Carl Icahn accuses eBay board of conflicts of interest

Carl Icahn is again on the warpath, and this time the target of his attack is eBay.

In an open letter sent to eBay stockholders on Monday, Icahn, who said he recently bought a larger stake in the company, accused board members of "blatant" conflicts of interest. He lashed out at board members for competing with eBay, putting their own financial gain ahead of their responsibilities to investors, funding the company's competitors, and demanding that eBay stop hiring the most talented employees.

One board member Icahn singled out was Marc Andreessen, an independent director on eBay's board, who "engaged in several transactions that lead us to question his loyalty to eBay," according to Icahn. Specifically, Andreessen bought large stakes in two former eBay subsidiaries and invested in five direct competitors of eBay, charged Icahn.

A second member caught in Icahn's bullseye was Scott Cook, accused of holding onto $1 billion in shares of Intuit, considered a competitor to eBay's PayPal unit in the payment processing market. Icahn also saved some choice comments for eBay CEO John Donahoe, whom he essentially accused of being asleep at the wheel while other board members look out for their own interests.

"It is very sad to us that Mr. Donahoe appears to lack awareness about what is going on around him on his board and in the marketplace," Icahn said. "It makes us seriously question his judgment and ability to make the crucial decisions that must be made concerning the future of PayPal."

What's behind Icahn's tirade against eBay's board?

The activist investor is demanding that the company spin off its PayPal unit, a move he said he believes would increase shareholder value, as described in his letter:

We believe creating two dedicated and highly focused independent businesses would provide employees and stockholders the best opportunity to remain competitive over the long term. We believe that the separation of the traditional eBay and PayPal businesses will: (1) highlight the significant value of the disparate businesses currently shrouded by a conglomerate discount the market has afforded eBay; (2) focus and empower independent management teams to most effectively build two very different business platforms, make economic decisions independent of each other and, most importantly, foster innovation; and (3) provide an even more valuable currency for future bolt-on acquisition opportunities and for recruiting the top talent necessary for PayPal to remain the market leader in payment technology.

But eBay has rejected that notion on the grounds that PayPal "drives commerce innovation in payments at global scale, creating value for consumers, merchants and shareholders." Icahn also wants his own people on eBay's board as replacements for the two he considers derelict in their duties. And he's calling on shareholders to approve a plan to separate PayPal.

In response to the open letter, eBay issued a statement reiterating its belief that eBay and PayPal are stronger together. The company also defended Andreessen and Cook and accused Icahn of resorting to "mudslinging attacks against two impeccably qualified directors."