Meg Whitman Week -- Wednesday: A Tawdry Episode

"Why did she risk the assault on her integrity and that of the company she has run so well? She certainly didn't need the money. Nor could she have been unaware of how unfair the practice is to small shareholders."

-- William G. Flanagan, Dirty Rotten CEOs, on Meg Whitman

"It's time to run California like a business."

-- Meg Whitman

Meg Whitman isn't the richest woman in California. She's only the fourth richest. In fact, she's barely the 897th richest person in the universe. And voters get that. That's what gives her that common touch you just wouldn't get from Queen Beatrix of the Netherlands.

And Meg Whitman earned her money herself. All $1.4 billion of it. It came from perseverance, patience and long hard honest work. Except for the $1.78 million from Goldman Sachs. Which she stole.

But she gave it back when they caught her. (Maybe there's a campaign slogan in that: "Whitman for Governor. If You Catch Me Stealing I'll Give it Back.") And the whole incident made her feel just awful.

She not only returned the cash, she emailed this note:

"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."

And since that day, her life has been charted by one lodestar and driven by one idea: The rules of corporate governance and business ethics must be loosened up.

But I'm getting ahead of myself.

It's like this:

Meg Whitman was the CEO of eBay. EBay's investment bankers were Goldman Sachs. EBay didn't have to hire Goldman Sachs to be their investment bankers, because this was a few years ago, when there were lots of banks, and not just the three we keep bailing out. Goldman Sachs was very grateful for eBay's business and they had a special way of showing their gratitude to eBay's executives. Goldman Sachs would let them buy shares in other companies whose initial public offerings they were underwriting. This was during the dot-com era and IPO companies often posted huge first-day gains. After Meg Whitman brought eBay's business to Goldman Sachs, she bought shares in 100 Goldman Sachs IPOs one day and sold them the next day. She made 1.78 million dollars.

It was a good day's work.

Don't think of it as a kickback. Think of it like Discover, the Card that Pays You Back.

Former SEC commissioner Steve Wallman had a less nice way to describe it:

"It's a black-and-white corporate bribery issue."

Who else was getting Goldman Sachs' insider trading frequent flier miles? People like the hardworking executives at WorldCom and Enron chairman Kenny Lay.

The process was called "spinning." Sorry, you're not allowed to do it anymore.

In 2002, a House Financial Services Committee found out about it. And so did eBay stockholders, who then sued their own executives for breaching their fiduciary responsibilities to the company by insider trading and not bringing enough for everyone.

Whitman and other eBay executives settled the suit by paying three million dollars, while denying that any of the allegations were true. Goldman Sachs kicked in another 300 grand.

By complete and total coincidence, Meg Whitman had been given a seat on the board of Goldman Sachs. She was forced to resign in disgrace. She'd been there 14 months. Which reminds me of my favorite line from Wall Street:

"You'll have the shortest executive career since that Pope that got poisoned."

It must have hurt. To a grade-grubbing ass-kissing resume-polisher like Meg Whitman it must have really, really hurt.

I think it's the whole reason she's running for governor. I think she doesn't just prattle on about cutting unfair regulations all the time because it's a Republican talking point. It's personal. She broke a rule. So the rules must be wrong.

I think what she really wants is vindication for her shame.

I don't think she wants to be governor for the fame or the power. And she's made it abundantly clear that she doesn't want the job so she can help anyone.

I think she thinks the people of California are the tools of her absolution.

Comments

[mysteryauthor]

Meg Whitman is typical of today's Robber Baron executives who believe they have a right to everything they can steal.

Ken Lay, Jeff Skilling, and Bernie Ebbers have become the poster children for predatory capitalism. Executives like Meg Whitman and many of the financial and wall street execs are driven by greed and narcissism and have a false sense of entitlement.

What they don't understand is their avarice has been the key driver in the destruction of our economy and until people at the top, like Meg Whitman, are exorcised this economy will continue its downward spiral and take everyone with it.

But someone's getting revenge in "Final Audit," my book about greed, corruption, and death at http://mystriguepress.com.

Jim Worth
Author, "Final Audit"

[123andy]

Just name for me the politician who is really clean. Never had even the tiniest grain of dirt on them. I am waiting...­..........­..........­..........­..........­.........I suspect it will be a long, long wait.
You may be able to find a CEO, or maybe two, but not too many. But that puts CEOs just a touch ahead of politicians.

[jhNY]

Now you're just guessing-- and betraying a personal bias. There's no reason on earth to believe any CEO anywhere is one whit more clean than any politician. It's a race to the bottom and nobody wins.

[Cowboylove]

Meg Whitman has no soul. She makes Kenny Lay seem like a boyscout - and he was Satan's spawn.

[chelliza]

So this "little bit of dirt" shouldn't stop her from being govenor? Think she'll do a great job, huh?

[FoonTheElder]

I don't care about dirt as much as what they are going to do when they get in office. Unfortunately, politicians who haven't sold out can't get elected to any high level office because the big corporations won't pay for their campaigns like they do for the big corporate suck-up candidates. In America, if you have no money, the corporate media ignores you because you don't have any money to spend on media ads.

[Jond0]

Dennis Kucinich

Jimmy Carter

Jesse Ventura

Al Franken

Howard Dean

I'm sure there are others, but I didn't want to keep you waiting too long.

[Patricia013]

I'm so happy to hear all the real dirt about Whitman coming out. I only know her after 10 years of selling on Ebay and I know she was iron-fisted and beat as much as she could out of the sellers (a tradition being carried to extinction by her cohort John Donahoe). She can't possibly be interested in the common people of California - she would see them simply as dollar signs...just as she saw Ebay's sellers. Just a herd to be manipulated and milked! Haven't we seen enough of that in California? We deserve decent guidance and Whitman is not it! I just cannot understand why she doesn't stay home and play with her money.

[delvis]

when you have to rely on honesty, even when buyer beware is the rule, Ebay fails to deliver.

[martinchill]

Hump Day - perfect for a "tawdry episode"... chris is the man!

[Redeemer777]

Chris you make me wish I had a third thumb so I can give you three thumbs up!

I still think you should do a piece on Meg in an F-22

[marinade]

1. Chris, you are funny.

2. Meg wants to be queen but she is a crook.

[Sinick]

A note to Californians: Nobody has been able to pin anything similar on John Corzine, and look what he's accomplished for the state of New Jersey! There's little evidence that corporate execs are more effective politicians than anybody else, except for actors maybe.

[JohnJudy]

The three most beautiful words in the English language: "Chris Kelly. Daily."

[plebeianswillrevolt]

Ebay was the untimate Corporation run for the benefit of insiders and analysts, by managing the numbers, giving "guidence" and beating the quarterly guidence by a penny so the stock would "pop. Do research on the history under Meg's tenure of this pattern of misbehavior. Look at the "guidence" she gave -- which is telling Wall Street what you expect to earn for the quarter, and then what the actual results were on "earnings release day" --- and the stock price results on that day. She was jerking the business around like a tuna on a fishing boat. Ebay had financial reserves and so-called "honey pots" of funds that were reserved and released into the books for years. all designed to manage the stock price for the benefit of executive stock options (she was the biggest holder ---- that's how she got "worth" $1.4 billion, and the benefit of Wall Street stock flippers like Soloman Brothers, eeer. Goldman Sacks.You don't get a seat at that table by flipin' pancakes.

Great article,,,­interestin­g, thanks!

a pleb.

[wendy82551]

I'm loving this series, loving it! Whitman is the beneficiary of the delusional notion that the corporate model (and, therefore, the corporate ruling class) is the ONLY organizational structure that makes any sense. A government run like a corporation? Spare us all. I hate to point to the obvious, but corporate culture and democracy are diametrically opposed to one another.

[writerjohnny]

Spot on Wendy. Das Kapital and the Communist Manifesto are MUST reads for everyone who is genuinely concerned about their future and their children's futures. The ruling reactionary class has attacked and "destroyed" communism and the idea of communism many times since Marx brilliantly analyzed the history of humanity's progression of class systems and the struggle for real equality. The "dictatorship of the proletariat" is NOT a dictatorship by one person. The proletariat are the humans who actually productively contribute to society as in the great majority of us, democratically speaking. Stalin was NOT a commie. He was a megalomaniac who killed off most of the real communists as soon as he could.

[sanych]

We don't have Capitalism in the way Marx described it.

The system we have today is, actually, looking more and more like the old Soviet one - with talentless oligarchy ruling over gray quiet masses.

The problem with Marx utopian theory is that the power is invariably consolidated and grabbed by the most ruthless, "power-hungry" people, who are willing to go over heads and bodies to get it.

Like Meg Whitman...

[KHAAANNN]

"Das Kapital" (subtitle: An Economic Interpretation of History) is a good book with many salient observations and conclusions.
The "Communist Manifesto" on the other hand is Utopian tripe replete with finger-pointing, blame-shifting, and more B.S. than insight.
By all means, read them both (there is no such thing as too much information) but draw your own conclusions.

[propitiousmoment]

You are the first person I've seen since my college political philosophy prof who got that analysis spot-on. Stalin was not a communist. Thank you.