InfoUSA shareholder lawsuit upheld, with some exceptions

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A Delaware judge would not dismiss three counts of a shareholder lawsuit alleging in part that Vinod Gupta, founder and CEO of Omaha, NE-based data company infoUSA Inc., had spent millions of dollars of corporate funds on personal expenses.

The judge, Chancellor William Chandler III, produced a 79-page opinion that was handed down August 13, dismissing some shareholder charges and keeping others. The suit was filed by activist hedge funds Dolphin Limited Partnership and Dolphin Financial Partners, which together own 2 million shares, or 3.6 percent of infoUSA.

Calls to Gupta's office were not returned, neither were calls to infoUSA chief financial officer Stormy Dean. Chandler's clerk was not willing to comment regarding the judge's opinion and Chandler was not immediately available for comment.

Amid this attention, the database giant hired Sloane & Co., a New York-based financial public relations firm, to provide strategic and crisis communications support to "manage a series of communications challenges," according to the press release.

Sloane is also providing marketing, transactional and investor relations support.

Elliot Sloane, CEO of Sloane & Co., would not comment beyond statements made in the press release regarding the communications tasks infoUSA has charged his firm to handle.

"InfoUSA is conducting business as usual, regardless of all this misleading press coverage," Sloane said.

"Its second quarter financial results are evidence of that," he added.

In the second quarter of 2007, infoUSA delivered record revenues of $160.1 million, up 60 percent from the same time the year earlier.

Sloane said he believes Gupta will be completely vindicated as the legal process continues to unfold.

As well as working on communications regarding the lawsuit, Sloane is also helping to clarify infoUSA's position on direct marketing industry best practices in the face of what the communications firm calls, "misleading press coverage."

In May, infoUSA was singled out in a New York Times article. The article specifically referred to the fact that in 2005, Iowa state regulators collected documents indicating that infoUSA sold lists containing the names of older Americans to telemarketing criminals.

At the time, infoUSA said the Times' assertions about the company were based on the files of a "now completed investigation of a suspected telemarketing criminal" by the Iowa attorney general.

Three years ago, infoUSA-owned Walter Karl provided documents at a meeting with Iowa's assistant attorney general. Iowa authorities determined infoUSA had done nothing wrong.

In Sloane's statement last week, he commented, "InfoUSA, led by founder Vin Gupta, has a compelling, up-by-the-bootstraps, entrepreneurial story, building from scratch a company that today provides essential marketing tools and services for millions of businesses.

"Yet infoUSA also operates in a complex and often misunderstood industry," the statement continued. "Our objective is to help infoUSA cut through the clutter and seize the right opportunities to tell its side of the story.

"We will focus on building a communications program that will let infoUSA highlight the many customer benefits of its products and services, as well as the leadership position it has long taken on the critical issues facing the direct marketing industry," the statement said.

Sloane, senior vice president John Hartz, and associate Doree Damoulakis lead the infoUSA account.

An Associated Press article last week stated that the upheld items of the shareholder lawsuit included allegations that in 2005, Gupta attempted to change the status of the company to privately owned, and that this was an attempt to pave the way for Gupta to purchase infoUSA at a later point in time.

The other charges upheld by the judge, according to the article were that Gupta inappropriately awarded 100,000 share options to former US president Bill Clinton without first getting approval from the board, and that the company paid for many of Gupta's personal expenses like jet travel, homes, a yacht, high-priced furniture and a collection of luxury automobiles.

Further lawsuit hearings are pending.

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