Starwood: Hilton CEO Condoned Use of Confidential Information

Starwood Hotels has turned up the heat in its corporate espionage case against Hilton, alleging in a new court filing that Hilton CEO Christopher Nassetta knew that two Starwood executives he hired were using confidential Starwood information. It also claims that one of the defendants was acting as a corporate spy while he was still at Starwood.

In a 135-page document filed in federal court Thursday, Starwood claims Nassetta and at least 43 other Hilton executives were personally involved in or were aware of and condoned the use of the confidential information that Starwood says was stolen by former executives Ross Klein and Amar Lalvani.

Hilton declined comment, citing company policy against making statements on pending litigation.

The filing also claims that Steven Goldman, Hilton’s head of global development and a key member of Nassetta’s senior management team, used Lalvani as a “corporate spy” while he was still at Starwood. Goldman personally recruited Lalvani, while Nassetta recruited Klein, the suit claims.

It cites an instance where Lalvani forwarded a report he had written for Starwood to Goldman’s personal email account in May, the month before he was hired, and says he provided Goldman with information about developers.

“Here’s an interesting one [developer],” Lalvani emailed to Goldman’s personal and Hilton email accounts on May 28, 2008. “This is going to be fun!!”

Starwood is asking the court to appoint a monitor for Hilton and to create a “penalty box” or “timeout” for further development of Hilton’s luxury or lifestyle brands.

“Since filing the initial complaint, Starwood has learned that Hilton’s misconduct was far more pervasive in terms of the staggering volume and commercial sensitivity of the information stolen, the widespread participation and personal involvement of Hilton’s senior management, and the dissemination and use of Starwood confidential information across all of Hilton’s luxury and lifestyle brands,” Starwood general counsel Kennet Siegel said in a statement.

“This case is about restoring a level playing field for fair competition, not just substantial monetary damages. We will do whatever it takes to protect our brands and intellectual property for the benefit of our investors, associates, owners and customers.”

Starwood first sued Hilton last April, accusing Klein and Lalvani of stealing more than 100,000 electronic files before and after they joined Hilton. The suit claims they used the information in the development of Hilton’s Denizen brand, which has since been put on hold.

Klein and Lalvani were put on leave after the suit was filed and Klein’s position has since been filed.

The latest filing comes amidst settlement talks between the two companies. A criminal investigation is also underway by the U.S. attorney for Manhattan.