her board knew she had done nothing wrong. That’s her story and she’s sticking to it.
This correction was later posted on Lance Williams story: (UPDATE: Whitman served on Goldman’s compensation committee, where in two annual pay cycles she signed off on $79 million in bonuses for five top Goldman executives, including then-vice chairman Lloyd Blankfein, now the CEO. The bonuses were based on competitive industry norms and the firm’s performance, the AP quoted her as saying.)
Champion cartoonist and Calbuzzer Tom Meyer today presents Peewee Pete Wilson in a cameo role as the BP of California politics, desperately seeking a clean-up solution for the Goldman Sachs-sullied campaign of his protege, Meg Whitman.
What Calbuzz does not know about corporate finance fills mountains of textbooks. But because we expect it won’t be long before we’re hearing a lot about charges of stock spinning against Meg Whitman, when she was CEO of eBay, we asked David Shapiro, a specialist on financial fraud at the John Jay College of Criminal Justice at the City University of New York, to spell it out for us. Here’s his offering:
the appearance of impropriety, conflict of interest, breach of ethics, breach of duty of loyalty, etc. presumably take a backseat, while voters in California ponder: What exactly were those motivations and intentions?
