|By Matt Miller, The Patriot-News,
Harrisburg, Pa.McClatchy-Tribune Regional News
Nov. 09, 2012--A midstate hotel mogul has gone to federal court to claim that the recent $22.2 million sale of the Harrisburg Hilton was rigged.
Hasu Shah, founder of the Hersha Hospitality Trust empire, claims in his suit that the Colorado-based firm which bought the Hilton in June got a rock-bottom price because of an insider deal that blocked other potential bidders from having a shot at buying the center city property.
He contends that the sale was orchestrated in part by an official of a Harristown Enterprises Inc. subsidiary, the hotel's former owner, who has become a principal with new owner Greenwood Hospitality Group.
Shah is asking U.S. Middle District Judge Christopher C. Conner to void the sale deal or to award him unspecified financial damages for loss of a potentially lucrative business opportunity.
Neal West, vice president and general counsel for Harristown, said today that his agency had not received the suit, although he added that Harristown officials deny Shah's allegations.
William Kohl, the former Harristown official cited by Shah as now working for Greenwood, said his new firm, too, had not received the suit. He declined comment, saying the matter will be referred to the company's lawyers.
When the sale between Harristown subsidiary Harrisburg Hotel Corp., which Kohl headed, and Greenwood was finalized, Mayor Linda Thompson said the proceeds retired $17 million in debt that the city had guaranteed for the Hilton.
Greenwood promised that the 341-room hotel will remain a Hilton, that its 400-plus employees would be retained and that $5 million would be invested in upgrades.
The sale included the Bricco restaurant at Third and Chestnut streets, and Greenwood also took over management of the Hilton Garden Inn Hershey, which was operated by the Harrisburg Hotel Corp.
Shah contends in his suit that Harristown and the city's taxpayers would have gotten an even better deal had the Hilton been offered openly on the market and not sold by way of a "conspiracy."
"In other words, the Harrisburg Hilton was sold to Greenwood for its minimum, or 'floor' price," Shah's suit states.
Shah claims that he was personally harmed because Harristown President Russell Ford had promised that he would have the opportunity to bid on the Market Square property if it ever came up for sale.
Harristown's supposed collusion with Greenwood to "fix" the sale price for the 22-year-old hotel violates federal and state laws against restraint of trade, unfair competition and interference with business relations, Shah contends.
He argues, too, that the manner in which the sale was managed deprived the nonprofit Harristown from obtaining a higher financial return that could have been used to forward its community development mandate.
In the suit, Shah contends that Kohl was an "insider" who improperly abetted the sale.
Before the sale, Kohl was president and CEO of Harrisburg Hotel Corp. He is now listed by Greenwood as the principal of its Pennsylvania Division, which is based at the Hilton.
Shah claims that he learned about the alleged conspiracy when he encountered Greenwood principal Thomas Conran at a charity event in Harrisburg last month and asked him how Greenwood struck the sale deal.
Conran replied that "Greenwood offered Mr. Kohl a partnership in Greenwood and secured Mr. Kohl's assistance in Greenwood's acquisition in the Harrisburg Hilton," according to Shah's suit.
"Mr. Kohl used his insider position...to complete the conspiracy by delivering ownership of the Harrisburg Hilton to Greenwood at a below-market sale price, without any competition," Shah claims.
Aside from his own alleged financial harm, he contends that the supposed "sweetheart deal" has harmed the hotel's downtown neighbors by "artificially depressing" their property values.
He accuses Harristown and Kohl of failing in their duty to get the maximum price for the Hilton and of "turning their back on their legal and charitable duties to the City of Harrisburg and the citizens utilizing the city's central business district."
Aside from being hotel magnates, Shah and his wife, Hersha, are known as major philanthropists. Their hospitality empire, which began with an 11-room motel in Middletown, now is worth billions and includes 64 hotels totaling more than 9,000 rooms across the country.
Greenwood specializes in upscale hotels and owns properties totaling more than 1,900 rooms in the U.S.
(c)2012 The Patriot-News (Harrisburg, Pa.)
Visit The Patriot-News (Harrisburg, Pa.) at www.pennlive.com
Distributed by MCT Information Services