Shareholders of US telco World Callnet, which owned UK internet service provider Callnet, have accused the company's directors of fraud.
In a lawsuit filed on 11 October in the Chancery Court of Delaware by Prospect Capital Group and other shareholders, it is alleged that the directors planned to unlawfully seize control of World Callnet for the purpose of "looting the assets for their own personal benefit, and contrary to the best interests of the company and its shareholders".
The directors named in the lawsuit are Peter Boonen, Gerald Farley, John Kahlbetzer, Iain Rugheimer and Richard Reinert. Also accused is David Anthony Peters, who it is alleged has been in "de facto control" of World Callnet since 1 August 2000. The directors did not respond to requests for comment.
According to the lawsuit, Peters seized control of the company with less than the mandatory 50 per cent support of shareholders. It is alleged that the directors, appointed after Peters' move, allowed the transfer of certain assets of the company, including valuable intellectual property, to companies owned by Boonen and Peters.
The shareholders allege that the board of World Callnet voted to merge the company's UK ISP Callnet with Ezeview Technologies, a company controlled by Peters. According to a press release issued by the company, Callnet accepted an offer from Ezeview on 21 September.
It is also claimed that the board also voted to merge World Callnet Ltd, the UK company that had developed MailTV technology, with Key Club, a company controlled by Boonen. It is further alleged that a certain amount of cash was transferred to entities controlled by Boonen.
According to the lawsuit, Peters and the directors made numerous misleading press releases, stating that they were seeking to enhance shareholder value. It is alleged that once they had voted to sell the assets to their own entities, they asked for the appointment of an administrator to seek the legitimacy of the English courts to sanction their acts.
It has been reported that ISP Callnet, which entered administration earlier this month, has since been bought by telco E-Tel Ventures.
The lawsuit alleges that the takeover of Callnet was illegal, and that the perpetrators and their appointed directors have "been self-dealing and flagrantly in breach of their obligation" to shareholders of World Callnet. The lawsuit also seeks monetary compensation.
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