A century at the Castle | AspenTimes.com

A century at the Castle

Jennifer Davoren
Aspen Times Staff Writer

Romance, riches, retribution – the turbulent tale of the 101-year-old Redstone Castle has it all. And that’s just the part that involves the Internal Revenue Service.

The castle – once home to one of the richest men in the United States and now a popular Crystal River Valley tourist attraction – has fallen on hard times. Its owners are currently under investigation for wire and securities fraud, leaving the stately manor in the hands of the IRS.

The case has caused concern among the Redstone residents, who view the castle as the town’s livelihood and fear the loss of the property.

And, contrary to the agency’s reputation, the case has earned the compassion of the IRS.

Coal and the Castle

Turn-of-the-century industrialist John Cleveland Osgood put the tiny town of Redstone on the map, literally.

Osgood, a partner in an Iowa-based fuel firm, first traveled to Colorado in 1882 in search of coal. He found the precious commodity in the Crystal River Valley, where he bought an old mining claim and its hidden coal seam for a mere $500.

Osgood parlayed his good fortune into the Colorado Fuel and Iron Company, which he used to mine 69,000 acres of land containing 400 million tons of coal. Osgood’s company also imported experienced miners from Europe to work these coal deposits, and rewarded their work by building a small community to house them – the collection of homes and businesses now known as Redstone.

The coal baron’s experiment in “industrial paternalism” was copied by many industrialists in the early 20th century. However, Redstone is one of the few such villages that stood the test of time.

“Redstone is one of the last remaining `model villages’ in the nation,” said Darrell Munsell, president of the Redstone Historical Society. “This is a very important monument that marks a very important period in American history.”

Osgood, then one of the five wealthiest men in the United States, also built a home for himself. Osgood and his first wife, a romance writer named Irene, made plans for a 42-room Tudor mansion they would call Cleveholm Manor – the stately structure known today as the Redstone Castle.

The castle took $2.5 million, three years and two wives to build. Osgood and his second spouse, Alma, took up residence in 1902, and quickly filled the manor with lavish accessories and designer furnishings. The castle gained notoriety among Osgood’s wealthy peers, and was used as a summer home for guests like John. D. Rockefeller, J.P. Morgan and U.S. President Theodore Roosevelt.

Osgood died of lung cancer in 1926, and bequeathed his entire fortune – $5 million in cash, several homes and the Redstone estate – to his third wife, Lucille. The young widow soon fell on hard times – though she married an accountant less than two years after Osgood’s death, the couple quickly lost the coal baron’s fortune on the stock market. They also ran into trouble with the IRS, which began demanding back taxes owed on several Redstone properties.

The onset of the Great Depression finally forced Lucille to sell the Redstone Castle and 500 acres of surrounding property for just $10,000.

The castle has changed hands several times since that first sale, serving as a private residence, a bed-and-breakfast, a day spa, and a popular tourist attraction for various owners and investors. Turbulent financial times occasionally left the estate empty, resulting in theft and vandalism.

The castle was put up for auction yet again in April 2000, allowing current owners Leon and Debbie Harte to purchase it for $6 million. The Hartes promised Redstone residents that they would live in the castle carriage house full time in order to operate the property as a tourist attraction – and, true to their word, daily tours and special events soon created a steady flow of revenue for the town’s hotels and restaurants.

Unfortunately, the Hartes’ plans were scuttled just one year later.

Redstone revenue

By May 2001, Leon Harte had moved out of the carriage house as he and his wife filed for divorce. It wasn’t an amicable split – Debbie Harte even filed a restraining order against her former husband, barring Leon from setting foot on Redstone Castle property.

It was a rough time for the couple, compounded by allegations of fraud made against them that summer.

Two lawsuits were filed against the Hartes and several former business partners that year, alleging the loss of millions of dollars in investments. Plaintiffs claimed that, rather than see a return on their contributions, their money was used to purchase items such as the Redstone Castle.

The Hartes’ troubles multiplied in March 2003, when the criminal investigation division of the IRS seized all properties related to the alleged scam. This included $25 million worth of property involved in the Harte case, as well as $2 million in cars and stacks of cash from questionable bank accounts.

The IRS also seized three properties connected to the Redstone Castle: the manor itself, the neighboring carriage house and a private residence on Redstone Boulevard.

Special Agent John Harrison of the IRS was named caretaker of the three Redstone properties after the seizure. He now supervises a number of day-to-day duties around the castle, including plumbing repair and fire mitigation.

“One of the [community’s] concerns was protecting the integrity of the property during that time period,” Harrison said of his new position.

Redstone residents feared the IRS’ involvement would mean the shuttering of the castle. However, an economic impact report conducted by the U.S. Attorney’s Office proved the castle’s effect on the vitality of Redstone.

“Our overall assessment was that it would be in the community’s best interest to keep it open, if we could,” Harrison said.

The agency sought permission to conduct business as usual at the castle – daily tours and lucrative special events, conducted with the help of the neighboring Redstone Inn. Local entrepreneurs rejoiced.

“The castle is extremely important to the people of Redstone,” the Historical Society’s Munsell said. “In terms of bringing in tourists, it’s an economic interest, and a very vital one.”

“Great cooperation” between agencies in Redstone and Pitkin County will keep the castle open until the official end of the summer season on Oct. 15, Harrison said. After that, the castle will open to the public on a limited basis – at least until the IRS investigation is settled.

Another auction?

Harris sees two options for the future of the Redstone Castle. However, one is a long shot.

The Hartes are still the owners of record, Harrison notes, even though Leon Harte died from a heart attack in June. The IRS investigation could lead the agency to clear all allegations against the couple and release their property.

“The court could up and say `Go home, give the property back’ – but I don’t think that will happen,” Harrison said.

The court could also call for the sale of the property, likely at public auction, in order to compensate the alleged victims in the fraud case. This, Harrison said, is where the castle’s future becomes cloudy.

“I think the concern of the community is that the property remains an open-access property,” Harrison said. “But the question would be, would that person [the next owner] want to keep that property open to tours?”

The Redstone Historical Society has spent the last two years promoting the city’s storied past through guided tours and presentations. The society has also joined the castle debate in an effort to protect the community’s interests, Munsell said.

Munsell admitted that the society “can’t simply gaze into a crystal ball” to see what’s in store for the castle. Instead, the Redstone group must remain in contact with interested parties – including the Colorado State Historical Society, the Colorado Preservation Corporation and the National Park Service – in an effort to protect the historical integrity of the property.

The historical society will also seek assistance from the Pitkin County commissioners, who could bring the castle under their protection.

“Hopefully, legislation will be passed by the county in the very near future to include the castle and the castle properties under the Pitkin County historic list,” Munsell said.

National historic property laws also offer a small share of protection for the castle. One law in particular, Section 106, will calm fears that the castle’s lavish interior – Tiffany lamps and chandeliers, antique furniture and other priceless heirlooms – could be sold off in an effort to pay the alleged victims in the case.

“The federal agency is obligated to explore alternatives that would ensure the long-term preservation of the building, as well a good portion of its grounds,” said Dan Corson, intergovernmental services director with the Colorado Historical Society. “The federal agency has the final word in terms of what is to be done, but it is required to consider all the alternatives – it can’t just blow them off, in other words.”

Section 106 calls for all parties, including those keeping close contact with Munsell, to sign a “memorandum of agreement” before a decision is made on a historical property. This memo must outline the final decision and include information on alternative courses of action.

“They do have an obligation under federal law … to explain why those alternatives were rejected,” Corson said.

The Colorado Historical Society sees dozens of these agreements each year, Corson said. The Section 106 process isn’t nearly as lengthy as it seems – decisions can be reached in a matter of months, Corson added.

Redstone residents simply hope that this final decision will reflect the town’s connection to the storied estate.

“The castle certainly is a national treasure, a historic treasure,” Munsell said. “It means a lot, not only for the people of Redstone, but also to the state of Colorado.”

Jennifer Davoren’s e-mail address is jenniferd@aspentimes.com

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