No money down: On paper, the Villa Bellagio sold for 
    $4.5 million -- but how much is it really worth?
No money down: On paper, the Villa Bellagio sold for $4.5 million -- but how much is it really worth?
John Johnston

Meanwhile, Back at the Villa...

Harry Elder isn't the only local builder of luxury houses who's battled creditors, lienholders and foreclosure actions -- and yet manages to live in a million-dollar-plus home he doesn't own. Paul Lambert, the president of Dorian Homes, has gone to extraordinary lengths to hold on to his dream house, even as his attorneys have sought to portray him as "broke."

Lambert has been building semi-custom spec and pre-sold houses in the $400,000 to $700,000 range for fifteen years. Two years ago, in an effort to promote lots he was developing in Daniel's Gate, just north of Castle Rock, he embarked upon the most outsized, extravagant and buzzed-about creation to ever grace the Parade of Homes: Villa Bellagio, a 9,100-square-foot manse inspired by the Hotel Bellagio in Las Vegas. Asking price: $4.1 million.

With its three kitchens, eleven bathrooms, "casino," Roman spa, 27,000-gallon swimming pool and waterfall, all squeezed on a half-acre lot yet backed by thousands of acres of open space, the VB was the talk of the 2002 Parade. But its in-your-face excess also drew fire from Lambert's subcontractors and suppliers, several of whom were suing him over unpaid bills, and from homebuyers who felt shortchanged in their dealings with Dorian Homes ("Viva Las Villa!," October 3, 2002).

Lambert blamed his cash-flow problems on the post-9/11 economy and vowed to recoup by selling the Villa Bellagio, which he'd originally built for himself, his children and his second wife. But the slump in high-end home sales became a free-fall plunge by the time the Parade opened, and Lambert's problems mounted. Various companies slapped liens on the VB for work done or materials provided. The primary lender, Commercial Federal, took steps to foreclose on the property.

And the Villa Bellagio was hardly Lambert's only headache. A woman named Marty Rohrs sued him, claiming that a $510,000 deposit she'd paid for a Dorian home was used to pay off other creditors and that the house she'd been promised was not completed on time. (The parties recently reached a confidential settlement in the case.) Lambert's ex-wife, claiming to be owed hundreds of thousands of dollars in back child support and maintenance payments, obtained a court order to seize vehicles, jewelry and cash.

Lambert's claims of being hamstrung by a bad economy were greeted with skepticism by some creditors. At one point in 2002, according to court records, only a few days after his attorney argued in divorce court that Lambert was broke, he and his new wife purchased a $97,000 Mercedes-Benz from a local dealer; on the dealer's credit application, Lambert listed his gross annual salary as $900,000. Although financial affidavits indicate Dorian Homes pays him between $7,000 and $14,000 a month, he's also borrowed extensively from the company, with the loans sometimes reaching $30,000 a month. According to a recent deposition of Lambert taken by a battery of his creditors, company funds have been used to subsidize personal vacations and Denver Nuggets tickets, even to pay off one of Lambert's gambling markers at a Las Vegas casino.

Lambert's pile of debts and lawsuits may well have consumed a lesser man. Yet today Lambert is living in the Villa Bellagio, thanks to a creative transaction that has creditors' attorneys shaking their heads in dismay.

Last summer, Dorian Homes sold the VB to Golden real estate investor Michael Keiter for a reported $4.5 million. But the actual deal was more complicated: According to sale documents, $2.7 million of the purchase price was funded through a new mortgage Keiter obtained with Chevy Chase Bank, enough to pay off Commercial Federal's $2.15 million loan as well as more than $150,000 in other liens and debts on the property; the remaining $1.8 million came from a loan Keiter had obtained from a second lender -- and was repaid the day of sale, with interest, from the proceeds of the closing.

In other words, Keiter put no actual cash into the purchase. In fact, a company Keiter owns was paid $165,000 out of the sale proceeds, an amount that Lambert's attorney would later characterize as "Keiter's fee for entering the transaction and purchasing the property." And according to a side agreement, Lambert has the option to repurchase the property from Keiter for $2.9 million.

The net result? The Villa Bellagio emerges from foreclosure clear of liens but with a whopping new mortgage, almost half a million dollars more than what the Douglas County Assessor's Office says the property is worth. The buyer makes a quick profit off the deal, contradicting those Parade of Homes gawkers who visited the VB and declared, "You couldn't pay me to live here." And Lambert has the option to buy, for less than $3 million, a mansion that appraisals and the recorded sale now show as being valued at $4.5 million.

The deal was recently challenged in court by one of Lambert's subcontractors, D&W Electric. The company's attorney argued that Lambert and Keiter had, in effect, looted equity in the VB that should have gone to Dorian Homes and its creditors. The filing also claimed that Lambert occupied the VB "as his physical residence" for several months after the sale and that the property now has more mortgages encumbering it.

Keiter couldn't be reached for comment. Lambert insists that D&W's allegations are much ado about nothing.

"I owed some money to my electrician, and he was throwing all these things out there just to get me to settle with him," Lambert says. "There's not one thing that's true in the allegations that lawyer made. I don't know about Michael Keiter's financing, what he did. It was his loan."

According to Lambert, it was the foreclosing bank's job to settle with the lienholders, not his. "Everyone else who wasn't paid in full has come to me, and I settled with them separately, even though I didn't have title to the house," he says. "There are only two or three who weren't settled, and D&W was one of them. It's a done deal." Two weeks ago, Lambert and D&W reached a confidential settlement in their dispute.

Lambert says that "sales are slowly picking up" on his semi-custom models in Daniel's Gate and that all of his issues with creditors are being resolved. He moved into the VB on May 1 of this year, he says, and is leasing the property from Keiter. The date is critical because of an agreement Lambert signed last year in his divorce case, in which he agreed to pay $44,000 in back payments owed to his ex-wife by May 1, 2004, and not to reside in the VB for as long as he was still in arrears. But according to records in that case, there may still be disputes over whether Lambert has complied with the terms of that agreement, which could complicate his "done deal" to live in the villa.

And although D&W's claims have been settled, an attorney representing another creditor told Westword that he, too, is looking closely at the sale of the house. Others say they were pleased to get at least partial payment for their work on the VB and have moved on.

Mike Mantey's company, The Grand Entrance, settled its case with Lambert months ago. "I don't care if he lives there or not, as long as he paid me in full," Mantey says. "He didn't. He's just trying to be tricky and get a house for less money than he committed to pay for it. But I'm not dwelling on it. I'm treating it as a learning experience."


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