Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 1 of 22 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA HASU P. SHAH v. Plaintiff, HARRISTOWN DEVELOPMENT CORPORATION, a Pennsylvania Non-Profit Corporation, HARRISTOWN HOLDING COMPANY, INC., a Pennsylvania Corporation, HARRISTOWN HOTEL DEVELOPMENT CORPORATION, a Pennsylvania Non-Profit Corporation, HARRISBURG HOTEL ASSOCIATES L.P., a Delaware Limited Partnership, HARRISBURG HOTEL CORPORATION, a Pennsylvania Corporation, RUSSELL C. FORD, an individual, WILLIAM D. KOHL, an individual, 2012 HARRISBURG INVESTMENT LLC, a Delaware Corporation, GREENWOOD HOSPITALITY GROUP, LLC, a Colorado Corporation, and THOMAS W. CONRAN, an individual. Defendants. Civil No. COMPLAINT JURY TRIAL DEMANDED Filed on behalf of Plaintiff, Hasu P. Shah Counsel of Record for this Party: Charles Kelly PA I.D. 51942 Richard J. Cromer PA I.D. 79214 Kevin B. Acklin PA I.D. 92690 LEECH TISHMAN FUSCALDO & LAMPL, LLC 525 William Penn Place, 30th Floor Pittsburgh, PA 15219 (412 261-1600 Counsel for Plaintiff COMPLAINT Plaintiff Hasu P. Shah files the within Complaint against Harristown Development Corporation, Harristown Holding Company, Inc., Harristown Hotel Development Corporation, Harrisburg Hotel Associates L.P., Harrisburg Hotel Corporation, Russell C. Ford, William D. Kohl, 2012 Harrisburg Investment LLC, Greenwood Hospitality Group, LLC, and Thomas W. Conran, averring as follows: -1-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 2 of 22 I. Parties 1. Plaintiff, Hasu P. Shah ( Mr. Shah, is an individual resident of the Commonwealth of Pennsylvania with a business address located at 44 Hersha Drive, Harrisburg, Pennsylvania 17102. 2. Defendant, Harristown Development Corporation ( Harristown Development, is a Pennsylvania nonprofit corporation having its registered offices at 11 North Third Street, Second Floor, P.O. Box 1224, Harrisburg, Dauphin County, Pennsylvania 17101. 3. Defendant, Harrisburg Hotel Associates, L.P. ( HH Associates, is a Delaware limited partnership having its registered offices at 11 North Third Street, Second Floor, P.O. Box 1224, Harrisburg, Dauphin County, Pennsylvania 17101. 4. Defendant, Harrisburg Hotel Corporation ( HH Corporation, is a Pennsylvania corporation and a 35.30% general and limited partner of HH Associates, having its registered offices at 11 North Third Street, Second Floor, P.O. Box 1224, Harrisburg, Dauphin County, Pennsylvania 17101. 5. Defendant, Harristown Holding Company, Inc. ( HHC, is a Pennsylvania corporation and wholly-owned subsidiary of Harristown Development, having its registered offices at 11 North Third Street, Second Floor, P.O. Box 1224, Harrisburg, Dauphin County, Pennsylvania 17101. 6. Defendant, Harristown Hotel Development Corporation ( HHDC, is a Pennsylvania nonprofit corporation and wholly-owned subsidiary of HHC and 64.70% limited partner of HH Associates, having its registered offices at 11 North Third Street, Second Floor, P.O. Box 1224, Harrisburg, Dauphin County, Pennsylvania 17101. -2-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 3 of 22 7. Defendant, Russell C. Ford ( Mr. Ford, is an individual resident of the Commonwealth of Pennsylvania, is President of Harristown Development and HHDC, and Vice President of HH Corporation, having his business offices at 11 North Third Street, Second Floor, P.O. Box 1224, Harrisburg, Dauphin County, Pennsylvania 17101. 8. Defendant, William D. Kohl ( Mr. Kohl, is an individual resident of the Commonwealth of Pennsylvania, was President and CEO of HH Corporation, and is presently a Principal of Greenwood Hospitality Group LLC, having his business offices at One North Second Street, Harrisburg, Dauphin County, Pennsylvania 17101. 9. Defendant, Greenwood Hospitality Group LLC ( Greenwood, is a Delaware limited liability company, having its business offices at 5445 DTC Parkway, Penthouse Four, Greenwood Village, Colorado 80111, and having its registered offices at One North Second Street, Harrisburg, Dauphin County, Pennsylvania 17101. 10. Defendant, 2012 Harrisburg Investment LLC, a subsidiary of Greenwood ( Greenwood Sub, is a Delaware limited liability company having its registered offices at One North Second Street, Harrisburg, Dauphin County, Pennsylvania 17101. 11. Defendant, Thomas W. Conran ( Mr. Conran, is an individual resident of the State of Connecticut and is a Principal of Greenwood, having his business offices at 10 Nature s Way, South Windsor, Connecticut 06074. II. Introduction 12. This action arises from the Defendants completed conspiracy to transfer the ownership of the Harrisburg Hilton Hotel and Towers (the Harrisburg Hilton from an affiliate of Harristown Development, a nonprofit corporation, to an affiliate of Greenwood, a for-profit enterprise, without providing any public notice or offering the Harrisburg Hilton for sale on the -3-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 4 of 22 open market, by fixing the sale price of the Harrisburg Hilton in violation of federal and state law, and further tortiously interfering with the prospective business relations of Mr. Shah regarding a promised opportunity to bid on the sale of the Harrisburg Hilton. 13. The original ownership structure of the Harrisburg Hilton, and the transfer of ownership of the Harrisburg Hilton from Harristown Development to Greenwood, involved a series of transactions described on Exhibit A attached hereto. 14. An essential fact of the litigation is Mr. Kohl had an ownership and/or controlling interest in the Harrisburg Hilton both before and after the sale to Greenwood, and upon information and belief, Mr. Kohl used his insider position to conspire with the other Defendants so as to fix the sale price of the Harrisburg Hilton and keep the Harrisburg Hilton off the open market, in violation of federal and state law. 15. Further, Harristown Development and HHDC, both Pennsylvania nonprofit corporations, as well as Mr. Ford, as President of both entities, each had a fiduciary duty to act in good faith and to maximize the sale price of the Harrisburg Hilton, consistent with its charitable purpose, for the benefit of Harristown Development, the public, and the City of Harrisburg. 16. Further, HH Corporation and Mr. Kohl, its President and CEO, and Mr. Ford, its Vice President, each had a fiduciary duty to act in good faith and to maximize the sale price of the Harrisburg Hilton, for the benefit of Harristown Development, the public, and the City of Harrisburg. 17. Mr. Ford had provided promises and assurances to Mr. Shah that once the Harrisburg Hilton was to be sold, Mr. Shah would be provided an opportunity to bid on the sale, and Mr. Shah had anticipated having such opportunity and was prepared to bid to acquire the Harrisburg Hilton. -4-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 5 of 22 18. Greenwood and its Principal, Mr. Conran, discussed and/or offered Mr. Kohl an ownership interest in Greenwood as a quid pro quo for Mr. Kohl using his position as an insider of the Harrisburg Hilton to fix the sale price of the Harrisburg Hilton and deliver it to Greenwood without market competition. 19. Through this action, Mr. Shah seeks monetary damages, treble damages, attorney s fees, and any other legal or equitable relief that this honorable Court shall award. III. Jurisdiction and Venue 20. Personal jurisdiction over all Defendants properly rests in this Court as all Defendants are either residents of the Commonwealth of Pennsylvania or have a registered agent in the Commonwealth; all parties residing outside the Commonwealth also transact business within the Commonwealth in a manner sufficient as for those parties to have minimum contacts with the Commonwealth and to be subject to the jurisdiction of courts within the Commonwealth. 21. The United States District Courts have original jurisdiction over the claims set forth in this Complaint because the claims are brought under the laws of the United States. 28 U.S.C. 1331. 22. The United States District Courts have supplemental jurisdiction over additional claims in this Complaint not arising under the laws of the United States, because those claims form part of the same case or controversy. 28 U.S.C. 1367(a. 23. Plaintiff has standing under 15 U.S.C. 15, providing for a private remedy to individuals injured in his business or property by reason of anything forbidden in the antitrust laws. -5-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 6 of 22 24. Venue properly lies in the Middle District of Pennsylvania pursuant to 28 U.S.C. 1391(a because: Mr. Shah, Harristown Development, HHC, HHDC and HH Corporation, are residents of Harrisburg, Pennsylvania; Mr. Kohl and Mr. Ford are residents of Pennsylvania; and, because HH Associates and Greenwood Sub have registered offices in Harrisburg, Pennsylvania. 25. Venue further lies in the Middle District of Pennsylvania because a substantial part of the events giving rise to Mr. Shah s claims occurred in the Middle District of Pennsylvania and because all parties are subject to personal jurisdiction in the Middle District of Pennsylvania. IV. Factual Background A. Harristown Development 26. Harristown Development, by and through its wholly-owned subsidiaries HHC and HHDC, and its affiliates HH Associates and HH Corporation, developed, owned and operated the Harrisburg Hilton, which opened to the public in October, 1990. 27. Harristown Development was incorporated in 1974 as a Pennsylvania nonprofit corporation for the following purposes: to combat community deterioration, enhance the quality of the social, cultural and economic life of the community, and promote participation in community development, and for other purposes within the meaning of Section 501(c(3 of the Internal Revenue Code... by planning for and participating in, as developer and otherwise, the redevelopment of the central business district of the City of Harrisburg. 28. The Articles of Incorporation of Harristown Development further provides that Upon dissolution of the Corporation, the Board of Directors shall, after paying or making provision for the payment of all corporate liabilities, transfer and convey to the City of -6-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 7 of 22 Harrisburg, Pennsylvania, all of its remaining property and interests in property of any kinds, real, personal or mixed to be used by the City exclusively for those of its usual activities which are within the meaning of Sections 501(c(3 or 501(c(4 of the Internal Revenue Code. 29. Mr. Ford served as the President of Harristown Development and HHDC and Vice President of HH Corporation for all periods relevant to the matters addressed herein. B. Harristown s Promise to Mr. Shah 30. Mr. Shah is a prominent member of the Harrisburg business community and for decades has been engaged in the business of developing and managing significant hotel and related investments in and around the Harrisburg area. 31. In late 2009 or early 2010, Mr. Shah had several meetings at his offices with Mr. Ford regarding the prospective sale of the Harrisburg Hilton. 32. At those meetings, Mr. Ford assured Mr. Shah that should Harristown Development and its affiliates HHDC and HH Corporation, the general and limited partners of HH Associates (collectively referred to hereinafter as Harristown proceed with selling the Harrisburg Hilton, that Harristown would contact Mr. Shah and give him the opportunity to bid on the Harrisburg Hilton, consistent with Harristown Development s charitable purpose and legal duties to promote community participation in important projects in Harrisburg s central business district. 33. On several occasions after his initial meetings with Mr. Ford, Mr. Shah made inquiries regarding the status of the sale of the Harrisburg Hilton with Mr. Ford and other representatives of Harristown and was reassured he would be contacted when the Harrisburg Hilton was to be offered for sale. -7-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 8 of 22 34. On June 29, 2012, Harristown s sale of the Harrisburg Hilton to Greenwood Sub, a subsidiary of Greenwood, was consummated pursuant to an Indenture filed that day with the Dauphin County Recorder of Deeds. See Instrument 20120018754 attached as Exhibit B hereto. 35. Harristown had a duty to maximize the sale price of the Harrisburg Hilton for the benefit of the City of Harrisburg and those utilizing its central business district, the ultimate beneficiaries of Harristown s activities. 36. Despite Harristown s duty to maximize the sale price of the Harristown Hilton, there was no public notice or public bidding of the sale, and neither Mr. Shah nor, upon information and belief, any other individual or entity, other than Greenwood, was afforded the opportunity to purchase the Harrisburg Hilton in a competitive, market-driven, sale process. 37. Mr. Kohl was an insider of both Greenwood, the buyer of the Harrisburg Hilton, and Harristown, the seller of the Harrisburg Hilton, because at the time of the sale of the Harrisburg Hilton, Mr. Kohl was the president and CEO of HH Corporation, the general partner of the Harrisburg Hilton, and Mr. Kohl was, at the time of or shortly after the sale of the Harrisburg Hilton, a Principal of Greenwood. 38. Upon information and belief, Mr. Kohl used his position as an insider of both Harristown and Greenwood to fix the sale price of the Harrisburg Hilton and to negotiate its sale for the fixed price without any competition or community participation. C. Pre-Sale Ownership of the Harrisburg Hilton 39. Prior to the sale of the Harrisburg Hilton, legal ownership of the Harrisburg Hilton was held by HH Associates, an affiliate of Harristown Development. 40. HH Associates is a limited partnership whose membership consisted of HHDC as a 63.70% limited partner and HH Corporation as a 36.30% general and limited partner. -8-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 9 of 22 41. HHDC is a wholly owned subsidiary of HHC, which in turn is a wholly owned subsidiary of Harristown Development. 42. HH Corporation, as the general partner of HH Associates, was responsible for managing the daily affairs of HH Associates, including all matters related to the ownership and maintenance of the Harrisburg Hilton. 43. Mr. Kohl was the President and CEO of HH Corporation, and Mr. Ford was the President of both Harristown Development and HHDC and Vice President of HH Corporation and both individuals had, or should have had, by virtue of their respective positions, access to all economically relevant information regarding the Harrisburg Hilton (e.g. occupancy rates, profit/loss margins that would be useful in determining a fair market value of the Harrisburg Hilton. D. The Ownership and Operation of Harrisburg Hotel Associates, LP 44. The partnership interests of HH Associates, are owned as follows: a. HH Corporation owns a 22.83% general partnership interest, a 7.02% Class A limited partnership interest, and a 5.45% Class B limited partnership interest. b. HHDC owns a 29.35% Class A limited partnership interest and a 35.35% Class B limited partnership interest. 45. Upon information and belief, the Harrisburg Hilton was HH Associates only business endeavor. 46. HH Associates, with the approval of Harristown Development, elected to engage HH Corporation effective January 1, 1996, as manager of the Harrisburg Hilton. -9-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 10 of 22 47. HH Corporation has complete control over the management of the HH Associates business affairs and all decisions pertaining thereto and is responsible for the day-today management and conduct of the business of the HH Associates. 48. Mr. Kohl was the President and CEO of HH Corporation, and Mr. Ford was President of Harristown Development and HHDC and Vice President of HH Corporation, prior to and at the time of the sale of the Harrisburg Hilton. E. Public Financing of the Harrisburg Hilton 49. At the time of its sale to Greenwood, the Harrisburg Hilton was financed by mortgages held by the Redevelopment Authority of the City of Harrisburg (the Redevelopment Authority and the City of Harrisburg. 50. At the time of its initial development, the Harrisburg Hilton was subject to three mortgages held by Harristown Development and the City of Harrisburg: specifically, Harristown Development held an $18,500,000 first mortgage ( First Mortgage and a $6,446,445 second mortgage ( Second Mortgage, while the City of Harrisburg held a $7,500,000 third mortgage ( Third Mortgage. 51. In 2001, the First Mortgage, Second Mortgage and Third Mortgage were refinanced by a $20,170,000 loan issued by Harristown Development to HH Associates ( the 2001 Loan. 52. The 2001 Loan was funded by $20,170,000 in bonds (the 2001 Bonds issued by the Redevelopment Authority pursuant to a trust indenture between the Redevelopment Authority and Allfirst Bank (the 2001 Bank. 53. The Redevelopment Authority loaned the proceeds of the 2001 Bonds to Harristown Development, who then made the loan to HH Associates. -10-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 11 of 22 54. For the 2001 Loan, HH Associates issued a mortgage in favor of the Redevelopment Authority and the City of Harrisburg, secured by the property comprising the Harrisburg Hilton (the 2001 Mortgage. 55. The City of Harrisburg was the guarantor of the 2001 Bonds (the 2001 Guaranty. 56. The Redevelopment Authority agreed to reimburse the City of Harrisburg for any payments made by the City of Harrisburg under the 2001 Guaranty (the 2001 Reimbursement. 57. Harristown Development assigned all of its rights and interests in and to the 2001 Loan and the 2001 Mortgage to the Redevelopment Authority, which rights and interests were further assigned by the Redevelopment Authority to the 2001 Bank, as security for the 2001 Bonds, and to the City of Harrisburg, as security for the 2001 Reimbursement. 58. HH Associates assigned to the 2001 Bank and the City of Harrisburg all of its rights to rents and leases with respect to the Harrisburg Hilton, as security and inducement for the 2001 Loan and the 2001 Guaranty, respectively. 59. The net effect of these transactions was that each of Harristown Development, the Redevelopment Authority, and the City of Harrisburg held significant financial obligations with respect to the 2001 Financing, reflecting the risk the City of Harrisburg and its constituents took on in order to facilitate Harristown Development s preferred position as an agent for the continued community development of this material public space, consistent with Harristown Development s public purpose to promote community participation in important projects in Harrisburg s central business district. 60. In April 2004, Harristown Development funded an additional $2,115,000 loan to HH Associates (the 2004 Loan. -11-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 12 of 22 61. The 2004 Loan was funded by $2,115,000 in bonds (the 2004 Bonds issued by the Redevelopment Authority pursuant to a supplemental trust indenture between the Redevelopment Authority and Manufacturers and Traders Trust Company, as successor to the 2001 Bank (the 2004 Bank. 62. The proceeds of the 2004 Bonds were loaned by the Redevelopment Authority to Harristown Development, and were further advanced by Harristown Development to HH Associates under the 2004 Loan. 63. HH Associates issued a supplemental mortgage in favor of the Redevelopment Authority and the City of Harrisburg, secured by the property comprising the Harrisburg Hilton (the 2004 Mortgage. 64. The City of Harrisburg was the guarantor of the 2004 Bonds (the 2004 Guaranty. 65. The Redevelopment Authority agreed to reimburse the City of Harrisburg for any payments made by the City of Harrisburg under the 2004 Guaranty (the 2004 Reimbursement. 66. Harristown Development assigned all of its rights and interests in and to the 2004 Loan and the 2004 Mortgage to the Redevelopment Authority, which rights and interests were further assigned by the Redevelopment Authority to the 2004 Bank, as security for the 2004 Bonds, and to the City of Harrisburg, as security for the 2004 Reimbursement. 67. HH Associates assigned to the 2004 Bank and the City of Harrisburg all of its rights to rents and leases with respect to the Harrisburg Hilton, as security and inducement for the 2004 Loan and the 2004 Guaranty, respectively. 68. The 2001 Loan and 2004 Loan had the net effect of setting a floor for the sale price of the Harrisburg Hilton any sale for less than the combined amounts of the 2001 and -12-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 13 of 22 2004 Loans would fail to satisfy the outstanding mortgages held by the Redevelopment Authority and the City of Harrisburg, effectively allowing one or more of the mortgagees to foreclose on the Harrisburg Hilton. 69. The net proceeds of the sale of the Harrisburg Hilton, after satisfying the 2001 and 2004 loans, were to be used by Harristown Development and its affiliates in a manner consistent with its charitable purposes, as described in Harristown Development s Articles of Incorporation, to generally benefit the City of Harrisburg and its residents. F. The Sale of the Harrisburg Hilton 70. On June 29, 2012, Harrisburg Hotel Associates, LP sold the Harrisburg Hilton to 2012 Harrisburg Investment, LLC, an affiliate of Greenwood. 71. The total amounts of the bonds issued by the Redevelopment Authority in favor of the Harrisburg Hilton and total amounts of the mortgages issued by HH Associates in favor of the bond proceeds from the Redevelopment Authority, provided to HH Associates as a loan from Harristown Development, was $22,285,000. 72. According to published reports, the Harrisburg Hilton was sold for approximately $22,200,000, a price that approximates the face amount of the 2001 and 2004 Loans regarding the Harrisburg Hilton, and to satisfy existing mortgages and compensate Harristown Development for any payments on principal made on the 2001 and 2004 Loans. 73. In other words, the Harrisburg Hilton was sold to Greenwood for its minimum, or floor price. G. Shah Learns the Facts Surrounding the Conspiracy to Acquire the Harrisburg Hilton 74. On or about October 13, 2012, Mr. Conran approached Mr. Shah at a charity event in Harrisburg, Pennsylvania. -13-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 14 of 22 75. Mr. Conran initiated a conversation with Mr. Shah, saying that Mr. Conran and his partners at Greenwood were well aware of Mr. Shah s substantial hotel developments and investments in and around the Harrisburg area. 76. Mr. Conran, Greenwood, and Mr. Kohl knew that if the Harrisburg Hilton were to be sold by a competitive process, Mr. Shah was both a likely bidder and had the means to acquire the Harrisburg Hilton. 77. Greenwood and Greenwood Sub were only assured of acquiring the Harrisburg Hilton if they did not have to compete with Mr. Shah in a market-driven process. 78. During Mr. Conran s conversation with Mr. Shah, Mr. Shah asked Mr. Conran as to how Greenwood was able to acquire the Harrisburg Hilton (a publicly-backed asset from Harristown (a 501(c(3 charitable organization with a self-proclaimed legal mission to promote community participation in central business district projects, without it being publicly bid or offered for sale. 79. Mr. Conran responded that he had a previous relationship with Mr. Kohl in connection with a prior investment, and that Greenwood offered Mr. Kohl a partnership in Greenwood and secured Mr. Kohl s assistance in Greenwood s acquisition of the Harrisburg Hilton. H. The Completed Conspiracy to Acquire the Harrisburg Hilton for Its Floor Price 80. At some time prior to the sale of the Harrisburg Hilton, Mr. Conran and Mr. Kohl discussed Greenwood securing Mr. Kohl s assistance in favor of Greenwood acquiring the Harrisburg Hilton. 81. Greenwood and its Principal, Mr. Conran, discussed and/or offered Mr. Kohl an ownership interest in Greenwood as a quid pro quo for Mr. Kohl s use of his insider position as -14-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 15 of 22 President and CEO of HH Corporation to deliver ownership of the Harrisburg Hilton to Greenwood at a below-market sale price and without competition. 82. Mr. Kohl and Greenwood knew that the Harrisburg Hilton would sell for more if the Harrisburg Hilton were placed on the open market. 83. Greenwood and Mr. Kohl conspired with HH Corporation, HH Associates, Mr. Ford, Harristown Development and HHDC to allow Greenwood to acquire the Harrisburg Hilton from HH Associates at its floor price of $22,200,000. 84. Mr. Kohl used his insider position as President and CEO of HH Corporation, and influence gained by running the day-to-day operations of the Harrisburg Hilton, to complete the conspiracy by delivering ownership of the Harrisburg Hilton to Greenwood at a below-market sale price, without any competition, including competition from Mr. Shah. I. The Completed Conspiracy to Acquire the Harrisburg Hilton Harmed Mr. Shah and Innocent Third-Parties 85. Mr. Shah was harmed by the Defendants completed conspiracy because Mr. Shah was denied the promised opportunity to purchase the Harrisburg Hilton and to derive revenues and profits from hotel guests and conventions, among other things, that make the Harrisburg Hilton an attractive and profitable business opportunity. 86. Nearby property owners were harmed by the Defendants completed conspiracy because the Harrisburg Hilton was sold at a below-market value without competition, causing nearby property values to be artificially depressed. 87. The City of Harrisburg was harmed by the Defendants completed conspiracy because Harristown Development and its officers and affiliates had a fiduciary duty to maximize the sale price of the Harrisburg Hilton for use by Harristown Development and its affiliates in a manner consistent with its charitable purposes, as described in Harristown Development s -15-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 16 of 22 Articles of Incorporation, to benefit the City of Harrisburg and all citizens utilizing the city s central business district. 88. The City of Harrisburg and its residents were harmed by the loss of additional tax revenue and/or sale proceeds that could have flowed back to the Redevelopment Authority and/or the City of Harrisburg via the non-profit Harristown Development when the Harrisburg Hilton sold for a below-market price. COUNT I AGREEMENT TO RESTRAIN TRADE AND COMMERCE IN VIOLATION OF THE SHERMAN ACT (Mr. Shah v. Greenwood, Greenwood Sub, Harristown Development, Mr. Kohl, and Mr. Conran 89. Plaintiff realleges 1 88 as if fully stated herein. 90. Greenwood, Greenwood Sub, Harristown Development, Mr. Kohl, and Mr. Conran agreed to restrain interstate trade and commerce by selling the Harrisburg Hilton without community participation or bidding, at an anti-competitive, below-market price, as part of an unlawful quid pro quo, or bribe, in which Mr. Conran offered and gave Mr. Kohl an ownership interest in Greenwood and/or Greenwood Sub in exchange for delivering the hotel in a private deal. 91. Harristown Development and Mr. Kohl understood, or should have understood, Harristown Development s public purpose as set forth in its Articles of Incorporation. 92. Harristown Development and Mr. Kohl understood, or should have understood, that for Harristown Development to meet its charitable purpose and avoid, inter alia, the disastrous federal tax consequences of failing to operate pursuant to its charitable purpose and in the community s best interest, but rather as if a private, for-profit entity, Harristown -16-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 17 of 22 Development had to promote community participation and maximize the purchase price in connection with the sale of the Harrisburg Hilton. 93. Mr. Kohl, Harristown Development, Greenwood, Greenwood Sub and Mr. Conran knew that if Harristown Development fulfilled its charitable mission and legal duty to promote community participation, at least one additional bidder, Mr. Shah, and perhaps many others, would have bid on the Harrisburg Hilton. 94. The Defendants knew that if a bidding process ensued, Greenwood s desire to obtain the Harrisburg Hilton at the floor price, and Mr. Kohl s desire to hold an equity position in Greenwood and the Harrisburg Hilton in the future, would be jeopardized and likely lost, because other, more substantial players, such as Mr. Shah, would have outbid Greenwood. 95. To avoid this scenario, Harristown Development and Mr. Kohl turned their back on their legal and charitable duties to the City of Harrisburg and the citizens utilizing the city s central business district and instead delivered the Harrisburg Hilton to Greenwood in a sweetheart deal that resulted in a financial benefit for the Defendants, not the Harrisburg community, including but not limited to Mr. Shah. 96. Plaintiff has been damaged by Defendants unlawful conduct. 97. A number of innocent third parties, including other competitors of Greenwood, consumers and nearby property owners, have been damaged by Defendants unlawful conduct by, among other things, deprivation of business opportunities, depression of property values, and the monopolization of hotel and convention space in downtown Harrisburg. WHEREFORE, Mr. Shah respectfully requests that this Court enter judgment in favor of Mr. Shah and against all Defendants and award Mr. Shah rescission of the sale of the -17-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 18 of 22 Harrisburg Hilton to Greenwood and Greenwood Sub, or alternatively, damages to be proven at trial, treble damages, attorney s fees, and such further relief as this Court deems just and proper. COUNT II CONSPIRACY TO RESTRAIN TRADE AND COMMERCE IN VIOLATION OF THE SHERMAN ACT (Mr. Shah v. All Defendants 98. Plaintiff realleges 1 97 as if fully stated herein. 99. Defendants engaged in a conspiracy to restrain interstate trade and commerce by agreeing to and/or participating in their surreptitious sale of the Harrisburg Hilton for what was known by Defendants to be an intentionally fixed, below-market price and without market competition. 100. Defendants restrained interstate trade and commerce by approving and/or by being party to a contract for the surreptitious sale of the Harrisburg Hilton for what was known by Defendants to be an intentionally fixed, below-market price and without market competition. 101. Defendants engaged in a conspiracy to restrain interstate trade and commerce by agreeing to and/or participating in the fixing of the sale of the Harrisburg Hilton to Greenwood and Greenwood Sub at an anti-competitive, below-market price. 102. Defendants restrained interstate trade and commerce by agreeing to and/or participating in the fixing of the sale of the Harrisburg Hilton to Greenwood and Greenwood Sub at an anti-competitive, below-market price. 103. Plaintiff has been injured and sustained damages as a result of Defendants unlawful conduct. 104. A number of innocent third parties, including other competitors of Greenwood, consumers and nearby property owners, have been damaged by Defendants unlawful conduct -18-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 19 of 22 by, among other things, deprivation of business opportunities, depression of property values, and the monopolization of hotel and convention space in downtown Harrisburg. WHEREFORE, Mr. Shah respectfully requests that this Court enter judgment in favor of Mr. Shah against all Defendants and award Mr. Shah rescission of the sale of the Harrisburg Hilton to Greenwood and Greenwood Sub, or alternatively, damages to be proven at trial, treble damages, attorney s fees, and such further relief that the Court deems just and proper. COUNT III TORTIOUS INTERFERENCE WITH PROSPECTIVE BUSINESS RELATIONS (Mr. Shah v. Greenwood, Greenwood Sub and Mr. Conran 105. Plaintiff realleges 1 104 as if fully stated herein. 106. As a natural buyer, and by virtue of Mr. Ford s promises and assurances to Mr. Shah that Mr. Shah would be given the opportunity to purchase the Harrisburg Hilton, Mr. Shah had a prospective contractual relationship with HH Associates, HHDC, and/or Harristown Development to purchase the Harrisburg Hilton. 107. Defendants knew that Mr. Shah was a major entrepreneur and business owner in the hotel industry in Harrisburg and its environs. 108. Harristown Development understood that to maximize the price for the Harrisburg Hilton and in order to fulfill its charitable purpose and legal duties, it had to include Mr. Shah and any and all others with similar financial wherewithal from whatever locale in the United States, in bidding for the Harrisburg Hilton. 109. Greenwood, Greenwood Sub and Mr. Conran induced Mr. Kohl and Harristown Development to ignore and/or otherwise repudiate their promise to include Mr. Shah in the bidding for the Harrisburg Hilton in contravention of their charitable and legal duties, by -19-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 20 of 22 promising Mr. Kohl an equity position in Greenwood if Mr. Kohl and Harristown Development simultaneously steered the Harrisburg Hilton to Greenwood in a private anti-competitive sale at a below-market price. 110. Greenwood, Greenwood Sub and Mr. Conran intended to harm Mr. Shah by completing their conspiracy to secretly purchase the Harrisburg Hilton without having it placed on the open market, thereby preventing the prospective business relations from occurring. 111. Because Greenwood, Greenwood Sub and Mr. Conran violated the Sherman Act and competed unfairly in contravention of Pennsylvania s law on unfair competition (see Count IV infra, Defendants acted without privilege or justification. 112. Plaintiff was injured and suffered damages as a result of Defendants interference with his prospective purchase of the Harrisburg Hilton, including, but not limited to reasonably ascertainable lost profits, in amounts to be proven at trial. WHEREFORE, Mr. Shah respectfully requests that this Court enter judgment in favor of Mr. Shah and against Greenwood, Greenwood Sub and Mr. Conran and award Mr. Shah compensatory and punitive damages to be proven at trial, costs and fees, and such further relief as this Court deems just and proper. COUNT IV UNFAIR COMPETITION (Mr. Shah v. Greenwood, Greenwood Sub, Mr. Kohl and Mr. Conran 113. Plaintiff realleges 1 112 as if fully stated herein. 114. The Defendants illegal and surreptitious conduct in acquiring the Harrisburg Hilton hindered rather than promoted the efficient operation of the market. -20-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 21 of 22 115. As President and CEO of HH Corporation, Mr. Kohl owed a duty of loyalty to HH Corp. and to the affiliated Harristown entities. 116. Greenwood s granting Mr. Kohl an ownership interest in Greenwood in exchange for Kohl delivering the Harrisburg Hilton to Greenwood without competition violates 18 Pa.C.S. 4108 (a (Commercial bribery and breach of duty to act disinterestedly because it influenced Mr. Kohl s conduct in relation to HH Corporation and the affiliated Harristown entities and completely vitiated Mr. Shah s (and other interested buyers ability to compete with Greenwood. 117. Additionally, Defendants means of competition were otherwise tortious with respect to Mr. Shah because they interfered with Mr. Shah s prospective business relations. 118. As a direct or proximate result of Defendants illegal conduct in the sale of the Harrisburg Hilton, Mr. Shah was injured and sustained damages by such unfair competition. WHEREFORE, Mr. Shah respectfully requests that this Court enter judgment in favor of Mr. Shah and against Greenwood, Greenwood Sub and Mr. Conran, award Mr. Shah compensatory and punitive damages to be proven at trial, costs and fees, and such further relief as this Court deems just and proper. COUNT V CIVIL CONSPIRACY (UNFAIR COMPETITION (Mr. Shah v. Greenwood, Greenwood Sub, Mr. Kohl and Mr. Conran 119. Plaintiff realleges 1 118 as if fully stated herein. 120. Greenwood, Greenwood Sub, Mr. Kohl and Mr. Conran conspired to sell and purchase, and did in fact sell and purchase, the Harrisburg Hilton in violation of Pennsylvania law prohibiting unfair competition. -21-
Case 1:12-cv-02196-CCC Document 1 Filed 11/02/12 Page 22 of 22 121. Greenwood, Greenwood Sub, Mr. Kohl, and Mr. Conran intended to harm Plaintiff and other potential buyers by denying them the opportunity to purchase the Harrisburg Hilton. 122. Because Greenwood, Greenwood Sub, Mr. Kohl, and Mr. Conran used commercial bribery to affect the conspiratorial sale of the Harrisburg Hilton, they acted without privilege or justification. 123. Greenwood, Greenwood Sub, Mr. Kohl, and Mr. Conran completed their conspiracy to unfairly compete with Mr. Shah and other potential buyers when they completed the acquisition of the Harrisburg Hilton for its floor price. 124. Plaintiff was injured and sustained damages as a direct or proximate result of Greenwood s, Greenwood Sub s, Mr. Kohl s and Mr. Conran s completed conspiracy. WHEREFORE, Mr. Shah respectfully requests that this Court enter judgment in favor of Mr. Shah and against all Defendants, award Mr. Shah compensatory and punitive damages to be proven at trial, costs and fees, and award such further relief as this Court deems just and proper. Respectfully submitted, November 2, 2012 LEECH TISHMAN FUSCALDO & LAMPL, LLC /s Richard J. Cromer Charles Kelly (Pa. ID No. 51942 Richard J. Cromer (Pa. ID No. 79214 Kevin B. Acklin (Pa. ID No. 92690 525 William Penn Place, 30th Floor Pittsburgh, PA 15219 (412 261-1600 -22-