The Securities and Exchange Commission has charged a group of former senior executives at an Omaha-based database company with scheming to funnel millions of dollars in illegal compensation to the former CEO.
The SEC has accused Vinod Gupta, the former CEO and chairman of infoUSA Inc. and infoGroup Inc., of fraudulently using corporate funds to pay himself almost $9.5 million in personal expenses to support his lavish lifestyle. That lifestyle included trips to destinations such as South Africa, Italy and Cancun, along with $2.8 million in expenses for his yacht, $1.3 million in personal credit card expenses, 28 club memberships, 20 automobiles, three personal life insurance policies and homes around the country. The SEC also said he caused the company to enter into $9.3 million of undisclosed business transactions between Info and other companies in which he had a personal stake.
The SEC also charged the former chairman of Infos audit committee, Vasant H. Raval, and two of the company's former CFOs, Rajnish K. Das and Stormy L. Dean, with enabling Gupta to carry out the scheme.
The SEC alleges that Raval failed to respond to various red flags concerning Gupta's expenses and Info's related-party transactions with Gupta's other entities. Two Info internal auditors raised concerns that Gupta was submitting requests for reimbursement of personal expenses, yet Raval failed to further investigate the matter and he omitted critical facts in a report to the board concerning Guptas expenses, according to the SEC.
The SEC further alleges that Das and Dean allowed Gupta to support his lavish lifestyle by rubber-stamping hundreds of his expense reimbursement requests. Das and Dean approved Gupta's expense reimbursement requests despite the fact that the requests lacked a sufficient explanation of the business purpose and supporting documentation, even after several employees raised concerns. Das and Dean also signed management representation letters to Info's outside auditor falsely representing that all related-party transactions with Gupta's entities had been properly recorded and disclosed in Info's financial statements.
Gupta, Raval, and Info agreed to settle the SEC's charges without admitting or denying the allegations against them. Gupta agreed to pay disgorgement of $4,045,000, prejudgment interest of $1,145,400, and a penalty of $2,240,700. Raval agreed to pay a $50,000 penalty. The SEC's case against Das and Dean is ongoing.