Friday, October 09, 2009

Starwood vs Hilton going to grand jury

For anyone wondering what ever happened with the Starwood vs Hilton lawsuit over the stolen documents, well don’t worry – it sure ain’t over yet.

Tomorrow’s Wall Street Journal is publishing an article detailing how a Federal Grand Jury is weighing whether to criminally charge Hilton and/or some of its executives in the trade theft case.

We’ve seen how Hilton all but canceled their Denizen brand (well – they haven’t publicly announced it, but its assumed), Ross Klein has been replaced by John Vanderslice, Amar Lalvani and a huge contingent of other employees who jumped from Starwood to Hilton are no longer with Hilton and Steve Goldman – formerly Hilton’s head of Global Development – has suddenly departed from the company as well.

Some have speculated that Hilton is close to reaching a settlement with Starwood, but unless I’m mistaken (I’m no lawyer), a Federal Grand Jury investigation would still continue even if Hilton & Starwood reached a settlement.

The part that makes me wonder – and I’m sure scares the Hilton leadership team is the possibility that Hilton Worldwide itself may get criminally charged with wrongdoing – in addition to it’s former accused executives. That could leave the company struggling to do business as normal in an already difficult time for the hotel industry, from the WSJ article:

Prosecutors have exercised particular caution in pursuing criminal charges against major companies since the 2002 indictment of Arthur Andersen LLP. Criminal charges against Arthur Andersen for allegedly destroying evidence in the massive fraud case against Enron Corp. are widely regarded as having led to the big accounting firm’s demise. The Supreme Court eventually reversed the firm’s conviction on those charges, but only after the firm was disbanded.

An alternative approach that has become more common in recent years is for prosecutors to seek what is known as a deferred prosecution or nonprosecution agreement. That typically requires that a company be supervised by a federally appointed monitor and commit to reforms over a period of years.

I think it will come down to how many within Hilton – including the top members of Hilton’s executive team were aware of the actions of the Denizen development team.

I wonder if we’ll ever find out.

One thing is definite though, no matter what the outcome of this Grand Jury investigation ends up being – Hilton will be years behind Starwood and Marriott in creating a boutique hotel brand, and that’s exactly what Starwood was trying to achieve.

Source : 4Hoteliers
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