OAKLAND, CA-The Oakland-based Hotel Employees & Restaurant Employees International Union (HERE) Local 2850 issued a report last week questioning related party transactions by La Quinta, CA-based KSL, its parent company KSL Recreation Corp. and Kohlberg Kravis Roberts & Co., which controls both KSL and its parent.

HERE’s research analyst Andy Lee tells GlobeSt.com that most of the actions that the union is calling questionable have been disclosed in the company’s filings with the Securities and Exchange Commission, and that the union has not sought an explanation of from KSL. What Lee did not tell GlobeSt.com is that HERE is in labor negotiations with KSL at two of its hotels. It was the first thing KSL brought up when contacted by GlobeSt.com for comment.

“The bottom line is we have labor negotiations going on with them at two hotels and this is just another example of them attempting to harass an employer into make bad decisions on economics on labor decisions,” Scott Delacio, president of KSL’s resort division, tells GlobeSt.com.

A summary of the HERE report lists the following related party transactions:

–KSL President & CEO Mike Shannon and KSL Executive Vice President Larry Lichliter bought residential homes from a KSL subsidiary, whose president is Lichliter, and then rented them back to the same subsidiary. The two KSL officers have collectively earned over $500,000 in rental income from the KSL subsidiary;

–KSL has made loans to Mr. Shannon and Mr. Larry Lichliter and two former KSL executives (one of whom is now a partner at KKR) to allow them to purchase the Parent’s stock, as well as to purchase partnerships affiliated with another KSL subsidiary (whose President is Mr. Lichliter), from which they have profited; and

–KKR has received millions in fees from KSL and its Parent, both of which it controls. KKR receives $500,000 annually for services to KSL Recreation Corporation and has received over $10 million in connection with services to KSL Recreation Group for acquisitions of three properties.

“Corporate scandals such as Enron have focused unprecedented attention on related party transactions. In such a scrutinizing environment, it is vital for companies to avoid perceptions of conflicts-of-interest and abide by the highest standards of corporate governance,” states Lee in his report.

Delacio says he is not concerned about the report. “If you look at what they have in their report, number one, it’s exaggerated; number two, in some cases it’s inaccurate; and number three, all these actions were properly approved by our board and detailed in our SEC filings,” says Delacio.

Labor negotiations have been ongoing for more than a year now, says Delacio. “Our intention is to continue bargaining in good faith,” he says. “A larger contract was signed in Hawaii and it took 19 months.”

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