Opinion ID: 77997
Heading Depth: 3
Heading Rank: 1

Heading: Hyatt

Text: Judge Couvillion found that, in the early 1970s, Prudential was involved in building the Embarcadero Hotel in San Francisco. Lisle and Ballard were charged with finding a company to manage the hotel. Two companies, Del Webb and Intercontinental Company (Intercontinental), were interested in the management contract. While Pritzker also was interested in the contract, Lisle initially would not accept a bid from Hyatt. However, J.D. Weaver, a high-level employee of a company that worked with Prudential in developing the Houston Hyatt Hotel, convinced Lisle to accept a bid from Hyatt. On the day in which the three management companies were to enter their bids, Intercontinental did not appear, and Del Webb's executive refused to enter a bid, stating that he had already been promised the contract but refusing further elaboration. Accordingly, as Hyatt had entered the only bid, it was awarded the hotel management contract. Thereafter, Hyatt entered into an agreement with Weaver whereby Hyatt paid Weaver's corporation, KWJ Corporation, 10% of its fees from managing the Embarcadero Hotel. Sometime after 1972, Pritzker informed Ballard that Hyatt was paying Weaver this finder's fee. Ballard informed Pritzker that if Hyatt could afford to pay a finder's fee, Prudential likely would reduce its payments under any future hotel management contracts. Pritzker assured Ballard that the finder's fee to Weaver was a unique occurrence. In 1973, Pritzker also informed Kanter of the agreement, asking him to review its terms. Sometime before March of 1976, Kanter and Weaver agreed that Weaver would transfer to IRA an option to purchase all of KWJ Corporation's shares, and the attendant right to the 10% finder's fee, in exchange for $150,000 and Weaver's continued right to receive 30% of the Hyatt payments. At the time, KWJ Corporation also had $149,000 in accumulated assets. Approximately three years later, in 1979, IRA exercised its option. In 1983, KWJ Corporation was liquidated and IRA's subsidiaries, TMT, Carlco, and BWK, received its assets. These subsidiaries formed a partnership, KWJ Company, to which they contributed the assets. TMT and Carlco each had a 45% interest in KWJ Company, and BWK had a 10% interest. In finding that the Hyatt transaction was not part of a kickback scheme, Judge Couvillion reasoned that Hyatt's payments to Weaver could not have been kickbacks to Ballard and Lisle for allowing, and accepting, Hyatt's bid because Kanter, Ballard, and Lisle did not know of the payments until months after the Hyatt/Weaver fee-sharing agreement was made. Moreover, Ballard's displeasure upon learning of the payments, and Pritzker's assurance that he would not make similar arrangements in the future, dispel[led] the notion that there was collusion between the parties. Judge Haines stated that Judge Couvillion's account of the transaction was incomplete and added the following. At trial, Ballard denied ever meeting Weaver. Pritzker did not inform any other Hyatt executives, save his two sons, of his fee-sharing agreement with Weaver. Regarding the negotiation of IRA's purchase of KWJ Corporation, Kanter testified that Weaver agreed to sell for the low amount of $150,00 because he needed the money. However, Weaver did not receive any money from the sale until four years later, in the mid-1980s. Once the sale was complete, Weaver and Kanter did not inform Hyatt of the change in ownership. Rather, Weaver simply forwarded future Hyatt payments to Kanter, and Kanter returned 30% of the fee amount to Weaver. Along with one of the checks that Weaver forwarded to Kanter, he sent a letter asking Kanter to please deposit and issue appropriate checks to the participants. Again, when KWJ Corporation was liquidated and KWJ Company formed, no one informed Hyatt of the change. Weaver continued to forward the checks to Kanter, and Kanter forwarded the money to TMT, Carlco, and BWK. On one occasion, Kanter paid TMT's and Carlco's portions in checks made out to Ballard and Lisle. Later ledger entries indicated that these checks were voided. In concluding that the Hyatt transaction was indicative of a kickback scheme, Judge Haines reasoned that Judge Couvillion clearly erred in finding that the record did not demonstrate how Weaver persuaded Lisle to allow a Hyatt bid. Specifically, Judge Haines infer[red] that Lisle allowed the bid, and that he and Ballard ultimately accepted the bid, because Weaver informed them of Pritzker's promise to share 10% of Hyatt's management fees and promised them a portion of these fees if they awarded Hyatt the contract. Later, Weaver also promised Kanter a portion of the fees if he made arrangements to hide the kickback payments. To do so, Kanter devised a plan whereby Weaver would sell to IRA KWJ Corporation and the right to a portion of the Hyatt payments for a nominal fee and IRA would then liquidate KWJ Corporation and form KWJ Company, with Ballard's TMT, Lisle's Carlco, and Kanter's BWK as partners. Judge Haines stated that Kanter's issuance of checks to Ballard and Lisle demonstrated that the Hyatt payments were earned by Ballard and Lisle personally. Judge Haines also stated that Weaver's letter referring to the participants demonstrated that IRA was not the sole recipient of the Hyatt payments. Judge Haines further reasoned that Judge Couvillion erred in crediting Ballard's and Kanter's testimony. Specifically, Judge Haines stated that Ballard's testimony that he was displeased upon learning of the fee-sharing agreement was not credible, as it was self-serving on its face and uncorroborated by other witnesses and as Pritzker wished to keep the payments secret and would not have volunteered their existence to Ballard. Judge Haines also stated that Ballard's indignation [that Pritzker would share his fees] was feigned. Likewise, Judge Haines pointed out that Ballard's denial of meeting Weaver cast doubt on his credibility, as even Judge Couvillion acknowledged that Ballard and Weaver met during the Houston Hyatt Hotel project. Regarding Kanter, Judge Haines stated that the fact that Weaver received no money from his sale of KWJ Corporation for four years cast serious doubt on Kanter's testimony that Weaver sold KWJ Corporation because he needed money. Contrary to Judge Haines's account of what led Lisle to allow Hyatt's bid, Ballard testified at trial that, although Lisle initially did not want to accept a Hyatt bid because he had heard that Pritzker was planning to build another hotel in the San Francisco area, he changed his mind when Weaver suggested that Pritzker might not build this other competing hotel if he could bid on and potentially win the Embarcadero Hotel contract. Also, the portion of the record cited by Judge Haines to illustrate Ballard's lack of credibility with regard to knowing Weaver shows that when an attorney asked Ballard if he knew whether Kanter and Weaver were acquaintances, Ballard responded in the negative. As an aside, Ballard then asked the attorney if he had ever met Weaver, to which the questioning attorney replied No. Ballard did not deny meeting Weaver, it was the attorney making this denial. Furthermore, contrary to Judge Haines's account of Kanter's testimony on Weaver's sale of KWJ Corporation, Kanter testified that Weaver wanted to sell KWJ Corporation because he needed money and was unhappy with the outcome of a recent dispute with Pritzker regarding the fee-sharing agreement. Judge Couvillion found this testimony credible.