Scandal Aspen III: The Financial Scandals
(I) Mining Scams, Bombs and Sex Toys
In a story read around the world, disgruntled longtime local Jim Blanning, 72, effectively held Aspen hostage on New Year’s Eve 2008, causing millions of dollars of business losses by threatening to blow up local banks. It was the culmination of more than a century of local swindles centered on mining scams. Blanning had many complaints with the world but was most bitter at being convicted of a fraudulent land deal based on the same methods he used to acquire old mining deeds.
From the beginning, in the late 1800s, mining promoters of various stripes made money from Aspen’s silver industry while never hoisting a pick. Some bought and sold claims, others salted bad claims with good ore and jumped claims that were unattended or poorly registered. As time progressed, so did the scams.
With the onset of tourism, the surface land for many mining claims became valuable for ski slopes and buildings. If you could legally establish a line of ownership to well-positioned and patented claims, you could sell them for lots of money to anyone from private citizens and developers to ski resort owners, Pitkin County and even the US Forest Service. Jim Blanning was one of several opportunistic locals who took advantage of shaky provisions of the antiquated 1886 Mining Act to do just that. In the end, as Pitkin County sheriff Bob Braudis said: “I think he would have rather hustled a dime than earn a thousand dollars.”
Tangling with Pitkin County led Blanning to threaten suicide while roped to the county courthouse roof in 1994. He also wore a dildo to harass county commissioners in the Cantina restaurant the same year. In 1996, he was found guilty of fraudulently laying claim to property owned by Aspenite Dieter Bibbig, sentenced to 16 years in prison and paroled after serving six. Following that, he continued to deal in mining claims, though it was legally forbidden.
Blanning is believed by Vail police to have robbed the Weststar Bank there in 2005 and 2006. And on New Year’s Eve this past year, he left two gift-wrapped bombs at Aspen banks with notes demanding $60,000 in cash or there would be “a horrible price in blood.” Downtown Aspen was evacuated for one of the busiest nights of the year. Blanning’s plans quickly unraveled, and he abandoned two more bombs in an alley and left a garbled note at The Aspen Times. Eventually his body was discovered with a self-inflicted gunshot wound and a rambling suicide letter.
Though he railed against the elite, once again most of the people hurt by Blanning’s schemes were anything but, whether they worked in businesses closed by the bomb threats or were friends who had to identify him and speculate about his motives. As Dieter Bibbig said, “I liked him, but he was a little deranged.” The only upside was that for the first time in memory, there were no drunk driving arrests in Aspen on one of the biggest party nights of the year.
(II) The Peak House Hustles
From its inception on three nearly vertical acres in 1993, the notorious Peak House (pictured above), the highest home on Red Mountain, has been scandal central. In 1997, the 15,000-square-foot palace with views rivaled only by Aspen Airways sold to Victor Kozeny, aka “the Pirate of Prague,” for $19.7 million, a record then for for Colorado real estate. His aggressive expansion of the house earned a stop-work order for exceeding his permits, and he was also sued by a contractor for failure to pay more than $500,000 for a gymnasium addition begun in 1997.
That same year Kozeny used the home to fête and dazzle many local investors at a seriously swank Christmas party where Natalie Cole entertained and guests were given bowls of beluga caviar. Kozeny was raising money to buy control of the state-owned oil company in Azerbaijan as it was being privatized. Investors included former Senate Majority Leader George Mitchell, the Wall Street hedge fund Omega Advisors and AIG—the high-rolling object of a federal bailout plan today, exercising bad judgment even then.
When Kozeny claimed he was betrayed by Azerbaijan officials and his plans foundered, he became the subject of numerous investigations and allegedly skipped to the Bahamas with $180 million of his investors’ money. Eventually, multiple state and federal charges were filed against Kozeny and two others, including bribery of Azerbaijan officials in violation of the Foreign Corrupt Practices Act.
The co-indictees were Kozeny’s neighbor on Red Mountain, Frederic Bourke Jr., chairman of the board and CEO of the Dooney & Bourke luxury handbags company, and David Pinkerton, a former managing director at AIG. Several others involved have already pleaded guilty to similar charges. AIG and Omega have sued Kozeny for $423 million, saying he used the Peak House to scam wealthy Aspen investors. Early in 2009 a settlement was announced in Omega’s U.K. lawsuit, but AIG wasn’t mentioned and no terms were disclosed.
In 2001, courts forced the sale of the now 24,000-square-foot Peak House, historically rented for up to $20,000 per day, for $22.1 million, another Colorado record at the time. Purchase payments are being escrowed for numerous claimants. The buyer? A private trust controlled by the chairman of Priceline.com, Richard S. Braddock, and his wife, at a time when his company’s extravagantly inflated stock value had all but vanished during the dot-com crisis.
(III) The Don Johnson Lawsuits
When Don Johnson, of “Miami Vice” and “Nash Bridges” fame, was pulled over at a border crossing in Europe in 2003 with bank records of $8 billion in financial transactions (yes, billion), it was just the latest financial dilemma for the actor, who then listed Woody Creek as his primary residence. The difficulty he was best known for here involved not being able to pay his Aspen grocer’s tab and almost having his multi-million dollar home foreclosed on, well before it was fashionable.
One of the biggest questions on blog sites about the $8 billion was where Johnson would have gotten it. “Maybe all those years on MV learning drug trafficking paid off,” suggested one. “Royalties for his hit single ‘Heartbeat,’” proposed blogger Norm MacDonald. All just an honest misunderstanding, Johnson told CNN’s Larry King. “I signed some autographs, we joked around.” No charges were ever filed.
So why couldn’t he pay his bills, asked people in Aspen? In early 2003, his Woody Creek home had a lien filed against it by a Beverly Hills bank where Johnson had failed to pay a $1 million promissory note. And in addition to the unpaid $5,000 grocery bill at Clark’s Market, he also owed Aspen Valley Hospital $7,345 and Grape and Grain Liquor Store $377, among others. Some wondered if two sexual assault lawsuits filed against Johnson by “Nash Bridges” cast members in 1997 and settled confidentially hadn’t cost him more than he could afford. DJ’s supporters noted that he wasn’t asking for a Presidential pardon and hadn’t pauperized his friends. The Woody Creek Tavern, a Johnson haunt, put out a tip jar to collect money for him.
By August 2004, Johnson had covered his shortfalls with a $10.6 million loan. His Woody Creek properties were listed for $21 million but taken off the market in December. In 2005, he was sued by a company for reneging on an agreement to auction the properties through them. Soon his most recent financiers, D.E. Shaw Laminar Lending, moved against him for failure to make good on the $10.6 million. Johnson was facing imminent foreclosure in 2006, when he beat the deadline by a couple of hours, selling the ranch for $15.75 million to pay what was now a $14.5 million obligation.
Just days later Johnson filed suit for “unlawful lending practices” that he said forced him to sell his home. D.E. Shaw sought immediate dismissal, but a federal judge in 2007 allowed part of the suit to stand and it was still in litigation as of this writing. Most recently, in February of 2009, Johnson sued the producers of “Nash Bridges” for “potentially tens of millions of dollars” in unpaid royalties for the show. Lots of lawsuits, lots of dollars, so little sense.
(IV) Madoff’s List (Bernie Madoff With Their Money)
It was December last year when Bernie Madoff’s $50 billion dollar ponzi scheme came unstuck, and for a while it seemed like most of his roughly 13,500 victims lived in Aspen. Many locals couldn’t decide which was worse: the embarrassment of being on Bernie’s list, or not being.
There were sound reasons for not wanting to be. It meant you hadn’t lost all that loot and you might be smarter than some of your friends. Besides, in a fraud case like this, in what’s called “claw back,” the government has declared its intent to recover money that any investor got back from Madoff in the past six years. Clearly if you had escaped with anything, it would be shrewd not to crow about it.
On the other hand, since it required serious player’s dough to even get accepted by Madoff (up to $10 million, plus references), one hated to be thought too poor to have been taken advantage of. Thus a kind of reverse bragging set in. Some said they’d been plundered when they hadn’t. Others openly confessed their fleecing while also making it known that however much they lost, it was no big deal.
As the lists of the bloodied appeared in newspapers, at least 50 local names surfaced. Total losses to families with significant Aspen connections were said to exceed a billion dollars. Media mogul Mort Zuckerman put his Red Mountain home up for sale when he reportedly lost $30 million. Chicagoan Howard Gottleib, who owns two houses in Aspen and is a major Aspen Music School patron, became suspicious of Madoff years ago and actually withdrew funds from him, only to invest them with another firm that turned out to be a feeder for Madoff.
Rumors abounded. John Denver’s partner and manager Harold Thau made “the list” and was said to have been hard hit, along with the singer’s widow and popular local, Annie Denver. Major Aspen arts supporter Richard Felder was also named. It was said that he had been one of Madoff’s oldest friends and was devastated after not only losing much of his own sizable fortune, but that of other family members as well.
Aspen dealt with all of this in typical fashion. The joke around town was that lots of people were on the Madoff diet. You lose weight, but you really hope it’ll come back. There was also a Madoff voodoo doll that would have sold a lot better if the prospective buyers had any money left.
Stressing that it wasn’t just zillionaires who got clipped, Jillian Livingston, who lives with her husband, Wade (a former publisher of this magazine), and their young son in Old Snowmass, wrote in the Aspen Times about her family being hustled and enduring comments about the “greed” of the victims. “Investigating and trusting a highly reputable investment firm is not greedy. … We were following some of the most brilliant people in the world who had also invested with Madoff.”
Locals were concerned that Madoff might show up in Aspen and “die” while awaiting sentencing, a la Ken Lay, potentially liberating his still wealthy family from any financial responsibility while he was spirited off to join Robert Vesco in Cuba. Apparently this also crossed the mind of the judge who had Madoff jailed immediately after he pled out to offenses that could draw up to 150 years. Many in Aspen hope he lives to serve them all.
(V) Bandar’s Billion-Dollar Bribes?
His Royal Highness Prince Bandar bin Sultan bin Abdulaziz, the former Saudi Arabian ambassador to the U.S. and son of the man next in line for the Saudi throne, built a vacation home for his family near Aspen in 1991 that was as posh and almost as big as the five-star Little Nell Hotel. But less busy.
When the Prince listed the Starwood property, known as Hala Ranch, for sale in 2007 for $135 million, it was, briefly, the most expensive private residence in America. Bandar subsequently pulled that listing and reportedly sold three of his other local properties instead for $85.5 million. Soon afterward a court case was filed alleging those properties and Hala Ranch were built with part of some $2 billion in bribes taken by the Prince from a British defense company for jet fighter sales to his country.
A group of shareholders from that company sued the Prince and others seeking to recover the money, and an embargo was placed on the Prince’s assets in the U.S. until there is a resolution. Given Saudi royalty’s longtime special relationship with American presidents, and specifically the Bush family, some find it shocking that the lawsuit hasn’t gone away. But Bandar has, not visiting Aspen since 2007.
Bandar’s attorneys insist there has been no wrongdoing and that in the meantime the frozen assets represent a financial hardship for the Prince. In 2009 a court disagreed, pointing out that the Prince’s net worth is estimated at $20 billion. The obvious implication is that not even a nice home in Aspen is worth enough to put that amount at risk. Stay tuned …
