Posted on: Thursday, January 24, 2002

Suit says Web firm hid details of contracts

Bloomberg News Service

Digital Island Inc., an Internet services provider, withheld information about lucrative contracts before taking a $3.40 per share buyout by Cable & Wireless Plc, former shareholders said in a lawsuit.

Telecommunications company Cable & Wireless bought Digital Island for about $340 million, including $49 million in debt, last August.

In a lawsuit filed in federal court in Delaware yesterday, eight former Digital Island shareholders claim their shares would have been worth more had directors revealed agreements to provide video data to media company Bloomberg LP and Internet services to Major League Baseball's Web site.

"There is little doubt that the disclosure of the Bloomberg and Major League Baseball deals" would have "dramatically increased shareholder value," according to the suit, which asks for class-action status, a jury trial, damages and legal fees.

Bloomberg LP is the parent company of Bloomberg News. Bloomberg and Major League Baseball aren't parties to the suit.

The shareholders say Digital Island officers and directors received extra payments for stock options in the sale, and five executives were given "lucrative employment contracts."