Starwood 2003 Annual Report Download - page 113

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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
RICO as well as fraud claims against the principals of Intelnet. The case was subsequently dismissed by the
court on the grounds that it was brought subsequent to the running of the statute of limitations. An appeal of
this decision is pending.
In July 2000, the Company Ñled suit in New York City against Aoki Corporation (""Aoki'') and certain
other related and unrelated entities regarding Starwood's management of nine hotels in the United States and
Canada owned by Aoki and/or such other entities. Starwood is seeking to enforce the management
agreements relating to these hotels and the rights Starwood acquired in connection with the purchase of those
agreements from Aoki in 1995. In addition, Starwood seeks monetary damages and other relief for defendants'
fraud, breach of contract, negligence, breach of duty of good faith and fair dealing, and other alleged acts of
wrongdoing.
In October 2000, Aoki and the other defendants in the lawsuit described above Ñled an action in New
York state court against Starwood claiming that policies and practices constitute breaches of its contractual
and Ñduciary duties with respect to fees and cost allocations relating to central reservations, the SPG program,
and marketing and sales initiatives; Starwood's purchasing practices, and the receipt of rebates; cross-selling
and other joint marketing and promotional programs undertaken by Starwood; and Starwood's management
and accounting practices regarding the hotels, including the extent to which Starwood responded to the
owners' prior demands for information and documents.
During 2001 Aoki and the other parties were ordered to mediation for both lawsuits. In May 2002, a
settlement agreement for two of the hotels was reached with entities controlled by parties other than Aoki.
The lawsuits are continuing with respect to the remaining seven hotels that are wholly-owned by Aoki.
Starwood believes that Aoki's complaint is without merit and intends to vigorously defend against the claims
made against the Company.
The Company is involved in various other legal matters that have arisen in the normal course of business,
some of which include claims for substantial sums. Accruals have been recorded when the outcome is
probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be
determined, the Company does not expect that the resolution of all legal matters will have a material adverse
eÅect on its consolidated results of operations, Ñnancial position or cash Öow. However, depending on the
amount and the timing, an unfavorable resolution of some or all of these matters could materially aÅect the
Company's future results of operations or cash Öows in a particular period.
Environmental Matters. The Company is subject to certain requirements and potential liabilities under
various federal, state and local environmental laws, ordinances and regulations. Such laws often impose
liability without regard to whether the current or previous owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. Although the Company has incurred and expects to incur
remediation and other environmental costs during the ordinary course of operations, management anticipates
that such costs will not have a material adverse eÅect on the operations or Ñnancial condition of the Company.
Captive Insurance Company. Estimated insurance claims payable at December 31, 2003 were $96 mil-
lion. At December 31, 2003, standby letters of credit amounting to $101 million had been issued to provide
collateral for the estimated claims. The letters of credit are guaranteed by the Company's captive insurance
company.
ITT Industries. In 1995, the former ITT Corporation, renamed ITT Industries, Inc. (""ITT Indus-
tries''), distributed to its stockholders all of the outstanding shares of common stock of ITT Corporation, then
a wholly owned subsidiary of ITT Industries (the ""Distribution''). In connection with this Distribution, ITT
Corporation, which was then named ITT Destinations, Inc., changed its name to ITT Corporation.
F-47