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EBay Shareholders Sue Firm, Officers Over IPOs

October 07, 2002|From Bloomberg News

Two EBay Inc. shareholders have sued the world's largest Internet auctioneer and its executives, accusing them of improperly benefiting from shares of initial public offerings underwritten by Goldman Sachs Group Inc.

EBay shareholders James Nolan and Michael Marra, in separate suits filed last week in Santa Clara County Superior Court, accused board member Robert Kagle, founder Pierre Omidyar, Chief Executive Margaret Whitman and former Vice President Jeffrey Skoll of breaching their fiduciary duties and usurping corporate opportunities.

The House Financial Services Committee is probing whether Goldman Sachs, the biggest underwriter of U.S. initial share sales, let executives buy shares before they were traded in exchange for investment banking business.

Documents released by Congress show that in the last four years stock allocations yielded instant profits to executives at EBay, Global Crossing Ltd. and 19 other firms.

The EBay shareholders said in the suits that the executives "breached their fiduciary duty of loyalty, and usurped corporate opportunities belonging to EBay, by accepting, selling and personally profiting from IPO shares allocated by Goldman in exchange for directing EBay's investment banking business to Goldman."

Kevin Pursglove, a spokesman for San Jose-based EBay, said he could not immediately comment on the suits.

Shares of EBay rose 45 cents Friday to $52.35 on Nasdaq

The shareholders are asking a judge to set up a constructive trust for the company for the profits the executives reaped from the sale of their IPO shares.

Goldman was EBay's banker on the $1.5-billion acquisition of electronic payments company PayPal Inc., which closed on Friday.

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