Meg Whitman says she lives by the principle of doing the right thing. It's there in the very first line of her autobiography.
"What is the right thing to do here?" she recalls challenging her underlings at EBay, where she was chief executive, after some troubling issue of customer service had arisen.
I've been trying to reconcile that principle with her actions in what's become known as her "spinning" scandal.
Eight years ago, it came out that Whitman was among an elite group of favored executives who had accepted preferential stock deals from Goldman Sachs while it was seeking business from their companies.
In spinning, executives would typically get shares in coveted initial public stock offerings, which they would "spin," or resell, into a soaring market, usually within days and sometimes within hours. Their quick and almost entirely risk-free profits were effectively gifts, and the investment banks the givers.
Whitman attempted to dodge responsibility for her actions by claiming that there was "nothing illegal" about them at the time. (This is rather at odds with a credo appearing on page 130 of her book: "Be accountable.")
Whitman's campaign suggests that the episode already has been thoroughly masticated in the press. "This is news that is literally very old," Whitman's spokesman, Tucker Bounds, told me.
Possibly, but it's also newly relevant. For one thing, Goldman Sachs is all over the news, these days for its alleged ethical shortcomings, as is the rest of Wall Street. More pertinently, Whitman, whose wealth from EBay now exceeds $1 billion, is running for governor. She has placed her business smarts and her "integrity" (the word appears on her website in big letters) front and center among the reasons Californians should vote for her. So if her business ethics and judgment have come into question, it's proper to review the facts.
Whitman got pulled over for spinning in 2002, when a congressional committee released a list of top executives who had received shares of hot IPOs from Goldman, Sachs & Co. during the high-tech boom of the '90s. She had participated in more than 100 IPOs, which put her near the top of the list. Three other EBay executives were in on the party, including its founder, Pierre Omidyar.
Whitman's links to Goldman Sachs go beyond spinning. She served on its board in 2001 and 2002 and invested in some of the firm's limited partnerships.
Spokesman Bounds points out that her rivals aren't exactly free of Goldman ties either. Steve Poizner, her opponent in the GOP primary, is a rich investor and former corporate executive who has had a stake in one of its investment funds.
And if Whitman gets past Poizner, she'll most likely face Democrat Jerry Brown, whose sister Kathleen, the former California state treasurer, is an executive in Goldman's Western region public finance department.
Yet the issue here isn't anyone's family connections or routine investments but Whitman's acceptance of preferential treatment from a firm angling to do business with her employer. (Whitman is currently divesting her ownership of the Goldman shares and options, Bounds says, a process that began before Goldman's latest legal problems surfaced.)
Whitman's defense appears in her 2010 book "The Power of Many." She says it's "totally false" to suggest there was any connection between the IPO deals and Goldman's winning investment banking assignments from EBay. She says she was offered the deals merely because her wealth made her a fabulous catch as a brokerage client. She says that not only were her actions legal, but "I had never seen anyone in government, the media or anywhere else raise the idea that this practice was a conflict of interest."
She says the deals, which netted her almost $1.8 million, were "a very small fraction" of her portfolio. She labels "absurd" the argument that these investment opportunities properly belonged to EBay, as they were "speculative" deals the company would never have accepted. Finally, she notes that Congress was so blase about the matter that it never even held hearings.
EBay shareholders, however, did sue her and the other executives in Delaware Chancery Court, a common venue for business litigation. There, in a ruling on the executives' motion to dismiss the case, a judge made short work of some of these points. He said EBay did plenty of investing in stocks and bonds during the boom years, and was entitled to take a crack at the opportunities that went to its executives instead.
"Nor can one seriously argue that this conduct did not place the defendants in a position of conflict with their duties to the corporation," he added. Whitman and her colleagues "were not free to accept this consideration from a company" that arguably hoped to induce them to keep funneling business its way. Whitman and the other executives eventually settled the lawsuit by giving up their profits.