Traverse City Record-Eagle

May 10, 2011

Would-be Sugar Loaf owner in trouble

By Tim O'Reiley
© 2011, LAS VEGAS REVIEW-JOURNAL

LAS VEGAS — Even as he promotes his vision for a high-flying airline called LV Air, Eneliko Smith continues to be dogged on the ground by what he terms "my stupid-ass mistakes in the past."

When he first announced the plan in February, Smith laid out a vision for luxury air service flying four daily round trips between Sin City and New York starting in 2011.

"Soon you will be able to fly LV Air to Las Vegas," the LV Air website promises. "Experience the luxury, the service and the brands that illustrate the world of Las Vegas when you board your aircraft -- everything afterward is fantasy."

The Associated Press, Bloomberg Television, CNN Travel and Huffington Post have featured stories about Smith and his audacious airline, which touts plush seats that fold out as beds, complimentary iPads, limo service and meals fit for "sheiks and moguls."

In mid-April, Smith upped the ante by announcing that 16 destinations were now under consideration.

But in El Dorado County, Calif., officials are still waiting for Smith to pay restitution for a previous failed venture, the Block Hotel in South Lake Tahoe, where he was the managing partner.

After months of not paying room taxes collected at the boutique hotel that catered to hard-partying snowboarders, Smith was arrested in September 2008 in Las Vegas and extradited to California.

"I paid my employees instead of my bed taxes, and I paid the price for it," Smith wrote in an email. "I never took one penny out of malfeasance and never will."

A year ago, Smith pleaded no contest to a felony count of grand theft by embezzlement. As part of the plea deal, the felony is to be dropped to a misdemeanor if he pays more than $120,000 in back taxes, said El Dorado County Assistant District Attorney Hans Uthe.

But Smith has paid nothing, Uthe said.

"We are less than pleased with his progress. He's in trouble."

Wanted in 50 states

Because Smith has violated terms of his probation, including moving around the country without reporting to his probation officer, El Dorado officials have issued a nationwide no-bail warrant for his arrest and extradition.

"Hell, I would probably go to Canada to get this guy," Uthe said.

Typically, back tax violations are treated as civil matters. But with Smith, Uthe said, "the size of what he had done, his unbelievable arrogance and the trail of broken promises made to city officials" led to criminal charges.

Meanwhile, the Internal Revenue Service in Las Vegas has filed liens totaling $140,000 against Smith for income taxes unpaid since 2005.

Last week, Smith said he was in Dallas negotiating aircraft leases, but it's unclear whether Smith, who goes by his middle name, Sean, and whose last-known address was in North Las Vegas, has anything more than a fantasy.

Smith's 42-page LV Air business plan says his startup "has retained Berkshire Bridge Capital LLC, a Las Vegas-based investment banking firm, to help source and facilitate investment and bridge financing presently estimated to be in the amount of $3.5 million."

Robert Lind, Berkshire's managing partner, said he met Smith, but that's all.

Lind said he wants a potential client to establish certain fundamentals, such as a corporate structure approved by an attorney, a business plan approved by a chief executive officer and an independent accounting firm on retainer.

"Those are necessary before I will begin working with a company," Lind said. "I did not see them with LV Air."

Smith, 40, lists himself as LV Air's chief marketing officer and touts a background in the lodging industry. He listed veteran airline and travel marketing executive Kent Smith -- no relation -- as CEO, but Kent Smith did not return messages left at a number provided by Sean Smith.

LV Air's business plan also lists retired Las Vegas attorney Brian Kay as interim chief financial officer. But Kay said his role was limited to unpaid consulting in March.

"I am not a CFO. Sean has some great marketing ideas, and some of us have been trying to give him advice. But right now, we are frustrated in terms of him not following our advice."

A February news release said LV Air "represented a collaboration" between Perpetual Group LLC in Las Vegas and Park Avenue Investors Group in New York, though the business plan makes no mention of them. No Perpetual Group could be located in Las Vegas last week, and calls to a New York firm with a name similar to Park Avenue Investors were not returned.

The slick website for LV Air initially showed a photo of a jet with the Air France emblem on the tail, but that was subsequently removed. Then a plane with "Las Vegas Airlines" on its fuselage was featured. It was replaced by a plain white airplane after the Las Vegas Convention and Visitors Authority noted that the "Vegas" design is its trademarked logo.

Smith blamed the errors on the New Zealand-based website builder.

"(T)hey do not know much about trademarks, and it was not intentional at all," Smith wrote in an email.

And that warrant for his arrest?

On April 18, Smith wrote that he would "make my first of many restitution payments today -- and I will be calling Hans Uthe as well to work toward a resolution through my attorney. This will be resolved by the end of this week."

Last Friday, two weeks later, Uthe said he had received nothing.

The takeoff

LV Air got its unofficial launch on CNN's "Larry King Live" in December, when former boxing champion Mike Tyson announced he would be the airline's celebrity spokesman. That vanished after a few weeks.

"Unfortunately, Tyson has severed (his) ties with Las Vegas Airlines," according to a statement from the boxer's publicist, Tammy Brook. "He entered into a verbal agreement in good faith while awaiting the proper paperwork to solidify the deal. However, this never transpired. He was advised by (his) legal team to terminate his association with Las Vegas Airlines."

Other details of LV Air have shifted, as well. In February, the focus was on attracting New York gamblers and vacationers willing to pay a premium for VIP treatment.

"We're in no rush to expand," Smith said in a news release at the time. "The goal is to fill Las Vegas hotel rooms with players, conventioneers and vacationers from the Northeast."

But last month, Smith was talking about flying to airports from Detroit to St. Louis to Palm Beach, Fla., that are willing to subsidize flights.

"(A)part from selling seats to the casinos, we will also ask for landing fee dismissals, gate incentives and, above all, marketing subsidies to support our marketing efforts," Smith wrote in an email. "PBI (Palm Beach International Airport) and Tampa (b)oth will be giving us incentives. (We will be) meeting with them next month, hopefully."

A spokeswoman for Tampa International Airport said no one there had heard of LV Air.

At St. Petersburg/Clearwater Airport, spokeswoman Michele Routh said there was "one preliminary conversation," but no offers were made because there was nothing firm in the presentation.

A Palm Beach airport official reported a preliminary contact, but no deal.

Officials at McCarran International Airport said LV Air has not contacted them about matters such as gate rental and ticket-counter space, though Smith said he has submitted some paperwork.

It's the money that matters

LV Air isn't Smith's first attempt to tap taxpayers for a business venture. Last year he announced that he would purchase and revitalize Sugar Loaf Mountain, a ski resort in northwestern Michigan. The project dissolved after a few months amid mutual recriminations.

Leelanau County Planning Director Trudy Galla said Smith hoped to use brownfield reclamation funding and tax increment financing for the project.

"From what we could find out, the guy doesn't have any money," Galla said.

Several other resort-related ventures Smith has announced in recent years have ended with similar results, including poker-themed hotels with celebrity player Johnny Chan; a project in Samoa; and a brand created around heiress Nicky Hilton, sister of the more famous Paris.

Other details about Smith are equally vague. His website said that he was born at Fort Bragg, N.C., the son of a soldier, and that he attended the University of Nevada, Las Vegas, as "the 1994 recipient of the prestigious Greenspun Scholarship."

UNLV records show he attended sporadically from 1995 through 2008 but did not graduate.

Smith also said he held jobs with local companies, including Boyd Gaming and the former MGM Mirage, and later was in hotel management in California.

He said he started the Block Hotel in 2003 and helped promote it by creating the short-lived G4 cable network reality show "The Block."

Both that South Lake Tahoe hotel and an associated property in Big Bear Lake, Calif., closed about two years ago.

At this point, Smith tries to deflect attention from his past and touts LV Air as a big component of economic revival.

"LV Air is a comeback story that lifts up Las Vegans and shows them that help is truly on the way," he said. "It's a story about the American dream."

But for Uthe, the El Dorado County prosecutor, reality takes precedence.

"We gave him all the breaks up front," he said of the broken plea deal. "Next time, we won't be so kind."

Contact reporter Tim O'Reiley at toreiley@reviewjournal.com or 702-387-5290.