High Bid Goes to eBay's General Counsel

Don Tartaglione

2012-12-26 12:52:06 PM

TITLE: Senior vice president, legal affairs, general counsel, and secretary

COMPANY: eBay Inc.

JOINED COMPANY: 1998

AGE: 58

'I was generally not viewed as one of the wild-assed entrepreneurial types who would go off and do the wild thing.'

Since its creation in 1995 eBay Inc. has grown into the world's largest online marketplace, with more than 90 million active users buying and selling items around the world. As of October, the company projected 2012 revenues of approximately $14 billion, due in part to a strong showing by its PayPal Inc. subsidiary; as of May, it ranked No. 228 on the Fortune 500. The company has more than 30,000 employees and maintains headquarters in San Jose.

INSIDE AND OUTSIDE COUNSEL

The legal department reflects the company's growth. In 1999, general counsel Michael Jacobson and a lone associate comprised the team. Today, the department employs 350 people, including 185 lawyers plus lobbyists and fraud investigators who also train law enforcement agents about Internet scams.

EBay is split into seven business groups, including three main units: the marketplace unit, which oversees auctions; payments, which runs the PayPal and Bill Me Later Inc. subsidiaries; and GSI Commerce, an online commerce and interactive marketing service designed to strengthen online businesses by connecting them with customers, acquired about 18 months ago. Jacobson works with the head of these groups almost daily, and also with a technology group, which focuses on patents and open-source software and related technology; the corporate group; and the government-relations group. He oversees eBay attorneys in 21 countries.

Formerly a transactions attorney, Jacobson has become more familiar with litigation since joining eBay in 1998. The very business of eBay — facilitating sales by millions of small sellers — tends to attract lawsuits, primarily allegations of counterfeiting or other violations of intellectual property rights, he said.

Handling these cases are members of the in-house team, but Jacobson hires outside counsel when he needs specific expertise and when the work piles up. "Deals and litigation are classic examples of work that comes in on an irregular basis, and you want to supplement what you can do internally with external resources," he said. He uses Cooley; Hogan Lovells; Paul Hastings; and Weil, Gotshal & Manges for litigation and Sidley Austin for securities work. Sidley and Weil Gotshal also help out on deals.

EBay users have been known to sell almost anything­ — and, sometimes, the legality of these sales is open to dispute. These questions Jacobson refers to outside counsel in the relevant jurisdiction or directly to regulatory authorities. In the U.S., the laws are clear: Guns and prescription drugs, to name two examples, are prohibited. But as eBay's reach extends around the world, the answers become more difficult. "Even if we know what the answer is in the U.S. or in the [European Union], it may not be the answer in India or China or South America," Jacobson said. "So a lot of our outside counsel spend is pretty geographically spread out."

DAILY DUTIES

Jacobson's day-to-day responsibilities include managing his department, acting as "chief lawyer" and advising the board of directors. He relishes his business responsibilities. "I think one of the great glories of in-house practice is the relationships you build up with your business colleagues — and it's certainly one of the things that I enjoy most," Jacobson said. "Working to come up with creative solutions to how they can accomplish their business goals without running afoul of laws and remaining fully compliant."

He finds that a certain amount of innovation is called for when working on the legal side of a cutting-edge company like eBay. He is one of the primary contacts for the board and is heavily involved in everything covered during board meetings, including governance, litigation and other business risks, and mergers and acquisitions. He reports to President and chief executive officer John Donahoe.

ROUTE TO THE TOP

Jacobson describes himself as old-fashioned in the sense that he's had only two jobs in his career. After law school, he joined the firm now known as Cooley. He worked on the corporate side, with a little bit of venture capital-related advising when he started. He shifted to financing fairly quickly, he said, describing himself unapologetically as one of the great experts on off-balance-sheet financing in the 1980s. This refers to a legal accounting method that keeps debt off a company's balance sheet as a liability, making it appear more credit-worthy. The technique has legitimate uses but is subject to abuse — Enron Corp. shifted billions of dollars in liabilities off its balance sheet before its collapse.

Later, Jacobson moved into mergers and acquisitions. He remained in finance into the 1990s. "As time went on, I became more and more intrigued by the notion of being involved with the business side of the clients. And, in particular, being involved in things like financings and transactional work earlier in the process, before it actually gets brought out to outside counsel, and then having more of an ability to influence the success or lack of success of the deal later."

At the time, eBay's chief financial officer was a former business partner of Jacobson's. At Cooley, "I was generally not viewed as one of the wild-assed entrepreneurial types who would go off and do the wild thing," he told Recorder sibling publication The National Law Journal in 1999. "But eBay offered me business opportunities that I thought were extraordinary. I had not seen many other companies I thought could become a Fortune 500 company in single-digit years." He remains eBay's first and only general counsel.

PERSONAL

Jacobson was born in Boston and grew up in suburban Newton, Mass. He earned his bachelor's degree in economics from Harvard University in 1975 and his J.D. from Stanford Law School in 1981. His hobbies include skiing, hiking, reading, cooking and collecting wine. He is married to Trine Sorensen; they will celebrate their 25th wedding anniversary on May 4. They have a 22-year-old son, Matthew Jacobson.

In 1999, the hot sellers on eBay included Barbie, Beanie Babies and Elvis memorabilia. Jacobson used the site to acquire old photographs and antique opera posters — enjoying the artwork more than the actual opera, he said at the time. He remains a loyal customer but his purchasing pattern has grown more pragmatic — he uses eBay to spare himself trips to the store. "There's no such thing as having enough power cords for all your electronics," he said.

LAST BOOK AND MOVIE

Thieves of Baghdad, by Matthew Bogdanos; The Avengers.

This article originally appeared in The Recorder.