Wednesday, March 15, 2006 | 7:05 a.m.
Mount Charleston has always provided a cool, alpine welcome to relieve the brutal heat of the Las Vegas Valley. A decade ago, visitors to the mountain were enticed with the possibility of building rental cabins among the abundant pine trees in the mountains.
More than 500 investors, in fact, jumped at the chance to sink modest amounts of money into a company that ultimately built two dozen cabins. They offer stunning views, parquet floors, hot tubs and wood-burning fireplaces.
Most investors put in relatively small amounts, $1,000 or $2,000, although some anted up as much as $50,000. They were initially promised an income stream of about 10 percent a year, investors say.
That was a decade ago. They have never seen a dime return on their money.
Many are retired, living on fixed incomes. Some undoubtedly have died or moved from Las Vegas.
"I'm trying to figure out what can be done," said Sal Sessa, 79, a retired stockbroker. Sessa and others say they are weary of years of unfulfilled promises from Barbara Orcutt, the operating manager, major stockholder and owner of the bar-restaurant next door.
If not able to recoup their money - much less any earnings - they would like even partial payback for more than $2 million they collectively gave for the project between 1993 and 1996.
Orcutt said this week that investors may soon receive money. She said checks have been held up for years because of a dispute with federal tax officials.
Orcutt said she could not immediately provide evidence of the dispute because the information was in the mail. Investors say they have heard a lot of promises over the years - and all they received was a single check, for less than $20 about five years ago. Investors say it bounced.
They got another promise in 2004, when Orcutt announced that the limited liability company that built the cabins had gone out of business, and 23 of the cabins had been sold at prices ranging from $175,000 to $350,000. One was kept for Orcutt to use as the new management office for the now co-op-style property.
Checks with proceeds from the sale, which should have netted almost $6 million, would be going out to investors "prior to year-end," Orcutt said in a 2004 letter to investors. The checks never arrived, investors say.
Sessa and other investors have complained to state officials in the Securities Division of the Nevada secretary of state. Officials in that office say their jurisdiction is only over the initial offering of the stock in 1995.
In a consent agreement, the division did order Orcutt to stop selling shares in the cabins. The division said Orcutt violated rules setting an 18-month limit on sales of the project. The order to refrain from stock sales expired in 2001.
Sessa and other investors say Orcutt is the reason they have never been paid.
"She figures we're going to die," Sessa said. "She's just biding her time."
Orcutt's name is virtually synonymous with Mount Charleston. She also is well-connected to Las Vegas media personalities and political figures, whom she often hosts at dinners at the lodge.
Sessa and other investors say she uses those connections to her advantage. They note that she has had a number of legal problems over the years, most recently with an attempt to build condominiums near the cabins and lodge.
Clark County had given Orcutt permits to build six single-family homes, but potential buyers were told that the six buildings would actually be multi-unit condominiums.
After the county threatened legal action, Orcutt promised to make all six single-family homes. She blamed a real estate agent and her lawyer for the misunderstanding.
Other legal issues include a 1996 raid on the lodge by the Internal Revenue Service, which closed the restaurant for a week before arrangements were made to pay thousands in back taxes.
The bad news over the last decade has been balanced by flattering media portraits for Orcutt's work on behalf of anti-drunken driving efforts, and on other subjects.
That rankles investors such as Steve Smith, 59, a retired school counselor and one of many former school district employees who invested in the project. Smith, who lives on a pension, purchased three shares in the cabins at $1,000 a share.
"My wife and I went up there for a dinner and saw the cabins they were building," Smith said. "We decided, OK, let's put a little money in there. Between the two of us we had $8,000 in our IRAs (individual retirement accounts)."
Smith said that for several years, he could not get a copy of the stock certificates. But in 1997 he finally received notice that he did indeed own the shares he paid for. But he has never received any income from the investment.
"I got so upset about some of this stuff, I just put it away," Smith said. "Not a penny. Not a penny. Promises for half of it, that kind of stuff, then not a penny ... "
Other investors, including those who served on the board of directors of the now-dissolved company that built the cabins, have recollections that differ from Orcutt's.
For example, Orcutt said she sank almost $600,000 of her own money into the project and opposed the dissolution of the company and sale of the cabins. "I knew I would lose my money," Orcutt said. "I absolutely did not want to sell the cabins."
But Kai Larsen, a retired pit boss at the Hilton, said Orcutt threatened the board members with a lawsuit unless they approved the sale. The board ultimately did so in 2002, and all board members immediately resigned.
"The board thought the receipts from the sale would go to the shareholders," he said. "Not one penny went to the shareholders."
Larsen is not sure if the money will ever be found, in part because the financial picture of the operation was never very clear.
"The accounting practices were just abysmal," he said.
A decade ago, board members suggested an audit. Orcutt told them that files with financial information had been stolen, "so there was no audit," Larsen said.
Phyllis Norquay, a retired administrative assistant with three shares, said she and Orcutt were good friends before the financial debacle with the cabins. Now, she said, she believes Orcutt used the proceeds from the sale of the cabins on other projects.
"Where do you think she got the money to build the condos?" Norquay speculated.
The investors are trying to find some way to recover part of their money. A small group has hired a private detective to determine what happened to the money from the sale of the cabins. Investors are also considering lawsuits, a move they have resisted so far.
"We don't have any money for a lawsuit," Norquay said. "Individual senior citizens don't have any money. One of the other reasons we haven't sued is we don't know if there is any money to recover."
Orcutt said she doesn't know how much money investors will get back, but she promised they would see a check, soon. The problem is with the federal tax officials, she said.
"Of course, when the IRS steps in, you stop everything," she said. "They charged me a small penalty, about $2,000."
Orcutt said before checks can go out, change-of-address information has to be entered into a computer program. The investors will not see all of their money returned, she said.
"It's not going to be a big check, I'm sure, but it's also going to give them (the investors) a deduction on their taxes," she said.
Orcutt said the cabins now are nearly booked solid, with 80 to 90 percent occupancy.
"The buyers are all very happy, so it proves it was a good project," she said. "Unfortunately, the first round of investors, which happens, did lose money. I'm thinking they could declare that on the income tax and get a deduction."
Orcutt said the investors should have known they were taking a risk.
"Buying stock is just as much a gamble as buying real estate or any other investment ... I lost more than any one of them, believe me. I feel very bad that these people lost money, but I can't beat myself up over it."
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