Tax Troubles Hound Gotham Hotel Queen Leona Helmsley, Whom Subjects Call a Royal Pain

updated 01/05/1987 AT 01:00 AM EST

originally published 01/05/1987 AT 01:00 AM EST

She is shrewd, she is seductive, she is rich beyond measure, and she may be the most convincing contemporary argument against monarchy in America. She is Leona Helmsley, "Queen" of New York's Helmsley Palace, one in a kingdom of 26 hotels, which she rules like a bejeweled despot from a chandeliered office swathed in pink brocade.

Queen Leona has reigned since 1980, when her billionaire husband, Harry Brakmann Helmsley, 77, a real estate tycoon whose holdings include Manhattan's Empire State Building, proclaimed her president of his Helmsley Hotels. The title was bestowed in a worldwide advertising campaign promoting the $120 million-plush Helmsley Palace Hotel in Midtown Manhattan. The ads pepper the pages of glossy magazines such as the New Yorker, showing Leona in a gold lame gown, a diamond tiara planted atop her immaculately coiffed head. The accompanying text declares the hotel to be "the only Palace in the world where the Queen stands guard."

Alas, on Dec. 2, Leona's smiling image was published in the New York Post opposite headlines that screamed SCAM. The tabloid alleged that the Helmsleys may have violated federal income tax laws by charging "millions of dollars" worth of renovations on their Greenwich, Conn, estate to their business properties in Manhattan. At issue are funds used for a glorious fix-up of their 28-room Tudor mansion. Bought in 1983 for a reported $8 million, the residence features an Italian marble pool, a walk-in silver vault and a $37,000 stereo system that wafts music from fountain and flower bed. Sheep with names like Bo and Pete once rambled across the 29 acres, and a full complement of servants tend to guests. "It is," says one visitor, "a fairyland."

The Post claimed that "stacks" of phony invoices had been approved by Mr. or Mrs. Helmsley for payment, and that several employees on the couple's personal staff had been paid with checks drawn on hotel payroll accounts.

When the story broke, lawyers for the Helmsleys scrambled to explain that the funds in question were to be repaid at the end of the year and that the phony invoice scheme was the work of underlings acting without the Helmsleys' knowledge. Harry Helmsley, a man with a reputation for fairness who generally avoids publicity, issued a cursory statement: "Mrs. Helmsley and I have done nothing wrong. We will have no further comment at this moment." The couple did not appear the following week at their annual office Christmas party; they had jetted to Barbados and taken refuge in a $6,000-a-week rented villa.

While the Helmsleys basked in Barbados, the Post brought forth a cast of disgruntled characters. Contractor Peter Guglielmi is suing the Helmsleys for more than $500,000 in unpaid bills; construction manager John Struck said that he had been ordered to falsify invoices by a Helmsley operative; Jay Nickburger, owner of a paint company, alleged that Leona refused to pay $88,000 for a year's work at the mansion, calling it a "commission" for $800,000 worth of work on Helmsley office buildings; fired landscaper John Fahey, who sued the Helmsleys for a $6,700 fee, declared, "I'd work for the bag ladies before I'd work for someone like Mrs. Helmsley again."

Federal and state agents are investigating the charges. An anonymous tip that a document-shredding operation was underway led agents to padlock records rooms in the Helmsley corporate headquarters. "The investigation is not just restricted to the home," says David Fishlow, spokesman for the New York State Attorney General's office. "There are allegations that the Helmsleys have engaged in various illegal business practices. This is a serious investigation."

The impression that Queen Leona was in a difficult spot encouraged shoals of irritated subjects to voice their bitterness. When the Helmsley expose appeared, says reporter Ransdell Pierson, who spent six months working on the story, "my phones did not stop ringing. Most of the calls seem to have been prompted by people's dislike of Mrs. Helmsley."

A handsome woman of 66 who looks a decade younger, Leona is always impeccably turned out and possesses a dark, musky voice that can warm a heart or—with a change of inflection—convey a menace that might set King Kong aquake. Feisty, flirtatious and full of charm when she so chooses, Helmsley is respected by many and feared by nearly all. "She comes on as extremely forthright, but that sometimes turns into brutality," says advertising executive Jane Maas, who served Helmsley for seven months. "She's icy, without compassion; she is remorseless and pitiless." Many of her associates, intimidated by her far-reaching power, are reluctant to talk about her. Says another colleague: "She can exude such warmth and love, you feel you are being embraced by this rich, glamorous, sexy lady. Then she can turn so vicious and verbally violent that you are left flabbergasted."

A demanding employer, she is feared for her kamikaze inspections. "You, with the dirty fingernails," she will call to some unkempt minion. She fires people at a moment's notice. From April to September 1986, an insider estimates that 46 employees at her country house were sacked. "I've stood there when she's been screaming at people who an hour before were 'honey and darling,' 'here's some chicken soup and go see my doctor,' " says a person who knows the couple well. "What's shocking is that Harry lets her do it. Harry doesn't buck Leona."

Helmsley can be imperious. One witness remembers having afternoon tea served by a young waiter who was so unnerved in his boss's presence that he quivered. "What's the matter with you," demanded Leona, noting the trembling teacup. "Nothing, nothing, Mrs. Helmsley," replied the attendant, whereupon she commanded, "Get-him-out-of-here."

Helmsley can be frugal. She once had a saleswoman rewrite her bill to send a pair of earrings to her Connecticut address just to save the $4 sales tax. Said Leona, charming the clerk: "That's how the rich get richer." Last November, Helmsley was named for failing to pay $38,662 in sales tax for jewels bought at Van Cleef & Arpels. Her lawyer said Leona was innocent of any wrongdoing but had believed the total cost included the tax.

Helmsley can also be playful. On at least one occasion, she has hidden beneath a blanket in the rear of her husband's limousine, then popped out to greet him when he was picked up at his office. One of Leona's most appealing attributes, in fact, is her public display of affection for her husband—her "gorgeous one, her pussycat, her snooky, wooky, dooky." They met 15 years ago, when Harry had already amassed a billion-dollar real estate portfolio and Leona had made a name for herself as a Manhattan co-op broker. He hired her as a $500,000-a-year senior vice president and married her about a year later, in April 1972.

It was a lofty attainment for Leona Mindy Rosenthal, the daughter of a Brooklyn hatmaker. As a teen Leona became Mindy Roberts, showroom model and eventually Chesterfield cigarette girl. Marriage to a Manhattan lawyer ended in 1959 (in 1982 their only son, Jay Panzirer, died of a heart attack in his early forties), and Leona Roberts barreled into real estate.

Leona says she fell in love the first time she danced with Harry—to the tune of Raindrops Keep Fallin' on My Head. One former colleague views their union less romantically, referring to the couple as "the gentleman and the streetfighter."

Harry Helmsley, a Quaker, who had been married and childless for 33 years before divorcing his first wife in 1972, seemed to brighten with his marriage to Leona. They divided their time between the duplex-penthouse atop his Park Lane Hotel in New York and a lakefront condominium in Palm Beach, where in 1973 Leona awoke in the dark to find that an intruder wearing a gas mask had broken into their bedroom. "Wake up, darling," she said, nudging her slumbering husband. "We have company." Harry and Leona gave chase—in the buff—and Leona was stabbed in the chest with a bread knife from her kitchen before the burglar fled. Her lung was punctured, and she believes she was near death.

Helmsley's purple rages seem to have grown along with her wealth and fame. "The richer she got, the more paranoid she became," says one former employee, "and the more powerful she got, the more difficult she was to deal with." When a high-level executive resigned in the middle of a Helmsley harangue, she chased him down the corridor past aghast executives, embarrassed secretaries and stunned visitors, shrieking, according to witnesses, "How dare you walk out on me! I'm Mrs. Harry Helmsley!" The executive kept walking.

The insistence on perfection so evident in her management of the Palace has apparently guided Leona's mammoth reconstruction of her Greenwich home. Stone contractor Sheldon Fein-stein was paid $195,000 but claims he was chiseled out of another $85,000 and is suing. Among his incidental complaints: Leona's regal style. "She never faced you," he says. "We would wait up at the house. She would sit down by the pool and have a gofer run back and forth. It could take 40 minutes to decide anything. Everyone I speak to has a bad word for her."

Not everyone. "She's fun. She has a sense of humor. She could laugh at the Queen thing and know it was kind of campy, but she has a vulnerability that is puzzling," says ad executive Joyce Beber, whom Helmsley has fired twice.

The commotion stirred by the New York Post is certainly not amusing the Queen or her relatives. "The Post is the garbage heap of New York," declares Leona's brother and Helmsley exec Alvin Rosenthal. "The Helmsleys are taking a bad rap. They really are good people and to run them down that way is just lousy." Of his sister he adds, "She is a very generous, very loving, very giving person. That's the way she has been all her life."

There will always be those who find that debatable. "She has left such a line of hurt and damaged so many lives that I couldn't stand it any more," notes one former associate. "She has no respect for most people and probably none for herself." Observers of the now-troubled Kingdom of Helmsley are finding new wisdom in Shakespeare's line—Uneasy lies the head that wears a crown.

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