Legal action surrounding Infogroup USA, founder Vinod Gupta and his new company has heated up again, with a $13 million settlement over corporate waste and a new lawsuit alleging improper marketplace conduct.
This month, shareholders who in 2010 sued Omaha-based Infogroup, once a publicly traded company, agreed to accept $13 million to settle their suit over Gupta’s conduct amid a buyout offer. The suit said the company was sold too cheaply by a board that caved in to the demands of Gupta.
Gupta, the company’s founder and a major shareholder, was described in the suit as favoring a quick sale after spending lavishly on luxury goods and travel and consulting fees for former President Bill Clinton and former U.S. Sen. Hillary Clinton. Gupta said that his relationship with the Clintons earned huge dividends for Infogroup and that the company was fortunate to attract the buyout offer it did get.
Last week, another suit joined the legal fracas. Infogroup sued Gupta, alleging his Omaha-based rival company called Database 101 has improperly recruited InfoGroup employees and accessed InfoGroup computer secrets.
Both companies are in the information business, using the Internet to sell data to customers. Examples are sales leads, business credit histories, demographic information and myriad details about people, companies and neighborhoods of interest to advertisers and sellers.
And the companies are bitter rivals. Infogroup was started by India-native Gupta in Omaha in 1972 as a direct-mail and telephone marketing company. He left in 2008 amid allegations of using company money for personal expenses. He then started Database 101 to compete with the company he founded.
The suit that was settled in Delaware Chancery Court said directors sold Infogroup to CCMP Capital Advisors in 2010 for less than they could have to raise cash for Gupta, then a large shareholder. Gupta, the suit said, was anxious to raise money because he had been ordered to pay the company $9 million to settle an earlier corporate-waste lawsuit from his tenure as CEO.
Gupta also had agreed to pay about $4 million to settle Securities and Exchange Commission claims that he misused company money while serving as InfoGroup’s leader.
The judge in the Delaware case ruled that Gupta utilized a “pattern of threats and bullying” to force the board to sell the company.
The Delaware suit was filed by a New Jersey pension fund that was a shareholder. The suit alleged that Gupta used company money to buy a yacht and pay the private-jet travel and consulting fees for the Clintons. Gupta also used company money to support favored Clinton charities and for luxury cars used for personal and family transportation, the shareholder suit said.
Gupta said his relationship with the Clintons, including money spent in their direction, was repaid to Infogroup many times over, leading to business with the Democratic National Committee and other organizations.
“Through the Clintons, we got to know new potential customers — and big ones,” Gupta said. “Companies like Google and Yahoo.”
The new Infogroup suit says Gupta’s Database 101 has poached key employees and copied the look of Infogroup’s websites.
“The visual layout and graphic interfaces associated with DB101’s websites are substantially similar — if not exact duplicates — of the visual layout and graphic interfaces found in InfoGroup websites,” the suit says. “Infogroup recently has uncovered evidence that DB101 has obtained access to InfoGroup protected computer systems or information stored on such systems on or about June 2013.”
Gupta said the suit is without merit and that he has only hired former Infogroup employees who were let go as part of job cuts at the rival company.
InfoGroup declined to comment, citing a policy on pending and past litigation.
The suit alleges deceptive trade practices, breach of contract, computer fraud, false advertising and other behavior. InfoGroup is seeking a jury trial, injunctions against what it calls misconduct, and unspecified damages.
The two companies tangled in 2011 over similar allegations in Douglas County District Court, with suit and countersuit eventually leading to a settlement. The accord included Database 101 agreeing to not refer to any of Infogroup’s brand names and to refrain from implying that the two are related. Database 101 is in violation of that settlement, the new lawsuit says.