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Aug. 22, 2008
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Meridian said to have run illegal hotel

Audit suggests condo property owes taxes for illicitly offering overnight rentals

By JOAN WHITELYand VALERIE MILLER
REVIEW-JOURNAL

An exterior view of the Meridian condominium complex at 250 E. Flamingo Road. Clark County shut down an unauthorized hotel operation at the Meridian in July.
Photo by Craig L. Moran

The Meridian, a luxury condominium property just east of the Strip, owes approximately $568,000 in taxes for operating an illegal hotel, according to preliminary results of an audit by Clark County's business license department.

County officials knew about the informal hotel operation since its beginning, claims Michael Mackenzie, who helped run it. And the county had agreed to tolerate it on the condition the Meridian eventually went through the required procedures, according to Mackenzie, who was voted off the Meridian homeowners board this week.

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    • "The county was aware from Day One that we were operating overnight rentals, and did not raise any issues," he wrote in an open letter to Meridian owners earlier this month.

    The letter claims certain county administrators backed away from their tacit tolerance, after one owner took her suspicions to the Review-Journal. Mackenzie had been president of the homeowners association.

    The county Wednesday flatly denied Mackenzie's version of events.

    "The first time that we became aware of an issue of short-term rentals happening at the property was this spring, when we started getting inquiries" from the media and Meridian owners, county spokeswoman Stacey Welling said Wednesday.

    The unauthorized hotel operation -- which the county shut down in July -- led to Rebekah DeSmet's court appearance Tuesday on two misdemeanor charges for zoning and licensing infractions. DeSmet's attorney, Becky Pintar, obtained a week's continuance from Judge Melissa Saragosa to straighten out the matter with the district attorney. DeSmet should not be charged, because she was only an employee at the Meridian, not a corporate officer, Pintar argued.

    Meanwhile, angry owners of units at the financially troubled Meridian, 250 E. Flamingo Road, turned Mackenzie out of office on Monday night. Many believe he misled them on the hotel, which he helped launch in summer 2007. The Meridian is now taking steps to legally reopen the hotel. Leases for terms longer than a month were already allowed at the Meridian, and continue.

    Mackenzie, who does not personally own a Meridian unit, is a vice president of American Invsco, the Chicago-based company that converted the Meridian from apartments to condos in 2005. DeSmet, who is based at the Meridian, is also an employee of American Invsco, which bills itself as the nation's leader in condo conversions.

    When the Meridian's hotel ceased, the well went dry for unit owners who were leasing out their units through a rental program affiliated with American Invsco. They have received no rent checks since June. Many unit owners counted on the rental income to cover the cost of their Meridian mortgages.

    About 80 of the 678 units at the upscale property are now in foreclosure, Mackenzie estimated Monday. He said he was "bitter" toward Kathleen Mannix, the owner who went to the county and the Review-Journal in spring. Unlike most unit owners, Mannix lives year-round at the Meridian and paid in full for her modest studio.

    About 400 of the Meridian's estimated 450 owners are in some degree of financial distress "now or soon," according to Scott Oelke, a real estate agent who owns a unit at the Meridian.

    Sally FitzHenry of Las Vegas -- who owns three units and was elected to the homeowners board Monday -- said she believes the homeowners association was used unwittingly to subsidize the questionable hotel operation that Mackenzie spearheaded.

    An insurance sales executive, FitzHenry said she believes that during the years Mackenzie headed the board, he intentionally kept owner-investors in the dark about finances, and may have failed to obtain the proper insurance for the sort of liabilities a hotel is exposed to.

    She said she is starting to analyze Meridian financial documents from the past several years.

    "Today we take the HOA (homeowners association) for ourselves," owner Frank Taddeo, a local resident, shouted at an informal meeting of owners on Monday afternoon. Many had flown in from out of town to attend.

    Taddeo, to applause, said that investors "deserve all the goodies, not American Invsco."

    Welling could not say when the county's audit of Meridian's unremitted room taxes will be ready. But when the audit -- which is looking for missed taxes from June 2007 through June 2008 -- is complete, Welling said the county licensing department has 30 days in which to bill the final amount to Meridian by Executive Location, which is the entity that has applied for the transient lodging status required to run a hotel.

    As for Mackenzie's notion that some at the county knew about the illegal overnight rentals, Welling said that she found an error in county records for November 2007, falsely indicating that Eric Lynn of Executive Locations had received a "renewal" of a business license to do transient lodging at the Meridian.

    "It was an error," Welling said. "Usually renewal notices are issued on an active license. But this license has never been issued."

    The county planning commission in August gave one approval for the hotel, but other procedural steps remain before the operation can resume.

    Contact reporter Joan Whitely at jwhitely@reviewjournal.com or 702-383-0268. Contact Valerie Miller at vmiller@lvbusinesspress.com or 702-387-5286.



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    Jack Richard wrote on October 19, 2008 08:05 PM: This is a lovely place to stay right on the canal so you get all the peace and quiet and yet are only a short walk from the city centre. The leisure facilities were very good and although we only had dinner there on one occasion it was very good. The laptop went fine to ExtasyCams.com with no drop frames at all.


    anon wrote on August 31, 2008 07:02 AM: I was a resident for many years, and was finally kicked-out 1 year ago. I feel Invesco has been shady from the beginning. It is undoubtedly a beautiful property with lots of potential, but so many of these investors were so blinded by the $$ in their eyes that they couldn't smell the coffee. From the start, Invesco collected their money when they purchased from the sale, through preferred lending, and by requiring all to purchase the $50k+ upgrade packages upfront before construction. Then a year later, required everyone to pay another $40k+ to furnish the units for the hotel. DID ANYONE EVEN NOTICE THAT THEY BOUGHT THEIR UNIT FROM A BRAND NEW NV COMPANY CALLED "Koval Flamingo LLC" THAT IS OWNED BY AMERICAN INVESCO!!!??? They likely started this LLC so if bankrupcy is claimed, their parent company stays clean.

    Now these distressed investors are screwed because their condo isn't allowed to be a hotel. Didn't any one of these "businessmen" consider it is probably difficult to turn an apartment complex into a condo and then into a hotel without lots of paperwork, licensing fees, inspections, time, etc and they should confirm it was all done by the book? Instead they just "believed" that Invesco was doing the right thing, eventhough they have such a questionable history. Invesco is probably dirt poor and living month to month just like the rest of us. They've been collecting taxes from the hotel guests for 1.5 years, but I wonder if they even have it in the bank?

    I believe: Fred (from the other articles) is exactly on target; Invesco deserves harsh punishment and jail; Mackenzie and Rebecca are informed pawns; Mannix is a victim and should be bought out for her purchase price; the investors deserve to have it be a hotel


    douglas wrote on August 26, 2008 03:39 PM: the investor/speculator who bought a unit has to live somewhere. i wouldn't commit to any residential property unless it was liquid at some/any price or into which i was prepared to move. if these investments were with little down [=> little equity], as the old man usta say, "your first loss is your smallest".

    thinking that some percentage occupancy rate from rental/leased/overnight program would make some mortgage payment is what we call "betting on the come".


    Ivar wrote on August 24, 2008 11:37 PM: Seems like the hotel operator is pretty proficient at scaming everyone.
    I wonder if the Feds would do anything if it was Federal Taxes. ????
    Clark County seem to think its not a big deal since no one is in jail, or did I misunderstand how they got away with this.??? Is this connected with the "Inside job" Break-in Condo incident??
    I wonder if this is how we got in the mess we are in this country now. ???
    I hope this doesn't indicate the Mob is moving back into town.


    007 wrote on August 22, 2008 10:18 PM: No sympathy for these yokel homeowners. They knew what they were buying into when these where condo conversions and all of them should be forced to pay the taxes due! Noted that over 50% of these owners in foreclosure and/or arrears because that cant rope a dope their units by running a hot sheet joint! The fact that full time resident blew the whistle on this enterprise is no surprise, since running the place as a no tell motel just lowered her valuation as a residential property!


    Govt SCAM wrote on August 22, 2008 03:17 PM: 1. $600,000 in taxes is SCAM. Govt did little or nothing for that Money!

    2. Govt craving for room Tax is at odds with condo concept LOL.

    My guess is that "hotel" idea arose when operators realized the condo plan was in trouble (units not selling as RE market declined). A buinsess decision, response.

    3. Anyone buying "condo" off Strip must know the tourist/hotel option.


    3 corner hat wrote on August 22, 2008 10:23 AM: MONEY! Let's build some APARTMENTS! MORE MONEY! Let's do some cosmetic work, and call them CONDOMINIUMS! Even MORE MONEY! Let's rent some UNITS out to the public (transients)! Oh! Don't forget the Parties that get Their CUT! (Taxes & Fees!) I can imagine the so-called CONDO Owners going through some MAJOR Stress wondering how safe their MODEST UNITS are from the visitors/travelers, not to mention Their INVESTMENTS! What's really amazing is the fact that "Plain Ol English," is not plain ol English anymore. What one person reasons or interprets is usually shot down by some AGENCY or AT TORN EY! As it's been said, It all boils down to INTERPRETATION! Ahh! All for the Love of MONEY!


    Dennis wrote on August 22, 2008 09:21 AM: Why is everybody a victim? If you purchased three units in the hope of renting out some or all of them - then you took your chances. To blame the condo board for your potential bankrupcy is just a lame excuse. Grow up and take the blame.