Wouldn't the other company have committed a privacy act violation?
That said, this is a very small town and it sounds like you are in a specialized niche. Blaze of Glory exits will haunt you for many years to come - it's a small town.
If the people you work for are rational, then definately the site down and honest frank discussion is the way to go. If they're not rational - well, still try but at the end of the day it sounds like you're critical to their future sucess - they can only be so offside with you.
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