cap debate watching guide - 3-15-2010

8/14/2019 CAP Debate Watching Guide - 3-15-2010

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California Accountability Project Debate Watching Guide1 of 31

2010 GOP Gubernatorial Primary

Meg Whitman vs. Steve Poizner

Republican Debate Watching Guide
http://www.californiaaccountability.com/steve-poiznerhttp://www.californiaaccountability.com/steve-poiznerhttp://www.californiaaccountability.com/blog/meg-whitman-finds-facts-are-pesky-things-so-she-fudges-them-abandonhttp://www.californiaaccountability.com/blog/meg-whitman-finds-facts-are-pesky-things-so-she-fudges-them-abandonhttp://www.californiaaccountability.com/meg-whitmans-campaign-runs-rails-oaklandhttp://www.californiaaccountability.com/meg-whitmans-campaign-runs-rails-oaklandhttp://www.californiaaccountability.com/meg-whitmans-campaign-runs-rails-oaklandhttp://www.californiaaccountability.com/meg-whitmans-campaign-runs-rails-oaklandhttp://www.californiaaccountability.com/blog/meg-whitmans-bermuda-and-cayman-islands-tax-shelters-why-she-must-release-her-taxeshttp://www.californiaaccountability.com/blog/meg-whitmans-bermuda-and-cayman-islands-tax-shelters-why-she-must-release-her-taxes


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The central argument of Meg Whitman's candidacy is her success in thecorporate world; since she has no experience whatsoever in public policy orgovernance.

But the record shows that - on the whole - Whitman's business record is one ofmediocrity and misconduct.

MEG WHITMAN AT E-BAY

When she resigned as President/ C.E.O. in 2008, Whitman left e-Bay withSliding Revenue and Profit, and an Identity Crisis, after Missteps,

and Mixed Results.

Ms. Whitman said she couldnt be prouder of her track record. But in the pasttwo years, eBay has been mired in a pronounced slowdown in growth and apainful transition. Buyers have fled the online marketplace, which many say iscompromised by forgeries, disreputable sellers and an unpredictable buyingexperience, and the companys stock has lost two-thirds of its value. BradStone, New York Times, February 22, 2009

Analysts widely see eBay as a company in need of reinvention as revenue fromits core auction business drops and as shoppers choose fixed-price online retail

sites dominated by Amazon and other competitors. A May 2009 Wall StreetJournal story about eBay's identity crisis noted that the company has hadsliding revenue and profit in the past two quarters, while Amazon has reportedrecord earnings. Jack Chang, Sacramento Bee, January 10, 2010

The Republican candidate has taken flak for some of eBay's perceivedmissteps, including its purchase of online phone service Skype and the roughly50 percent drop in eBay's stock since 2004. Whitman left the company last year.

Sacramento Bees Capitol Alert, November 30, 2009

Until she stepped down as CEO in 2008, Whitman tried to keep that momentumgoing by expanding to foreign markets and tirelessly seeking acquisitions withmixed results. For example, eBay purchased such lucrative companies as themoney-transfer firm PayPal but also paid what many considered an inflated pricefor the online telephone company Skype without acquiring its underlyingtechnology. They clearly made some decisions that in hindsight don't look sohot, said industry analyst Peter Zollman.... Whitman may have fallen short byZollman's measure. Nearly two years after her resignation as CEO, eBay's futureis uncertain, with its stock price about 40 percent of its peak November 2004value. Jack Chang, Sacramento Bee, January 10, 2010


WHITMAN SAYS:

I was a great success in the business world. I'llrun California like a business.


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Whitman Camp Suggests She Was A Superstar at e-Bay, But e-Bay FolksArent Talking

Most of Whitman's colleagues at eBay, however, have stayed mum about hertenure, and the company declined to speak to The Bee. Whitman's campaignalso refused a request to interview her. To date, her campaign has tightlycontrolled media access to the candidate. Others who wouldn't comment include:co-founder Omidyar; former technology leader Mike Wilson; former ChiefFinancial Officer Gary Bengier; and Bob Kagle, a general partner at the venturecapital firm Benchmark Capital, which was an early investor in eBay. JackChang, Sacramento Bee, January 10, 2010

Whitmans Description of Her Tenure at e-Bay Doesnt Square with Reality

Whitman often describes eBay's halcyon early days in her campaign stumpspeech, although parts of her account clash with other descriptions of that time.Whitman has dramatized the company's growth by describing how when shearrived, she had to replace lawn chairs still being used by employees with realoffice furniture. Cohen's book, however, tells how Omidyar and Skoll had alreadyreplaced the lawn furniture at the end of 1997, at least a month before Whitman'sarrival. Jack Chang, Sacramento Bee, January 10, 2010

Whitman Claims She Wants to Help Californias Small Businesses, But asHead of e-Bay, She Hiked their Costs Repeatedly To Turn a Profit

For a long period of time, eBay generated revenue growth by raising fees onsellers, said Scot Wingo, the founder of Channel Advisor, which helps smallbusinesses sell on the Internet. Now everyone is starting to realize that wasunsustainable. Brad Stone, New York Times, February 22, 2009

Sellers also complain that, under pressure to meet Wall Street expectations,eBay under Whitman repeatedly jacked up fees, driving off many sellers andmaking the site far less profitable for others. - Ken McLaughlin/ Pete Carey,San Jose Mercury News/ Contra Costa Times, October 4, 2009

Whitman Erected Burdensome Regulations at e-Bay

Whitman certainly has her detractors, including many sellers who, ironically,complain that eBay during her reign erected a thicket of rules that were every bitas burdensome as the government regulations she now assails. - KenMcLaughlin/ Pete Carey, San Jose Mercury News/ Contra Costa Times,October 4, 2009


WHITMAN SAYS:



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Whitman Led e-Bays Purchase of Skype, Costing the Company More than$1 billion in Losses

Ms. Whitman also led eBays 2005 purchase of the Internet calling serviceSkype, in part based on the belief that eBay buyers and sellers would want totalk to each other to close deals. Most did not, and less than two years later,eBay acknowledged the mistake and wrote off more than half of the $2.6 billionpurchase price. Brad Stone, New York Times, February 22, 2009

Clearly the worst decision was buying Skype for $3.1 billion, on the questionabletheory that eBay buyers and sellers would flock to the service to talk to each

other to close their deals. Whitman eventually admitted she paid too much forSkype, and the company took a $1.4 billion write-down. Meg was trying to paperover the cracks with acquisitions, and Skype was an unmitigated disaster, saidJeff Lindsay, an analyst with Sanford C. Bernstein. I think she did a good job ofkeeping the growth going for the first five to seven years. But when the growthstarted to slow down, her record is a lot more mixed. - Ken McLaughlin/ PeteCarey, San Jose Mercury News/Contra Costa Times, 10/4/09

Skype: Meg Whitmans $3 Billion Flop Investment for eBay

Which makes sense, since Kazim was her point man at Skype eMegs $3

billion flop investment for eBay. Calbuzz doesnt expect to hear any critical eMegwar stories from these guys; for sheer interlocking intertwinedeness, the Tokoniconnection is unmatched. Jerry Roberts and Phil Trounstine, Cal Buzz,February 4, 2010


WHITMAN SAYS:



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Whitman Made Tactical and Strategic Missteps During Her Tenure At e-Bay

And there have been a handful of tactical and strategic missteps duringWhitman's tenure. In 2002 she pulled eBay out of Japan, the world's secondlargest economy and Internet user, when it became clear that Yahoo Japanthen controlled by Japan's Softbankhad gotten there first and grabbed aninsurmountable lead. She figured that eBay naturally would be a hit in the offlineworld and so spent $235 million of eBay's stock in 1999 buying traditional auctionhouse Butterfield & Butterfield in San Francisco. The synergies were elusive;eBay quietly sold Butterfield in 2002 for what it calls an immaterial gain. Her

costliest mistake also offered the biggest lessons about how much the eBaycommunity determines the company's success. In 2001, eBay unveiled acheckout procedure for completing transactions. The initiativeworked well,allowing buyers and sellers to settle bills quickly. But instead of hailing it, theeBay community went crazy. The problem: The checkout procedure seemed tofavor payment via Billpoint, eBay's payment-processing service. Frequent sellershad grown attached to PayPal, then an independent company, and weresteamed that eBay was subverting their choice. About one-third of the sellershated it, says Jordan. They puked on it. For me it was a lesson in humility andan object lesson that this is a joint venture. The train kept on rolling, it seemed,whether eBay was working the levers or not. The company quickly made the

checkout function optional, and in 2002 eBay bought PayPal for $1.5 billion,hundreds of millions more than it might have paid a year earlier. AdamLashinsky, Fortune, August 11, 2003

Whitmans Reign at e-Bay was Blemished with Poor Decisions and aSeries of Ethically Dubious Stock Deals

In recent weeks, the Mercury News interviewed numerous current and formereBay employees, buyers and sellers, investors and stock analysts, asking themto judge her performance and predict how it might translate to running the state.The consensus: Whitman was a hands-on and savvy CEO whose reign was

somewhat blemished by poor decisions and a series of ethically dubious stockdeals. - Ken McLaughlin/ Pete Carey, San Jose Mercury News/ ContraCosta Times, October 4, 2009


WHITMAN SAYS:



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Whitman Raked in Nearly $2 Million Through IPO Spinning, A Practice NowBanned

some fault Whitman for her ready acceptance of friends and family stockfrom Wall Street giant Goldman Sachs during the superheated dot-com era. Untilthe practice was banned in 2003, brokerage houses routinely allocated shares ofhot stock offerings to top executives as a reward for giving the investment firmscorporate business. Whitman had hired Goldman to take eBay public in 1998.For the next four years, the investment bank allocated to her shares in more than100 initial public offerings. All told, Whitman made a $1.78 million profit when shesold the stocks. After being singled out in a congressional report that called the

IPO system rigged and corrupt, Whitman issued an internal memo to eBayemployees saying she got the shares because she was a personal client ofGoldman Sachs. There is nothing worse than having your integrity questionedunder circumstances where you know that you did nothing wrong, she wrote. Yettwo professors who focus on business ethics David Shapiro at the CityUniversity of New York and William Black at the University of Missouri-KansasCity predict the issue might prove troublesome for her on the campaign trail.The fact that she could say she could learn no ethical lesson is illustrative ofmoral blindness, Black said. - Ken McLaughlin/ Pete Carey, San JoseMercury News/ Contra Costa Times, 10/4/09

MEG WHITMANS BUSINESS CAREER BEFORE E-BAY

Whitman Pre-eBay was So Ordinary

Like many Silicon Valley standouts, she was never a star in the old economy.People who worked with Whitman pre-eBay say she was smart but so ordinary.She responds, Well, I always felt that if I kept my head down and delivered,things would work out. From Disney she moved to FTD (flowers) as CEO, whereshe failed to fix the business. At Hasbro, she ran the preschool division. Goingfrom CEO to division president was great, says Whitman, 43. I was able to dothe Hasbro job effectively and raise two young boys at the same time.

Patricia Sellers, Fortune, October 25, 1999

Whitman was Never Too Successful Before Joining ebay

She was never too successful in her previous career. And you find this pattern alot in Silicon Valley. It's the people that don't make it in a big way in traditionalcorporate America, who are the ones who are restless, who are the ones who areeven the misfits, who make the leap, who take the gamble. Patricia Sellers/Fortune Magazine/ CNN Newsstand, October 7, 1999


WHITMAN SAYS:



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MEG WHITMAN AT FTD

It was her two years as chief executive of Florists' Transworld Delivery inMichigan, though, that proved her biggest disappointment. Ms. Whitman hadbeen hired by the florist-owned member association in 1995 -- better known asF.T.D. -- to help smooth its transition to a privately held company. But several keymembers opposed the idea, quick decisions were politically impossible andcompetition was eroding market share. Conceding defeat, Ms. Whitman quit in1997, moved briefly to Hasbro and the next year found herself at Ebay. -LauraM Holson, New York Times, May 10, 1999

Whitmans own executive assistant at FTD, Peggy Bacarella, was highlycritical of her tenure at the Company, noting Whitmans leadership waspoorly received, and saying:

"She considered all of us nothing but auto-company rejects, and she didn't wanta bunch of auto-company rejects working for herI found her to be very, verycold and impersonal, probably the coldest person I've ever worked for." [PeggyBacarella, as quoted by Jack Chang in the Sacramento Bee, March 7, 2010]

The Bee added that Whitman left FTD after two disappointing yearsstruggling to turn a profit. This company is not fixable, at least not by me,

Whitman told FTD Chairman Richard Perry at the end of her term. [Jack Chang,Sacramento Bee, 3/7/10]

It was her two years as chief executive of Florists' Transworld Delivery inMichigan, though, that proved her biggest disappointment. Ms. Whitman hadbeen hired by the florist-owned member association in 1995 -- better known asF.T.D. -- to help smooth its transition to a privately held company. But several keymembers opposed the idea, quick decisions were politically impossible andcompetition was eroding market share. Conceding defeat, Ms. Whitman quit in1997, moved briefly to Hasbro and the next year found herself at Ebay. [Laura MHolson, New York Times, May 10, 1999]


WHITMAN SAYS:

http://topics.sacbee.com/FTD/http://topics.sacbee.com/Chairman+Richard+Perry/http://topics.sacbee.com/Chairman+Richard+Perry/http://topics.sacbee.com/Chairman+Richard+Perry/http://topics.sacbee.com/FTD/http://topics.sacbee.com/FTD/


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MEG WHITMAN AT THE STRIDE RITE CORPORATION

Meg Whitman worked as a senior executive at the Stride Ride Corporation from1992 through 1995, serving as President of the Stride Rite Division, as well asExecutive Vice President of the Companys Keds Division.

In 1992, the company started overcharging customers on 5 million pairs ofshoes. Beginning in 1993, state and federal authorities investigated the scheme.Eventually, the Federal Trade Commission and all 50 State Attorneys Generaldetermined that their behavior was a price-fixing scheme and the company wasforced to pay $7.2 million in fines and enter into an injunction.

In 1992, Meg Whitman Joins the Stride Rite Corporation, Serving as aSenior Executive Through 1995

Prior to FTD, Whitman was president of the Stride Rite Corp.'s Stride RiteDivision, where she was responsible for the launch of the highly successfulMunchkins baby shoe line and the relaunch of the Stride Rite brand and retailstores. She had also been executive vice president for the Keds Division, andserved as corporate vice president of strategic planning, from 1992 to 1993.Business Wire, January 20, 1997

Southfield-based FTD Inc. has named a consumer-products marketer as itssecond-in-command. Margaret Whitman, 38, joined FTD as president last weekfrom Cambridge, Mass.-based Stride Rite Corp., where she was president of itsStride Rite Division and executive vice president of its Keds Division. Whitmanhad worked at Stride Rite since 1992. She supervised Stride Rite's 250company-owned stores and 450 licensed dealers.-Matt Roush, Crain's DetroitBusiness, February 13, 1995

Fuhrman said the departure of Kelly and the earlier exit of creative director DaveLubars had no bearing on the decision to review agencies, a decision made byMeg Whitman, Keds' senior vp/marketing, product development and operations.

Adweek, January 17, 1994


WHITMAN SAYS:



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On September 28, 1993, New Yorks Attorney General Announces StrideRite Subsidiary Keds Has Agreed to Pay $7.2 Million In Fines And Enterinto An Injunction Related to a Price-Fixing Scheme Which began in 1992and Involved All 50 States

The Keds Corporation has agreed to pay $7.2 million to settle sneaker price-fixing suits brought by 50 states, the Federal Trade Commission and the Districtof Columbia, New York's Attorney General, Robert Abrams, said yesterday. Insigning the agreement, Keds, a subsidiary of the Stride Rite Corporation, did notadmit or deny wrongdoing, Mr. Abrams said. He maintained that Keds hadthreatened to stop supplying some of its most popular women's sneaker styles to

retailers that discounted prices. Mr. Abrams also said Keds had encouragedretailers to spy on competitors and report price-cutting. He said that as a resultconsumers across the country paid higher prices. The settlement requires Kedsto pay for its price-fixing by turning over the same amount overcharged, he said.Mr. Abrams said Keds sold five million pairs of women's sneakers, ranging inprice from $19.19 to $44.99, in the United States during the reported schemefrom Sept. 1, 1992, to Feb. 28. 1993. He said it involved six styles of women'ssneakers. The settlement must be approved by United States District Court inManhattan, where the suits were filed. - New York Times, September 28, 1993

Keds Corp. of Cambridge, Mass., settled a price-fixing case in September 1993

by agreeing not to require that its shoes be sold at specific prices and donating $5.7 million to women's and children's charities. Associated Press, May 5,1995


WHITMAN SAYS:



10/31

In this case, between May 1, 1992, and April 30, 1993, Keds told retailers not todiscount six of its women's Champion shoe styles: canvas and leather oxfords,canvas and leather slip-ons, leather walkers and leather booties. The purposewas to support the image of the brand by prohibiting price reductions.That's aform of price-fixing, alleged the New York attorney general and the FederalTrade Commission. Paul Kempainen, head of the antitrust division inMinnesota's attorney general's office, said the practice resulted in shoe pricesthat were $ 1 to $ 1.25 higher per pair than they would have been without theillegal price maintenance. (Would anyone think Keds were a higher-class shoebecause its products cost $ 1 to $ 1.25 more?) As New York officials beganinvestigating, Keds offered to settle, Kempainen said. The company wanted to

avoid the time and expense of legal action, he said, and agreed to pay $ 7.2million, including $ 1.5 million in investigation and administrative costs. As part ofthe deal, Keds explicitly denied wrongdoing. But it did agree not to do it againand said it would notify dealers that they can set their own prices on Kedsproducts. The $ 5.7 million intended for consumers was to be doled out to eachstate according to its population: Minnesota's share is $ 98,631. Dan WascoeJr., Minneapolis Star-Tribune, November 14, 1993

A SURPRISE $ 7.2 million settlement in a vertical price fixing dispute filed by theNew York state attorney general's office against the maker of Keds athletic shoesmay be a harbinger of more such suits to come. Stride Rite Corp. of Cambridge,

Mass., agreed in September to settle the suit. The state attorney's investigationwas begun in December 1992 after two major retailers voiced complaints to thatoffice. At the same time, Stride Rite entered into a consent decree with theFederal Trade Commission, which has no power to levy fines or seek punitivedamages, but can seek injunctive relief. The Keds case joined by the attorneygenerals of all 50 states is the first major price-fixing settlement for the statesince 1991, when state attorney general Robert Abrams won a $ 25 millionvertical price fixing settlement with Nintendo and an $ 8 million settlement withMitsubishi. Jeff Barge, Corporate Legal Times, November 1993


WHITMAN SAYS:



11/31

On the stump, on her web site, and in her book, Meg Whitman tells her e-Baystory.

The fact is, the story contains multiple falsehoods, as noted below.

How many employees were at e-Bay when she started at the company?

Was it 35?

"[Interviewer] How many employees do you have? [Whitman] It's about 200 full-time. [Interviewer] And how many were there when you arrived? [Whitman] About

35. That does not include all of our customer support contractors. ChuckLenatti, Auction Mania, Upside, July 1999

Was it 30?

"When I took over a $4 million company with thirty employees MegWhitman, Page 9. The Power of Many, Crown Publishers, 2010

"When she joined eBay, the company had just $4.7 million in revenues and 30employees; when she retired in March of 2008, ten years later, the company hadnearly $8 billion in revenues and 15,000 employees worldwide with millions ofusers in California alone. Meg Whitmans campaign website

Was it 20?

"Well, we've obviously grown very, very rapidly. When I joined eBay, there wereabout 20 people at eBay. - National Press Club Luncheon Speaker MargaretWhitman, President And CEO, Ebay Inc. Moderator: Larry Lipman, NationalPress Club Ballroom, Washington, DC Federal News Service, April 20, 1999

When I joined the company in January, 1998, we had just finished a year wherewe did $4.5 million in sales. There were 20 people in the company in a smalloffice in Silicon Valley. Meg Whitman interviewed by Robert D. Hof in

Business Week March 19, 2001

"Every month, the company [eBay] evolves a bit. We're still growing so fast thatwe evolve our thinking almost every month.as we go from 20 people to 300people at the company, we have got to get the users here so our executives, ourmanagers, our engineers, and our customer-support reps can actually meetusers face to face. Meg Whitman int. w/ Robert D. Hof, Business Week,12/3/01,


WHITMAN SAYS:

I took e-Bay, a Company with 30 employees and $4.5 million inrevenues, and folding chairs, and turned it into a 15,000

employee powerhouse with $8 billion in revenues.
http://www.businessweek.com/magazine/content/01_49/b3760606.htm%20%20Was%20it%2019?http://www.businessweek.com/magazine/content/01_49/b3760606.htm%20%20Was%20it%2019?http://www.businessweek.com/magazine/content/01_49/b3760606.htm%20%20Was%20it%2019?http://www.businessweek.com/magazine/content/01_49/b3760606.htm%20%20Was%20it%2019?http://www.megwhitman.com/aboutMeg.phphttp://www.megwhitman.com/aboutMeg.php


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"But I knew that I was coming to a startup. There were 19 people here. Thebooks were on QuickBooks. Meg Whitman int. w/ Charles Fishman, FastCompany, April 2001

It turns out, the answer is NONE OF THE ABOVE.

The FACT is: There were AT LEAST 41 people at e-Bay before Meg Whitmanjoined the company in May of 1998.

"The Company's total headcount grew to 41 by December 31, 1997 and to 76 byJune 30, 1998. - e-Bay Investor Prospectus September 25, 1998,

Note that eBay's prospectus indicates there were 76 employees by June 30, amonth after she joined the Company.

Thusly, it is quite possible that eBay had DOUBLE the amount of employees sheoften claims it did when she joined.

Whitman also cant seem to get it right on revenues when she started at theCompany.

Was it $4 million?

"When I took over a $4 million company with thirty employees MegWhitman, Page 9. The Power of Many, Crown Publishers, 2010

"Id put this record up against anyones: In 10 years, eBay went from 300,000users to 250 million and from $4 million in annual revenue to $8 billion. But oursis a business where the pace of change is dramatic. Meg Whitman, asquoted by Amy Wallace for Portfolio.com, April 14, 2008,

"Mitch Zack, a spokesman for Whitman's campaign, said she stands by herrecord as leader of the world's largest online auction firm, saying that she joinedthe company when it had 30 employees and $4 million in revenue. Carla

Marinucci, San Francisco Chronicle, 4/17/09

Was it $4.5 million?

"When I joined the company in January, 1998, we had just finished a year wherewe did $4.5 million in sales. There were 20 people in the company in a smalloffice in Silicon Valley. Meg Whitman interviewed by Robert D. Hof inBusiness Week, March 19, 2001


WHITMAN SAYS:


http://www.portfolio.com/news-markets/national-news/portfolio/2008/04/14/Meg-Whitman-Discusses-EBay-Exit/http://www.portfolio.com/news-markets/national-news/portfolio/2008/04/14/Meg-Whitman-Discusses-EBay-Exit/http://www.portfolio.com/news-markets/national-news/portfolio/2008/04/14/Meg-Whitman-Discusses-EBay-Exit/http://www.portfolio.com/news-markets/national-news/portfolio/2008/04/14/Meg-Whitman-Discusses-EBay-Exit/http://investor.ebay.com/secfiling.cfm?filingID=1012870-98-2475http://www.portfolio.com/news-markets/national-news/portfolio/2008/04/14/Meg-Whitman-Discusses-EBay-Exit/http://www.portfolio.com/news-markets/national-news/portfolio/2008/04/14/Meg-Whitman-Discusses-EBay-Exit/http://www.portfolio.com/news-markets/national-news/portfolio/2008/04/14/Meg-Whitman-Discusses-EBay-Exit/http://www.portfolio.com/news-markets/national-news/portfolio/2008/04/14/Meg-Whitman-Discusses-EBay-Exit/http://investor.ebay.com/secfiling.cfm?filingID=1012870-98-2475http://investor.ebay.com/secfiling.cfm?filingID=1012870-98-2475


13/31

Was it $4.7 million?

"When she joined eBay, the company had just $4.7 million in revenues and 30employees; when she retired in March of 2008, ten years later, the company hadnearly $8 billion in revenues and 15,000 employees worldwide with millions ofusers in California alone. Meg Whitmans campaign website,

It turns out, the answer is NONE OF THE ABOVE.

The FACT is: When Meg Whitman joined the company in May of 1998, revenueswere north of$5.7 million.

"Since Whitman joined eBay in early 1998, its revenue has exploded--from about$ 5.7 million to an expected $ 4.3 billion this year. William Meyers, US News& World Report, 10/31/05

"The company looks small. Revenues for all of 1997, its first full year in business,were $5.7 million. But net sales for just the first half of this year were $14.9million. What's more, because eBay isn't selling its own merchandise, what yousee is what you get: gross profits are a hair below net sales at $13.2 million. Adam Lashinsky, San Jose Mercury News, July 24, 1998

"In 1997 the company reported earnings of $ 874,000 on revenue of $5.7million, and in the first six months of 1998 it posted earnings of $ 348,000 onrevenue of $14.9 million. Nelson Wang, Internet World, 7/27/98

"The Company's net revenues increased from $372,000 in 1996 to $5.7 millionin 1997 and from $1.7 million in the first six months of 1997 to $14.9 million in thefirst six months of 1998. The increases between the comparison periods wereprimarily the result of growth in the number of items of merchandise listed bysellers for auction on the Company's Web site and from the number of auctiontransactions successfully concluded by the Company. The increase from 1996 to1997 was, to a lesser extent, the result of small increases in average transactionsize and certain increases in the placement fees for various forms of featuredplacements for listed items. The total number of items listed grew fromapproximately 289,000 in 1996 to approximately 4.4 million in 1997 and fromapproximately 1.2 million in the first six months of 1997 to approximately 10.8million in the first six months of 1998. eBay Investor Prospectus September25, 1998,


WHITMAN SAYS:


http://www.megwhitman.com/aboutMeg.phphttp://investor.ebay.com/secfiling.cfm?filingID=1012870-98-2475http://investor.ebay.com/secfiling.cfm?filingID=1012870-98-2475http://investor.ebay.com/secfiling.cfm?filingID=1012870-98-2475http://investor.ebay.com/secfiling.cfm?filingID=1012870-98-2475http://www.megwhitman.com/aboutMeg.phphttp://www.megwhitman.com/aboutMeg.php


14/31

But it isnt just the number of employees and company revenues Whitmancontinues to fudge.

She also continues to repeat the falsehood that folks were sitting in lawn chairsand beach chairs when she started at eBay.

"I walked into a room filled with computers, beach chairs, cables, coffee cups,and a crew of intense, bright, young employees in jeans, shorts, and T-shirts.Page 14, Meg Whitman, The Power of Many, Crown Publishers, 2010.

"I called the phone company to set up the phone lines, she tells the group. I

bought cubicles and furniture because we only had lawn chairs. I wrote themarketing plan myself. Meg Whitman quoted by Patricia Sellers, Fortune,3/30/09

But the fact is, thats just not true; as noted by the Sacramento Bees JackChang.

"Whitman often describes eBay's halcyon early days in her campaign stumpspeech, although parts of her account clash with other descriptions of that time.Whitman has dramatized the company's growth by describing how when shearrived, she had to replace lawn chairs still being used by employees with real

office furniture. Cohen's book, however, tells how Omidyar and Skoll hadalready replaced the lawn furniture at the end of 1997, at least a monthbefore Whitman's arrival. Jack Chang, Sacramento Bee, January 10, 2010


WHITMAN SAYS:




15/31

Meg Whitman didn't care enough about California to bother voting in many,many California Primary and General Elections. By her own admission, hervoting record is unacceptable and inexcusable.

Contra Costa Times: Whitmans Misleading Statements About Her VotingHistory Show A Disdain for the Political Process and the Electorate Sheis Asking to Support Her

The issue is not just that she failed to register and failed to vote; it's also thereasons she has given and her misleading statements about her voting history. Itall shows an unacceptable disdain for the political process and the electorate she

is asking to support her. Contra Costa Times editorial, October 5, 2009

Contra Costa Times:Whitmans Voting Record is Unacceptable

Then, after trying to duck the issue for days, Whitman finally offered anexplanation for her poor voting record. I was focused on raising a family, on myhusband's career, and we moved many, many times, she said. It's no excuse.My voting record, my registration record, is unacceptable. She's right. Familyresponsibilities and moving are no excuse for not voting. (What an insult toparents across the state who somehow manage to raise their kids and still cast aballot!) And, yes, her voting record is unacceptable. Contra Costa Times

editorial, October 5, 2009

Reporters: Its Still Clear That Whitman Missed Most Elections

The pushback is part of a newly aggressive effort to repair the damage thatcame from being depicted as unengaged politically for the last 28 years. And itmarks yet another attempt for the Whitman campaign, following apologies andexplanations, to take control of a storyline that her campaign has been unable tosquelch. Still, some political observers say, the fallout will likely linger. It's stillclear that Whitman missed most elections, and other questions still remain overher fresh claims that she voted. Whitman's campaign this week said she voted inthe 1984 and 1988 presidential elections for Ronald Reagan and George H.W.Bush. Steve Harmon & Denis Theriault, Contra Costa Times, October 6,2009


WHITMAN SAYS:

Im running for Governor because I care too much aboutCalifornia to watch it fail.


16/31

Novice Candidate Whitman Faces Revelations She Often Failed toRegister and to Vote, Provides Shifting Explanations

In California, another novice candidate for governor, former eBay chiefexecutive Meg Whitman, has run into a buzzsaw of controversy followingrevelations that she had often failed to register and to vote in elections. Criticshave questioned whether she has provided shifting explanations for her record ofparticipating in elections. Jeff Mapes, The Oregonian, December 22, 2009

In 2000, Business Week noted Whitmans Worse Than Spotty VotingRecord

Almost 9 million Californians cast ballots in the 2003 special election that sweptmovie star Arnold Schwarzenegger into the Governor's Office. Meg Whitmanwasn't among them. The billionaire businesswoman now running for governorherself in 2010 didn't vote in that special election, even after Business Weeklisted her among a group of top executives with worse than spotty votingrecords in a 2000 magazine story, public records show.- Andrew McIntosh,Sacramento Bee, September 24, 2009

Further, Meg Whitman only lived in California for 11 years from 1981 to 1992 -before abandoning the State for Massachusetts.

She told a reporter at the time that she felt it was the right thing to do and a betterplace to race her boys than California.

She only returned to California in 1998, 6 years later, to take the job at e-Bay.

Also, Meg Whitman doesn't care enough about California to pay her fairshare in State taxes.

Whitman's own IRS filings show her charitable foundation sent millions offshore,to the Cayman Islands and Bermuda, notorious havens for tax dodgers who don'twant to pay the taxes they owe the state and nation.

In 2007, Meg Whitmans charitable foundation sent several million dollarsoffshore, to Hedge Funds based in Bermuda and the Cayman Islands.


WHITMAN SAYS:



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The Griffith R. Harsh IV and Margaret C. Whitman Charitable Foundationin 2007also invested $3 million in hedge funds based in the CaymanIslands a Caribbean tax haven that's been the subject of politicalcontroversy. When you're a billionaire, you will do things with moneythat don't look so good when you're a political candidate, said JohnPitney, a government and politics professor at Claremont McKennaCollege. Even if they're totally ethical and lawful, they can still beembarrassing. [Mercury News, 11/18/09]

The foundation's tax returns also show $3 million invested in CaymanIsland hedge funds and $1 million in another fund in Ireland. If I were her

investment adviser, I would have told her to avoid the offshore investmentuntil she had figured out her political future, said Morris, theaccountant.The Caymans have been a target of politicians in recentyears. U.S. Sen. Carl Levin, D-Mich., and Rep. Lloyd Doggett, D-Texas,recently introduced legislation seeking to rein in tax shelters in placessuch as the Caymans. [Mercury News, 11/6/09]

The filings can be found at:

http://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf

Heres what they reveal:

In 2007 alone, Meg Whitmans foundation invested $4 Million in CaribbeanTax Havens.

$1 MILLION INVESTED IN ARCHIPELAGO HOLDINGS (Based in Bermuda)

According to information provided to the IRS by the Griffith R. Harsh IV andMargaret C. Whitman Charitable Foundation, the foundation transferred $1million to Bermuda-based Archipelago Holdings, Ltd. on 9/28/07.

[http://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf]


WHITMAN SAYS:

http://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdfhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdfhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdfhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdfhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdfhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdfhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf


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$1 MILLION INVESTED IN MASON CAPITAL, LTD. (Based In CaymanIslands)

According to information provided to the IRS by the Griffith R. Harsh IV andMargaret C. Whitman Charitable Foundation, the foundation transferred $1million to Cayman Islands-based Mason Capital, Ltd. on 9/28/07. [http://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf]

$2 MILLION INVESTED IN TPG-AXON PARTNERS (OFFSHORE), LTD

According to information provided to the IRS by the Griffith R. Harsh IV andMargaret C. Whitman Charitable Foundation, the foundation transferred $2million to Cayman Islands-based TPG-Axon Partners (Offshore) Ltd. on 5/1/07.

[http://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf]

In 2007, the Pittsburgh Post-Gazette (7/6/07) discussed Offshore Hedge FundsArchipelago and Mason Capital, reporting:

Between Sept. 28 and Sept. 30, 2004, the University of Pittsburgh MedicalCenter transferred $55 million to investment funds in the Caribbean, morethan half of the money destined for a Cayman Islands office building knownas the Safehaven Corporate Centre.

The transfers were part of $204.5 million sent by UPMC to sun-soaked,tax-friendly locations in the Caymans, the Virgin Islands or Bermuda duringthe fiscal year beginning July 2004 and ending June 2005, according toInternal Revenue Service records. Many of the funds were set up by privateinvestment syndicates looking to avoid U.S. taxes.

.In fact, nonprofit health-care providers, colleges and philanthropieswith major endowments have spent the last decade or so steering large

chunks of their portfolio away from the volatile U.S. stock market and intoless traditional investments -- particularly private equity and hedge funds,thousands of which are registered hundreds of miles south of Miami, in theCaribbean. Thanks to a loophole in the tax code, which is now underexamination by Congress and soon could be eliminated, there are taxbenefits to the offshore strategy


WHITMAN SAYS:

http://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5Dhttp://dynamodata.fdncenter.org/990pf_pdf_archive/208/208033091/208033091_200712_990PF.pdf%5D


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Investing in a U.S.-based hedge fund -- which typically borrows againstthe investors' kitty, using the original investment plus the leveraged moneyto play for big short-term gains -- normally would subject a nonprofit tosomething called the unrelated business income tax.

.But by investing offshore, nonprofits are able to escape that tax -- fornow. The U.S. Senate Finance Committee is considering a proposal thatwould tax the dividends from offshore hedge fund investments, which, ifimplemented, would significantly lower the nonprofits' hedge fundreturns.It's troubling that some nonprofits are part of that game, Sen.Charles Grassely [sic] of Iowa, the senior Republican on the committee,

said recently.

.In its most recent filing, [Pitt] reported, among other transfers, havingsent $3 million to Archipelago Holdingsin Bermuda, $3.5 million to BeaconInternational in Bermuda, $3.5 million to Bermuda's March International,and $12.5 million to Mason Capital Ltd. in the Caymans. [Pittsburgh Post-Gazette, July 6, 2007]

The Associated Press reported on 2/18/10:

Thousands of international companies and hedge funds have traditionally

been incorporated in offshore financial centers in the Caribbean andelsewhere, drawn by low tax rates and banking rules and legal systems thatmake it easy to move capital around the globe. But U.S. and Europeanlawmakers and regulators are weighing a number of proposals aimed atcracking down on abuses and collecting more tax revenue frommultinational operations. The Cayman Islands, which lie 150 miles (240kilometers) south of Cuba, does not directly tax any of the roughly 80,000companies registered there, and has no income tax or capital gains tax. Itsoffshore financial services sector accounts for about half of the islands'economy.


WHITMAN SAYS:



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The Los Angeles TimesGeorge Skelton writes:

It started last fall with a radio ad, later abandoned, asserting that statespending had risen 80% in the last 10 years. It actually had increased just27% and, considering inflation and population growth, had declined byalmost 17%. [Times, 2/25/10]

On the CalBuzz blog, Mark Paul also took candidate Meg Whitman to task for herfact fudging on state spending:

That hope withered the other day when I heard one of Whitmans recent

radio ads. We know spending has been out of control in Sacramento, shecrooned from the speakers. Et tu, Meg? Say it aint so. The only people whoknow state spending is out of control dont know what theyre talkingabout.

According to the latest budget estimates, the state will spend less thisyear than it did in 2005, when there were two million fewer people inCalifornia. And as this chart shows, when measured as a share ofCalifornias personal income, state spending is at the lowest level in ageneration.

If its smaller government you want, California has already got it, thesmallest since Ronald Reagans final years in Sacramento.

When they say what theyll do about out of control spending, Whitmanand Steve Poizner, her rival for the Republican nomination for governor,point quickly to how many people work for the state. Here, too, they haveflunked their business due diligence.

Yes, more people work for the state today than a generation ago. As thischart shows, their number has almost doubled in the last 35 years. But sohas Californias population. If state government employment wereincreasing faster than state population, youd be worried. In this chart, youcan see the opposite is true. The number of state employees per 1,000Californians has declined since the mid-1970s.

If you believe California is out of line in how many people it employs instate government, you havent been paying attention. [CalBuzz, 2/26/10]

California Watchs Robert Salladay also weighs in on Meg Whitmans factfudging.


WHITMAN SAYS:

State spending is out of control, and I will fire 40,000 stateworkers to trim the fat.
http://skitch.com/mugwump2/nsmbg/california-state-employees-per-1-000-of-populationhttp://skitch.com/mugwump2/nsk98/california-state-employeeshttp://skitch.com/mugwump2/nsmbu/spending-as-percentage-of-california-personal-incomehttp://www.calbuzz.com/2010/02/ok-meg-and-steve-lets-analyze-california-inc/http://skitch.com/mugwump2/nsmbg/california-state-employees-per-1-000-of-populationhttp://skitch.com/mugwump2/nsmbg/california-state-employees-per-1-000-of-populationhttp://skitch.com/mugwump2/nsk98/california-state-employeeshttp://skitch.com/mugwump2/nsk98/california-state-employeeshttp://skitch.com/mugwump2/nsk98/california-state-employeeshttp://skitch.com/mugwump2/nsk98/california-state-employeeshttp://skitch.com/mugwump2/nsmbu/spending-as-percentage-of-california-personal-incomehttp://skitch.com/mugwump2/nsmbu/spending-as-percentage-of-california-personal-incomehttp://www.calbuzz.com/2010/02/ok-meg-and-steve-lets-analyze-california-inc/http://www.calbuzz.com/2010/02/ok-meg-and-steve-lets-analyze-california-inc/


21/31

Salladay writes:

Republican gubernatorial candidate Meg Whitman wants to chop thestate's workforce by 40,000 employees, a pledge she made again thisweekend at the state GOP convention. But does the nation-state ofCalifornia really have such a bloated government?

Not according to the Center for Continuing Study of the CaliforniaEconomy, an independent research group based in Palo Alto. The director,Stephen Levy, is one of the principal experts on the state's economy, andhe reported in December:

There is broad agreement that seeking efficiencies in governmentprograms is good public policy. Yet, the data suggest that at the aggregatelevel California is not overstaffed relative to caseloads in the majorprogram areas. Indeed, a stronger case can be made that public programsare being carried out with less staffing than in most other states.

In his report from last December, Levy's organization found thatCalifornia which has 38 million residents had the third lowest number offull-time state government employees relative to the population.

California and Florida both had 103 state employees for every 10,000residents, while Illinois had the lowest ratio at 97, the group reported. TheU.S. average was 143 state employees per 10,000 residents, with California28 percent below the national average.

But what about all the local government employees? Even adding those tothe mix, California still has a comparatively small workforce, according tothe employment and population numbers from 2008. The report concluded:

When state and local government employees (including education) areadded together, California has the fourth lowest ratio of employees topopulation. California had 484 state and local full-time equivalentemployees per 10,000 residents in 2008 compared to the national averageof 549. Nevada was the state with the lowest ratio (440) followed byMichigan (475), Pennsylvania (478), and Utah (493). Californias ratio was 12percent below the national average.

Levy's group also found that between March 2008 and October 2009, thenumber of state and local government jobs declined by approximately70,000, while the state added approximately 600,000 residents.


WHITMAN SAYS:

http://www.ccsce.com/index.phphttp://www.ccsce.com/index.phphttp://www.ccsce.com/Steve_Levy.phphttp://www.ccsce.com/Steve_Levy.php


22/31

Whether the government payroll is inflated or not depends a bit on yourperspective, of course. Could some government services, such asrunning prisons or monitoring toxic waste in rivers, be performed moreefficiently and effectively in the private sector? Is California simply oneof the least bloatedout of 50 bloated state governments?

Whitman uses state Department of Finance figures to highlight the totalnumber of all state employees, including University of California, CaliforniaState University, employees of the Legislature and state courts, the statepension system, and other departments outside of the governor's direct

control and, in some cases, operating without general fund support.

That figure shows state positions have grown from 313,684 in the 2004-05state budget to 345,288 in the current budget.

But look at the (PDF) chart Whitman links to on her Web site. Anothermeasure of state government spending has been reduced or stayed flat,even while the number of all state employees has increased. The state ofCalifornia is spending less per capita and less per $100 of personal incomethan it did in 2004-05. [Robert Salladay, California Watch, March 15, 2010]


WHITMAN SAYS:

http://www.ebudget.ca.gov/pdf/BudgetSummary/BS_SCH6.pdfhttp://www.ebudget.ca.gov/pdf/BudgetSummary/BS_SCH6.pdfhttp://www.ebudget.ca.gov/pdf/BudgetSummary/BS_SCH6.pdfhttp://www.megwhitman.com/platform_sub_topic.php?id=378&type=spendinghttp://www.megwhitman.com/platform_sub_topic.php?id=378&type=spending


23/31

Meg Whitman regularly attacks the States CalWorks program; and, as newsreports and expert make clear, her rhetoric does not match reality.

In the Modesto and Sacramento Bees, Frank Mecca, executive director of theCounty Welfare Directors Association of California, has taken Whitman to taskfor making false allegations which are flat-out wrong. [Modesto Bee,2/26/10, Sacramento Bee, 2/21/10]

The Sacramento Bees Jack Chang also noted:

Whitman's ad hits hard at a signature issue for her party but continues her

pattern of using statistics selectively to exaggerate her point. It's true thatonly 22 percent of welfare recipients statewide from October 2007 toSeptember 2008 spent a required number of weekly hours working forincome or doing community service, adult education or other work-relatedactivities, according to the most recent federal data.

But 39 percent of welfare recipients are minors whose parents have losttheir aid because they didn't comply with the program's requirements orhave exceeded its lifetime aid limit. Whitman's ad doesn't say how theproposed changes would affect these children. And it's not true that only22 percent are working at all. Another 16 percent of recipients work or do

work-related activity for less than the required number of weeklyhours. [Bee, 1/29/10]

The San Jose Mercury News also took issue with Whitmans CalWorks factfudging; editorializing that:

One of Whitman's chief criticisms of CalWorks is also misleading. Shetrumpets that only 22 percent of California's welfare recipients are workingfor their welfare checks. But about four of every 10 welfare recipients areminors. She also neglects to mention, as the Sacramento Bee reported,that another 16 percent work or do work-related activity, although it's lessthan the state's required number of weekly hours. [Mercury News Editorial,2/12/10]


WHITMAN SAYS:

California is 'the welfare state', and 22% of the people onwelfare don't even work to earn their benefits.


24/31

In an article called Ad Watch: Whitman's efficiency message distortsreality,Sacramento Bee political writer Jon Ortiz noted that:

It's true that some state organizations use 30-year-old software, such asthe Employment Development Department. But the ad's implication thatthe state hasn't invested in IT to pour money into payroll isn'taccurate. [Bee, 2/20/10]

The Los Angeles TimesGeorge Skelton also weighed in on Meg Whitmans IT/Software claim, writing:

Adrian Farley, chief deputy honcho for the state's computer system,says 90% of the machines run modern Windows XP. And although somesoftware is decades-old, it is more efficient than any of the newfangledstuff. [Times, 2/25/10]


WHITMAN SAYS:

The State is using an outdated IT infrastructure; outdatedcomputers.


25/31

"Unfortunately for Whitman, much of the mom-and-apple-pie talk was eclipsedby controversy over the only specific in the ad: her statement that the state is inthe worst shape that I've seen in the 30 years that I have lived in California.Trouble was, she hasn't actually lived in California for 30 years. Herdecampments here have been punctuated by moves elsewhere, including one toMassachusetts, which she proclaimed a better place to raise her sons thanCalifornia. - Cathleen Decker, Los Angeles Times, 2/7/10

I have lived in California for nearly 20 years and Ive never been to see theelephant seals. And we had a ball. We drove to Half Moon Bay, drove down thecoast, had a picnic lunch, went to see the elephant seals, on the most

spectacular California day that you have ever seen. And then took off to a hike inthe redwoods thats just north of or just a little bit south of Half Moon Bay, anddid about a 10-mile hike, which I was dying at the end of. Meg Whitmaninterview with Lesley Stahl, WowOWow.com, March 13, 2008 - http://www.wowowow.com/post/part-vii-meg-whitman-ive-got-lots-other-things-my-plate


WHITMAN SAYS:

Ive lived in California for 30 years.
http://www.wowowow.com/post/part-vii-meg-whitman-ive-got-lots-other-things-my-platehttp://www.wowowow.com/post/part-vii-meg-whitman-ive-got-lots-other-things-my-platehttp://www.wowowow.com/post/part-vii-meg-whitman-ive-got-lots-other-things-my-platehttp://www.wowowow.com/post/part-vii-meg-whitman-ive-got-lots-other-things-my-plate


26/31

Steve Poizner was elected to keep watch over the insurance industry, but therecord shows hes surrounded himself with Insurance Industry insiders, and thattime and again, hes been asleep at the switch when it comes to regulating themand protecting consumers.

He allowed automobile and homeowners insurance companies to raise rates onCalifornia consumers, and dropped the ball with health insurance companiesaccused of illegally cancelling peoples coverage after they got sick.

Poizner Has Surrounded Himself with Insurance Industry Insiders,Angering Consumer Advocates

Poizner has angered critics by surrounding himself with insurance industryinsiders. Poizner's first move was to hire former insurance industry lobbyist BillGausewitz as his special legal counsel for policy issues. His chief of staff is JimRichardson, who'd previously served as chief of staff for former Assembly GOPleader Jim Brulte, a consultant with California Strategies, whose client roster isknown to include big-name insurance companies. Brulte, who co-headedPoizner's 2006 campaign and is leading his exploratory committee for governor,declined to comment for this story. Poizner's staff counsel is Adam Cole, whopreviously was a partner at a major law firm that has long battled Proposition103, though his own role was seeking claims against insurance companies.

Steve Harmon, Contra Costa Times, December 22, 2008

California's newly elected insurance commissioner, Republican Steve Poizner ofSilicon Valley, promised to create a non-partisan agency that is fiercelyindependent from those being regulated. But in one of his first moves, thepotential gubernatorial candidate in 2010 has appointed a longtime insuranceindustry representative, Bill Gausewitz, as his special counsel, a top legalposition in his office. Poizner -- who presides over the obscure but powerfulagency that regulates the state's insurance industry -- also selected as his chiefof staff a former high-level Republican staffer in the state Senate. But theappointments have prompted questions about Poizner's commitment to create a

centrist, independent office. One leading consumer rights advocate whoendorsed Poizner instead of Democrat Cruz Bustamante was incensed by thechoice of Gausewitz in particular, saying it creates a fox-guarding-the-henhousescenario. It contradicts what Poizner promised to the public,' said HarveyRosenfield, the author of Proposition 103, the landmark 1988 measure thatestablished regulations for the auto insurance industry. He's proposing putting anindustry guy in charge of regulating the industry. That's devastating. MikeZapler, San Jose Mercury News, February 14, 2007


POIZNER SAYS:

As Insurance Commissioner, I kept watch over the InsuranceIndustry and protected consumers.


27/31

As Insurance Commissioner, Poizner Has Been Cozying Up to theInsurance Industry

But critics are worried that Poizner, the independently wealthy Silicon Valleyentrepreneur, is cozying up to the insurance industry in less blatant ways than adirect exchange of money. They suggest that Poizner has proposed a series ofrule changes that will result in higher costs for homeowners and drivers as a nodto the industry, and indirectly to build his alliances with the Republican Party,which relies heavily on contributions from insurers. Steve Harmon, ContraCosta Times, December 22, 2008

Consumer Watchdog Says Public Perceives Poizner to Be In Bed WithThe Insurance Industry and Devoted to the GOP

But critics say that Poizner has allowed his role as advocate for consumers to betrumped by his devotion to the free market and to the Republican Party. He hasspent the past two years cultivating relationships with Republican activists in anattempt to overcome their reluctance to support an abortion rights candidate.Mollifying the pro-business wing of the party with a more lenient view toward theinsurance industry, they said, could go a long way in pulling the party behind himfor his gubernatorial race. I think he's struggling with his own ideology; he has aninbred dislike of regulations, Bach said. That is proving to be a substantial

challenge for him. I do think there will be political fallout for him if by the time heruns for re-election or for governor, the public perceives him to be in bed withindustry and is rubber-stamping rate increases. Steve Harmon, ContraCosta Times, December 22, 2008

Consumer Advocate Says Poizner Is Trying to Deregulate the InsuranceIndustry

Rosenfield, who heads Consumer Watchdog in Santa Monica, said the disputegoes beyond politics. The things that Poizner has been doing and is nowproposing constitute a deregulation of the insurance industry, said Rosenfield,

the author of 1978's Proposition 103, which created strict regulations forCalifornia insurers. - Dean Calbreath, San Diego Union-Tribune, February 1,2009


POIZNER SAYS:



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Poizner Rule Change Allows Insurers to Game The System

Another important change involves the rate-setting process. When evaluatingrequests for rate changes, Garamendi used a standard three-year base period todetermine whether an insurer's business trends justified a higher -- or lower --rate. Poizner changed the rule to let insurers suggest their own base periods ofup to six years. His critics say such a change allows insurers to game thesystem, since they can extend the period to show the effect of a long-resolvedevent such as the 2003 wildfires, which might have little revelance [sic] to theircurrent financial position. In a letter to Garamendi last spring, Poizner said hischanges were necessary to protect the health, vibrancy and competitiveness of

the insurance market. But Rosenfield said Poizner's changes were nearlyidentical to revisions previously proposed by the insurance industry. Insurancecompanies have happily embraced the changes to request major rate increases,he said. Rosenfield said insurance rates have generally been on an upward trendsince Poizner changed the laws. - Dean Calbreath, San Diego Union-Tribune,February 1, 2009

Poizner Allowed Auto and Homeowner Insurers to Charge More Money forTheir Policies , Boost Their Profit Margins

After several years of lowering their rates, some of California's top insurers have

been given permission to charge more money for their auto and homeownerspolicies. Within the past six months, the state Insurance Department has grantedrate increases ranging from 4.25 percent to 6.9 percent on auto policies issuedby such companies as Progressive, Farmers, Hartford, Wausau and Lincoln.More than half a dozen other major insurers, including 21st Century, State Farm,and Safeco, are applying for similar increases, worth more than $220 million.Insurers also are pressing for increases in homeowners policies. Thedepartment, headed by Insurance Commissioner Steve Poizner, maintains thatthere are valid reasons for the increases.. But Poizner's critics -- ranging frominsurance industry watchdog Harvey Rosenfield to Lt. Gov. John Garamendi --accuse him of rewriting regulations to make it easier for insurers to raise rates.

Poizner's job is to protect the consumers, not the insurance industry, saidGaramendi, Poizner's predecessor at the Insurance Department. His actionsthreaten to gut the consumer agency. Dean Calbreath, San Diego Union-Tribune, February 1, 2009


POIZNER SAYS:



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Last spring, for instance, Poizner enacted so-called emergency regulations thatreversed some of Garamendi's policies. Among other things, he allowed insurersto boost their profit margins by 2 percent above previous levels. DeanCalbreath, San Diego Union-Tribune, February 1, 2009

Consumer Watchdog Says Poizner Rule Changes Raised Auto InsuranceRates by $26 Million

Poizner issued a series of changes this year. Rosenfield said those regulationshave raised auto insurance rates by $26 million, and eight companies haveapplied for another $300 million in increases to auto and homeowner coverages.

Steve Harmon, Contra Costa Times, December 22, 2008

Poizner Proposed Changes That Consumer Groups Said Would IncreaseRates for Automobile, Homeowner and Most Other Kinds of Coverage byMillions of Dollars

State Insurance Commissioner Steve Poizner is under fire from his predecessorand a consumer group for proposing regulation changes that they say wouldincrease rates for automobile, homeowner and most other kinds of coverage bymillions of dollars. The proposed rules would alter how insurers calculate therates they can charge, allow them to cut rates without facing a full review from

the Department of Insurance and allow the commissioner to phase in big ratechanges. Opponents say the rules would allow companies to cook their books tojustify rate hikes, make smaller rate cuts than they should and keep excessiverates in place longer than justified. Insurance rates will go through the roof at atime when we can hardly afford to deregulate another industry in the financialsector, said Harvey Rosenfield, founder of the Consumer Watchdog group andthe author of Proposition 103, a rate-regulation initiative approved by voters in1988. Lt. Gov. John Garamendi, Poizner's predecessor as commissioner, saidPoizner's actions threaten to gut the consumer agency we worked so hard torebuild after the Quackenbush scandal, a reference to former CommissionerChuck Quackenbush, a Republican who was forced from office in 2000 amid

corruption allegations. The pending amendments come on the heels of aseries of changes Poizner issued in May. Rosenfield and Garamendi say thoseregulations have raised auto insurance rates by $26 million and triggeredapplications for another $305.2 million in increases to auto and homeownercoverage. - Steve Lawrence, Associated Press, December 18, 2008


POIZNER SAYS:



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Times Columnist Hiltzik: Poizner Goes Too Easy On Insurers

In a column entitled Poizner Goes Too Easy on Insurers, Times consumercolumnist Michael Hiltzik noted, Poizner has made much of his refusal to acceptpolitical contributions from insurance companies, which makes him lookindependent. But going easy on them -- by pledging to extract big fines, butsettling for less -- makes it seem as if he doesn't really want to shake them up,either. It may be too cynical to assume that Poizner's approach is designed to wininsurers' support and the GOP's for his gubernatorial bid. But the interests ofCalifornia's millions of health insurance customers would be better served if hereally got tough. Michael Hiltzik, Los Angeles Times, January 26, 2009

In Backroom Deal, Poizner Quietly Dropped Effort to Seek Refunds forHomeowners Who Overpaid

California Insurance Commissioner Steve Poizner has quietly dropped an effortto seek refunds for Allstate Corp. policyholders who might have paid too much fortheir homeowners' coverage in recent years. Critics immediately denounced hisdecision.

On July 10, Poizner announced that Allstate had been ordered to slash itshomeowners' rates by 28.5% for policies that begin or renew after July 30. But

still pending, his office said at the time, was whether a refund would be orderedfor previous years. In an unannounced legal settlement July 31, Allstate agreednot to contest Poizner's rate cut order. In return, the Republican commissioneragreed to not take any action based on allegations that Allstate previouslycharged rates that were excessively high. Consumer advocates criticized theagreement. Commissioner Poizner's backroom deal with Allstate effectivelypardoned them for past misdeeds, said Daniel Y. Zohar, a Los Angeles attorneywho represented Consumer Watchdog, a Santa Monica advocacy group, in therate case. Poizner's decision to avoid a confrontation with the state's third-largestproperty insurer, which was not released by his office, contrasted with his toughpublic stance toward the company in May 2007. I am drawing a line in the sand,

Poizner said at the time. If I find that Allstate 's rates are excessive, refunds willoccur. I will take clear and decisive action to protect consumers. - Marc Lifsher,Los Angeles Times, August 5, 2008


POIZNER SAYS:



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Consumer Advocate Says Poizner Avoided Suing Insurance Companies ToWin Their Support

Yet Poizner also appeared to see the job principally as a warmup for his currentcampaign for the Republican nomination for governor, said Amy Bach, executivedirector of the consumer advocacy group United Policyholders. His interest inmaintaining support from insurance companies made him more likely to negotiatewith than to sue the firms he regulated, Bach said. his political aspirations andhis political views have held him back in being as good a regulator as he couldhave been Jack Chang, Sacramento Bee, January 24, 2010

Consumer Advocates Say Poizner Staffing Changes Hampered Office, Ledto Higher Insurance Premiums

Consumer advocates such as [Amy] Bach [of United Policyholders] and HarveyRosenfield, founder of Consumer Watchdog, said that while cutting employeenumbers made for good Republican politics, it hampered a department that wasalready short-staffed. The changes that were made made it harder for theInsurance Department staff to do their jobs, Rosenfield said, and underminedthe uniformity, consistency and stability of the regulatory process, and led tohigher premiums. Jack Chang, Sacramento Bee, January 24, 2010

POIZNER SAYS:

http://topics.sacbee.com/United+Policyholders/http://topics.sacbee.com/United+Policyholders/http://topics.sacbee.com/Amy+Bach/http://topics.sacbee.com/Amy+Bach/

cap debate watching guide - 3-15-2010

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