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Meg Whitman Week -- Wednesday: A Tawdry Episode

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.
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"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.