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PayPal row heats up as eBay chair calls Icahn claims 'false and misleading'

Mud-slinging begins as investor pushes for PayPal spin-off

Internet Security Threat Report 2014

eBay chairman Pierre Omidyar has said activist investor Carl Icahn's comments about the firm are "false and misleading" as the row over the fate of PayPal heats up.

In one of his notorious open letters to shareholders, Icahn accused eBay's board of having conflicts of interest that had affected its decision not to spin off PayPal, as the investor had suggested.

But billionaire founder and board chairman Omidyar said his "attacks" were "false and misleading".

"A new shareholder, Carl Icahn, is making unsubstantiated claims about our company - and deliberately impugning the integrity of our directors," he said in a statement.

"Instead of having an honest discussion about a reasonable question, Mr. Icahn has chosen to attack the integrity of two highly respected and qualified board members, Scott Cook and Marc Andreessen. He also has attacked the integrity of our CEO John Donahoe."

Icahn suggested that Cook, who is the founder of financial software firm Intuit, had a conflict of interest when it came to PayPal.

"eBay has previously stated that Mr Cook’s company, Intuit… and PayPal are not competitors. However, to state they are not competitors is absurd," Icahn claimed.

"Both PayPal and Intuit have publicly declared the increasing importance and the desire to greatly expand within payment processing over the long-term. Both companies have identical product offerings such as 'PayPal Here' and 'GoPayment', among many others.

"In our opinion, having Mr Cook on the board while planning PayPal’s future is akin to having Pete Carroll, coach of the Seattle Seahawks, sitting in when the Denver Broncos were constructing their game plan for the Super Bowl (then again, maybe he did)."

Icahn also alleged that Andreessen was sitting on the board of "no less than five competitors" to PayPal and accused him of a previous conflict of interest on eBay's board to boot. Icahn said that eBay was planning to put Skype up for an IPO when it owned the firm, but Andreessen and his investor group bought it instead at 70 per cent less than what eBay paid for it.

"Had eBay sold Skype to Microsoft at the price paid to Mr. Andreessen’s group, eBay shareholders would have been at least $4bn richer upon the sale. Mr. Andreessen’s group profited by about $4bn in only a year and a half. This is an indisputable fact," he said.

He demanded that eBay chief John Donahoe hand over the records of eBay's deliberations about what to do with Skype.

Omidyar said that eBay had a "world-class board" and that Cook and Andreessen were "world-class directors with impeccable credentials".

"Throughout the board’s process of divesting Skype, Marc Andreessen recused himself from all deliberations on the transaction, including all discussions, negotiations, and decisions," he said. "eBay and its shareholders benefitted from the divestiture of Skype and its ultimate sale to Microsoft. The transactions were widely seen as a superb outcome for the company.

"Mr. Icahn’s claims about Scott Cook also are unfounded. As founder of Intuit and chairman of the company’s executive committee, Scott has an exceptional track record of creating value and driving innovation. He has been an enormous asset to eBay’s board for many years. The overlap between Intuit and eBay is small for both companies."

Omidyar didn't respond to Icahn's offer to publicly debate the issues on CNBC. ®

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