By Kris Hudson
Of THE WALL STREET JOURNAL
A nasty battle has surfaced in the usually buttoned-down hotel
industry, pitting Host Hotels & Resorts Inc. (HST)--the largest
U.S. hotel owner--against a real-estate brokerage firm it hired to
sell some of its hotels.
In a lawsuit filed Friday in Maryland state court, Host accused
brokerage Molinaro Koger Inc. of setting up front companies to flip
the properties for its own profit rather than getting the highest
possible price for Host. The suit outlines more than $15 million of
gains allegedly reaped from flipping Host's hotels without its
knowledge.
Molinaro Koger's president, Rob Koger, said in a written
statement Sunday that he is "puzzled and disappointed" by Host's
"baseless" charges. "The fictitious complaint is belied by the fact
that senior management at Host had complete knowledge of the
transactions of which they now complain," the statement said.
(This story and related background material will be available on
The Wall Street Journal website, WSJ.com.)
Host, a Bethesda, Md., real-estate investment trust, owns stakes
in 133 hotels globally. Closely held Molinaro Koger, of Vienna,
Va., has brokered more than $15 billion of hotel deals since its
founding in 1959.
Host hired Molinaro Koger as its agent on 11 deals from 2004 to
2010, according to court papers. However, Mr. Koger and his
brokerage "have repeatedly abused this trust, causing untold damage
to Host and...one of Host's affiliates," Host's suit alleges.
Charles Kimmett, a Wiltshire & Grannis LLP attorney
representing Molinaro Koger, denied Host's allegations and said the
firm would "vigorously defend" itself against Host's lawsuit.
Host, which is represented by law firm Skadden, Arps, Slate,
Meagher & Flom LLP, alleges in the suit that it was defrauded
in its sale of three hotels in 2009 and 2010.
Specifically, Host alleges that Molinaro Koger established front
companies led by the brokerage's employees or a business partner of
Mr. Koger to buy the hotels from Host without Host knowing of their
involvement in those companies. The buyers would then immediately
flip the hotels to higher bidders that had been concealed from
Host, allowing the middlemen to pocket the profit, according to
Host's lawsuit.
In one deal, Molinaro Koger brokered the sales of Host's
Sheraton hotel in Stamford, Conn., and the Washington Dulles
Marriott Suites in 2009 to a company led by a Molinaro Koger
employee and one of Mr. Koger's business partners, the lawsuit
alleges. The buyer then resold the hotels on the same day to a
bidder willing to pay a price $13 million higher, the lawsuit
alleges.
The Molinaro Koger employee leading one of the middleman
companies died last year due to accidental gas poisoning in his
home, according to a police report filed as an exhibit in the case.
However, the man's notarized signature still appeared four months
later on the deal's closing document, according to Host's
lawsuit.
Molinaro Koger denies that any of its employees or associates
was involved in the companies that bought the hotels from Host.
Molinaro Koger, meanwhile, alleges that unknown persons are
trying to destroy it. The company last fall claimed in a separate
lawsuit filed against "John Does" in a Virginia state court that
those people--whose identities it is still trying to determine--are
waging a smear campaign by sending anonymous emails to several
clients accusing the brokerage of "illegal and unethical actions"
against the clients.
In addition, the suit states that the company's Vienna, Va.,
headquarters were burgled in December 2010 and financial records
stolen. The suit further alleges that an information broker, hired
by Potomac, Md., private-investigations firm Rosetti Group LLC,
called banks used by Molinaro Koger and posed as Mr. Koger in an
attempt to get Molinaro Koger's bank records.
Molinaro Koger now is attempting to get Rosetti to reveal its
client roster by court order.
In a statement late Sunday, Rosetti Group's attorney denied that
the company had conducted so-called pretexting, including that
alleged by Molinaro Koger.