Burkle Sues OTK Associates in Morgans Hotel Group Fight

Billionaire investor Ron Burkle accused OTK Associates LLC in a lawsuit of seizing control of Morgans Hotel Group Co. (MHGC) by misleading shareholders in proxy materials.

Burkle, founder of Yucaipa Cos., is seeking a new shareholder meeting and director elections, according to a complaint filed today in federal court in Manhattan.

Morgans Hotel Group investors voted to fill the board of the company with all seven directors proposed by OTK, rejecting six incumbent members, including Burkle, he alleged.

“Without an injunction from this court, Morgans will be controlled by elected directors who were elected by means of an improper proxy solicitation,” Burkle said in the complaint.

OTK, the hotel company’s largest shareholder, and Burkle’s Yucaipa, also a substantial stakeholder, have been embroiled in disputes over control of the hotel firm. Morgans operates luxury hotels under brands including Hudson, Delano and Mondrian.

Burkle alleged the election process was “tainted” because OTK provided proxy solicitations that materially misrepresented the conclusions of advisory firms regarding the vote.

Dan Gagnier, an OTK spokesman with Sard Verbinnen & Co., didn’t immediately return a call seeking comment on the lawsuit.

The case is Ronald W. Burkle v. OTK Associates LLC, 13-cv-4557, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Christie Smythe in Brooklyn at csmythe1@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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