U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21451 / March 15, 2010
SEC v. Vinod Gupta, Civil Action No. 8:10-cv-00100 (D. Neb.); SEC v. Vasant H. Raval, Civil Action No. 8:10-cv-00101 (D. Neb.); SEC v. Rajnish K. Das and Stormy L. Dean, Civil Action No. 8:10-cv-00102 (D. Neb.)
SEC Charges infoGROUP's Former CEO, CFOs, and Audit Committee Chair with Fraud
The Securities and Exchange Commission ("Commission") today filed civil injunctive actions charging former senior executives and a former director of Omaha-based infoUSA Inc., k/n/a infoGROUP Inc. ("Info") with securities fraud and other violations of the federal securities laws. Specifically, the Commission's complaints against Vinod Gupta, Info's former CEO and Chairman, Vasant H. Raval, former chairman of Info's audit committee, and Rajnish K. Das and Stormy L. Dean, Info's CFOs during the relevant period, allege that from 2003 through 2007, the Defendants caused Info to pay Gupta almost $9.5 million of unauthorized and undisclosed perquisites and to enter into $9.3 million of undisclosed related party transactions with Gupta's entities.
The Commission's complaints, filed in federal district court in Nebraska, allege that Gupta improperly used corporate funds for over $3 million of personal jet travel for Gupta and his family and friends to such destinations as South Africa, Italy, and Cancun; $2.8 million of costs associated with Gupta's yacht; $1.3 million of personal credit card expenses; and costs associated with 28 club memberships, 20 automobiles, his homes around the country, and premiums for three personal life insurance policies. The Commission also alleges that Gupta failed to inform Info's other board members of the material fact that he had purchased shares of an Info acquisition target for his own benefit from which he obtained realized and unrealized ill-gotten gains.
The Commission also alleges that from January 2005 through July 2006, Raval, Info's former audit committee chairman, failed to respond appropriately to various red flags concerning Gupta's expenses and Info's related party transactions with Gupta's entities. According to the complaint, Raval failed to take appropriate action regarding the concerns expressed to him by two Info internal auditors that Gupta was submitting requests for reimbursement of personal expenses. Additionally, the complaint alleges that notwithstanding his charge by Info's board in January 2005 to investigate potential improper payments to Gupta, Raval failed to take meaningful action to further investigate Gupta's misconduct and omitted critical facts in his report to the board concerning Gupta's expenses.
The Commission also alleges that two of Info's former CFOs, Das and Dean, allowed Gupta to support his lavish lifestyle by rubber-stamping hundreds of Gupta's expense reimbursement requests. According to the complaint, Das and Dean approved Gupta's expense reimbursement requests despite the fact that the requests lacked sufficient explanation of business purpose and supporting documentation, even in the face of concerns raised by several Info employees. The complaint alleges that Das and Dean knew, or were reckless in not knowing, that Info's Commission filings materially understated Gupta's compensation and failed to disclose properly related party transactions with Gupta's entities. The complaint further alleges that Das and Dean signed management representation letters to Info's outside auditor that represented falsely that all related party transactions had been properly recorded and disclosed in Info's financial statements.
Without admitting or denying the allegations in the Commission's complaints, Gupta and Raval agreed to settle the matters. Gupta consented to a final judgment enjoining him from violations of Sections 10(b), 13(b)(5), and 14(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-3, and 14a-9 and from aiding and abetting Info's violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 13a-1, 13a-13, and 12b-20; imposing disgorgement of $4,045,000, plus prejudgment interest of $1,145,400; imposing a $2,240,700 civil money penalty; barring him from serving as an officer or director of a public company; and placing restrictions on Gupta's voting of his Info common stock.
Raval also consented to a final judgment enjoining him from violations of Exchange Act Sections 10(b) and 14(a) and Rules 10b-5, 14a-3, and 14a-9, and from aiding and abetting Info's violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) and Rules 12b-20 and 13a-1; imposing a $50,000 civil money penalty; and barring him from serving as an officer or director of a public company for five years.
Das and Dean are charged with violating Exchange Act Sections 10(b), 13(b)(5), and 14(a), and Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-3, and 14a-9, and for aiding and abetting Info's violations of Exchange Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B), and Rules 12b-20 and 13a-1. Additionally, Das is charged with violating Exchange Act Rule 13a-13. The Commission's complaint seeks permanent injunctions, third-tier civil penalties, prejudgment interest, and an officer and director bar against both defendants. The Commission's case against Das and Dean is ongoing.
In a related action, Info consented to the issuance of an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (the "Order") without admitting or denying any of the findings in the Order. The Order orders Info to cease and desist from committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 14a-3, and 14a-9.
See Also: SEC Complaint vs. Gupta; SEC Complaint vs. Raval; SEC Complaint vs. Das and Dean