eBay 2002 Annual Report Download - page 139

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (CONTINUED)
Integration of Half.com Platform
In March 2003, we announced our intention to fully integrate the platform of Half.com, a wholly
owned subsidiary acquired in July 2000, with the eBay.com platform by the end of 2004. Half.com's oÇce
in Pennsylvania, where 65 of its employees work, will be shut down once this process is complete.
Management is in the process of formalizing an exit and integration plan and expects to Ñnalize the plan
by the end of 2003. Based on our preliminary estimates, we anticipate costs related to employee retention
and severance will total approximately $3 million. If we decide to exit Half's leased oÇce facility, the
amount of lease termination costs, excluding any possible sublease income, and Ñxed asset write-oÅs will
total approximately $2 million. Costs related to our exit plan will be recorded as charges on our income
statement over the exit and integration period in accordance with SFAS No. 146, ""Accounting for Costs
Associated with Exit or Disposal Activities.''
PayPal's Prior Services to Online Gambling Merchants
PayPal completed its exit from the business of processing payments for online gambling merchants in
November 2002. Approximately 6% of PayPal's revenues in 2002 were derived from this business.
Beginning in July 2002, PayPal provided documents and information related to its services to online
gambling merchants in response to a federal grand jury subpoena issued at the request of the U.S.
Attorney for the Eastern District of Missouri. On March 28, 2003, PayPal received a letter from the U.S.
Attorney for the Eastern District of Missouri indicating its contention that PayPal's provision of services to
online gambling merchants violated 18 U.S.C. Û 1960 of the USA PATRIOT Act, which prohibits the
transmission of funds that are known to have been derived from a criminal oÅense or are intended to be
used to promote or support unlawful activity, thereby subjecting PayPal to potential civil forfeiture of the
amounts it received in connection with such activities as well as potential criminal liability. The letter
oÅered a complete settlement of all possible claims and charges from the U.S. Attorney for the Eastern
District of Missouri if Paypal paid the purported amount of its earnings derived from online gambling
merchants during the nine-month period from October 26, 2001 to July 31, 2002, plus interest. PayPal
acted in the good faith belief that its conduct did not violate 18 U.S.C. Û 1960 and PayPal calculates that
the amount of its earnings from online gaming activities was less than asserted in the letter. Although the
outcome of this matter is not yet determinable, the monetary amounts associated with this matter are not
expected to have a material impact on our Ñnancial position, results of operations or cash Öows.
137