A Montgomery County Court judge has granted Host Hotels & Resorts a $22.7 million judgment against its former real estate broker Molinaro Koger, which the Bethesda hospitality firm had accused of fraud.
The decision, issued three days before the case was set to go to trial on July 16, stems from a civil lawsuit filed last summer. In it, Host accused Molinaro Koger and its president, Robert Koger, of conspiring with the buyers of three Host properties to secretly flip the properties for a $15 million profit, instead of obtaining the highest sales price for Host.
“The decision validates our claims that Molinaro Koger and Robert Koger completely abandoned their fiduciary duty as Host’s broker and engaged in fraudulent schemes against us,”said Host general counsel Elizabeth Abdoo, in a statement.
Koger declined to discuss the case, but said, through a representative, he is appealing the decision.
According to court transcripts, the court sided with Host because Koger failed to submit depositions or produce any documents during the pre-trial, discovery phase of the proceedings. Attorneys for Koger and his Vienna-based company argued that the delays stemmed from a decision by the defendants to change lawyers.
Molinaro Koger brokered 11 transactions for Host between 2004 and last year, receiving upwards of $4.4 million in commissions. Three of those deals are at the center of the lawsuit.
In one, the brokerage firm arranged the 2009 sale of the Washington Dulles Marriott Suites and the Sheraton Stamford in Connecticut, which traded for a total of $36 million to Scioto Partners, a company Host claims it later learned was led by an employee of Molinaro Koger and one of its business partners.
On the day of the acquisition, the buyer, with Molinaro Koger acting as the escrow agent, resold the pair of properties for $13 million more than it paid on the day of purchase, according to court papers.
Host was first alerted to possible misconduct in a series of anonymous e-mails sent to several of Molinaro Koger’s clients in 2010. The e-mails accused the brokerage firm of being “guilty of crimes of moral turpitude,” according to a separate lawsuit Molinaro Koger filed last fall against “John Does.” That case was dismissed.
News of the Host complaint raised red flags among a number of the Molinaro Koger’s clients and partners. Eleven separate companies filed lawsuits demanding the brokerage firm return money held in escrow by Koger. The money in question was returned in all of those cases.
Two other lawsuits against the company, one involving a defaulted loan on a corporate jet and the other on back rent, are still pending. The company has since traded hands and the new buyers have not been named.