LV Air CEO scrutinized over business debts

Every day for more than two weeks, publicist Wayne Bernath stopped at a bank near his house to try to cash a $2,300 check from LV Air, only to be told his client's account was empty.

In mid-March, Bernath was surprised that the check cleared and the teller began counting out $100 bills. Moments later, LV Air proprietor Eneliko Smith called him and asked him to return the money so that he could pay other employees.

Bernath declined.

Although Bernath said he is still owed nearly $1,700 for publicity work, he did relatively well by comparison.

The Las Vegas Review-Journal has learned that Smith has failed to pay more than $100,000 in outstanding business debts associated with an airline that exists only on paper. Most of the money is owed for rent, salaries and utilities, but the Golden Gate hotel also paid Smith $24,000 to be included as an LV Air preferred vendor in a program that has yet to materialize.

Smith received national media attention in February when he announced creation of an ultra-luxury carrier to fly between Las Vegas and New York.

But on May 6, the Review-Journal reported that Smith claimed partnerships with resorts that he did not have, listed respected industry leaders as employees or advisers without their knowledge, and lacked financing to obtain jets he said he would use. Meanwhile, Smith is wanted by authorities in California for violating probation and failing to make restitution following a felony embezzlement conviction and faces a large IRS tax lien.

Smith's last known address was in North Las Vegas, but his current location is unknown. He continues to promote LV Air, and on Sunday the Samoa News published a news release in which he identified himself as a Samoan entrepreneur and repeated plans to start flights later this year.

But some who have worked with Smith in recent weeks say they have borne the cost of Smith's high-flying dream.

'I KNOW I WON'T GET ANY CASH OUT OF HIM'

Kit Rose, who met Smith last year when both worked for Avatar Airlines, an un­related startup that never got off the ground, has filed a claim with the state's Office of Labor Commissioners for $15,000 in back pay. She said she also supplied computers and other office equipment, plus $600 from her own pocket for office supplies and incorporation filing fees.

"I know I won't get any cash out of him,'' she said.

Rose started working for Smith last September on an unpaid basis, on the condition that checks would come once LV Air found a permanent office. That happened in early January, but she still saw no compensation.

"I still believed in the concept, even though my instincts were saying other­wise," she said, as LV Air's debts mounted.

Smith's initial concept called for integrating the flight itself into the Las Vegas vacation experience by giving the plane's cabin a Las Vegas club atmosphere and flying to several cities at competitive prices. The business plan morphed over time to emphasize opulent touches such as lie-flat seats, four-course meals, on-board iPads and door-to-door limo service for passengers.

'HE HAD A REBUTTAL ON EVERY ISSUE'

Ed Mueller, who has filed a claim for $3,000 in pay not received in his short tenure as LV Air's human resources director, assembled corporate infrastructure such as policy manuals and compensation schedules for Smith.

He said he was aware of Smith's background, including hotel ventures in California, Michigan and Samoa that went nowhere or went bankrupt. The Block Hotel in South Lake Tahoe, where Smith was managing partner, ran up more than $100,000 in unpaid room taxes and led to his conviction on a felony count of grand theft by embezzlement last year.

Mueller said he quizzed Smith about the checkered background "and he had a rebuttal on every issue that made sense to me."

However, Mueller set up the LV Air bank accounts covertly to try to prevent Smith and his wife, Sarah, from gaining access to them. He said he knew the company was in trouble on March 8, when the couple managed to gain control of the money and lock out everyone else.

LV Air's biggest known debt is to Rafael Construction for office rent: $62,500 for a deposit and three months' rent prior to the company's April 1 eviction.

LV Air no longer has a physical address, but Smith is plugging away. The current issue of Wynn, a glossy hotel guest-room promotional magazine, includes a full-page ad for LV Air under the headline, "How do whales fly?" The magazine's rate card lists a full page ad at $13,068. Publisher Laurie Brookins did not return calls about the status of that bill.

Smith also has approached several Las Vegas businesses to solicit paid partner­ships, and has had some takers.

Mueller said the Golden Gate paid $24,000 toward a $40,000 deal to be included in what Smith touted as "the cloud," a group of hotels, limo services and restaurants to be marketed to LV Air's well-to-do passengers. Golden Gate executives declined comment.

The Rumor boutique hotel also paid $2,750 and was named as the airline's official crew base in April, though LV Air has no flight crews. While not addressing the payment, hotel owner Siegel Group issued a statement that it "has decided not to partner" with LV Air.

Not everyone approached by Smith bought in, however.

'DOING MY DUE DILLIGENCE'

When Las Vegas Limousines was approached about paying $40,000 to join "the cloud," corporate affairs director Chris Palladino balked.

"Any time someone asks us to do business with them and asks us to pay for the pleasure, I start doing my due diligence," he said, adding that in addition to concern about problems in Smith's past, he was unimpressed by the whole concept.

"I'm a Vegas kid, and I just couldn't see reinventing the junkets of the '70s," Palladino said.

Palladino said Smith told several other limo operators they had to sign quickly because their competitors were ready buy into "the cloud,'' but when the operators compared notes they found that none were interested.

While none of the former LV Air employees or business contacts know where Smith is now, some said they would like to see him again, though not in a business setting.

"I would like to be there when he is arrested,'' Rose said. "I am just female enough to want to see him led away in handcuffs."

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