Ace Hotel president accused of fraud by Founder’s Estate

Posted in News on 20 October, 2016

An executive of Ace Hotel Group has been accused of trying to cash in on late founder Alex Calderwood’s untimely death in 2013 by conspiring to con his father out of a majority stake in the boutique chain.

Calderwood’s estate has sued Brad Wilson, Ace’s New York-based president and chief operating officer, accusing him of intentionally mismanaging the company and conspiring with a lead investor to rip off Tom Calderwood. The estate is seeking at least $14.5 million in damages in the lawsuit filed in state court in Manhattan.

An inquest into the 47-year-old’s November 2013 death found that Calderwood died inside one of the hotel rooms at the chain’s trendy property in London’s Shoreditch neighbourhood, surrounded by drugs and alcohol, according to media reports. At the time of his death, Calderwood held a 51.74 per cent controlling stake in the company, according to lawyers for his estate.

Calderwood had grown Ace “from a ‘flophouse’ in a run-down part of Seattle” into a successful international brand with locations all over the world. The transformation was due in part to a $10 million investment by the investor, Ecoplace LLC, for a 33 per cent stake of the company two years before Calderwood died, the filing said.

The investment, which allowed Calderwood to buy out former partners, gave the founder the option to buy back Ecoplace’s stake for $20 million within a few years of the agreement, anticipating a rapid increase in the company’s value, according to court documents filed in a related case.

After Calderwood died, Wilson and New York investor Ecoplace LLC allegedly sought to exploit his father, Tom, giving him misleading financial information to acquire a majority interest in the company on the cheap, according to the complaint. Ecoplace isn’t named in the lawsuit but is a defendant in a related case.

“Ecoplace, with Wilson’s knowledge, threatened to dilute Alex’s interest or sell Ace in a way that would result in Alex’s estate ‘receiving nothing’ unless Tom agreed to sell all of Alex’s interest in Ace for $200,000,” according to the complaint.

As part of the alleged scheme, Wilson and Ecoplace commissioned a bogus appraisal of Ace that omitted key assets to make the elder Calderwood think Ace was worth about $8.2 million, according to the complaint. Wilson also intentionally failed to properly manage the hotel company and conspired to make a secret $2 million distribution to Ecoplace, according to the filing.

Wilson, who was paid an annual salary of $475,000 plus bonus, failed to deliver on expansion opportunities, according to the complaint. His management resulted in a loss of key restaurant and retail partnership opportunities, a dearth of new property acquisitions and a loss of interest among collaborators, according to the suit. This was all part of a plan to drive down the value of Ace’s brand, estate lawyers said.

“Tom did not succumb to Wilson’s attempts to extort and defraud him,” the lawyers said in the complaint.

Ace officials didn’t return a message left with the company’s press office for comment on the lawsuit. Richard Mattiaccio, a lawyer for Ecoplace, declined to comment on the allegations.

The case is The Estate of Alexander Calderwood v. Wilson, 655471/2016, Supreme Court of the State of New York, County of New York (Manhattan).

Credit: bloomberg.com