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Starwood's New Accusations Against Hilton CEO and Execs

Both Hilton Worldwide chief executive Christopher Nassetta and head of global development Steven Goldman and "at least 44 Hilton executives were personally involved in or aware of and condoned Hilton's wrongdoing," Starwood Hotels & Resorts Worldwide said in an amended complaint filed yesterday in U.S. District Court in White Plains, N.Y.

Hilton is accused of stealing confidential information about Starwood's luxury and lifestyle brands St. Regis, W and The Luxury Collection when two former Starwood execs Ross Klein and Amar Lalvani were part of the development of a new Hilton luxury brand called Denizen. Last April, Starwood accused the two former employees of taking boxes of confidential paperwork and thousands of files to Hilton. The two have now left Hilton and Denizen is dead in the water. Hilton has declined to comment on pending litigation.

The full, 86-page complaint can be found here. (Warning: It's a large PDF file.)

The new complaint alleges that knowledge of corporate espionage went all the way to the top, including five on Hilton's executive committee. It states that Nassetta was under "intense pressure" to provide results after the Blackstone Group purchased Hilton for $26 billion in 2007. Although Nassetta isn't named as a defendant in the complaint, it alleges he knew about the espionage for months.

Starwood alleges Goldman used Lalvani as a "corporate spy" for Hilton who provided Goldman with confidential information about hotel developers, including one interested in opening a W branded hotel in Thailand. Lalvani was later hired by Hilton. From the complaint:

"Here's an interesting one. . . . I have good connections with the owner," Lalvani e-mailed to Goldman. "Let's discuss protocol during my transition on deals like this so we don't miss them but also dealing with the fact we don't have a lifestyle offering yet. This is going to be fun!!"
BNET reported that Hilton has been in negotiations with Starwood to settle the lawsuit since June, but apparently has made little headway.

From a letter sent to Hilton employees Thursday by Nassetta:

To recap some of the key responsive steps taken by Hilton: In November 2008 when Hilton's top management first became aware that former Starwood employees Mr. Klein and Mr. Lalvani had brought Starwood materials with them to Hilton, Hilton's legal department commenced an internal investigation that resulted in Hilton returning to Starwood several boxes of materials that originated at Starwood. In April 2009, without any discussion with Hilton, Starwood filed its original complaint in this action and issued a press release. Since the original complaint was filed by Starwood, Hilton terminated Mr. Klein and Mr. Lalvani and has discontinued its Denizen brand.
A federal grand jury was deciding whether to charge Hilton or any of its executives in October. Since April, approximately 30 members of Hilton's luxury brand group have left, been placed on leave or dismissed.

Looking over the complaint I learned that Klein made $400K a year and Lalvani $250K and both signed employment contracts with a lot of caveats. I also learned that Starwood employees who are in danger of being accused of corporate espionage probably should not use corporate e-mail so freely.

The knowledge that Hilton wants to settle and has terminated several employees involved lets me know they want this to go away, but Starwood does not. Apparently someone high in the company has decided this is worth fighting for, millions of dollars on legal fees be damned. Is it for justice? Is it for revenge? Or is it the faint hope that there will be a big payday for Starwood in the future?

I'm not sure the latter will happen, but perhaps this is all showboating for the media and a huge settlement ... or maybe it's because someone in Starwood's hierarchy won't be satisfied until Goldman, now on leave, is fired.

More of the Starwood/Hilton situation on BNET:
http://industry.bnet.com/travel/10001658/hilton-gets-subpoena-in-starwoods-industrial-espionage-lawsuit/
http://industry.bnet.com/travel/10002211/travel-roundup-hiltons-settlement-with-starwood-biden-lahoods-high-speed-rail-delta-drops-nairobi-and-more/

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