(CN) - Megamillionaire Vinod Gupta is enriching himself at shareholders' expense in selling his Omaha-based infoGROUP to a private equity firm for $635 million, or $8 a share, shareholders say in a state class action in Omaha. Gupta "destroyed enormous value" by wasting millions on "jet travel, vacation homes, a yacht, country club memberships and a collection of luxury automobiles," the shareholders say.
The class claims that Gupta's "misconduct" caused two previous shareholder lawsuits, in 2006, and an SEC investigation, and that the settlements forced Gupta out as CEO and cost the company millions in reorganization expenses.
Gupta founded infoGROUP in 1972. The company has 31 independent businesses and earned $500 million in revenue last year, according to the complaint in Douglas County Court.
"InfoGROUP is the leading provider of data-driven and interactive resources for targeted sales, marketing and research solutions for businesses all over the globe," the complaint states. It "powers 95 percent of Fortune 500 companies, powers the top five Internet search engines, is used in 90 percent of in-car navigation systems in North America, deploys 30 billion emails annually on behalf of its clients, partners with CNN on its exclusive CNN/Opinion Research Poll, and has more than 4 million global customers," according to the complaint.
Gupta was appointed U.S. Consul General to Bermuda, and declined President Clinton's nomination to be U.S. Ambassador to Fiji, according to Forbes.
Gupta was a major fundraiser for the Clintons, and "spent $900,000 of corporate money flying the Clintons to various destinations," according to National Public Radio.
Gupta received a $10 million severance payment when he was removed as CEO of infoGROUP in 2008, shareholders say.
In January this year infoGROUP announced that it would reorganize, then declared on March 8 that it would sell itself to CCMP Capital Advisors instead.
Shareholders call the deal an "unfair process at an unfair price."
They say they will receive "a paltry $8.00 in cash for each infoGROUP share," 11 percent less than the price the shares traded at as recently as November.
They say that while Gupta is expected to pay infoGROUP $9 million over 4 years to settle the shareholder lawsuits, the acquisition would allow Gupta to pay off that debt immediately, since he would receive cash from illiquid holdings in the company. They claim that CCMP is likely to hang on to infoGROUP's management, making the directors both sellers and buyers in the deal, which shareholders say is "fraught with conflicts of interest."
To close the deal, shareholders say, infoGROUP unfairly offered a short, 21-day "go shop" period for competing bidders, and shut out interested companies by refusing to disclose confidential information, locking up 36 percent of the voting stock in favor of CCMP, offering more than $17 million in termination and expense fees, and allowing CCMP 5 days to match any new offers.
The shareholders want the directors, infoGROUP and CCMP enjoined from consummating the sale. They allege breach of fiduciary duties and aiding and abetting.
The director-defendants are Vinod Gupta, Bill Fairfield, Roger Siboni, George Krauss, Gary Morin, Bernard Reznicek, Lee Roberts, John Staples III, Thomas L. Thomas and Clifton Weatherford.
The named plaintiff is The Pennsylvania Funds. The putative class is represented by Harvey Cooper with Abrahams, Kaslow & Cassman of Omaha, and Coughlin Stoia Geller Rudman & Robbins of New York, N.Y.
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