UK telecoms firm, Cable & Wirless (C&W) is being sued by its U.S investors after claims that the firm failed to reveal a 1.5bn tax charge linked to the sale of telecom operator One2One to Deutsche Telekom in 1999.
In a statement by U.S law firm, Schiffrin & Barrow on behalf on C&W American Depository Receipt (ADR) holders, the firm said it had filed a class action suit in the Court of Virginia over "materially false and misleading statements" between August 1999 and December 2002.
The complaint alleges that the financial agreement between C&W and Deutsche Telekom was false as it failed to identify a 1.5bn tax indemnification clause agreed by C&W which the company would be liable to pay if C&W's long-term debt rating fell below a predetermined threshold.
Following the announcement on December 6, 2002 that Moody's investment service would downgrade C&W's debt rating from Baa1 to Baa2, the company revealed the activation of the 'trigger clause' causing C&W's stock to fall 40 percent during one day.
C&W has stated that it was "aware of its obligations to shareholders and would defend itself vigorously."