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EcommerceBytes-NewsFlash, Number 2179 - December 11, 2009 - ISSN 1539-5065     Previous | | Next
Craig Newmark Takes the Stand in eBay v Craigslist
By Ina Steiner
EcommerceBytes.com
December 11, 2009




The eBay v Craigslist corporate governance trial heated up when eBay's lawyer questioned Craigslist founder Craig Newmark late in the day on Thursday in the Chancery Court in Delaware.

Mr. Newmark seemed vague at times about the specifics of the stock maneuverings and Craigslist Board decisions, stating that CEO Jim Buckmaster and outside counsel Ed Wes generally discussed matters and then brought them to his attention.

But when eBay's attorney Mike Rhodes of Cooley Godward persisted in questioning him in what was the most contentious part of the trial to date, Mr. Newmark could not be rattled.

Mr. Rhodes asked about the heart of the matter - the decision by Newmark and Jim Buckmaster, both Board Directors, in 2007 to make changes that would force eBay to choose between putting its stock back under ROFR (right of first refusal) or of diluting its shares. Mr. Newmark did not indicate he felt he had compromised his fiduciary duties by taking those actions.

In addition, Mr. Rhodes spent about ten minutes asking Mr. Newmark if he had misled the Craigslist community when he was untruthful or evasive in answering their questions to him about whether he had received money as part of the eBay acquisition of Phillip Knowlton's shares. Mr. Newmark said he was rarely asked and generally avoided answering the question.

Under questioning by his company's own legal team, he had disclosed that he had received $9.5 million as part of the three-way deal between eBay, Craigslist and Phillip Knowlton, and said the negotiations team felt it was not appropriate to release the information.

When asked by Craigslist's lawyer if he had personal reasons for not wanting to disclose the sum, he cited physical security. He said Pierre Omidyar "had to travel with big guys with things in their ears," an obvious reference to body guards, and said he was not that comfortable with luxury anyway. He said in the course of doing customer service for Craigslist, he had received death threats and had online stalkers, so was concerned about making the information public.

Craigslist's founder expressed several times his disappointment with former eBay CEO Meg Whitman that she had not kept the promises she personally made to him during negotiations to acquire the Phillip Knowlton shares. Specifically, she had said eBay would be comfortable in holding a minority stake during a courtship period - but things changed after the deal went through, with repeated demands by eBay executives for a larger stake in the company, Newmark said.

Whitman had also promised that if the parties "decided not to get married," they would depart amicably - though she did not provide details about how that parting would occur.

Ms. Whitman had also had told him that Craigslist was the play for eBay in the classifieds space. After eBay launched its Kijiji classifieds site in the U.S., Mr. Newmark said he was disappointed, more dramatically than the initial disappointment when eBay first launched Kijiji overseas.

In Whitman's response to Mr. Buckmaster's letter to her after the launch of Kijiji in the U.S., "She was basically saying, while we were steadies, she had another steady. That was uncomfortable," Mr. Newmark said.

Was Newmark aware that Craigslist gave eBay confidential data? Yes. Did anyone tell him that Craigslist confidential data was being shared with eBay personnel that would be used to launch Kijiji? "That would have been a deal breaker," he said.

Mr. Newmark will take the stand on Friday morning for the completion of cross-examination by eBay's legal team, to be followed on the stand by Craigslist CEO Jim Buckmaster.

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