Attorneys representing Marriott International Inc. and bondholders presented final arguments yesterday in a federal case that alleges the hotel operator misled investors when it sold $400 million of debt.
After closing statements, the case was sent to the jury. But Judge Alexander Harvey II allowed the panel to recess late yesterday afternoon after it failed to reach a decision. Deliberations are to resume today.
Plaintiffs are seeking roughly $18 million in damages from Marriott International, Chief Executive J. W. Marriott and Richard Marriott, and former Chief Financial Officer Stephen F. Bollenbach.
As they had throughout the three-week trial, the two sides continued to differ on the timing of a decision to divide the company, which resulted in the October 1993 creation of Host Marriott Corp., which Mr. Bollenbach now heads.
The case centers on bonds purchased by the institutional investors in April 1992, which fell by 30 percent six months later when Marriott announced the plan to dispose of its poorly performing $1.4 billion real estate holdings and related debt. The bond ratings on the issues were eventually lowered from investment-grade debt to so-called "junk bonds."
Plaintiffs contend Marriott officials devised the plan at least a month before the bond sale, with the full knowledge that the announcement would adversely affect the bonds, in an effort to bolster its struggling stock price.
"Had the plaintiffs known Marriott was considering the possibility of splitting the company, it would not have purchased the bonds at the prices paid," said Lawrence Kill, an attorney representing 11 different insurers and pension funds. "This is not an attack on the splitting of companies. The issue here is Marriott's recklessness."
Marriott attorneys denied that the company failed to provide adequate information in a timely fashion or that it had sinister motives.
Marriott attorney Arne Sorenson contends that the idea of a division, conceived in May 1992 after the bond sale, was one of several options the company considered to boost income and deal with the lack of new hotel development opportunities.
"This case is about whether large institutional investors can come into this court and get something they didn't pay for," Mr. Sorenson said.