eBay has agreed to a $3 million criminal penalty, a deferred-prosecution agreement, and compliance monitor, all to settle charges from a bizarre incident in 2019 of the company’s internal security team stalking and harassing an online critic of the company.
The case was cuckoo crazy at the time, and remains so today. eBay’s then-head of security and six of his underlings were accused of harassing a woman named Ina Steiner, who ran (and still runs today) an online newsite called eCommerceBytes. Steiner had a long history of unflattering coverage of eBay, which its senior executives couldn’t stand, and who finally directed the security goons to “take her down.”
Said security goons — all of whom have since been convicted of harassment charges — then engaged in a campaign that reads like a bad season of Fargo. They surveilled Steiner and her husband at their home in Natick, Mass.; sent disturbing deliveries to their house including live insects, a bloody pig mask, and a book on how to survive the death of a spouse; placed fictitious online ads announcing sex parties at their house; and placed a GPS tracker on their car.
When Natick police began to investigate, the seven offending employees concocted ways to mislead the officers; they also lied to eBay investigators conducting their own internal investigation. And so on and so forth.
This all became public in 2020 when federal prosecutors charged the seven security employees. Now we have the corporate settlement announced by federal prosecutors in Boston on Thursday. It offers a fascinating glimpse into corporate culture gone wrong and current Justice Department thinking on how a company should rectify that.
Displeasure With eBay Tone at the Top
One striking point in the deferred-prosecution agreement is that federal prosecutors clearly were not happy with how eBay handled the departure of its then-chief executive, Devin Wenig. Namely, the company pooh-poohed his exit as a mutually agreed-upon decision, and let him walk away with a severance package worth more than $40 million.
We should examine the timeline here. The harassment against the Steiners happened in August and September 2019. For several months prior to that, Wenig and his then-chief communications officer, Steve Wymer, had been griping to each other about Steiner’s coverage and how they wanted her to stop. For example, on Aug. 1, 2019, Wenig texted Wymer after yet another critical post from Steiner, saying, “If we are ever going to take her down… now is the time.” Wymer replied, “On it.”
Throughout 2019, however, Wenig had been having a rough time at eBay. Activist investors unhappy with eBay had put new directors on the board, so on Sept. 25, 2019, Wenig announced that “in the past few weeks it became clear that I was not on the same page as my new board,” and he was leaving.
Meanwhile, eBay put out the typical bland statement that “a number of considerations” led Wenig and the company to mutually agree “that a new CEO is best for the company.”
Federal prosecutors had a big problem with that. Consider this from the DPA:
The company did not publicly reprimand the CEO for his actions with respect to the conduct described in the statement of facts — including his statements concerning the victims — or for the corporate culture that he oversaw that permitted the offense conduct to occur. Instead, it lauded him in its public announcement of his departure as “a tireless advocate for driving improvement in the business” and paid him contractual severance benefits of more than $40 million.
Or, in the words of acting U.S. attorney Joshua Levy, “Today’s criminal resolution with the company imposes the maximum fine that the law allows under the statutes, holding eBay accountable for a corporate culture that led to this unprecedented stalking campaign.”
The $3 million criminal penalty might seem like small change for a company the size of eBay, making roughly $10 billion a year in revenue — but it is the maximum fine allowed by law for these offenses. Moreover, the independent compliance monitor and extensive compliance program remediations will be a lot more expensive.
This case is quite a juxtaposition with the FCPA cases compliance officers typically see, where we have “victimless” crimes and enormous financial penalties. Here we do have victims, who suffered terribly, thanks to a company where senior leaders didn’t just let an astonishingly bad culture take root; they encouraged it. Prosecutors couldn’t hit eBay hard financially, but it’s obvious they wanted to hit eBay somehow.
Remediation and Compliance Measures
Aside from the egregious nature of the harm and the complicity of senior leaders, the feds did praise eBay for trying to turn things around after Wenig and Wymer departed. Among the steps that won plaudits:
- Launching remedial measures as soon as eBay’s internal investigation bore fruit, even before the U.S. attorney’s office began its own investigation. (We had a post on remediation during an ongoing investigation a few months back, by the way.)
- Hiring more compliance personnel, including a chief ethics officer who reports to the general counsel and audit committee.
- Bringing in other new board directors and senior management as part of Wenig’s successor, Jamie Iannone, arriving in 2020.
- Drafting a new set of policies, procedures, and internal controls focusing on safety and security, ethical leadership, proper use of company-owned communications devices, and third-party contracting.
- Overhauling eBay’s compliance training and communications.
eBay also received credit for extensive cooperation with federal prosecutors, which included turning over certain evidence that prosecutors hadn’t previously known about; and producing “voluminous relevant documents” on the case.
One interesting point is that eBay does get an independent compliance monitor, but its chief compliance officer does not need to certify the effectiveness of the company’s compliance program at the end of the DPA.
I’m not sure what that’s about. Justice Department officials have talked many times about CCO certification now being a standard part of corporate resolutions. Even just this week, when SAP settled FCPA charges and avoided an independent compliance monitor, it still had to accept CCO certification as part of its own DPA.
But here, where eBay clearly had a problematic culture all the way to the top, taking much more aggressive and threatening actions than a bribery case — we don’t need CCO certification? Wha?
Anyway, we’re pleased to see the Steiners receive another dollop of justice in their quest to hold eBay accountable. They are also suing Wenig in civil court, and a federal judge ruled last month that the case can proceed. Good. They deserve that justice too.