DURING THE HEADY DAYS OF 2000 WHEN INFOSPACE (NASD:INSP) founder Naveen Jain flamboyantly proclaimed that he would create the world's first trillion dollar company, there were those in the industry who were actually willing to place a bet on him doing just that.

Sadly for Jain, it hasn't been exactly that. The man—who has been described as “colorful”, “animated”, and “outspoken”—has been entangled in a number of lawsuits. The suits accused him of—among others—misrepresenting financial performances, breach of fiduciary duties, breach of state laws on the purchase of certain assets, and most recently, breach of contractual obligations bought against him by Infospace, which he quit in December 2002.

The lawsuit was the latest in a long list of problems for the one-time Internet darling, whose stock briefly rose to $1300 in March 2000. The charges came after Jain was unceremoniously ejected as chief executive officer on December 21, 2002 and replaced by Jim Voelker, whom he later accused of “cronyism.”

An earlier class action lawsuit had charged Infospace and Jain with misreporting the company’s 1999 and 2000 financial performances. This allegedly helped Jain sell millions of dollars of his own Infospace shares at artificially inflated prices. Incidentally, a September 2002 article in Fortune magazine also listed Jain as the ninth most-greedy CEO in America for cashing out $406 million in stock.

The lawsuit further alleged that Infospace completed a series of acquisitions, including the October 2000 acquisition of Go2Net, using inflated stock as currency. In May 2002, the complainant added Merrill Lynch and its analyst Henry Blodget to the lawsuit for issuing “buy” ratings on Infospace, when Blodget allegedly called it a “piece of junk” in private.

When the company’s new board, chaired by CEO Voelker, announced that Infospace would be suing Jain for breaching contractual and fiduciary duties, it become apparent how deep the animosity ran. Shorn of the legalese, this meant Infospace was accusing Jain of essentially starting his own company, Intelius, to compete with Infospace.

Jain for his part clarified that the two companies were not in the same space. He then went on to accuse Infos-pace’s current management of “insider dealings” and “siphoning off company cash.”

The Intelius website says the company is focused on developing “integrated intelligent information for homeland security and personal safety.” Meanwhile, Infospace alleges Intelius is developing a directory service product, which directly competes with an Infospace offering that links a free white pages directory to various for-pay databases.

Smarter Than Bill
Jain left New Delhi in 1979 to make his fortune in the U.S., and worked for Burroughs (now Unisys) in New Jersey for a while. But finding the freezing New Jersey winters unbearable, he moved west to the Bay Area, where the climate and work ethics were “amenable.” He worked for a succession of startups before finally gravitating towards Microsoft in 1989. In Redmond, Jain made his name as a program manager, starting out on OS/2 and then working on all of Microsoft’s greatest hits, including MS-Dos, Windows NT, and Windows 95 (for which he holds three patents). But working at the software giant made Jain realize how strong his entrepreneurial urges were. “When you’re working for Bill, you never know how good you really are. One person cannot make a difference at Microsoft,” he was quoted as saying. “At some point, you've got to go stand on your own two feet.”

To satisfy his entrepreneurial yearning, Jain left Microsoft in April 1996 to found Infospace. As the dotcom fever hit the pitch, there were numerous comparisons between Jain and Gates. A July 17, 1995 article in InfoWorld magazine compared him and Gates, and found Jain to be smarter!