Aug. 22, 2008 - 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.

"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.

By Joan Whitely and Valerie Miller

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