December 12, 2009 / 12:03 AM / 8 years ago

Craigslist CEO: EBay's Whitman turned back on us

WILMINGTON, Del./SAN FRANCISCO (Reuters) - Craigslist’s chief executive said on Friday he was so alarmed by a “condescending” attempt by his counterpart at eBay to reassure him about their relations that he started maneuvering to remove the online auctioneer from his board of directors.

Jim Buckmaster told a Delaware court on Friday that eBay’s then-CEO Meg Whitman “slammed the door” on his request in 2007 to find a new owner for Craigslist shares held by eBay, which had just launched a rival U.S. classified ad business.

He felt Whitman essentially admitted using confidential information gathered at Craigslist board meetings for its own classified business and raised fears that eBay would try to own Craigslist outright.

“It was being implicated here that eBay would be acquiring the company,” said Buckmaster, referring to an email sent to him by Whitman in July 2007 in response to his earlier one to her expressing his desire to dissolve the relationship.

Whitman’s email indicated “eBay and its CEO, Meg Whitman, were going to turn their back on promises she made to us,” he said.

Buckmaster said after Whitman’s email, a Craigslist attorney began looking for corporate governance steps that led to the measures at the center of the suit: the dilution of eBay’s stake and its loss of a Craigslist board seat.

EBay claims that, after it launched the Kijiji online classified business in the United States, where Craigslist is the dominant player, Buckmaster and Craigslist founder Craig Newmark hatched a “coercive plan” to dilute eBay’s stake and eliminate its board seat.

Craigslist, meanwhile, has sued eBay in San Francisco, saying the larger rival used its board seat to glean confidential information about the classified ad business.

EBay -- which became a Craigslist minority shareholder in 2004 -- is seeking the reinstatement of its minority stake and board seat.

HIGH OPINION DASHED

Buckmaster -- who said Whitman had personally assured him in 2004 that the parties could “gracefully unwind the relationship” if ever needed -- said he had reached out to Whitman in hopes eBay would resell its shares to Craigslist.

“I had a very high opinion of Meg Whitman at this time,” Buckmaster said. “I was optimistic that I would get a good response from that.”

Craig Newmark, founder of the San Francisco-based website Craigslist, walks from the the courthouse during the Ebay versus Craigslist trial at the Chancery court in Georgetown, Delaware, December 10, 2009. REUTERS/Tim Shaffer

Buckmaster said he never would have signed the deal with eBay had he known executives would back-pedal on promises.

“That kind of conduct on the part of an organization is certainly not an organization we would choose to be associated with,” he said.

Earlier on Friday, Newmark acknowledged under cross examination that he did not voice his objections to eBay when the online giant launched Kijiji, keeping his suspicions, and subsequent disappointment, to himself.

“I never accused them with my specific unhappiness, which was a betrayal of trust,” said Newmark, who added he never again spoke with Whitman after agreeing to a shareholder deal.

In a week’s worth of testimony in Delaware Chancery Court, executives from two of the most prominent Internet companies testified to a series of missteps and betrayals that led to the unraveling of their relationship. A ruling on the case may come as early as January.

CULTURE CLASH

Newmark, who said he had never visited the Kijiji site, said he “didn’t want to voice a suspicion and only a suspicion that things were going badly,” when he first realized eBay was expanding into classifieds abroad.

EBay’s attorney sought to cast doubt on Newmark’s memory of events and claim that Whitman assured Craigslist that eBay would collaborate, but not compete, with it.

“The problem with coming to court and telling us what someone said is it’s hard to know (if it happened) ... when it doesn’t make it into the contract,” pressed the attorney.

“You’re right. I take people at their word,” replied Newmark on his second day on the stand.

Whitman, who testified Monday, told the Georgetown, Delaware, court she had considered classifieds an important area in which to expand and originally considered Craigslist as her company’s “play” in that market.

But testimony and evidence submitted to the court showed a culture clash from the start, whether eBay executives mocking Newmark and Buckmaster for “amateurish board meetings” or the Craigslist executives noting eBay’s focus on money-making.

The trial is taking place in Delaware, where Craigslist is incorporated and is being broadcast over Courtroom View Network.

The case is eBay Domestic Holdings Inc v Newmark, et al, Delaware Chancery Court, No. 3705-CC.

Reporting by Tom Hals and Alexandria Sage; editing by Steve Orlofsky and Andre Grenon

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