We've actually seen this kind of behaviour with some of the sites from new clients.
They interlinked all their websites, usually with the same templated design.
If you didnt get any warning in webmaster tools, this is probably a purely algorithmic issue which is a whole lot harder to get out of.
I would look at the other things, technical seo, onpage, content being updated, those sorts of usual seo stuff. You competition might be different now in the SERPS as the keywords you were targeting are now showing different results.
