InfoUSA, Hostile Shareholder Group Start Round 2 of Control Battle
The war of words between infoUSA and an investment group that holds a 3.6% stake in the company is escalating in advance of infoUSA’s annual shareholder meeting.
The investment firm, Dolphin Limited Partnership, reiterated a series of charges it made last year. These include allegations that infoUSA is not delivering shareholder value; has not justified spending corporate funds on a yacht, a variety of residences, luxury cars and other assets; and does not have adequately independent oversight of compensation.
On Tuesday infoUSA issued a rebuttal statement from Gupta reading, in part, “Dolphin is an opportunistic hedge fund that typifies what’s wrong with Wall Street these days. Claiming to be crusading for the interests of investors, waving the banner of ‘corporate governance,’ Dolphin looks to make a quick buck. … [I]t is disconcerting to receive communications from Dolphin claiming to know what is best for the future of infoUSA. Then to be confronted with the reality that, according to Thompson Financial in the first quarter of this year, Dolphin reduced its holdings in infoUSA by 185,301 shares.”
Dolphin has been agitating for changes in infoUSA’s board of directors for more than a year and a half. On Tuesday, institutional investment advisory firm Institutional Shareholder Services (ISS) withheld judgment on those board members up for reelection, and recommended that shareholders vote against a proposed incentive plan.
ISS’s evaluation mirrors a position Dolphin advocated last year, during its previous unsuccessful attempt to change infoUSA’s management. This year, Dolphin is contesting the re-election of Bill L. Fairfield; Anshoo S. Gupta; and Elliot E. Kaplan, whose seats are up for re-election come infoUSA’s June 7 annual meeting. But unlike its previous effort, this year Dolphin has not proposed a slate of three alternative directors.
Both Dolphin and ISS mentioned that an agreement under which infoUSA CEO Vinod Gupta promised not to acquire any more shares of his company will expire on July 21. Between Gupta, infoUSA’s board and management, insiders control at least 43.1% of the company’s stock, according to papers filed with the U.S. Securities and Exchange Commission.
The statements from Dolphin and infoUSA come against a backdrop of two recent, and unflattering, articles in the New York Times about infoUSA and Gupta. In the first, printed on Sunday, May 20, both infoUSA and retail bank Wachovia were slammed for negligent practices that allowed fraudsters to swindle elderly consumers (directmag.com/disciplines/lists/bank_scam_artists/index.html). Gupta denied any culpability in the deceptions.
On Saturday May 26, the Times ran a story detailing Gupta’s relationship with former President Bill and Senator Hillary Clinton. Disclosure of several interactions between Gupta and the Clintons was included in lawsuits filed late last year by Dolphin and another shareholder group, Cardinal Capital Management. According to the Times, Dolphin and Cardinal accused Gupta of misusing company funds in order to ingratiate himself with the Clintons.
