NEW YORK, Jan. 23, 2004 (PRIMEZONE) -- The Delaware Court of Chancery ruled today that a derivative action on behalf of eBay, Inc. (Nasdaq:ebay), can go forward. The suit, which named as defendants several eBay inside directors and Goldman Sachs Group, alleged that eBay's investment banking advisor, Goldman, engaged in a practice known as "spinning," whereby it allocated shares of lucrative initial public offerings of stock to the defendant directors in exchange for additional investment banking business from eBay. The case seeks to recover for eBay the profits from those transactions.
Chancellor Chandler said the suit stated a valid cause of action as to the defendant directors for breaching their duties of loyalty to the company and as to Goldman for aiding in the breach. The Court stated: "The conduct challenged here involved a large investment bank that regularly did business with a company steering highly lucrative IPO allocations to select insider directors and officers at the company . . . . Viewed pragmatically, it is easy to understand how steering such commercial rebates to certain insider directors places those directors in an obvious conflict between their self-interest and the corporation's interest."
H. Adam Prussin, of the firm Pomerantz Haudek Block Grossman & Gross LLP (www.pomerantzlaw.com), is lead counsel for the plaintiff shareholders. "This decision vindicates the principle that corporate executives should not be accepting personal financial benefits from people who are soliciting business from the company," Mr. Prussin said. In the late 1990s, opportunities to get in on the ground floor of certain "hot" initial public offerings was extremely valuable and many insiders became very wealthy from the IPOs of small Internet start ups. "These opportunities to invest are inducements and invitations for doing business." Mr. Prussin said. "As such," he added, "they rightly belong to the company and not the insiders."
The Pomerantz firm, which has offices in New York, Chicago and Washington, D.C., is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz firm pioneered the field of securities class actions. Today, more than 50 years later, the Pomerantz firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members.
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