Kenneth J. Abdalla, former owner of the then-Sky Lodge in Park City, now Main & Sky, has pleaded no contest to a second-degree felony theft charge and was sentenced to a $10,000 fee and without imprisonment if he maintains good behavior for the next two years.

He was investigated by the Park City Police Department for theft and unlawful dealing with property by a fiduciary in connection with his operation of The Sky Lodge. Abdalla entered his plea June 14 in Summit County’s Third District Court.

The terms of the plea, which were agreed upon by Abdalla and the Summit County Attorney’s Office:

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• A no contest plea to one count of second-degree felony theft.
• The plea will be held in abeyance for a period of 24 months.
• The conditions of abeyance will be good behavior and payment of a $10,000 fee.
• If successful during the abeyance period, the conviction will be entered as a class B misdemeanor theft.

The court accepted Mr. Abdalla’s plea and ordered the conditions that the parties agreed upon.

“I express my gratitude for the tireless dedication and efforts of our detectives and prosecutors in the investigation of Mr. Abdalla. Their unwavering commitment while investigating this egregious crime is a testament to the exceptional qualities of the individuals representing the Park City Police Department and Summit County Attorney’s Office,” Park City Police Chief Wade Carpenter said. “Our thoughts are with the victims in this case, and we trust that this resolution, to some extent, will help address their pursuit of justice.”

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According to the charging documents in May 2022: A detective with the Park City Police Department received a theft or fraud report involving the homeowners association at Sky Lodge condominiums. The project has faced several lawsuits since 2017. During the litigation, a third-party officer appointed by the court discovered evidence of criminal activity, court documents said.

Sky Lodge was originally marketed and sold as a luxury boutique property consisting of 22 residential units and six commercial units, according to court documents. Each residential unit was divided into eight fractional interests. The owner of each unit was entitled to use it for 45 days of the year and could choose to live there or rent it out through a rental management program independent of the association of property owners, the Union Square Owners Association Inc.

There were 176 shared interest units in total, which accounted for 69% of the percentage interests in the Sky Lodge project, according to court documents. Each shared interest unit owner was a member of the owners association and paid dues based on the percentage of units they owned.

According to the charging documents, the commercial units accounted for 31% of the project’s percentage interests. They included the historic Depot Building, which previously housed Robert Redford’s Zoom restaurant, the Lumber Building, which also served as various restaurants and bars, a barbershop, which was originally a bakery, a spa, the hotel’s lobby and space on the fourth floor, which was originally the Sky-Blue Lodge.

Around March 2012, Abdalla and his then-wife, Kay Carol Stoneburner, purchased all six commercial units through various entities as well as 53 fractional units. The couple appointed three individuals to become commercial unit directors, including Stoneburner, who served as one for much of the time between 2012 and 2018, according to court documents.

The county attorney alleged that in 2012, Abdalla assumed control of the rental management program at Sky Lodge through his entity, Malibu Companies LLC. The company was supposed to help fractional unit owners rent out their property, and in return, it would keep 50% of the income from nightly rentals and the other half went to the unit owner. If a shared interest unit owner was delinquent in paying their assessments, any rental income due was remitted by Malibu Companies and credited to the amount overdue.

According to court documents, Abdalla and his business entities acquired additional fractional units between March 2012 and January 2015. That year, Abdalla and Stoneburner allegedly used their voting power to appoint most of the management committee members. Malibu Property Management, Abdalla’s company, was brought on to serve as the association’s property manager in exchange for $10,000 a month.

By 2017, Abdalla and Stoneburner elected all seven management committee members, according to the County Attorney’s Office.

“In short, over the span of a few years Mr. Abdalla and Ms. Stoneburner gained control of the management committee, the rental program and the property management,” court documents stated.

Between 2015 and 2017, the fractional unit assessments were increased by more than 281%, while the commercial unit assessments were decreased over the same time, according to charging documents. While the commercial unit assessments were decreased by more than 20% in 2016, the management committee increased the number of common expenses to the fractional unit owners.

Court documents state that the budget for 2015, which was prepared by the management committee in 2014, before the couple took majority control, allocated 76% of the budget to fractional unit owners. Their share of the budget increased to 86% in 2017 and almost 90% in 2018. In 2015, the overall owners association budget was $1.5 million and it increased to $3.9 million in 2017.

The county attorney said that although the budget increased by more than 163%, the services and amenities at Sky Lodge quickly fell into severe disrepair. Many fractional unit owners were allegedly forced or coerced into abandoning their properties or transferring them to one of the Abdalla business entities, court documents said.

Civil action was initiated on behalf of nearly 40 fractional unit owners to choose a third party to be appointed over the owners association and obtain financial records. An evidentiary hearing was held at the Third District Court in August 2019. The following month, the court announced there were accounting irregularities in the payroll and the association was at risk of insolvency, which was allegedly exacerbated by Abdalla’s failure to pay assessments and rental income owed to the owners association.

According to court documents, there was also evidence of mismanagement of the owners association, including reserve funds not being used to pay operating expenses, that the reserve funds had not been built up — and there was no plan to do so — and certain transactions lacked documentation. The owners association allegedly had inaccurate records from mid-2017 to April 2019 and no board meetings were held in that time. The association allegedly did not invoice for assessments, and bills were not paid when they became due, charging documents said.

Based on the court’s findings, a receiver — the appointed officer who has custody of certain assets and can liquidate them and distribute the proceeds — was assigned to the owners association. According to court documents, the receiver was ordered to “audit the books and records going back 12 months and if a reasonable basis existed, for additional time periods beyond the 12-month time period.”

The receiver determined that “significant commercial and personal expenses of Abdalla or entities owned or controlled by him were paid by the association over several years.” Court documents allege the commercial entities included Malibu Companies and Coal and Lumber LLC, which the receiver said operated the former restaurant on the property.

“It also appears that Mr. Abdalla caused these expenses to be paid by the association to or on behalf of the Abdalla Entities,” court documents stated. “For example, Mr. Abdalla wrote checks on the association’s account to pay for the food and liquor Coal and Lumber sold to its patrons.”

The County Attorney’s Office said the forensic audit report contains a highly detailed analysis of the association’s budgets, assessments and expenses as well as amounts due from the rental management program compared to the association funds expended.

Abdalla and his related entities owed the owners association more than $4.1 million, according to court documents. More than $3.7 million of that amount was spent on non-association expenses like food and liquor licensing as well as paying Abdalla’s personal chef and nanny, court documents allege. The receiver estimated that Abdalla misappropriated over $3.7 million over four years, and $142,645.35 of the misappropriation occurred on or after May 2, 2018.

Under state law, a second-degree felony conviction can result in between one and 15 years in prison and a $10,000 fine.