Pierre Omidyar's corporate spying scandal buried for good as eBay sells Craigslist stake
It didn’t get much attention, but eBay just quietly unloaded its 28.4 percent stake in Craigslist, putting to rest one of the most sordid episodes in Silicon Valley, in which eBay executives — including First Look Media publisher Pierre Omidyar and HP chief Meg Whitman — were directly implicated in corporate spying, stealing secrets, and exploiting Craigslist’s anti-capitalist idealism.
Terms of eBay’s “sale” of its stake back to Craigslist are confidential — but it makes sense that eBay would want to close out a major outstanding liability like its 8-year-long legal battle with Craigslist now, just as its highly anticipated spinoff of its PayPal unit is about to take place.
The eBay-Craigslist legal scuffles have gone largely unnoticed, underreported, or completely misreported, which is a shame given the incredible drama and the high-profile names involved.
Few people are even aware that First Look Media publisher Pierre Omidyar was investigated by a federal grand jury in 2011 for criminal fraud and misrepresentation—essentially stealing Craigslist’s secrets and handing them to eBay. Omidyar was specifically named in the September 7, 2011 subpoena, which strongly suggested an ongoing FBI and US attorneys office investigation into the First Look Media publisher’s role in “stealing Craigslist’s secret sauce,” as a Delaware judge described it.
As we reported last year, eBay aggressively pushed to get control of the 28 percent stake in Craigslist held by one of the company’s three partners, who put it up for sale in 2004. Craigslist balked, fearing that eBay would destroy its altruistic, anti-capitalist, community-based culture. When the deal fell through, eBay Chairman and primary shareholder Pierre Omidyar was brought into the negotiations to convince Craigslist that his only interest was in maintaining Craigslist’s values and that community-based culture. Omidyar and other eBay executives withheld from Craigslist one vital piece of information: eBay was already working on launching its own online classifieds operation, Kijiji, which in private memos eBay executives nicknamed “Craigslist Killer.”
Omidyar convinced the two remaining Craigslist founders—Craig Newmark and Jim Buckmaster—that his intentions were as pure as theirs were; in return, not only did they accept eBay’s offer, they also insisted that Omidyar sit on Craigslist’s board of directors—a position Omidyar used to pass on more of Craigslist’s proprietary “secret sauce” to eBay’s “Craigslist Killer” project.
Craigslist’s founders were caught completely unawares by Omidyar’s duplicity. As Buckmaster wrote in an email to Meg Whitman back in 2004:
“i should also mention that craig has immense respect for pierre, and it would mean a lot to him personally to have such a giant and pioneer of online community working with us at craigslist in this capacity.”
The Pierre Omidyar revealed in emails, memos and filings is very different—far more cunning and calculating—than the goofy billionaire waif portrayed in snotty East Coast magazines. Perhaps the goofy billioinaire Omidyar is more comforting for journalists and readers alike; but actually believing in the Omidyar-waif can be dangerous, as Craigslist’s owners discovered:
“After the meeting, Omidyar reported back to [eBay executive Garrett] Price that he did not think he raised any ‘red flags’ in Newmark’s mind. As a result of Omidyar’s assurances, Newmark trusted that eBay shared the same community values as craigslist.”
In the Delaware judge’s ruling in one of the two main lawsuits -- which stated that Craigslist was right in stripping eBay of its board seat, but wrong in unilaterally diluting eBay’s shares -- he confirmed many of Craigslist’s core grievances against eBay and Omidyar:
“eBay executives calculated that the eBay-craigslist relationship would at least provide them with an opportunity to learn the ‘secret sauce’ of craigslist’s success, presumably so that eBay could spread that sauce all over its own competing classifieds site.”
When Craigslist’s owners finally discovered a few years later that they’d been used and deceived by Omidyar and other eBay executives to help them launch their own “Craigslist Killer” project, they initially tried to discuss their concerns privately and discreetly—and got rudely shut down.
Garrett Price, an eBay executive whom Omidyar named as his replacement on Craigslist’s board of directors, responded to Buckmaster’s emails about their relationship by telling Buckmaster
“that he and Newmark were mortal, but eBay was not, and eBay would acquire 100 percent of craigslist whether it took decades and, if necessary, over Newmark’s and Buckmaster’s dead bodies.”
Buckmaster responded by reminding Price of their agreements, particularly their agreement to have a three-year “courtship period” to see if their two company cultures properly meshed.
Price responded to Buckmaster:
“that was then, this is now."
He also threatened to unleash Meg Whitman the predator on Craigslist’s doe-like owners, warning that there were two Meg Whitmans:
“the good Meg [and] the evil Meg [who] could be a monster when she got angry and frustrated.”
The reality is that the two corporate cultures were as antithetical as any imaginable in Silicon Valley. Behind their backs, Craigslist’s anti-greed, community-oriented values were a source of much laughter and derision in private eBay executive emails that mocked Craigslist for holding “amateurish board meetings,” describing its owners as “definitely from another planet.”
Meanwhile, eBay continued using its board seat and stake in Craigslist to “steal its secret sauce.” In an email containing proprietary Craigslist budget figures, written by eBay’s in-house counsel Brian Levey to other executives, he boasted:
“Here are the numbers for [c]raigslist’s 2007 financial plan. Look at all that cash! Please pass along to whomever on a need-to-know basis. Thx!”
In 2009, a Delaware judge asked eBay’s counsel, Levey, to confirm he’d really done that:
“Q. You took confidential craigslist information and you gave it to the people at eBay that were planning to launch Kijiji in the United States in the spring of 2007, didn’t you?
“Levey: Yes.” Finally, in 2007, Craigslist’s Buckmaster wrote to eBay’s Meg Whitman asking to formally terminate their agreement and return their shares. When Whitman didn’t respond, Craigslist’s attorney contacted eBay’s Brian Levey and asked him how Whitman reacted to Buckmaster’s email. Levey responded,
“How would Jim [Buckmaster] and Craig [Newmark] react if Whitman told them to go ‘pound sand’?”
Whitman and eBay achieved peak Steve Jobs asshole-ery in a series of email exchanges after reading a Fortune magazine article in which Craigslist’s Buckmaster still somehow managed to maintain a positive attitude towards his eBay shareholders, telling the interviewer that while he was concerned about eBay’s new online classifieds business, “our first instinct is still to trust eBay.”
Whitman quoted that in an email she sent around to other eBay executives, saying she found Buckmaster’s optimism “pretty funny.”
eBay’s Garrett Price—Omidyar’s choice to replace him on Craigslist’s board—emailed Whitman back:
“[y]es, I am glad to read that he trusts us."
To which Whitman responded with a Jobs-ian smiley:
“Love this. :)”
Now that the two companies have finally settled and moved on, and the federal criminal investigation into Omidyar and other executives appears to have been put to rest, the real question hanging over this is the role that the Intercept’s publisher played in stealing “the secret sauce” from idealists who trusted him. Omidyar was investigated in 2010 and 2011 and perhaps beyond that; we don’t know. Like the Ferguson policeman who shot to death Michael Brown, Pierre Omidyar is one of those rare lucky few Americans investigated by a grand jury, but never charged or indicted.
Two years after being criminally investigated for stealing secrets and misrepresentation, Omidyar ingratiated himself with a pair of journalists, Glenn Greenwald and Laura Poitras, who were the only two people given the complete cache of Snowden secrets. When initially asked about Omidyar’s trustworthiness, back in 2013, Greenwald told Amy Goodman that he believed Omidyar,
“would not start a new business in order to make money. He would only start a new business for some goal, some civic-minded goal.”
Craigslist’s owners had also once believed in Omidyar’s civic-minded goals, only to turn around a few years later and accuse Omidyar of conduct they described in their court complaint as,
“malicious, fraudulent, oppressive and was, on information and belief, carried out with a willful and conscious disregard of the rights of craigslist.”
Now, with the lawsuit settled and Craigslist and eBay separating for good, the full story of what Pierre Omidyar did to help eBay steal Craigslist’s “secret sauce” may never be known.
[illustration by Brad Jonas]