Candidate Meg Whitman touts her experience at eBay, the online auction house that made her rich, but her career and personal fortune are entwined with another company: the Goldman Sachs investment bank, a major player in public finance in the state she wants to lead.

Whitman's relationship with the giant Wall Street firm - as investor, corporate director and recipient of both insider stock deals and campaign donations - could pose conflicts of interest if the Republican front-runner is elected governor of California, critics say.

From 1998 to 2002, while she was CEO of eBay, Whitman helped steer millions of dollars of her company's investment banking business to Goldman, court records show.

In 2001, Goldman put Whitman on its corporate board, paying her an estimated $475,000 for little more than a year of part-time service. The company also gave her insider access to the initial public offerings of hot stocks worth millions, according to the records.

Whitman left the board in 2002 after she was singled out in a congressional probe of bond underwriters and "spinning" - a financial maneuver, now banned, in which Goldman and other firms allegedly traded access to hot IPOs for bond business. Whitman later settled a shareholder lawsuit related to profits she and other execs made from buying the IPOs.

In recent years, Whitman has kept part of her fortune, estimated by Forbes magazine to be $1.2 billion, in investment funds managed by Goldman, her financial disclosure report indicates. For her campaign, she's received $105,500 in donations from Goldman executives, state records show.

Major player in finance

Meanwhile, Goldman is a major player in California state finance. It has been the underwriter of $78.9 billion in bonds issued by the state since 2006, records show, second only to Merrill Lynch, now a division of Bank of America, which was underwriter of $79.3 billion in the same period.

Goldman was underwriter of more than 2 percent of the bonds issued by the state in the past five years, the records show. State pension funds, meanwhile, have invested more than $1.3 billion with Goldman.

The firm has sought other state business as well. In 2007, Goldman and the now-defunct Lehman Bros. investment bank pitched Gov. Arnold Schwarzenegger on an ambitious plan to boost state revenue by privatizing the California Lottery, according to news reports.

Goldman also urged the governor to raise money by selling EdFund, the state agency that insures student loans. Schwarzenegger expressed interest, but the ideas weren't carried out.

With Goldman active on so many state issues, Whitman would face "a pile of potential conflicts of interest" if elected governor, said Doug Heller, spokesman for Consumer Watchdog of Santa Monica.

Whitman declined to be interviewed for this story, but her campaign lawyer said conflict concerns were overblown. If elected, Whitman will sell her Goldman stock and put the rest of her portfolio, including her Goldman-managed investments, into a blind trust, the lawyer, Tom Hiltachk, said in a written statement.

That will "put further distance between Meg's assets and her duties as governor," he wrote. Meanwhile, Whitman will "scrupulously" follow state law to avoid conflicts, he wrote.

Goldman could have 'access'

Eric Jackson, founder of the Ironfire Capital hedge fund in Florida and an advocate of corporate reform, said concerns could arise even after Whitman sold her Goldman holdings. Given its long relationship with Whitman, Goldman probably would enjoy "access, and being able to make their case in terms of lobbying or certain outcomes that benefit them," he said.

Whitman's association with Goldman also raises questions about her values and judgment, some Wall Street reformers say.

While Whitman was on Goldman's board, she served on the compensation committee, which approved multimillion-dollar bonus packages for then-CEO Henry Paulson and his top aides.

Also during Whitman's service, Goldman invested $140 billion into mortgage-backed securities. Years after she left, the firm sold off $135 billion in bonds tied to the risky home loans, according to published accounts, essentially unloading the assets before the market plunged and sent the nation into economic crisis.

Goldman's dealings in the ramp-up to world recession have made the firm a lightning rod for criticism, especially as it has rebounded with record profits while the national unemployment rate hovers around 10 percent.

Wall Street's spiral

Whitman's campaign attorney said it was "plainly ridiculous" to hold Whitman responsible for the problems of Wall Street because she spent 15 months on Goldman's board.

"Making Meg culpable for the culture of Wall Street ... is a stretch too far," Hiltachk wrote. He didn't respond to questions about decisions she made on the Goldman board.

In recent years, Whitman has only occasionally referred to her time at Goldman Sachs.

During the 2002 IPO "spinning" controversy, Whitman denied wrongdoing, telling eBay employees in a memo that Goldman had offered her stock deals because she was a private client of the firm, not in exchange for eBay's bond business.

In her autobiography, "The Power of Many," Whitman said she quit Goldman's board because CEO Paulson wanted directors only to "rubber stamp" decisions he had already made.

Bill Whalen, a fellow at Stanford University's Hoover Institution and a former adviser to Gov. Pete Wilson, warned that Democrats would face blowback if they attempted "to use Goldman as a bludgeon" against Whitman in the governor's race.

"There's a long list of Democrats who have ties to Goldman," Whalen said, starting with former state Treasurer Kathleen Brown, who is a Goldman executive in Los Angeles.

Her brother, Democrat Jerry Brown, the former California governor who is expected to face Whitman in November if she wins the June 8 primary election, has no Goldman investments, campaign manager Steve Glazer said.

State Insurance Commissioner Steve Poizner, Whitman's rival for the GOP gubernatorial nomination, borrowed $500,000 from Goldman in 2003 for an unsuccessful campaign for the state Assembly, records show.

Underwriter's role

Based on Wall Street but with offices around the world, Goldman Sachs underwrites stocks and bonds, provides financing for business mergers, and manages the money of high-wealth individuals, corporations and even governments.

In 1998, shortly after she became CEO at eBay, Whitman and the eBay board hired Goldman Sachs to underwrite a $72.5 million IPO. The next year, Goldman was hired again, this time for an additional sale of $1.25 billion worth of stock.

Also in 1999, Whitman and her husband, Stanford School of Medicine neurosurgery Professor Griffith Harsh, began investing their personal wealth with Goldman, her lawyer said. In July 2002, eBay hired Goldman again, this time to handle eBay's $1.5 billion acquisition of the online payment business PayPal.

Goldman was paid more than $8 million for its work at eBay, wrote Delaware Judge William Chandler, who later presided over a shareholders' lawsuit concerning the IPOs.

More important, Goldman also was able to buy 1.2 million shares of eBay stock at the IPO price of $18, the judge wrote in an opinion on the case. A year later, the stock was trading at $175 - a bump of $188.4 million.

While seeking eBay's underwriting business, Goldman repeatedly gave Whitman and three other eBay officials the chance to buy IPO stock of other firms Goldman was taking public. Whitman bought more than 100 offerings, according to the judge's account.

The executives "were able to flip these investments into instant profit," the judge wrote. "Whitman sold these equities in the open market and reaped millions of dollars in profit."

Joining Goldman's board

By the time of the PayPal deal, Whitman was also a Goldman director. Appointed in October 2001, she was paid a package of cash and stock options for attending board and committee meetings. An expert who reviewed the pay package for this report said Whitman received the equivalent of $475,000 for attending perhaps a dozen meetings over the 15 months she was on the board.

When she was on the board's compensation committee, it twice signed off on big bonus packages for Paulson and four other top executives, including then-Vice Chairman Lloyd Blankfein, now CEO.

Paulson's 2001 bonus package was $11.5 million, more than 19 times his salary, records show. The company earned $2.3 billion that year. In her two years on the committee, the five men were paid $79 million in bonuses.

The trend continued as Goldman's profits soared in the intervening years. In January, under pressure from shareholders' lawsuits, Goldman agreed to slash its bonus pool and cut back on pay by about 15 percent.

Whitman left the board soon after the IPO "spinning" controversy became public. In October 2002, Rep. Michael Oxley, R-Ohio, chair of the House Financial Services Committee, identified 21 business executives who he said had obtained IPOs from Goldman and two other firms in exchange for bond business. Oxley called the transactions "corrupt."

Settling 'spinning' complaint

The executives he named included William Clay Ford of Ford Motor Co., Enron CEO Kenneth Lay, Yahoo founder Jerry Yang - and Whitman.

Goldman denied wrongdoing but, months later, paid $110 million to settle its part of a Securities and Exchange Commission complaint that accused 10 Wall Street firms of misleading customers with biased stock research. As part of that settlement, "spinning" of IPOs was banned, records show.

For her part, Whitman insisted she had done nothing illegal or unethical, saying she was the victim of "the climate of finger pointing and scandal," that accompanied the bursting of the dot-com bubble. She made a profit of $1.78 million on the IPOs, she told eBay employees. It was "a very small fraction of my investment portfolio," she wrote in her book.

Nevertheless, two shareholder groups sued Whitman and the other eBay insiders, contending that money from flipping the IPOs should have gone to eBay. Eventually, Whitman and the other officials paid about $3 million to eBay to settle the suits. Goldman paid $395,000 of the settlement, she wrote in her book.

Goldman declined to comment for this story.

Whitman's investments

Today, Whitman's connection to Goldman endures through her investments. The financial report she filed as a candidate requires her only to give a general estimate of the value of her investments. Her lawyer declined to disclose the total value of her Goldman portfolio.

Still, the documents show she has a multimillion-dollar stake in 21 different investment funds managed by Goldman. Most are private equity funds open only to investors who can put millions into a single fund.

She has more than $1 million in the firm's Whitehall Street real estate funds, owner of the famed La Costa Resort in Carlsbad (San Diego County) at a deep discount; $2 million in mezzanine funds, which provide high-cost financing, often for corporate leveraged buyouts; and more than $3 million in a telecom-related fund.

She has more than $1 million each in two Goldman "distressed opportunity" funds, which focus on companies facing possible bankruptcy.

State's ties to Goldman

Meanwhile, retirement funds for state workers, teachers and employees of the University of California have more than $1.3 billion in Goldman stock or equity funds. CalSTRS, the California State Teachers' Retirement Fund, has $299 million in a single Goldman investment.

Last fall, Goldman was underwriter of $8.8 billion in revenue anticipation notes when the cash-strapped state had to borrow to pay its bills.

More state borrowing - and thus, more bond issues - will be required before California gets its budget mess straightened out, experts say. If voters approve the $11 billion state water bond on the November ballot, "it's a certainty" that Goldman will be among the underwriters, said Tom Dresslar, spokesman for state Treasurer Bill Lockyer.

The treasurer's office, not the governor, selects bond underwriters, and state retirement boards sign off on investments.

But the governor has appointment authority at the retirement boards, and the power to propose and promote bond issues.

Campaign funding

The issue of global warming probably will bring California's next governor into contact with Goldman. With the passage of AB32, California is on the verge of creating a "market-based program to cap carbon emissions," the governor has said. Goldman has expressed interest in entering the cap-and-trade market. Schwarzenegger, a proponent of the new law, has met with Goldman on global warming issues, he said in a press release.

Whitman's other continuing connection with Goldman involves campaign cash. Of the money she's received from Goldman employees, $94,300 came from eight California-based executives of the firm.

If she is elected, Whitman will have to "disclose decisions that are being made by Goldman - and her part in them that relate to California," said Robert A.G. Monks, a former federal pension trustee and an expert in corporate governance. "Frankly, I don't know how she's going to do that, because there's a lot of it."

California Watch is a project of the Center for Investigative Reporting, with offices in the Bay Area and Sacramento. To read more about money and politics, go to www.californiawatch.org.