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Hotel operator sues airport authority, Infosys over lease termination

July 23, 2018

A Detroit-based hotel operator has filed a lawsuit against the Indianapolis Airport Authority and Infosys Ltd., alleging the authority and the tech company colluded to wrongfully terminate the hotel company's lease to make room for Infosys' proposed $245 million innovation hub development at the airport.

According to the lawsuit filed this month in Michigan Bankruptcy Court, the firm, Indiana Hotel Equities LLC, or IHE, leased a 257-room hotel property from the Indianapolis Airport Authority in January 2016 and agreed to make repairs and updates to the facility.

The hotel at 2500 S. High School Road currently operates as the Clarion Hotel Airport and was previously known as the Lexington Hotel Indianapolis Airport and the Radisson Hotel Indianapolis Airport.

In its lawsuit, IHE says the airport authority severely underrepresented the condition of the hotel when it leased the property. IHE said it made more than $2 million in repairs to the property to make it operational.

The lawsuit alleges the lease between the airport authority and the hotel company was terminated for the purpose of redeveloping the property for use by Infosys “under a pre-textual allegation that [Indiana Hotel Equities] had breached the lease.”

Three days after a major economic development announcement in May 2017 that Infosys would build a massive tech hub in Indianapolis, the airport authority notified IHE in a letter that it “defaulted by failing to perform all of the improvement and rebranding requirements under the lease.”

According to the suit, the airport authority said IHE failed to comply with the lease because it failed to provide a swimming pool. IHE said the existing pool had been filled in for at least a decade. The pool area is used as a banquet facility for events and weddings and serves as "a major profit center for the property," IHE said.

Plans for the pool were eventually made after other "major renovations" to the property were completed, but not in time for the Dec. 31, 2016, deadline called for in the lease agreement.

IHE claims it "substantially and materially" complied with the lease requirements and it filed suit to prevent being evicted. A Marion Superior Court ruled in favor of the airport authority on March 28 and ordered IHE to vacate the property by April 14.

IHE, which is a limited liability company solely owned by Remo Polselli, filed for Chapter 11 bankruptcy protection on April 10. Later that month, airport and Infosys officials announced that Infosys would build its tech hub at the airport.

The hotel company alleges the airport authority knew all along that Infosys wanted the airport property yet failed to disclose that information to IHE or the court.

It says the Infosys deal was deliberately “covered up and hidden” in the case. The suit said Eric Anderson, property director for the authority, testified under oath that the property "was not subject of any sale or lease," and that "there were no plans for the reuse of the subject property."

IHE said it is appealing the case, partly on the basis that the airport authority and Infosys concealed information that could have changed the court's decision.

The airport authority’s “ulterior motive was simply to make room for Infosys to take over the subject property at any cost and without compensation” to the firm, the company said in the suit. IHE said its lease was cut short “because a bigger and better opportunity for the State of Indiana manifested."

The firm alleges former Infosys CEO Vishal Sikka, who stepped down from the firm last year, participated in a conspiracy to commit tortious interference with IHE's contracts because he knew about the existence of the company’s lease.

“Despite this knowledge, Infosys and Sikka negotiated backdoor deals with the [airport authority]" and other state employees, according to the suit.

Infosys told IBJ in a statement that “the claims alleged in this lawsuit are meritless” and that the company “will defend itself vigorously in court.”

Indianapolis Airport Authority spokeswoman Stephanie McFarland said airport officials do not comment on pending legal cases.

Polselli, who once owned the now-defunct Sugar Loaf ski resort in Michigan, was convicted of evading federal taxes in connection with one of his hotel properties. He served more than a year in a federal prison before being released in 2004.

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