Starwood Accuses Hilton CEO of Stealing Secrets

(Reuters) – Starwood Hotels & Resorts Worldwide Inc (HOT.N) accused 44 top Hilton Worldwide executives of stealing trade secrets, escalating a battle over alleged corporate espionage between the lodging chains.

In an amended complaint filed on Thursday with the Manhattan federal court, Starwood said Hilton Chief Executive Christopher Nassetta knew his company was stealing confidential information about Starwood’s luxury and so-called lifestyle brands, including the St. Regis, W and The Luxury Collection.

The complaint suggests that Nassetta is under “intense pressure” to deliver solid results after private equity firm Blackstone Group LP (BX.N) bought Hilton for a premium price of $26 billion in 2007.

“Intense pressure — whether from Blackstone or otherwise — is no excuse for corporate espionage, and it is no excuse for the massive theft and widescale use of confidential and proprietary Starwood information,” Starwood said in the complaint.

Starwood said “at least 44 Hilton executives were personally involved in or aware of and condoned Hilton’s wrongdoing,” including five on its executive committee.

Hilton spokesman Aaron Radelet declined to comment, saying the company does not discuss pending litigation.

Starwood is seeking to appoint one or more monitors to ensure Hilton’s compliance with all injunctions. It also wants the court to impose a “time out” period for further development of Hilton’s luxury and lifestyle brands.

The U.S. hotel industry has since experienced its worst downturn since the Great Depression.

Hilton is the world’s fourth-largest hotel chain by number of rooms, while Starwood ranks eighth.

EXPANDED ALLEGATIONS

In the original lawsuit, Starwood accused Hilton and two former executives of stealing trade secrets to speed Hilton’s entry into the “lifestyle” hotel market with a new brand, Denizen. 

Hilton said at the time the lawsuit was without merit. The two executives, Ross Klein and Amar Lalvani, have since left Hilton, and development of the brand was halted.

In its latest complaint, Starwood now claims that Hilton’s head of global development, Steven Goldman, also knew of the theft.

“Nassetta and Goldman induced both Klein and Lalvani to breach their contractual and fiduciary obligations to Starwood,” it said.

Nassetta was previously chief executive of real estate investment trust Host Hotels & Resorts Inc (HST.N).

The case is Starwood Hotels & Resorts Worldwide Inc v. Hilton Hotels Corp et al, U.S. District Court, Southern District of New York, No. 09-3862. (Reporting by Santosh Nadgir in Bangalore and Deepa Seetharaman in New York; Editing by Erica Billingham and Derek Caney)