SEC Charges Former infogroup CEO for Skimming $9.5 Million
Vinod Gupta settles for $7.4 million and other penalties.
The SEC announced Monday that it charged Vinod Gupta, the former CEO and chairman of database giant infogroup, for allegedly skimming $9.5 million from the company for personal perks. Gupta has agreed to settle and, among other concessions, pay a $7.4 million fine.
Three other senior executives—Vasant Raval, former chairman of infogroup's audit committee; and former CFOs Rajnish Das and Stormy Dean—were also charged for their complicity in Gupta's activities.
Gupta [pictured at right with Bill Clinton] was outsted in August 2008 from the company he founded more than 30 years ago. At the time, his resignation capped a year-long shareholder lawsuit.
The SEC's complaints span from 2003 to 2007, and include allegations of using corporate funds to pay for personal jet travel, using almost $3 million in investor money for maintaining his yacht, and paying off his personal credit cards. "Gupta stole millions of dollars from Info shareholders by treating the company like it was his personal ATM," said Robert Khuzami, director of the SEC's Division of Enforcement, in a statement.
Raval has been accused of failing to "respond appropriately" to Gupta's spending sprees, even after two internal employees raised concerns to Raval.
Das and Dean, said the SEC, rubber-stamped "hundreds" of Gupta's expense reimbursement requests.
Gupta and Raval have agreed to settle, without admitting or denying the allegations. Raval will pay a $50,000 fine and agreed to an order that bars him from serving as an officer or director of a public company for five years.
Gupta's penalties are far worse. He's agreed to pay just over $7.4 million in the settlement, which include a $4.045 million disgorgement; prejudgement interest of $1.1 million; and a penalty of $2.2 million. He also will be barred from serving as an officer or director of a public company. His voting rights on his common stock, of which he still owns about 36 percent of outstanding shares, have been restricted.
The case against Das and Dean is still ongoing. As for the company itself, the SEC's investigation of it has concluded. Accordingly, the company has, without admitting or denying liability, consented to an SEC administrative Order which includes remedial efforts to replace officers and directors; create a new position of executive vice president for business conduct and general counsel; and hire an independent compensation consultant to advise on compensation matters, among other directives.
All of this follows a week after infogroup agreed to be acquired by affiliates of CCMP Capital for a total sale price of about $635 million. For their part, infogroup shareholders will receive $8 for each share of common stock they own. Infogroup's revenues for fiscal 2009 were $499.9 million
Read the full SEC release here.
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