ExciteAtHome bondholders seek at least $600 million plus undetermined damages for actions taken by Comcast and Cox executives who had seats on the ExciteAtHome board. The transactions came about a year before the cable companies ended their contracts with ExciteAtHome.
Comcast, the nation's third-largest cable TV company, with more than 8.5 million subscribers, is poised to become the largest with the planned acquisition of No. 1 AT&T Broadband, forming an AT&T Comcast with 22.3 million subscribers. Atlanta-based Cox is the fifth largest cable company, with 6.2 million customers.
ExciteAtHome, based in Redwood City, Calif., sold high-speed Internet service over cable TV lines. It filed for Chapter 11 bankruptcy protection a year ago and ceased operation in March. A U.S. Bankruptcy Court has approved plans to liquidate the company effective Tuesday.
The lawsuit against Cox and Comcast, filed by the committee representing unsecured bondholders in U.S. District Court in Wilmington, Del., alleged that a series of insider deals led to ExciteAtHome's demise.
"The three controlling shareholders of ExciteAtHome -- AT&T Corp., Cox and Comcast -- each used their insider positions to force the company to enter into a series of convoluted and interconnected agreements in March 2000 ... that benefited the controlling shareholders, but left ExciteAtHome critically weakened," the lawsuit said.
The lawsuit said the transactions, which brought Cox and Comcast $3.4 billion worth of AT&T stock, resulted in transfer of control over ExciteAtHome's board to AT&T, while giving Comcast and Cox "an enormously lucrative financial exit from their ExciteAtHome investment."
The lawsuit alleged that Brian Roberts, president of Comcast, and David Woodrow, a Cox vice president, both of whom had ExciteAtHome board seats, breached their duties as directors by entering into transactions "structured so that ExciteAtHome received inadequate consideration while Cox and Comcast reaped extraordinary benefits."
Comcast took note of the lawsuit in an SEC filing, saying the company considers it "without merit and intends to vigorously defend itself." Company officials wouldn't comment further.
Cox also said in an SEC filing it intended to "defend this action vigorously." Cox officials didn't immediately return calls seeking comment.
Edward Johnson, an attorney for the bondholders, declined to comment on why AT&T wasn't named as a defendant.
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