Gilbert Ortega family divided over control of empire

In his lifetime, Gilbert Ortega cashed in on a craze for turquoise jewelry that swept through the Southwest in the 1970s.

He emerged with an empire of Indian arts stores in Arizona and two other states, along with Scottsdale real estate, a twin-engine Cessna airplane and a Rolls Royce Corniche.

A self-made multimillionaire, he left his considerable estate to his four children when he died in 2003 at age 67. The family business continues with Gilbert Ortega Jr., 49, at the helm.

But a bitter family legal battle over the estate, at one time estimated at $40 million, threatens the turquoise and silver empire. The dispute involves a lawsuit and countersuit between the Ortega siblings, their mother, Linda Ortega, and David Stocking, an accountant for the family business. The legal claims involve allegations of drug use, mismanagement and a battle for control of the three remaining stores and commercial real-estate holdings.

Gilbert Ortega Jr.'s three sisters - Gayle, Desiree and Renee - contend he is not fit to run the business and they attempted to take control two years ago. That prompted Gilbert Jr. to file suit against his sisters claiming they acted illegally in firing him, which conflicted with their father's wishes that Gilbert Jr. would run the company.

His younger sister Renee responded with a countersuit alleging Gilbert Jr. raided the family business and failed to properly manage the family trust.

Gilbert Jr. won a temporary injunction in the fall of 2008 that allowed him to resume his leadership of the company, but legal proceedings in the civil cases continue.

Family members have largely held their silence. But the Ortega family portrait that emerges from court records and interviews is one of dysfunction, alleged drug and alcohol abuse and infighting over business operations and a valuable collection of Pima basketry, Navajo rugs and Western art.

Gilbert Sr. freely admitted to his biographer that his family life was difficult.

Like other family-business disputes, which are common when one generation succeeds another, this one raises questions about whether it will undermine the enterprise Gilbert Ortega Sr. created along Route 66 and later on downtown Scottsdale's Main Street, First Avenue and Fifth Avenue.

The trouble also comes at a tough time for Indian arts shops, which have been hit hard by the recession and tourism slump.

"Everyone is in survival mode," longtime Scottsdale tourist-shop operator Marilyn Atkinson said.

Family feud

The Ortega business includes three Indian arts shops and real-estate holdings in downtown Scottsdale.

Dozens of other shops in Phoenix, Scottsdale, New Mexico and Texas have closed over the past few decades.

Trouble surfaced five years after Gilbert Ortega died. Gilbert Jr. and his sisters had all worked in the family business starting in childhood, but with their father gone, disputes erupted.

The three sisters and their mother insisted that all company employees take a drug test in spring of 2008.

Gilbert Jr. refused to be tested, according to his sisters' allegations. He had served nearly three years in an Arizona prison in the mid-1990s after six drunken-driving arrests in three years and possession of marijuana, according to court records.

According to legal documents, in July 2008, the three Ortega sisters held a meeting at the Hotel Valley Ho in Scottsdale to elect Renee and Desiree to the board of directors for the family business.

Gilbert Jr. responded with his lawsuit in September 2008. Gilbert Jr., in his suit, said his father's intent was legally clear in stating that Gilbert Jr., Linda Ortega and Stocking were to manage the trust and the Ortega company.

Gilbert Jr. also said his sisters were not shareholders of the family business, and were not authorized to elect themselves as majority members of the board and remove him as chairman.

Renee, the youngest at 48, filed a countersuit a month later. She alleges her brother raided the family business, made back-channel deals and failed to properly manage the family trust. Gilbert Jr., his mother and Stocking are trustees of the family trust.

"Unfortunately, the nontransparent way in which they ran the company for six years has caused what was once a very close-knit family to divide," Renee said in a statement to The Arizona Republic.

Other family members, their attorneys and former business associates declined interview requests from The Republic when asked about the ongoing legal dispute.

As the legal fees and documents have piled up, Gayle and Desiree continue to work with Gilbert Jr. at the family's stores, and Renee returned to work there in July.

Business gets personal

Renee's conflict with Gilbert Jr. appears to be the most volatile among the siblings.

Her lawsuit includes a variety of allegations involving the business and family property. Among them, she alleges:

• Gilbert Jr. improperly acquired their father's Paradise Valley home, at one time valued at $2 million. Her suit contends that her father wanted the home sold so that his children would not be burdened with maintaining it. Renee alleges that Gilbert Jr. owes $1 million to the estate for the sprawling property.

• Gilbert Jr. and her mother withheld $1 million worth of her father's art collection and jewelry. That includes $180,000 worth of paintings and bronze sculptures by Joe Beeler and John Hampton, two of the founders of the Cowboy Artists of America.

• Gilbert Jr. paid $3.5 million in 2008 for a commercial building at Scottsdale Road and First Avenue that was appraised for $2.6 million in September 2007. The family estate bought the building from one of Gilbert Jr.'s friends.

Renee contends that Gilbert Jr. received a kickback payment from him.

• Gilbert Jr. has refused her suggestions that the company diversify by adding a store in Cave Creek that she would operate.

A forensic accountant is reviewing company documents to determine if there is any basis for allegations of financial mismanagement.

No trial date has been set for the civil complaints. A status conference is set for September.

Route 66 roots

Gilbert Ortega Sr.'s rise to wealth and a Paradise Valley mansion was a long journey from shining shoes as a kid growing up in Holbrook and living on the wrong side of the Little Colorado River.

A fourth-generation Arizonan, he later worked at his father's trading post in Lupton and scratched out a living with his own stores in the early 1960s selling Indian jewelry and trinkets to tourists along Route 66 and later Interstate 40.

The high points of his rags-to-riches narrative, as told to journalists and biographer Patricia Bezunartea, involved a surge of business in the mid-1970s as turquoise and silver Indian jewelry boomed.

Ortega rode that until 1977 when he sold 14 of his 16 stores, including the Cameron Trading Post near the Grand Canyon, for $5 million.

Then it was off to Nashville where he cut an album, "The King of Indian Jewelry Goes Country."

After a short-lived stint as a country-Western singer, Ortega ventured back into the Indian arts business, opening 22 Valley stores.

"He had a lot of good aspects about him," said Ken Godber, a Scottsdale jeweler who formerly worked in Old Town.

Ortega worked hard to get a bargain.

"When he ordered jewelry, he would beat (suppliers) down on the price," Godber said.

The Indian jewelry business collapsed in the 1970s with knockoff silver and turquoise from the Philippines flooding the market. But Ortega managed to survive, Godber remembers.

He added that Ortega had a reputation of living a wild life outside of his business: "He was like a teenager."

Personal struggles

What is perhaps most telling about Ortega is what he told his biographer. He admitted that his 12-hour workdays for more than 25 years took a toll on his family.

"For some reason, my personal life has always been horrible," Ortega told Bezunartea. "I could never get that right."

Ortega married Linda VanderWagen in 1957 in Gallup, N.M. They had four children in four years.

The couple divorced in 1972, but Linda Ortega continued to work with her ex-husband until his death.

Ortega remarried in Las Vegas the day after Christmas in 1989. He was 53 and Sali Ortega was 27.

They divorced in 1993, and Sali returned a 3 1/4-carat diamond ring Ortega had given her.

That ring is among the disputed family assets.

Splitting heirs

The Ortega saga is a familiar American story of a successful entrepreneur who hands over the family business to heirs who don't necessarily share the same vision for the company, or the same work ethic. Nate Sachs, president of Blueprints for Tomorrow, a Scottsdale firm that advises entrepreneurs on succession plans, said an inside handoff to several children can work but it's fraught with risks.

"One of my clients had a theory that a business is an asset that should be grown and sold, not passed on to the children," said Sachs, who has no connection to the Ortegas.

Sachs recommends that a board of advisers be appointed to referee business disputes among siblings.

"They should be in business together and still be able to have Thanksgiving dinner together," Sachs said.

Marilyn Atkinson, whose family has operated Atkinson's Indian Trading Post in Scottsdale since 1974, said she hopes the Ortegas can resolve their differences.

"(Gilbert Sr.) was a very good businessman," she said. "He would be a little disappointed in the problems that I guess have arisen."


by Peter Corbett The Arizona Republic August 21, 2010 06:35 PM



Gilbert Ortega family divided over control of empire