Redstone rocked by castle seizure

Lynn BurtonPost Independent Staff

The federal government seized the historic Redstone Castle Friday, which left locals wondering whether the popular tourist draw will operate this summer.”It’s possible there could be tours,” said Internal Revenue Service spokesman John Harrison. “We realize the community is somewhat dependent on it as a tourist attraction. It would have to be okay with the court.”The IRS seized the castle in connection with allegations that one of the castle owners and his business partners engaged in securities fraud, money laundering and wire fraud, according to documents filed in U.S. District Court in Denver.The government claims former Redstone resident Leon Harte and his limited liability company, Reserve Foundation Trust LLC, defrauded investors out of $20 million since 1999. Harte and his then-wife, Debbie Harte, and partner Norman Schmidt allegedly used $6 million of that money to buy the Redstone Castle in 2000, court documents say.No charges have been filed, and the investigation continues, said Jeff Dorschner, spokesman for the U.S. attorney’s office in Denver.Harrison said the IRS seized the castle and three other Redstone properties because the government alleges they were purchased with funds derived from a crime. He called the fraudulent trading program a “prime bank note scheme.” “The financial instruments are useless paper,” Harrison said.Victims were told they would earn 25 to 100 percent or higher per year, per quarter or month, depending on how much they invested. Harte operated the scheme from Castle properties by conducting meetings and making phone calls, court documents say.Former Redstone Castle general manager Cynthia Lange was one of Harte’s victims, court document say. Harte told Lange she could invest in his program, and promised a 50 percent annual return on investments of $100,000 or more. When Lange said she could only come up with $50,000, Harte indicated he would accept that amount because she was “a friend.”Lange sold her Redstone home and used the money to invest with Harte, court documents say. “In spite of repeated requests, Lange has never received back her $50,000 or any of the promised interest,” court documents say.”I’m very surprised it took this long,” said Aspen attorney Peter Thomas of the federal seizure, who handled a civil lawsuit for Lange. The suit was settled for an undisclosed amount.Last September, Thomas also filed suit on behalf of six people living in Ulzburg, Germany, and Edmonton, Canada, who are collectively seeking $800,000 in lost investments from the Hartes and Schmidt. The lawsuit states that the Hartes, Schmidt and their various corporations promised investors a yield of not less than 50 percent monthly.Thomas said there is a motion pending before the judge in that lawsuit for a default judgment against the defendants, for their refusal to cooperate with various parts of the lawsuit.Leon and Debbie Harte were not available for comment. They are reportedly divorced.Beside the 42-room Castle, the IRS also seized 149 acres of surrounding lands, the Carriage House parcel, and the former restaurant at 410 Redstone Blvd. where the castle originated its tours.The Castle seizure was the talk of the town Monday. “It was a surprise to us,” said Joyce Illian of Marble, a clerk at the Redstone General Store.Illian said Debbie Harte was in the store last week, and they talked about attending a yoga class. “She seemed fine,” Illian said.Harte closed the 20,000-square-foot Redstone Castle for the winter season last fall, and said at the time she hoped to reopen it this summer.Harrison said the castle will revert to its owners if the government doesn’t bring charges. The owners would retain the castle if the case goes to trial and they are found not guilty. The owners could also agree to sell the castle to reimburse victims, or the federal government could auction it off. Harrison would not speculate on how long the entire process might last.Word of the castle’s seizure spread quickly around the state after a Denver TV station aired the story Monday night. Redstone real estate broker Jeff Bier, who said he was the agent in the castle in the past, said he has received several calls. “Most people are just wondering what happened,” Bier said. “It has caused quite a stir, to say the least.”Bier said the castle has been sold three times in the past six or seven years, and owners have had a hard time operating it as a bed-and-breakfast and public facility. The 100-year-old castle is important to Redstone’s economy because it attracts tourists. “It’s like our brother,” said Debbie Strom, general manager at the popular Redstone Inn.Bier said residents worry the next owner will use the castle as a private residence, rather than open it up for tours, overnight stays, weddings and other gatherings.Aspen Times writer Naomi Havlen contributed to this report.Contact Lynn Burton: 945-8515, ext. 534lburton@postindependent.comPromises vs. reality: prime bank note schemeSchemers will promise:-Exhorbitantly high rates of return.-The initial investment will be returned in full.-The investment is fully insured and protected by the world’s top 100 banks.-A secret investment offered only to the wealthy.In reality, there is no:-Trading market for the investments.-Payment of investment returns.-Return of initial investments.Source: U.S. Internal Revenue Service

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