InfoGroup to Pay $13 Million to Settle Suit Over Buyout

InfoGroup Inc. agreed to pay $13 million to resolve investors’ claims that directors sold the database-marketing company on the cheap to bail out founder Vinod Gupta, a former financial backer of Bill Clinton.

InfoGroup will hand over $13 million from insurance to settle the class-action lawsuit brought by the New Jersey Carpenters Pension Fund, according to a Delaware Chancery Court filing. Gupta browbeat InfoGroup’s board into selling the company to CCMP Capital Advisors LLC for $463 million, shortchanging investors, the fund said.

The fund alleged Gupta, forced to step down as InfoGroup’s top executive over his use of corporate monies to buy a yacht and bankroll private-jet travel and consulting fees for former President Clinton and ex-Senator Hillary Clinton, engineered a quick sale to New York-based CCMP in 2010 to unload his shares and raise millions of dollars to wipe out debt.

The settlement brings to a close more than seven years of litigation revolving around Gupta’s management of InfoGroup, which changed its name from InfoUSA in 2008. Investors criticized directors for allowing Gupta to use millions in company funds to support his lavish lifestyle and back the Clintons’ political campaigns and charitable works.

Gupta and other board members acknowledged no wrongdoing under the settlement, their lawyers said in a Feb. 4 court filing. They agreed to the accord “solely to eliminate the uncertainties, burden and expense of further litigation,” according to the filing.

‘Bullying’ Finding

Delaware Chancery Court Judge John Noble in September 2011 rebuffed a bid by Gupta and other InfoGroup directors to have the New Jersey fund’s suit thrown out. Noble found that Gupta used a “pattern of threats and bullying” to force the board to sell the company to CCMP.

Gupta and Allison Cole, a spokeswoman for CCMP, didn’t immediately return calls for comment today on the settlement.

Shareholders initially raised questions about Gupta’s management style in 2006, accusing directors in a Delaware suit of turning a blind eye to his misuse of corporate assets.

Investors claimed the board failed to properly oversee millions of dollars in payments to Gupta for homes, automobiles, a yacht and private-jet flights for his family and the Clintons, according to court filings.

Gupta’s donations to the Democratic Party earned him a stay in the Lincoln bedroom during Clinton’s term as president, according to the Washington Post. Gupta also paid the Arkansas Democrat more than $3 million to serve as a company consultant after he left office, according to court filings.

Senate Campaign

Gupta donated more than $220,000 to the Democratic Party during Hillary Clinton’s 2000 U.S. Senate campaign in New York and gave the maximum allowable donation of $5,000 to her political action committee, the Washington Post reported. The India-born entrepreneur also gave $250,000 to Bill Clinton’s foundation and a six-figure gift to the Clinton Presidential Library in Little Rock, Arkansas, the newspaper said.

InfoGroup investors cited more than $146,000 paid by Gupta to fly Bill, Hillary and Chelsea Clinton to Acapulco, Mexico, in January 2002, according to the suit. The Clintons traveled on Gupta’s jet to Switzerland, Hawaii and Jamaica as well, according to court filings.

Bill Clinton also sailed on Gupta’s $3 million-dollar yacht, the American Princess, bought with InfoGroup funds, shareholders alleged. The 80-foot yacht “typically travels with an all-female crew,” according to Delaware court filings.

Leased Cars

Shareholders also objected to use of InfoGroup funds to lease cars, such as an H2 Hummer, a gold Honda Odyssey, a Mini Cooper, a Lexus 330 and Mercedes SL500, for Gupta and his family, according to court filings.

Gupta and other InfoGroup directors agreed in 2008 to pay more than $16 million to settle investors’ corporate-waste suits. The accord required Gupta to return $9 million to the company’s coffers and InfoGroup to pay more than $7 million to cover shareholders’ legal fees and expenses.

Gupta, who resigned as InfoGroup’s chief executive officer and chairman under the accord, also settled U.S. Securities and Exchange Commission claims he misused corporate assets.

Gupta paid more than $7 million in 2010 to resolve allegations he improperly used $3 million in corporate funds on personal travel, $2.8 million for yacht costs and $1.3 million for credit-card expenses, according to court filings.

To deal with more than $12 million in debts generated by the settlements, Gupta pushed directors to find a buyer for InfoGroup so he could sell his shares and satisfy a “need for liquidity,” according to court filings.

CCMP Bid

The New Jersey pension fund sued Papillion, Nebraska-based InfoGroup in 2010 after directors accepted CCMP’s bid of $8 a share. The offer amounted to a 2 percent discount on the database provider’s shares, the fund said.

At the time of the buyout, Gupta was InfoGroup’s largest shareholder and his holdings were valued at about $150 million, according to the New York Times.

Noble found in 2011 that Gupta vowed to sue other directors if they didn’t back an immediate sale. The board ultimately “was simply overwhelmed by Gupta,” the judge said.

The fund also alleged Gupta disrupted the board’s attempt to shop InfoGroup around for the best price by “influencing the list of potential bidders, conducting unsupervised negotiations and leaking confidential information about the sale,” the judge said.

After Noble cleared the way for the claims to go to trial and granted them class-action status, InfoGroup directors agreed to mediation to work out a settlement. Former U.S. District Judge Layn Phillips met with both sides in July and helped hammer out an agreement, according to court filings.

The case is New Jersey Carpenters Pension Fund v. InfoGroup Inc., CA No. 5334, Delaware Chancery Court (Dover).

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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