Groupon $4.2 Million to Lefkofsky-Backed Companies
Groupon Inc. (GRPN) paid $4.21 million for services from companies partly owned by Eric Lefkofsky, the executive chairman and one of two board members appointed to run the daily deals site following the ouster of Andrew Mason as chief executive officer.
Groupon disclosed Mason’s resignation as director and Lefkofsky’s business transactions in a filing yesterday with the U.S. Securities and Exchange Commission.
The board’s haste in removing Mason following three quarters of missed results has left Groupon’s operation in the temporary care of two part-time leaders, Lefkofsky and Vice Chairman Ted Leonsis, investors with ties to dozens of companies in Chicago, Washington and San Francisco. Disclosing such connections is a common practice for investors who become involved in a company’s operations, according to Erik Gordon, a business and law professor at the Stephen M. Ross School of Business at the University of Michigan in Ann Arbor.
“Venture capitalists, especially fairly big ones, often have keiretsu,” or a web of companies, Gordon said in an interview yesterday. Groupon’s leaders had to disclose such relationships per SEC rules “because they are taking control of the management,” he said.
In conjunction with the changes, Leonsis stepped down from his role as chairman of the audit committee. Robert Bass, another director, will assume that role, the filing said.
InnerWorkings Inc. (INWK), a company co-founded by Lefkofsky, received $1.1 million from Groupon last year for marketing services, according to the regulatory filing. Echo Global Logistics Inc. (ECHO), also co-founded by Lefkofsky, earned $1.9 million providing supply-chain management for Groupon in 2012. Groupon also paid $325,000 to Fooda Inc., $260,000 to Lightswitch and $625,000 to Benchprep -- all startups backed by Lefkofsky’s investment firm, Lightbank LLC.
Leonsis is chairman and CEO of Monumental Sports & Entertainment LLC, which made $300,000 in proceeds selling event tickets in partnership with Groupon.
“The InnerWorkings and Echo Global Logistics relationships, which are just two of over 60 investments by individual board members, were only in place for a limited period of time and we don’t expect them to continue going forward,” Charles Sipkins, a spokesman for Groupon’s board, wrote in an e-mail. “We have strict measures in place to make sure every related party deal goes to audit.”
Lefkofsky holds a 6.2 percent stake in InnerWorkings, according to data compiled by Bloomberg. He served as director there until October 2012, the company said in its filing. The Groupon chairman owns a 14 percent stake in Echo Global, where he is still the largest shareholder. Lefkofsky left Echo Global’s board in December.
Groupon disclosed the business relationships to comply with Item 404 of Regulation S-K in the U.S. Securities & Exchange Commission Act, the filing said.
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