BBG Video: Should Hewlett-Packard Even Be in the PC Business?

My chat with @nicolelapin last night on @BloombergWest re $HPQ:

Sphere: Related Content

The Seven Habits of Spectacularly Unsuccessful CEOs Hall of Shame

Which CEOs would be in the Hall of Shame for exhibiting the 7 Habits of Spectacularly Unsuccessful CEOs?


Read the full post on Forbes

Sphere: Related Content

The HP Board Hires Trusty Bankers to Protect It From Fiendish Imaginary Activist Investors

The HP Empire is under grave threat from peasant shareholders who actually want its stock price to increase. The board must not allow it.

Read the full post in Forbes

Sphere: Related Content

Ray Lane Must Go at HP

How can you be the Chairman of HP after the last 11 months and give yourself a promotion? Ray Lane must go now.

Read the full post in Forbes

Sphere: Related Content

Jackson Says HP's Lane Chose Whitman as a `Star CEO' to Take Heat Off Himself

Sphere: Related Content

5 Things Meg Whitman Wants You to Forget

Some home truths about Meg Whitman.

Read the full post here on TheStreet.com

Sphere: Related Content

HP's Board of Directors Is Pathetic

This HP Board has screwed up so many times, it's a joke.  They need to be completely dismantled.

Read the full Forbes post

Sphere: Related Content

eBay Wins With Skype Deal

By Eric Jackson05/10/11 - 09:39 AM EDT

NEW YORK (TheStreet) -- When former eBay(EBAY_) CEO Meg Whitman bought Skype in 2005 for $2.6 billion ($3.1 billion with all the earn-outs added back), most assumed it was the deal that would sink her career.

It seemed like a laughable idea then: that buyers and sellers on eBay's marketplace were going to click on a Skype icon and talk to each other to finalize the details of their transactions.

It was a laughable idea. It was completely strategically flawed at the time. It never should have been done in the first place, and Whitman's successor sought to undo the deal as quickly as he could.

On top of that, Whitman took a lot of heat for overpaying for Skype. Critics said that spending so much money on a private company showed a callous disregard for eBay shareholders.

I believe, in fact, that the size of the Skype deal scared other buyers from anything close to that price range -- until Groupon came along.

The only big Internet deal after Skype (and before the rumored interest in Groupon by Google(GOOG_)) was YouTube for $1.5 billion. Remember when that amount seemed staggering?

When current eBay CEO John Donahoe sold off 65% of Skype in 2009 to outside investors including Andreesen Horowitz and the Canada Pension Plan Investment Board, eBay shareholders and the business media in general seemed relieved.

That deal was struck for $1.9 billion. It was still far below the purchase price from 2005, but eBay seemed to get more pats on the back for at least getting back close to even.

Now, not even two years later, Microsoft(MSFT_) is paying $8.5 billion for all of Skype.

It's difficult to criticize Donahoe for making the 2009 deal to sell off most of the company. Back in 2009, few would have predicted that in only two years Silicon Valley would be seeing huge multiples of the YouTube takeout price paid for private companies. In fact, people would have thought you were crazy.

Donahoe deserves credit for keeping a minority stake of 33% in Skype. That was smart.

.......

[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

Sphere: Related Content

Ex-Tech CEOs Whitman, Fiorina Are Lousy Candidates

By Eric Jackson, Senior Contributor

06/16/10 - 07:00 AM EDT

Stock quotes in this article: HPQ , EBAY

Meg Whitman and Carly Fiorina have star power. They are both wealthy and have led well-known technology companies. Both also won their primaries last week in their latest step of their careers. Whitman -- the former CEO of eBay(EBAY) -- is seeking to become California's governor when she goes up against Jerry Brown. Fiorina -- the former head of Hewlett-Packard(HPQ) -- is attempting to unseat well-known California senator Barbara Boxer.

I don't have a dog in this fight as I don't live in California. However, as an investor in our capital markets and as a proponent of strong corporate governance, I oppose their candidacies.

Both hold themselves up as experienced and successful corporate leaders. Because they led large companies, they argue that they would make good political leaders. They're suggesting that leading a large number of people in business is not all that different than leading a handful of political staffers; proposing new business strategies is not all that different from proposing new legislation; and doing sit-down interviews for business magazine cover stories is not all that different from doing sit-down interviews with cable news channels.

Both former CEOs are running as Republicans, so they're brandishing their business backgrounds as evidence that they are fiscal conservatives.

Here are the problems with both candidates though, as I see it:

Both women left their organizations under a cloud

According to Bloomberg BusinessWeek, Fiorina was fired by her board of directors in 2005 after the board determined it could no longer work with her and that her tenure at H-P had been a failure. That same article quotes a former H-P exec as saying Fiorina's "good with marketing; she's a good speaker for the company. But this is a company that doesn't need a statesman. It needs a hands-on operations person ... Things [that] needed to make us more competitive in certain segments weren't being done."

By the time Whitman exited eBay in January 2008, the company's stock was down 48% from its December 2004 all-time highs. The company's growth had stalled severely. One analyst covering eBay at the time referred to Whitman's playbook for the company as "old and dusty." And eBay's $4 billion acquisition of Skype to turbo-boost eBay's growth was judged to have "bombed" by the time Whitman left.

Both women have shown questionable judgment under duress

According to Fiornia's memoirs, in January 2005 -- just weeks before she was fired by the board -- she ordered a private investigation into who on H-P's board might be leaking confidential information to the press. Those recent leaks had made Fiorina look bad. Later, these confidential investigations involved spying and lying to the phone company in order to access a reporter's private phone records. Fiorina has kept herself at arm's length from these actions to date.

The New York Times reported on Monday that Whitman paid an eBay employee "around $200,000" after shoving her while the employee was trying to prepare her for an upcoming interview. Whitman required the employee to never speak publicly about the incident in exchange for the payment.

Both women feasted on excessive perks which were beyond the pale compared to other CEOs

Whitman racked up over $1 million in private air travel on the eBay corporate jet in 2006 and 2007.

Both women have overseen organizations where they have increased spending -- not decreased spending -- belying their touted fiscal conservatism.

If either woman had a business record of cutting back excessive spending at their organizations and turning around performance, I'd be willing to go along with them portraying themselves as fiscal conservatives. However, that's not what happened. eBay was a once-hot tech company trying desperately to find a new direction when Whitman left. H-P was a sluggish colossus, losing market share and in need of a radical restructuring to get it back on track when Fiorina was done.

Both women arguably couldn't get another job as a CEO at a major corporation today.

Although most voters won't understand this, the truth is that neither of these women would have an easy time finding another top CEO job today. They bring so much negative baggage from their last jobs that few boards would want to take a risk on them. Any organization that would hire them would likely be much smaller and much less successful than H-P or eBay.

American politics needs more experienced business and financial people. The reality is that business execs and investment managers who are successful and think they can continue to be successful in their careers aren't choosing to go into politics. They're probably thinking, "Why should I subject myself and my family to the 24/7 news media investigations into my past, when I can keep getting acclaim in business or finance and make a heck of a lot more money?" I don't blame them.

........

[This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.]

Sphere: Related Content

LA Times: Whitman's words put spotlight on deeds

A lucrative Goldman Sachs deal, a Craigslist battle and personal investments raise questions.

In her autobiography, Whitman disavows Wall Street “self-dealing and fraud” and rejects as myth the idea that successful executives must “step on people, stretch the truth ... and make heartless decisions based only on the bottom line.” (Paul Sakuma, Associated Press / April 23, 2010)

By Evan Halper and Jack Dolan, Los Angeles Times

May 12, 2010

Reporting from Sacramento

Meg Whitman says she became one of the world's wealthiest CEOs by always asking, "What is the right thing to do?"

In her recently released autobiography, the front-runner for the GOP gubernatorial nomination disavows Wall Street "self-dealing and fraud" and rejects as myth the idea that successful executives must "step on people, stretch the truth . . . and make heartless decisions based only on the bottom line."

Several of Whitman's actions while in corporate office and as an investor, however, raise questions about whether her conduct has squared with the image she has created in the book, on the stump and through tens of millions of dollars' worth of campaign commercials. Her ethical compass was tested repeatedly as she went from young Harvard MBA to chief executive of the online auction giant EBay, and some shareholders, regulators and business partners found it wanting.

» Don't miss a thing. Get breaking news alerts delivered to your inbox.

A lucrative deal that Whitman cut for herself with investment banking giant Goldman Sachs was called "corrupt" by the U.S. House of Representatives Financial Services Committee. The partnership she forged between EBay and online rival Craigslist landed in court and is still there; Craigslist has accused EBay of stealing trade secrets and fraudulent advertising. At another company, her dismissal of a subordinate executive resulted in an age-discrimination lawsuit and a secret court settlement.

As an investor, she put millions of dollars into private equity firms with a reputation for callous business practices. Subsidiaries of one of the "distressed asset" firms in which she identifies herself as a limited partner foreclosed on dozens of victims of Hurricane Katrina.

"It's nice to say if you just behave ethically, you will make profits," said Meir Statman, a professor of finance at Santa Clara University who focuses on ethics. "If that were true, life would be really easy. But . . . there are tradeoffs. And if you are a politician, you have to account for them."

Whitman declined to be interviewed, referring questions to her campaign staff.

Her business practices came under intense scrutiny in the fall of 2002, when congressional investigators identified her as one of a handful of corporate executives who had made self-serving deals with Wall Street firms at the expense of shareholders.

After Whitman hired Goldman Sachs to handle EBay's investment banking business — deals that generated $8 million in fees for the bank, court records show — Goldman gave Whitman early access to initial public offerings of stock for her personal portfolio. The head start on the rest of the market allowed her to sell shares for a profit of $1.78 million.

The deals raised suspicions among regulators that Whitman and other executives, including Kenneth Lay of Enron, were trading shareholder assets — in the form of fees paid to investment banks, for example — for personal gain.

"It is effectively a bribe for future services," said Mercer Bullard, a law professor at the University of Mississippi and former Securities and Exchange Commission attorney who was not involved in the government investigation. "It was exactly the kind of thing crooked politicians engage in."

Goldman Sachs and nine other Wall Street firms agreed to stop giving executives they do business with early access to public offerings as part of a settlement with regulators in 2003. Whitman writes in her book that there was nothing illegal about the transaction and that "such investment opportunities were common at the time."

In a debate last week with her primary election opponent, state Insurance Commissioner Steve Poizner, Whitman said she "did not actually see a conflict of interest" in the deal. "It was a completely separate account that had nothing to do with EBay's banking business," she said. "But the truth is leaders have to be above reproach."

Whitman, who had joined the Goldman Sachs board in October 2001, resigned from it two months after she was named in the congressional investigation. She paid $1.78 million to settle a subsequent lawsuit brought by EBay shareholders who said the money she made on the stock deal belonged to them, not her.

She has since worked to restore her reputation, devoting substantial time and resources to charitable efforts. Her book says that in the aftermath of Hurricane Katrina, EBay dropped $1,000 credits into the accounts of 1,000 customers in New Orleans.

"It was the best million dollars we ever spent," she wrote.

Sometimes, however, the way she has managed her family's personal investments has contrasted with such efforts.

A disclosure of economic interests that the state requires of candidates shows that Whitman's family has placed at least $2 million in Fortress Investment Group, a private equity firm that gained notoriety a few years ago when subprime lenders it owned foreclosed on homeowners, including at least 34 Katrina victims.

In a written statement, Whitman campaign spokesman Tucker Bounds declined to specify how much the candidate has invested in Fortress. Her disclosure form, which she filed March 11 and which covers the previous 12 months, notes two investments exceeding $1 million; the state does not require more specificity.

As a limited partner in the fund, "Meg has no control or influence over investment decisions," Bounds wrote. Asked in April whether she knew about the Katrina foreclosures, he responded, "No."

The firm's investments created unwelcome headlines in 2007 for Democratic presidential candidate John Edwards, who had worked for Fortress for 14 months and had $16 million invested in the firm. Edwards ultimately renounced Fortress, divested his holdings and created a charity to help the Katrina victims who were foreclosed upon.

Whitman is a limited partner in more than two dozen other secretive hedge fund and venture capital investments, some of which have been accused by regulators, scholars and activists of questionable business strategies. The Whitman family portfolio includes, for example, at least one fund that sought profits from the bankruptcies of American automakers and another that is partly owned by the government of Abu Dhabi, which has been cited for human rights abuses by U.S. officials and advocacy groups.

Whitman has said she is a passive investor in these businesses and cannot be held responsible for what they do with her money. But some experts disagree.

"You are on the hook for what you own," said David Wood, director of the Initiative for Responsible Investment at Harvard University. "It is a dodge to say, 'There is no way I could possibly monitor all these investments.' "

» Don't miss a thing. Get breaking news alerts delivered to your inbox.

One investment that Whitman has taken ownership of is the $1.15 million she contributed to stop the development of a 572-acre property near land she has in Telluride, Colo. The money helped the city use its power of eminent domain to force the owner to sell.

Neal Blue, a San Diego defense contractor, bought the pristine land adjacent to small, wealthy Telluride for $6 million in 1983. Years later, he began moving on plans to build condos and shops on the land. Local preservationists and affluent landowners, including Whitman, protested.

To stop Blue's development, the town expanded its border in 2001, annexing his property. Litigation ensued. The courts ruled that Blue could be forced from his land in exchange for $50 million.

Whitman, in addition to pitching in the $1.15 million, "rallied friends around the country to the cause," according to a May 2007 news release from the nonprofit Valley Floor Preservation Partners. Property-rights advocates — whose views she claims to share unequivocally — said Telluride was engaging in an unconscionable abuse of government power.

Blue, who is now 75, "didn't appreciate a fellow Republican, somebody who supposedly stands up for property rights, being at the forefront of the effort to take away his land," said his attorney, Thomas Ragonetti.

Bounds said Whitman "simply supported a community fundraising effort" and was not involved in the eminent domain proceedings. Whitman asserted in an October interview on the conservative blog Flash Report that "people's property rights absolutely need to be respected" and they are "a core part, I think, of why people live in America."

As Whitman celebrated the 2007 victory in Colorado, her EBay shareholders had little to cheer about. The stock price was in decline. It had peaked at the end of 2004 and had lost more than half its value by the time Whitman announced her departure from the company in January 2008 amid talks with top Republicans about a possible run for California governor.

Some of her boardroom moves in the final years of her decade-long EBay tenure rankled investors.

Eric Jackson, a hedge fund manager and shareholder activist who analyzed EBay's SEC filings for the online financial publication TheStreet.com, found that Whitman's take from salary, bonuses, stock awards and other perks jumped nearly fivefold, from $2.9 million in 2004 to $13.9 million in 2007. Costs to shareholders from her use of the company jet soared, the filings show; she spent more than $1 million on the plane in 2006 alone. In addition to her work travel, she charged EBay shareholders nearly $300,000 for flights to attend board meetings for other companies.

Bounds said the private jet travel was "instrumental in growing EBay from a start-up company to an $8-billion global corporation." He added that most of Whitman's personal fortune, which has been widely estimated at more than $1 billion, did not come from salary or stock grants received in her later years with the company, some of which she never redeemed.

"Meg earned her money because she had an early ownership stake in EBay and grew the company into a huge success," Bounds said.

Another product of Whitman's EBay years continues to dog the company. EBay is locked in dueling lawsuits with Craigslist.com, perhaps the world's best-known classifieds website, whose owners accuse EBay of stealing their proprietary financial information to launch a competing website.

The seeds of the dispute were sown in 2004, when EBay bought about a third of Craigslist. Founder Craig Newmark and Chief Executive Jim Buckmaster were wary of what a profit-driven, mainstream corporation might do to their proudly low-budget website. They signed the deal, according to Buckmaster's December 2009 testimony in a Delaware courtroom, after Whitman gave her "personal assurance" that EBay would "gracefully unwind" the collaboration if anyone became uncomfortable with the partnership.

That discomfort arrived with a shock in the summer of 2007, when EBay announced the U.S. launch of a classified ad site — Kijiji.com — designed to compete directly with Craigslist.

Buckmaster said in court that he demanded Whitman sell EBay's share of Craigslist. He didn't want a competitor on the board with access to his company's most sensitive financial data and Web traffic statistics.

Whitman testified that she refused to sell. But she assured Buckmaster in an e-mail that her company, "with the emphasis our culture places on integrity," had taken steps to protect Craigslist's trade secrets from the Kijiji team. Whitman later acknowledged in court that she had no idea what steps EBay was taking when she made her assurances.

"The firewall would have lived at a much lower level," she testified in the lawsuit that EBay filed against Craigslist. That suit accuses the smaller firm of violating its shareholder agreement with EBay through actions that Craigslist executives say were necessary to protect trade secrets. They included diluting EBay's stake in their company enough to remove EBay from the board.

Craigslist countersued, accusing EBay of unfair competition and false advertising for, among other things, buying ads on search engines that invited users to clickhttp://www.craigslist.org. But the link took customers to EBay's new site instead.

Without acknowledging any role in buying the ads, Whitman testified that she didn't think they were deceptive or even particularly unusual.

"This didn't completely surprise me," she added. "I mean, this is sort of typical. . . . When you actually type in 'Meg Whitman for Governor,' guess who has bought the keywords next to Meg Whitman for Governor? My gubernatorial opponent."

» Don't miss a thing. Get breaking news alerts delivered to your inbox.

Bounds declined to answer specific questions about the ongoing litigation.

The tolerant attitude Whitman displayed on the witness stand in December contrasts with her actions in 2008, when she sued an independent entrepreneur for trademark infringement and "political cyberfraud" after discovering that he had registered several potential Whitman campaign Web addresses, including whitmanforgovernor.com, megwhitmanforgovernor.com and Meg2010.com.

Her complaint demanded hundreds of thousands of dollars in damages and an advertising campaign, funded by the entrepreneur, to "correct any consumer confusion or misperceptions." She took her case to a United Nations arbitrator in Switzerland — where she lost — before signing a secret settlement.

Earlier in her career, she ended another court case with a secret settlement after being sued, at age 39, for age discrimination.

In December 1995, eight months after Whitman took over as chief executive of the flower delivery service FTD, she fired her 55-year-old technology chief, Dave Carlson. She replaced him with a man almost two decades younger, according to the lawsuit Carlson filed in a suburban Detroit court near FTD's headquarters.

Whitman told some staff members that the company was too "old and stodgy," Carlson alleged. He also said she told a conference room full of senior managers: "We need about 15 killer young executives."

FTD's vice president of government affairs interrupted, telling Whitman that she didn't mean to use the word "young," the complaint said. "Actually, I do," Whitman allegedly replied, "but I get your point."

Carlson declined to comment because of the confidentiality agreement he signed to settle the case. Whitman's attorney denied Carlson's allegations in his response to the lawsuit.

Bounds said in his statement: "Suits of this nature filed against executives of major companies are commonplace today. Too often they are frivolous and in no way reflect the true performance of management."

evan.halper@latimes.com

jack.dolan@latimes.com

This begins a series of articles examining the backgrounds of the major candidates for California governor and U.S. Senate in the June 8 primary election.

Sphere: Related Content

Some thoughts on Meg Whitman....

From Salon.com

MONDAY, APR 12, 2010 04:01 EDT

Meg Whitman's fortunes entwined with Goldman Sachs

The GOP candidate for California governor steered the investment bank millions in eBay business while on its board

BY LANCE WILLIAMS

AP/Paul Sakuma

Meg Whitman in March.

(This article also appears in California Watch, a product of the Center for Investigative Reporting.)

Candidate Meg Whitman touts her experience at eBay, the online auction house that made her rich, but her career and personal fortune are entwined with another company: the Goldman Sachs investment bank, a major player in public finance in the state she wants to lead.

Whitman’s relationship with the giant Wall Street firm -- as investor, corporate director and recipient of both insider stock deals and campaign donations -- could pose conflicts of interest if the Republican front-runner is elected governor of California, critics say.

From 1998 to 2002, while she was CEO of eBay, Whitman helped steer millions of dollars of her company’s investment banking business to Goldman, court records show.

In 2001, Goldman put Whitman on its corporate board, paying her an estimated $475,000 for little more than a year of part-time service. The company also gave her insider access to the initial public offerings of hot stocks worth millions, according to the records.

Whitman left the board in 2002 after she was targeted in a congressional probe of bond underwriters and “spinning” — a financial maneuver, now banned, in which Goldman and other firms allegedly traded access to hot IPOs for bond business. Whitman later settled a shareholder lawsuit related to profits she and other execs made from buying the IPOs.

In recent years, Whitman has kept part of her fortune, estimated by Forbes magazine to be $1.2 billion, in investment funds managed by Goldman, her financial disclosure report indicates. For her campaign, she’s received $105,500 in donations from Goldman executives, state records show.

Meanwhile, Goldman is a major player in California state finance. It has been the underwriter of $78.9 billion in bonds issued by the state since 2006, records show, second only to Merrill Lynch, now a division of Bank of America, which was underwriter of $79.3 billion in the same period.

Goldman was underwriter of more than 2 percent of the bonds issued by the state in the past five years, the records show. State pension funds, meanwhile, have invested more than $1.3 billion with Goldman.

The firm has sought other state business as well. In 2007, Goldman and the now-defunct Lehman Brothers investment bank pitched Gov. Schwarzenegger on an ambitious plan to boost state revenues by privatizing the California Lottery, according to news reports.

Goldman also urged the governor to raise money by selling EdFund, the state agency that insures student loans. Schwarzenegger expressed interest, but the ideas weren’t carried out.

Conflicts could arise

With Goldman active on so many state issues, Whitman would face “a pile of potential conflicts of interest” if elected governor, said Doug Heller, spokesman for Consumer Watchdog of Santa Monica.

Whitman declined to be interviewed for this story, but her campaign lawyer said conflict concerns were overblown. If elected, Whitman will sell her Goldman stock and put the rest of her portfolio, including her Goldman-managed investments, into a blind trust, the lawyer, Tom Hiltachk said in a written statement.

That will “put further distance between Meg’s assets and her duties as governor,” he wrote. Meanwhile, Whitman will “scrupulously” follow state law to avoid conflicts, he wrote.

Eric Jackson, founder of the Ironfire Capital hedge fund in Florida and an advocate of corporate reform, said concerns could arise even after Whitman sold her Goldman holdings. Given its long relationship with Whitman, Goldman would likely enjoy “access, and being able to make their case in terms of lobbying or certain outcomes that benefit them,” he said.

Whitman’s association with Goldman also raises questions about her values and judgment, some Wall Street reformers say.

While Whitman was on Goldman’s board, she served on the compensation committee, which approved multi-million dollar bonus packages for then-CEO Henry Paulson and his top aides.

Also during Whitman’s service, Goldman invested $140 billion into mortgage-backed securities. Years after she left, the firm sold off $135 billion in bonds tied to risky home loans, according to published accounts, essentially unloading the assets before the market plunged and sent the nation into economic crisis.

Goldman’s dealings in the ramp-up to world recession have made the firm a lightning rod for criticism, especially as it has rebounded with record profits while the national unemployment rate hovers around 10 percent.

Wall Street woes

Whitman’s campaign attorney said it was “plainly ridiculous” to hold Whitman responsible for the problems of Wall Street because she spent 15 months on Goldman’s board.

“Making Meg culpable for the culture of Wall Street … is a stretch too far,” Hiltachk wrote. He didn’t respond to questions about decisions she made on the Goldman board.

In recent years, Whitman has only occasionally referred to her time at Goldman Sachs.

During the 2002 IPO “spinning” controversy, Whitman denied wrongdoing, telling eBay employees in a memo that Goldman had offered her stock deals because she was a private client of the firm, not in exchange for eBay’s bond business.

In her autobiography, “The Power of Many,” Whitman said she quit Goldman’s board because CEO Paulson wanted directors only to “rubber stamp” decisions he had already made.

Bill Whalen, a fellow at Stanford University’s Hoover Institution and a former adviser to Gov. Pete Wilson, warned that Democrats would face blowback if they attempted “to use Goldman as a bludgeon” against Whitman in the governor’s race.

“There’s a long list of Democrats who have ties to Goldman,” Whalen said, starting with former state treasurer Kathleen Brown, who is a Goldman executive in Los Angeles.

Her brother, Democrat Jerry Brown, is the former California governor who is expected to face Whitman in November if she wins the June 8 primary election. He has no Goldman investments, campaign manager Steve Glazer said.

State insurance commissioner Steve Poizner, Whitman’s rival for the GOP gubernatorial nomination, in 2003 borrowed $500,000 from Goldman for an unsuccessful campaign for the state assembly, records show.

A global firm

Based on Wall Street but with offices around the world, Goldman Sachs underwrites stocks and bonds, provides financing for business mergers and manages the money of high-wealth individuals, corporations, and even governments.

In 1998, shortly after she became CEO at eBay, Whitman and the eBay board hired Goldman Sachs to underwrite a $72.5 million IPO. The following year, Goldman was hired again, this time for an additional sale of $1.25 billion worth of stock.

Also in 1999, Whitman and her husband began investing their personal wealth with Goldman, her lawyer said. In July, 2002, eBay hired Goldman again, this time to handle eBay’s $1.5 billion acquisition of the online payment business PayPal.

Goldman was paid more than $8 million for its work at eBay, wrote Delaware Judge William Chandler, who later presided over a shareholders’ lawsuit concerning the IPOs.

More importantly, Goldman also was able to buy 1.2 million shares of eBay stock at the IPO price of $18, the judge wrote in an opinion on the case. A year later, the stock was trading at $175 – a bump of $188.4 million.

While seeking eBay’s underwriting business, Goldman repeatedly gave Whitman and three other eBay officials the chance to buy IPO stock of other firms Goldman was taking public. Whitman bought more than 100 offerings, according to the judge’s account.

The executives “were able to flip these investments into instant profit,” the judge wrote. “… Whitman sold these equities in the open market and reaped millions of dollars in profit.”

Joining the board

By the time of the PayPal deal, Whitman was also a Goldman director. Appointed in October 2001, she was paid a package of cash and stock options for attending board and committee meetings. An expert who reviewed the pay package for this report said Whitman received the equivalent of $475,000 for attending perhaps a dozen meetings over the 15 months she was on the board.

When she was on the board’s compensation committee it twice signed off on big bonus packages for Paulson and four other top executives, including then-vice chairman Lloyd Blankfein, now CEO.

Paulson’s 2001 bonus package was $11.5 million, more than 19 times his salary, records show. The company earned $2.3 billion that year. In her two years on the committee, the five men were paid $79 million in bonuses.

The trend continued as Goldman’s profits soared in the intervening years. In January, under pressure from shareholders’ lawsuits, Goldman agreed to slash its bonus pool and cut back on pay by about 15 percent.

Whitman left the board soon after the IPO “spinning” controversy became public. In October, 2002, Rep. Michael Oxley, R-Ohio, chair of the House Financial Services Committee, identified 21 business executives who he said had obtained IPOs from Goldman and two other firms in exchange for bond business. Oxley called the transactions “corrupt.”

The Executives he named included William Clay Ford of Ford Motor Co., Enron CEO Kenneth Lay, Yahoo founder Jerry Yang – and Whitman.

Goldman denied wrongdoing, but months later, paid $110 million to settle its part of a Securities and Exchange Commission complaint that accused 10 Wall Street firms of misleading customers with biased stock research. As part of that settlement, “spinning” of IPOs was banned, records show.

For her part, Whitman insisted she had done nothing illegal or unethical, saying she was the victim of “the climate of finger pointing and scandal,” that accompanied the bursting of the dot-com bubble. She made a profit of $1.78 million on the IPOs, she told eBay employees. It was “a very small fraction of my investment portfolio,” she wrote in her book.

Nevertheless, two shareholders’ groups sued Whitman and the other eBay insiders, contending that money from flipping the IPOs should have gone to eBay. Eventually, Whitman and the other officials paid about $3 million to eBay to settle the suits. Goldman paid $395,000 of the settlement, she wrote in her book.

Goldman declined to comment for this story.

Whitman’s investments

Today, Whitman’s connection to Goldman endures through her investments. The financial report she filed as a candidate requires her only to give a general estimate of the value of her investments. Her lawyer declined to disclose the total value of her Goldman portfolio.

Still, the documents show she has a multi-million dollar stake in 21 different investment funds managed by Goldman. Most are private equity funds only open to investors who can put millions into a single fund.

She has more than $1 million in the firm’s Whitehall Street real estate funds, owner of the famed La Costa Resort in Carlsbad; $2 million in mezzanine funds, which provide high-cost financing, often for corporate leveraged buyouts; and more than $3 million in a telecom-related fund.

She has more than $1 million each in two Goldman “distressed opportunity” funds, which target companies facing possible bankruptcy.

Meanwhile, retirement funds for state workers, teachers and employees of the University of California have more than $1.3 billion in Goldman stock or equity funds. CALSTRS, the state teachers’ fund, has $299 million in a single Goldman investment.

Goldman a big player

Last fall, Goldman was underwriter of $8.8 billion in revenue anticipation notes when the cash-strapped state had to borrow to pay its bills.

More state borrowing — and thus, more bond issues — will be required before California gets its budget mess straightened out, experts say. If voters approve the $11 billion state water bond on the November ballot, “it’s a certainty” that Goldman will be among the underwriters, said Tom Dresslar, spokesman for state treasurer Bill Lockyer.

The treasurer’s office, not the governor, selects bond underwriters, and state retirement boards sign off on investments. But the governor has appointment authority at the retirement boards, and the power to propose and promote bond issues.

The issue of global warming will likely bring California’s next governor into contact with Goldman. With the passage of AB32, California is on the verge of creating a “market based program to cap carbon emissions,” the governor has said. Goldman has expressed interest in entering the cap-and-trade market. Schwarzenegger, a proponent of the new law, has met with Goldman on global warming issues, he said in a press release.

Whitman’s other continuing connection with Goldman involves campaign cash. Of the money she’s received from Goldman employees, $94,300 came from eight California-based executives of the firm.

If she is elected, Whitman will have to “disclose decisions that are being made by Goldman – and her part in them that relate to California,” said Robert A.G. Monks, a former federal pension trustee and corporate governance expert. “Frankly, I don’t know how she’s going to do that, because there’s a lot of it.”

Sphere: Related Content