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May 28, 1997


The opinion of the court was delivered by: KRAM


 This action for libel and tortious interference with employment arises out of a letter written by a law firm to its client containing allegations that plaintiff Nicholas Coliniatis ("Coliniatis") was involved in an illegal kickback scheme. On July 25, 1996, Magistrate Judge Ronald L. Ellis issued a Report and Recommendation (the "Report") recommending that defendant The National Herald's motion for summary judgment be denied, and that both parties' motions for sanctions pursuant to Federal Rule of Civil Procedure 11 be denied. In accordance with Federal Rule of Civil Procedure 72(b) and 28 U.S.C. ┬ž 636(b)(1)(C), the Court reviews de novo those portions of the Report to which the parties have objected.


 I. The Allegations

 Olympic Airways ("Olympic") is the national airline of the Republic of Greece and is owned by the Greek government under the supervision of the Greek Cabinet. Olympic is a highly visible entity within the Greek-American community and is widely considered to be the most important corporation within that community. Deposition of Nicholas Coliniatis, dated July 25, 1995, at 122.

 Coliniatis was employed by Olympic for twenty-eight years, from 1964 until he was terminated in March 1993. Deposition of Nicholas Coliniatis, dated Feb. 28, 1995, at 13. From 1989 to 1992, Coliniatis served in New York City as the Director of Operations for North and South America, Olympic's highest and most prestigious overseas position. During this period, Coliniatis was responsible for Olympic's public relations in the United States generally and in particular in the Greek-American community. Coliniatis's duties in New York included: oversight of budgetary and financial matters; employment of service providers to Olympic; retainment of legal counsel; purchase of advertising space; and the general management of Olympic's affairs throughout North and South America. Complaint at P 9. In performing these functions Coliniatis was assisted by the Olympic public relations department in Athens and a Greek-American public relations consultant, Demetrius Filios. In this connection, Coliniatis held press conferences and Olympic's New York office issued press releases.

 On November 28, 1991, the Olympic board of directors approved the sale of its leasehold interest in its New York headquarters located at 647 Fifth Avenue in Manhattan to Olympic Towers Associates for $ 9,000,000. On September 16, 1992, Olympic, through Coliniatis, purchased two midtown Manhattan buildings for a total of $ 7,000,000 in order to house its new offices. The real estate broker in the purchase transaction, Eastern Consolidated Properties, Inc. ("Eastern"), was to receive a 6% commission. Defendant Dimas & Johnston is a law firm that provided legal services to Olympic from 1983 to 1992, including representing Olympic in these transactions. Defendant Simos C. Dimas ("Dimas") is a partner at Dimas & Johnston. Olympic also retained Nicholas Sfouggatakis ("Sfouggatakis"), a licensed real estate broker and certified public accountant, to provide tax advice in connection with the purchase of the buildings. Sfouggatakis had an agreement with Eastern whereby his company, Nasco Realty Services, would receive two-thirds of Eastern's $ 420,000 brokerage fee, or $ 280,000.

 On September 16, 1992, Dimas wrote a letter (the "Letter") to Loukas Grammatikos ("Grammatikos"), Olympic's Director General in Athens. The Letter described an alleged conversation between Dimas and Sfouggatakis in which Sfouggatakis informed Dimas that Coliniatis was involved in a possible kickback scheme related to the transaction, under which he was demanding two-thirds of Sfouggatakis's brokerage fee. The Letter further stated that Coliniatis was planning to defraud Olympic of additional funds totalling at least $ 500,000. The Letter stated, in part:

I find myself professionally obligated to relay to you information of substantial but not absolute reliability suggesting a scheme to defraud Olympic of over $ 500,000 by one of its trusted agents. . . . It seems Mr. Coliniatis expected to receive a kick-back from all of the professional arrangements entered into between Mr. Sfouggatakis and Olympic. When I spoke to him, Mr. Sfouggatakis told me that Mr. Coliniatis had told him that as a condition for obtaining these arrangements with Olympic, Mr. Sfouggatakis would be required to pay Mr. Coliniatis the first $ 280,000 which Mr. Sfouggatakis received, and then to pay him 50% of all remaining money received. If this be true, Mr. Coliniatis was planning to obtain $ 500,000 back from Mr. Sfouggatakis. And if that be true, that number would be but the beginning of the scheme.

 See Letter from Dimas to Grammatikos, dated Sept. 16, 1992, annexed to the Complaint as Exh. "A."

 Some time after September 16, 1992, Antonis H. Diamataris ("Diamataris"), the editor and publisher of The National Herald, an eighty year old Greek language daily newspaper published in New York City, received a copy of the Letter and confirmed its authenticity. Diamataris recognized that the Letter "was a story, and a big one," and he assigned an experienced reported, Theodore Kalmoukos ("Kalmoukos"), to cover it. During the weekend beginning September 26, 1992, Diamataris made several unsuccessful attempts to contact Grammatikos, who was in New York investigating the allegations in the Letter.

 On October 2, 1992, one day prior to publication of the Letter, Kalmoukos, at Diamataris's direction, contacted Dimas and Sfouggatakis for comment. Dimas refused to comment based on the confidential nature of attorney-client communications. Sfouggatakis denied making the statements alleged in the Letter to Dimas, and denied any involvement in the kickback scheme. Kalmoukos also attempted unsuccessfully to reach Coliniatis, who was in Greece at the time.

 On October 3, 1992, The National Herald published an article entitled: "'Kick Back' of $ 500,000.00, demanded the Director of O.A., charge the Lawyers of the Company" (the "Article"), containing certain statements set forth in the Letter. The first two paragraphs of the Article state:

A huge financial scandal involving an illegal commission ("KICK-BACK"), of the magnitude of at least $ 500,000.00, at the expense of OLYMPIC AIRWAYS, with the Director of the Company for its North and South America Operations, Mr. Nikolaos Coliniatis, as the Protagonist, is being charged through a top secret and confidential letter to the General Director of our National Air-Carrier, Mr. Loukas Grammatikos, by the Law firm of "OLYMPIC", Dimas and Johnson. [sic]
In their letter the Legal advisors of "OLYMPIC," state that "they feel professionally obligated" to relay to him information "of substantial but not of absolute reliability" suggesting a scheme to defraud OLYMPIC of over $ 500,000.00 by one of its "most senior and trusted representatives", to wit, Mr. Coliniatis. Specifically, the attorneys charge that Mr. Coliniatis has set as a "pre-condition" to the real estate broker, Mr. Nikolaos Sfouggatakis, to hand over to him as a "bribe", two-thirds of his commission, totalling $ 280,000.00, in other words, $ 200,000.00, for Mr. Coliniatis himself.

 Article, annexed to Def.'s Aff. in Supp. of Mot. for Summ. Judg., as Exh. "1B." The Article also includes comments by Sfouggatakis, in which he states: "I did not make any accusations about Mr. Coliniatis. . . . I deny it. I did not give any money; no one has asked me for any money." Id. In addition, the Article included a statement by Dimas declining to comment based on the confidential nature of attorney-client communications. Id.

 Coliniatis was subsequently recalled to Greece and relieved of his duties as Olympic's Director of Operations for North and South America. On November 19, 1992, he brought this action for libel and tortious interference with employment against Dimas ...

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