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Public pension fund seeks damages and a court order enjoining CommonWealth REIT's management from further related-party transactions and consummating a recently-announced Equity Offering and Tender Offer; the suit was filed by Chimicles & Tikellis LLP and Shapiro Haber & Urmy LLP in Federal Court in MassachusettsBOSTON,
Feb. 28, 2013 /PRNewswire-USNewswire/ -- Chimicles & Tikellis LLP,
Haverford, PA, and
Shapiro Haber & Urmy LLP,
Boston, MA, today announced that public pension fund Delaware County Employees Retirement Fund initiated a shareholder derivative action in federal court in
Boston, Massachusetts on behalf of
Massachusetts-based CommonWealth REIT ("CWH") against its co-founder
Barry Portnoy and his son
Adam Portnoy ("Portnoys"), and their wholly-owned entity Reit Management & Research, LLC ("RMR"), and certain other former and current officers and trustees of CWH (collectively, "Defendants").
CWH is a public real estate investment trust ("REIT") that owns and operates office and industrial buildings and leased industrial land worth nearly
$7 billion. CWH's operations are conducted by RMR, its external manager, pursuant to hefty fee-based management agreements with RMR. The Portnoys own RMR and sit on CWH's Board of Trustees ("Board"), which consists of the Portnoys' longtime friends and business associates. Through their control of the Board and RMR, the Portnoys control CWH.
In its 65-page Complaint, Plaintiff alleges a long history of management abuse, self-dealing, and waste which resulted in various breaches of fiduciary duties owed by Defendants to CWH, including the transfer of CWH's best properties to other REITs formed and controlled by RMR for the benefit of the Portnoys. By diverting key assets, RMR (and the Portnoys) were able to borrow and raise more capital, acquire more properties and earn more management fees from the other REITs controlled by RMR.