The Board of database giant and ORC owner infoGroup has removed Vin Gupta from his Chairman's role following an investgation which has found him guilty of 'excessive spending'. In support of the finding, the firm has introduced a new policy which limits directors' use of company funds.
In January, the infoGroup - which bought research firmORC in 2006 and was formerly known as infoUSA - set up a special litigation committee in response to the mismanagement lawsuit brought by shareholders Cardinal Value Equity Partners and Dolphin Limited Partnership.
The pair claimed that the company had misspent millions of dollars on payments to a company Gupta owned called Annapurna Corp for use of a jet plane, an 80-foot yacht, apartments in Hawaii and California, and a University of Nebraska stadium box.
According to the lawsuit, the firm also spent nearly $900,000 flying Bill and Hillary Clinton to domestic and international locations and political events. Gupta, who is a major donor to the Democrats, defended the expenses as business-related, but agreed to the restrictions imposed under the new expense policy.
The policy prohibits the use of company money to pay for personal travel or entertainment, and in addition, any related transactions between infoGroup and any business affiliated with an executive or large shareholder will require pre-approval from the board if they cost more than $120,000. The policy also prohibits owning or leasing yachts, and prevents members of the Gupta family from becoming directors, officers, employees or consultants of the company.
Following the Board's decision, Gupta holds on to the role of CEO and has agreed to pay a $9m litigation settlement fee over the next five years. Gupta, who founded the company in 1972 and now holds a 40% stake worth $109m, has also agreed not to buy additional infoGroup stock until July 2009.
In connection with its findings, the committee asked Directors George Haddix, Elliot Kaplan and Vasant Raval to resign from the Board, and CFO Stormy Dean will take up a new position in corporate strategy and planning, but will remain in his current position until a new CFO is named.
infoGroup also announced the creation of a new post - EVP for Business Conduct and General Counsel - responsible for supervising all internal legal and compliance functions. The new employee will report directly to new Chairman of the Board, Bill Fairfield, who has been a Director of the firm since 2005.
Fairfield said in a statement that the decisions made by the committee 'address the internal deficiencies identified during the review and create a different governance process and structure that will enable the company to build on past successes'.
Following this announcement, infoGroup's stock jumped 9%, or 44 cents, to close at $5.35 yesterday.
Web site: www.infoGROUP.com .
All articles 2006-20 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.