Judge Allows Infogroup 'Breach of Duty' Claims

A US judge has refused a request by Infogroup founder Vin Gupta to dismiss a former shareholder's complaint that he and other past directors were in breach of their duties during the firm's $468m sale to private equity group CCMP Capital Advisors last year.

Gupta made the request in June after former Infogroup shareholder NJC Pension Fund alleged that Gupta intimidated fellow Board directors into approving the sale of the database giant at an 'inopportune time' and at an 'irresponsibly low price', while using a flawed sales process.

The sale was first announcedin March 2010, when Infogroup's Board unanimously approved it. However, the agreement met opposition from certain shareholder groups, with opponents accusing the Board of attempting to sell the company at an unfair price.

Certain investors in the company then filed a lawsuit on behalf of shareholders, alleging 'breaches of fiduciary duty' by the Board.

Gupta, who at the time of the sale held around 14.8 million shares in the company, made about $101m when the deal went through.

The Delaware Court of Chancery has now denied Gupta's request to dismiss the 'breach of duties' claim, and held that the alleged intimidation could have rendered the Infogroup Board directors 'non-independent' for the purposes of voting on the sale. The court maintains that Gupta's 'desperate need for liquidity' and personal financial stake in the sale made him an 'interested' director.

Gupta was sacked as Infogroup Chairman in 2008, following an investigation which found him guilty of misspending millions of company dollars. After an internal investigation, he agreed to pay $9m over a five-year period, an amount more than offset by the $10m he received as part of his severance package.

He has since set up business contacts firm Database101, and is currently countersuing Infogroup over the company's allegations of illegal practices, including the alleged theft of its database.

Web sites: www.infogroup.com and www.database101.com .

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.