Federal prosecutors consider charges in probe of Hilton Hotels

Agents took up the case against Hilton after Starwood Hotels filed a lawsuit against the chain last April.
Agents took up the case against Hilton after Starwood Hotels filed a lawsuit against the chain last April. (Reed Saxon/associated Press)
By Associated Press
Saturday, February 20, 2010

Federal prosecutors and agents are investigating possible charges including fraud and theft of trade secrets in a criminal probe of Hilton Hotels and two executives lured away from a competing hotel company, according to a court motion filed Friday.

The U.S. Attorney's Office for the Southern District of New York sought to limit the sharing of information in a lawsuit pursued by Starwood Hotels & Resorts Worldwide against McLean-based Hilton and two former Starwood executives, Ross Klein and Amar Lalvani.

The motion says possible charges include conspiracy, computer fraud, theft of trade secrets and interstate transportation of stolen goods.

Messages seeking comment from attorneys for Klein, Lalvani and both companies were not returned Friday afternoon.

Federal agents took up the case after Starwood filed suit in April claiming that Klein and Lalvani, who formerly headed the company's luxury hotels group, took more than 100,000 documents with confidential and privileged information and used them to create a Hilton "lifestyle" brand to compete against the W hotel chain Starwood launched.

Prosecutors say the lawsuit must be halted because Starwood had been demanding, as part of routine discovery, all materials Hilton exchanged with federal prosecutors and FBI special agents.

"Significantly, these requests have impaired, and will continue to impair, our office's ability to obtain full and complete information from certain witnesses who are essential to our investigation," the U.S. attorney's office wrote.

Prosecutors also said Hilton and its employees could have benefited by using Starwood materials obtained in discovery to tailor their testimony in criminal proceedings.

The motion to suspend the lawsuit for six months must be approved by a federal judge.

In an amended complaint last month, Starwood said at least 44 Hilton executives, up to and including chief executive Christopher Nassetta, knowingly allowed the stolen information to be used to develop a "lifestyle" brand at breakneck pace. Hilton announced the launch of Denizen in March, months after Lalvani and Klein were hired.

According to the suit, the documents allegedly stolen included detailed Starwood marketing materials, future growth plans, agreements with franchisors, blueprints for developing the W hotels brand and instructions to convert existing properties.

Hilton, which is owned by the Blackstone Group, had previously disclosed a grand jury subpoena, but prosecutors would not confirm an active investigation.

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