Ocean City's famed Carousel Hotel & Resort is scheduled to be auctioned Monday, the result of a showdown between the Pennsylvania heart surgeon who owns the hotel and a court-appointed receiver who contends that the 21-story building needs millions of dollars in repairs.

The foreclosure sale is linked to a legal tug-of-war between Dr. Siamak Hamzavi of Scranton, Pa., the owner of the Carousel's 264-room hotel, and the owners of the property's 190 condominium units.

The condominium owners, who succeeded in persuading a Worcester County judge to name a receiver to sort out the Carousel's financial problems, contend that Hamzavi has failed to maintain the property, even to the point of not paying necessary services such as electricity.

In January, a Worcester County judge ruled that Hamzavi had to pay $3.3 million to satisfy liens and make repairs. In response, Hamzavi filed for bankruptcy to protect the hotel, but a federal judge threw out the bankruptcy petition.

"The doctor continues to refuse to make any payments, including water or electricity," said Courtland K. Townsend, an Ocean City attorney representing court receiver James R. Bergey Jr.

"Our accounting shows he hasn't paid a cent toward fixing the property. He's just letting it sit and is doing nothing, and the condo owners are going broke trying to keep the thing afloat," Townsend said.

But Hamzavi, who acquired the hotel for $7 million in August 1995, said the receiver's accounting is flawed.

"His basis for accounting is bogus, it's false accounting," said Hamzavi.

And the heart surgeon maintains that the matter will be resolved. "There ain't going to be no auction," he said. "We're going to prevent it. We have our means, but I'm not going to say now what they are. We're going to prove our case in a court of law."

To sue condo owners

Hamzavi says the condominium association owes him $1.8 million for services over the past three years and he intends to sue the "belligerent condo owners" for $8 million in damages.

Hamzavi also blames the Worcester County courts for the hotel's problems. "They have their own way of measuring things there," Hamzavi said. "Their system of justice is totally haphazard."

The auction comes as the hotel faces a court-imposed May 31 deadline to begin repairs or face being closed down.

The Carousel's troubles are in contrast to Hamzavi's upbeat vision in 1995 after his Four Star Enterprises bought the hotel from the former Bank of Baltimore.

At the time, Hamzavi pledged to invest $3 million to improve the property -- built as one of the first high-rises in Ocean City.

Cracked foundation

But by December 1996, the hotel, at 11700 Coastal Highway, faced 40 fire and city building code violations, including citations that the Carousel's foundation was cracked and that masonry panels had fallen off the exterior. About $1.7 million would be required to fix the problems.

The Carousel seems to spell bad luck for its owners. Its developer, Bobby Baker, an aide to President Lyndon B. Johnson, was convicted of income tax evasion after the hotel opened in 1962.

"I don't know what [Hamzavi's] endgame is here," said Townsend, the lawyer for the court receiver. "It's extremely frustrating. You just have to wonder why he's letting all this debt pile up."

Pub Date: 3/09/99