IRS vs. RHS
How Redstone Won the Ponzi Scheme
by Ron Sorter
In 2003 the IRS seized the Redstone Castle to help repay victims of an investment scam, a Ponzi Scheme, estimated to have scammed $56 million from investors. The future of the Redstone Castle seemed doomed. The IRS was charged with liquidating all assets to repay investors until our “little but mighty” Redstone Historical Society (RHS) parlayed forces to save this historic treasure.
RHS helped arrange a local meeting in May 2003 to meet the state and federal players and learned from the IRS that disposal of a seized property where “historic preservation is not a priority” could likely result in an auction of the property, fixtures and furnishings. The agent admitted that the local IRS office, based in Grand Junction, had never seized anything as large as the castle. Another Castle lien-holder had already acquired the right to dispose of the interior furnishings, whereby the Tiffany lamps and Stickley furniture could be auctioned to the four winds. Not a great scenario.
Allowing the Castle interior to be gutted, subdividing the front lawn or losing the momentum effect of castle tours on Redstone’s economy would not be good. Dan Corson, bless him, of the Colorado Historical Society, was at that meeting and described Section 106 of the National Historic Preservation Act. Most of us, including the IRS, had never heard of it. But that arcane, bureaucratic reference is the reason the Castle isn’t a smoking ruin. It basically requires federal agencies, whenever they happen to get control of an “historic property” to allow public input (in the form of consulting parties”) with the aim of reaching agreement on ways to avoid or reduce adverse effects on that property.
That rule became our Lousville Slugger. All we needed were some legendary swingers. We and our partners had several so, in the bottom of the ninth, many years later, bases loaded, we won the World Series. The Castle was now protected as an historic jewel by some bulletproof conservation easements when it was bought by Ralli Dimitrius at the IRS auction in 2006 conservation easements and all. There was kicking. There was screaming. Isn’t there always?
The IRS eventually agreed to be bound by Section 106. And they eventually agreed that they had no experience writing Memorandums of Agreement, MOA are maps of how, in detail, to preserve big castles. They let the preservation groups, including the Redstone Historical Society do that. There aren’t enough words in the dictionary to describe U.S. Attorney Jim Russell’s work in getting that to be a fact.
Peter Martin was our pro bono attorney
THE SEC? Now that’s a different story. The Security and Exchange Commission, is a federal agency but their top lawyer ruled that the Section 106 didn’t apply to them. Then (for some reason) our case got transferred from Colorado where we’d been given “standing,” to Florida where the largest group of “victims” lived and where we didn’t have “standing.” Did I mention our group had no legal fund at all? RHS Board member and former president, Peter Martin, acting as our pro bono attorney, traveled there at his own expense, got the judge to admit him (and RHS) to the case and (somehow) persuaded him to order the SEC to comply with Section 106. Seems simple, right? It wasn’t.
Darrell Munsell was our president
Darrell Munsell, RHS president during this adventure, spent more time talking, cajoling, traveling, and meeting with people than can be described here. Two years in one sentence? No way. But effective. You bet. In the end, Darrell and Peter were jointly awarded Redstone’s Community Service Award.
Nancy Taylor, our next RHS president, worked with (short story) Colorado Preservation Inc. to have the Castle designated by them as one of the most endangered places in the state. Lots of attention, lots of press, and more help from more people.
Darrell Munsell went to the 2006 ceremony in Washington, DC, at his own expense, to receive our Partnership award on behalf of the RHS along with representative from our other partners: Colorado Preservation, Inc, The National Trust for Historic Places, Colorado Historical Society and Pitkin County. One of the things that impressed him most was how much national attention there was regarding the successful preservation of the Castle.
Obviously, both the Castle and the Redstone Inn are huge drivers of the social and economic life surrounding Redstone. It’s critical for them to remain historically valuable and economically viable especially for the heritage tourism market. We were the group that needed to make that happen and there it is. In the end, there is no way to describe all the work and effort that went into it but sharing the credit: Barb Albin, Jill Briggs, Marty Fiala, Bev Goss, Ann Martin, Sue McEvoy, Michelle Sorter, Debby Strom, Pat Zollinger. Thank you.
Author Ron Sorter is a former RHS board member extraordinaire. He now lives in Washington State but still is actively involved in the Society.