Is Vinod Gupta going to turn out to be Hillary Clinton's Ken Lay?
May 26, 2007
Suit Sheds Light on Clintons’ Ties to a Benefactor
By MIKE McINTIRE
When former President Bill Clinton and Senator Hillary Rodham Clinton took a family vacation in January 2002 to Acapulco, Mexico, one of their longtime supporters, Vinod Gupta, provided his company’s private jet to fly them there.
The company, infoUSA, one of the nation’s largest brokers of information on consumers, paid $146,866 to ferry the Clintons, Mr. Gupta and others to Acapulco and back, court records show. During the next four years, infoUSA paid Mr. Clinton more than $2 million for consulting services, and spent almost $900,000 to fly him around the world for his presidential foundation work and to fly Mrs. Clinton to campaign events.
Those expenses are cited in a lawsuit filed late last year in a Delaware court by angry shareholders of infoUSA, who assert that Mr. Gupta wasted the company’s money trying “to ingratiate himself” with his high-profile guests.
The disclosure of the trips and the consulting fees is just a small part of a broader complaint about the way Mr. Gupta has managed his company. But for the former president, and for the senator who would become president, it offers significant new details about their relationship with an unusually generous benefactor whose business practices have lately come under scrutiny.
In addition to the shareholder accusations, The New York Times reported last Sunday that an investigation by the authorities in Iowa found that infoUSA sold consumer data several years ago to telemarketing criminals who used it to steal money from elderly Americans. It advertised call lists with titles like “Elderly Opportunity Seekers” or “Suffering Seniors,” a compilation of people with cancer or Alzheimer’s disease. The company called the episodes an aberration and pledged that it would not happen again.
Asked to describe Mr. Clinton’s consulting services, an infoUSA official said they were limited to making appearances at one or two company events each year. Jay Carson, a spokesman for Mr. Clinton, would not elaborate on what the former president does for infoUSA, but said that he shared the public’s concern about misuse of personal information.
“It goes without saying that any suggestion that seniors are being preyed upon should be fully investigated and addressed by the appropriate agencies,” Mr. Carson said.
Aides to Mrs. Clinton were at pains to distance her from infoUSA, pointing out that she had sponsored legislation that would strengthen privacy rights of consumers. As for the flights on infoUSA’s plane, Phil Singer, Mrs. Clinton’s spokesman, said the senator “complied with all the relevant ethics rules” on accepting private air travel.
Ethics rules for senators and candidates require only that the recipient of a flight make reimbursement at a rate equal to that of a first-class ticket, a long-derided loophole that allows special interests to provide de facto gifts of expensive private air travel, which generally costs far more than commercial fares. Mr. Singer would not say what Mrs. Clinton paid for her flights.
InfoUSA’s troubles come at an especially awkward moment for Mrs. Clinton, since Mr. Gupta is among a loyal coterie of reliable fund-raisers whom she would be expected to turn to as she pursues the Democratic presidential nomination. He has raised hundreds of thousands of dollars for the Clintons’ campaigns over the years, and has donated $1 million to Mr. Clinton’s foundation.
The Clintons’ role in the shareholder suit has been largely overlooked even as the presidential race has heated up. The Deal, a business publication, said in a February article about infoUSA that the lawsuit’s references to an unnamed “former high-ranking government official and his wife” appeared to describe Mr. and Mrs. Clinton.
Neither aides to the Clintons nor infoUSA disputed that the complaint referred to the Clintons.
An entrepreneur from India, Mr. Gupta, 60, founded infoUSA in Omaha in 1972 and built it into a publicly traded company with more than $400 million in revenue. Along the way, he nurtured a taste for politics, becoming a major Democratic fund-raiser and a Lincoln Bedroom guest in the Clinton White House.
Before leaving office, Mr. Clinton appointed Mr. Gupta to the board of the Kennedy Center for the Performing Arts. Earlier, Mr. Clinton had nominated him for two minor ambassadorships, which Mr. Gupta declined because of business commitments.
“Vin’s done a very good job over the years finding ways to get connected,” said Stormy Dean, the chief financial officer of infoUSA and onetime candidate for governor in Nebraska, where the company is based.
“I don’t know whether he’s ever got anything out of his connections in politics,” Mr. Dean said. “But he likes it, and he’s good at it. He’s a legitimate American success story.”
Mr. Gupta declined to comment for this article.
Mr. Gupta is clearly proud of his friendship with the Clintons. He once had a personal Web site — it was taken down last year — where he posted photographs of himself socializing with them. One showed him with Mr. Clinton on a golf course, arms draped around each other and smiling; another showed Mrs. Clinton posing with the Gupta family in Aspen. Mr. Gupta even dedicated two school construction projects he financed in a rural part of his native India to the Clintons, naming one of them after him and the other after her.
After Mr. Clinton left office, Mr. Gupta was one of two businessmen with whom the former president agreed to enter into consulting arrangements (the other was Ronald W. Burkle, a billionaire investor and major Democratic donor). In 2002, Mrs. Clinton began reporting her husband’s work for infoUSA on her Senate financial disclosure forms, but she does not have to disclose his income and it is not clear what he is paid.
The shareholder lawsuit against infoUSA, brought by two Connecticut-based hedge funds, Dolphin Limited Partnership and Cardinal Capital Management, forced that information into the open. It charges that Mr. Gupta’s spending on the Clintons is part of a pattern of improper company expenditures for things like luxury cars, jets and houses, as well as a yacht that is notable for being one of the few to have an all-female crew.
Mr. Gupta has defended the expenses as legitimate and business-related, and he has accused the hedge funds of trying to wrest control of the company through a smear campaign. Mr. Gupta has moved to have the lawsuit dismissed; a decision is pending.
Representatives of Dolphin and Cardinal declined to comment. Herbert A. Denton, president of Providence Capital, a New York hedge fund that also invested in infoUSA and had pressed for management changes, said the expenditures cited in the lawsuit were hard to defend.
“When the C.E.O. of a publicly traded company can say with a straight face that the shareholders benefit from having a yacht with an all-female crew stationed in the Virgin Islands, then you’ve got a problem,” Mr. Denton said.
The lawsuit says Mr. Clinton signed a consulting agreement in April 2002 to “provide confidential advice and counsel to the chairman and C.E.O. of the company for the purpose of strategic growth and business development.” InfoUSA made $2.1 million in quarterly payments to Mr. Clinton from July 2003 to April 2005, and in October 2005 entered into a new three-year agreement to pay him $1.2 million. It also gave him an option to buy 100,000 shares of infoUSA stock, with no expiration date.
The complaint asserts that the contracts with Mr. Clinton are “extremely vague” to the point of being wasteful. It says they state that Mr. Clinton will not lobby for infoUSA, and that the company cannot use his name, likeness or association for any business purpose.
Mr. Dean said the former president’s presence at company events “adds a lot of credibility” to infoUSA in business circles. Mr. Clinton normally commands $125,000 to $300,000 for the many speeches he gives each year, and has earned almost $40 million on the lecture circuit since leaving office.
Mr. Dean said Mr. Clinton had no role in infoUSA’s data collection and distribution business, which was criticized by the authorities in Iowa who uncovered the questionable sales of call lists during an investigation of unscrupulous telemarketers in 2005. After the Times article on Sunday about that case, officials at the Federal Trade Commission indicated they were considering opening their own inquiry into infoUSA’s practices.
Mr. Dean also said that the numerous flights infoUSA provided for Mr. Clinton’s nonprofit foundation activities constituted charitable donations, for which the company was entitled to a tax deduction. The flights included trips to European capitals, Alaska, Florida, Hawaii and Mr. Clinton’s home state of Arkansas.
Mrs. Clinton’s use of infoUSA planes appears to be mostly campaign related. In one instance cited in the lawsuit, Mrs. Clinton “traveled at the company’s expense aboard a private jet from White Plains, N.Y., to Detroit, Mich., and then to Fort Lauderdale, Fla., and home to White Plains, N.Y., after calling the company the previous day in desperate need of a plane.”
InfoUSA paid $18,480 in January 2004 to fly Mrs. Clinton “and her four-person entourage” to New York from New Mexico, where she had made a campaign appearance and attended a book signing. Campaign finance records show that her committee, Friends of Hillary, made a reimbursement of $2,127 for that flight. It was not clear if any other candidate committees in New Mexico also helped defray some of the cost.
Her aides said that in addition to using campaign money to pay for some of the infoUSA flights, Mrs. Clinton used personal finances to pay for parts of any flights that did not involve political activities, like the 2002 trip to Acapulco. As for why infoUSA paid anything at all for a round-trip flight to a vacation destination, Mr. Dean insisted it was a legitimate expense.
“I’m not sure what they were doing down there,” Mr. Dean said, “but it was business related.”
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