Ariyoshi, Onuma sue over Pihana merger
By Rick Daysog
Advertiser Staff Writer
By Rick Daysog
Former Gov. George Ariyoshi and high-tech entrepreneur Lambert Onuma made a splash in Silicon Valley and on Wall Street by raising more than $200 million in financing for local startup Pihana Pacific Inc. nearly eight years ago.
Now, the two are taking legal action over allegations that they were improperly "frozen out" of Pihana.
In an Aug. 22 lawsuit in state Circuit Court, Ariyoshi and Onuma alleged that Pihana's former CEO Richard Kalbrener and Pihana's successor company, California-based Equinix Inc., concealed key financial information and failed to hold a shareholder vote on a 2002 merger between Equinix and Pihana. Onuma founded Pihana and owned 75 percent of its management common stock at the time of the merger, and Ariyoshi served on the company's board.
According to the suit, neither received compensation as a result of the merger.
"Pihana (executives), the board, its agents and all defendants determined that the purported merger of Pihana ... would give them an opportunity to unlawfully freeze out plaintiffs, thereby taking the value of plaintiffs' ownership in Pihana for themselves," the lawsuit said.
Kalbrener could not be reached for response, and a spokesman for Equinix did not return a call seeking comment.
Pihana, which was founded in 1999, operated Internet data-exchange centers. At its peak, the company employed about 200 people and operated data centers in Los Angeles, Sydney, Seoul, Tokyo, Hong Kong and Singapore.
In 2002, the company merged with SST Communications, a Singapore government-financed venture capital fund, and Equinix, which is a publicly traded company that provides Internet exchange services for networks, Internet infrastructure companies and content providers.
The lawsuit also said that Equinix was "virtually bankrupt" at the time of the merger but has bounced back since then.
The company now has a market capitalization of about $2.9 billion, annual revenues of more than $400 million and more than 900 employees in the United States, Asia and Europe.
The suit said the value of the Pihana stock that was merged into Equinix represents about 22.5 percent of Equinix's outstanding shares.
At today's stock price, the value of those shares is about $700 million.
The suit asks for damages, to be proven at trial. But attorneys for Onuma and Ariyoshi said their clients believe that they may be entitled to all or some of the $700 million amount.
The lawsuit was filed by local attorney John Edmunds and Los Angeles litigators Don Howarth and Suzelle Smith. Howarth and Smith represented the widow of the former Malboro Man who sued the tobacco industry in 1996 after her husband died of lung cancer.
Reach Rick Daysog at firstname.lastname@example.org.