NEW YORK - BILLIONAIRE investor Carl Icahn stepped up his criticism on Wednesday of Yahoo, saying its board and top management sabotaged a takeover bid from Microsoft to the detriment of shareholders.

In a statement released after details emerged from a shareholder lawsuit, Mr Icahn said the 'best chance' for the struggling Internet giant would be to replace the current board and chief executive Jerry Yang to revive the Microsoft bid.

Mr Icahn, citing details from the legal complaint, said he believes Yang and the board were deceitful in negotiations with Microsoft.

'Most importantly, Microsoft might never be able to trust a CEO and board who, while claiming to be negotiating in good faith, went behind their back and adopted a 'plan' which not only sabotages any Microsoft acquisition but went so far as to completely disable its own ability to rescind the 'plan' as long as Microsoft's offer remains pending,' Mr Icahn said.

The plan that Mr Icahn refers to relates to an employee retention mechanism the complaint said was put in place 'to sabotage a Microsoft bid,' according to the statement, which was an open letter to Yahoo's board.

The plan allows Yahoo employees to leave with hefty severance payments in the event of a takeover, making a bid more expensive.

Mr Icahn said this plan is effectively a US$2.4 billion (S$3.3 billion) 'poison pill'.

He said the board should 'simply rescind the poison pill 'severance plan,' which would free up approximately US$2.4 billion and possibly even more which could be added to the bid.'

Mr Icahn said last month in an open letter that Yahoo 'completely botched' merger talks with Microsoft and that he was amassing Yahoo stock to oust the board of directors at an annual shareholders meeting.

Mr Icahn had acquired 59 million shares of Yahoo - around four per cent of its capital - and had formed a 10-person slate which will stand for election against the current board.

Earlier this week, details of a shareholder lawsuit unveiled in Delaware showed Microsoft offered US$40 a share to buy Yahoo in 2007, well above the US$31 proposed in January.

Microsoft says it broke off takeover talks in late April after it upped its bid by US$3 billion and Yahoo's board still wanted more.

In his latest letter to Yahoo chairman Roy Bostock, Icahn said: 'I have constantly complained about how far CEOs and boards will go in order to retain their jobs, yet even I am amazed at the length Jerry Yang and the Yahoo board have gone to in order to entrench their positions and keep shareholders from deciding if they wished to sell to Microsoft.'

Mr Icahn added: 'Until now I naively believed that self-destructive doomsday machines were fictional devices found only in James Bond movies. I never believed that anyone would actually create and activate one in real life. I guess I never knew about Yang and the Yahoo board.' -- AFP