Waldorf Astoria Beverly Hills Accused Of Stealing Trade Secrets

Peninsula Hotel in Beverly Hills has launched a lawsuit against Waldorf Astoria and Hilton over stolen confidential documents.

Waldorf Astoria Beverly Hills

The lawsuit claims that Waldorf Astoria General Manager would have instructed Peninsula hotel employee to forward him confidential documents before hiring the person.

You can access Waldorf Astoria Beverly Hills here.

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Here’s an excerpt from WSJ (access their piece here):

The Peninsula Beverly Hills alleges that the Waldorf’s former general manager coordinated with a Peninsula employee who acted as a mole for 14 months, and that the employee stole more than 45,000 emails and other documents that included “proprietary information” about the travel preferences of “lucrative Middle Eastern clients,” according to a lawsuit filed on Tuesday by the Peninsula’s owner in a state court in Los Angeles.

The Peninsula employee, Houssem Tasco, then left to take a similar position at the Beverly Hills Waldorf a few months before it opened in 2017, the complaint said.

Here’s the press release from Peninsula:

The owners of the top-rated luxury hotel The Peninsula Beverly Hills filed court papers today accusing Hilton of engaging in corporate espionage and unfair business practices by stealing thousands of proprietary documents to “jump start” the opening of the rival Waldorf Astoria Beverly Hills, located across the street.

The amended complaint, filed in Los Angeles Superior Court, accuses the Hilton Domestic Operating Company, its Waldorf-Astoria Management division, and property owner Oasis West Realty, LLC of conspiring with a former Peninsula BH manager to steal more than 45,000 confidential documents including guest lists, financials, personnel records, marketing plans and operating protocols.

The complaint compares the thefts to a previous case when Hilton executives were caught stealing confidential information from Starwood Hotels and Resorts. Starwood sued in U.S. District Court, leading to a 2010 agreement in which Hilton paid $75 million and signed a permanent injunction prohibiting it from using Starwood’s data. Hilton also instituted a policy barring every employee from bringing with them or sharing any competitor’s trade secrets.

The Peninsula BH’s complaint, however, calls that policy a “sham” and details how Hilton executives engaged in an “orchestrated scheme to raid and steal the Peninsula’s trade secrets” before opening the Waldorf in June 2017—saving millions of dollars in start-up costs.

“This is a blatant and outrageous case of corporate espionage, theft of trade secrets and unfair competition where the Hilton Defendants got caught red-handed—once again,” it says.

The complaint also accuses Hilton officials of covering up the scheme.

After discovering the thefts in early 2017, Peninsula BH legal representatives approached Hilton to inquire if it knew anything about the misappropriation of information by Waldorf executives. Hilton’s corporate General Counsel reported back that a thorough internal review showed no trace of the Peninsula BH’s proprietary information in Hilton files.

“This was not true,” the complaint says. “Hilton was intimately involved with every aspect of the opening of the Waldorf Hotel, including the misappropriation of Peninsula’s information. Hilton, by and through its top lawyers, covered up its culpability.”

Hilton’s deception led Peninsula BH to initially believe the thefts were the rogue actions of former Guest Relations Manager Houssem Tasco.

Only after a two-year legal fight, which included constant stalling and obfuscation, did The Peninsula BH finally obtain access to Tasco’s personal computer and phone, uncovering the trove of stolen documents that revealed he had been a willing “pawn in the Hilton Defendant’s scheme to steal Peninsula’s trade secrets,” the complaint says.

Documents recently obtained in discovery show that while working at The Peninsula BH, Tasco met secretly with Oasis President Ted Kahan and Waldorf Beverly Hills Managing Director Luc Delafosse, who reported directly to Hilton’s corporate offices.

Delafosse used Tasco as a “mole” to access Peninsula BH’s proprietary files for 14 months—from September 2015 to November 2016—while Tasco was still working at The Peninsula BH, the complaint says.

Even after the Waldorf hired Tasco away in November 2016, Tasco convinced a former Peninsula BH colleague to leak him the hotel’s 150-page operations manual.

In all, Tasco emailed, downloaded or took screenshots of more than 45,000 documents. Of particular importance were files on Middle East guests, a lucrative Beverly Hills market segment that accounts for millions of dollars in business.

For nearly 30 years, The Peninsula BH has been the choice of well-heeled travelers because it is widely considered one of the best and most successful luxury hotels in the world. It has consistently earned AAA’s “Five Diamond” and Forbes’ “Five Star” ratings, along with No. 1 rankings from Conde Nast Traveler and Global Traveler Magazine.

The Plaintiffs are represented by Skip Miller and a team of lawyers at Miller Barondess LLP in Los Angeles. Per Miller, who is lead counsel: “With a reputation earned over nearly 30 years of exceptional service, The Peninsula Beverly Hills is not afraid of fair competition from anyone else, even Hilton.”

“But what Hilton did was far from fair,” said Miller. “It was a calculated, unethical and illegal scheme to steal the Peninsula playbook—and that playbook is quite unique.”

Here’s the court document:

Download (PDF, 9.17MB)

Conclusion

Hilton hired two Starwood employees in the late 2000s who had been working on the W brand that the hotel company wanted to replicate. The employees brought with them confidential documents that helped to speed up the development of the Denizen brand.

Starwood sued, and the case was settled for $75 million, and Hilton agreed not to launch a brand to the lifestyle segment for two years (they still don’t have one to match W).

It seems that the General Manager of Waldorf Astoria Beverly Hills used dirty tactics here by essentially stealing information from a competitor. It wouldn’t surprise me if this case is settled before it goes to court.

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