InfoSpace, Jain reach settlement

Bellevue Internet company InfoSpace could receive $83 million in a proposed agreement to settle several lawsuits involving its founder and former chief executive, Naveen Jain.

The agreement could also lead to dismissal of a $247 million penalty Jain was ordered to pay to InfoSpace for violating insider-trading rules.

King County Superior Court and the U.S. District Court for the Western District of Washington would have to approve the agreement for it to take effect.

The negotiations revolve around several cases stemming from a derivative lawsuit that shareholder Thomas Dreiling filed on behalf of InfoSpace in 2001 against former company officers and former and current directors. In it, Dreiling alleged Jain and the others misled shareholders about the company's prospects while profiting from selling its stock.

Dreiling, a Seattle lawyer, also filed a separate lawsuit alleging Jain had violated insider-trading laws by buying and selling stock in a six-month period. That lawsuit led last year to the $247 million penalty, at the time the largest of its kind.

Jain, once one of the richest men in the country on paper, appealed that decision.

Yesterday's agreement could lead to dismissal of both lawsuits with prejudice, meaning the claims could not be brought again. However, derivative claims against one non-officer or defendant would be dismissed without prejudice.

The settlement would also pay Dreiling's lawyer's fees and other costs, which are not included in the $83 million cash payment.

And it would settle two other lawsuits Jain filed against InfoSpace last year after being ordered to pay the penalty.

One blamed InfoSpace and others for errors that led to the huge judgment. Jain filed the other against InfoSpace and its insurance companies to have them pay the $247 million fine.

Jain had to post a $253 million bond to prevent his assets — which include a waterfront mansion in Medina, a stake in the Seattle Sonics and two yachts — from being seized while he appealed the penalty.

Lawyers for the parties declined to comment yesterday, referring all questions to a statement InfoSpace released late yesterday afternoon..

"The settlement agreement was entered into for the sole purpose of resolving contested claims and disputes as well as avoiding substantial costs, expenses and uncertainties associated with protracted and complex litigation," the release said.

The company has faced several lawsuits over the years, and Jain welcomed controversy.

He founded InfoSpace in 1996 as an online e-mail directory, taking the company public two years later and turning it into an Internet and wireless-services company.

At its height, InfoSpace had a stock-market value higher than Boeing's, and Jain claimed InfoSpace would one day become the world's first company worth a trillion dollars.

The company then lost more than $30 billion in shareholder value during the dot-com bust.

In late 2002, the board fired Jain, who started a new Internet company called Intelius in the building across the street from InfoSpace headquarters.

InfoSpace sued Jain and another former employee, contending they violated contracts by setting up Intelius. That suit would be settled as part of yesterday's agreement.

Jim Voelker, the new CEO of InfoSpace, has replaced most senior management, and the company is now profitable.

Shares of InfoSpace rose 15 cents yesterday and closed at $47.27.

Sharon Pian Chan: 206-464-2958 or