A Portland strip club owner purchased Salem’s iconic Morrow Mansion a year ago for $2.5 million with the intention of turning it into a high-end bed and breakfast.

But the plan of Carol Lee, one of the owners of Portland’s Casa Diablo, met with sharp resistance from neighbors and has been rejected twice by Marion County.

Lee has appealed to the Oregon Land Use Board of Appeals.

Lee said she intends to charge between $300 and $800 per night in an area where most bed and breakfasts are advertised between $25 and $100 per night.

Neighbors contend Lee’s intention is to run a boutique hotel and not a quaint bed and breakfast.

“All the way up, both sides of the road, nobody is happy about what’s going on up there,” said Robert Gunn, an attorney who is one of three neighbors to file a motion to intervene in the case.

“I’ll tell you the problem, the problem is the neighbors are really very suspicious. Who buys a two-point-something-million-dollar property and says they want to put a bed and breakfast in it?”

The Morrow Mansion

The house at 3705 Ballyntyne Road was built in 1990 for Richard Morrow, co-founder of Morrow Equipment, a worldwide tower crane leasing company.

The opulent 21,151 square foot house — nicknamed the Morrow Mansion — is situated on 9.4 acres southeast of Salem a little over a mile from Sprague High School.

Part of Ballyntyne Road is in Salem city limits, but the Morrow Mansion is on unincorporated Marion County land.

The stone mansion has nine bedrooms – including two one-bedroom apartments with kitchens – 15 bathrooms, formal living and dining rooms, 11 fireplaces, a two-story foyer with double staircases, a breakfast room, two home offices, a billiards room, a dance floor, an exercise room, an indoor swimming pool, a bowling alley and a six-car garage.

And it has acres of landscaped gardens, fountains and patios behind its gated entrance with grand views of South Salem.

Morrow died March 26, 2016. His family put the mansion up for sale later in 2016. It was initially listed at $3.5 million.

The house was on the market for over a year and the listing price dropped to $2.95 million. Lee purchased it for $2.5 million on Dec. 29, 2017, according to the Marion County Tax Assessor’s office.

Lee testified to the Marion County Commissioners she purchased the house fully furnished and moved in shortly after, though she said she still has a house in Lake Oswego and spends time there, too.

Neighbors countered they have not seen Lee at the house since she purchased it.

“The only activity we’ve seen are the landscapers,” said neighbor Rhonda Grefenson said at the Marion County Commissioners meeting. “This is the first time I’ve ever seen her.”

Within days of Lee receiving initial approval for the B&B plan on May 23, neighboring property owners appealed the decision. The appeal was heard June 21, and the hearing’s officer denied the request Sept. 7.

That decision was appealed Sept. 24 to the Marion County Commissioners and they denied the application after a heated public hearing Oct. 17.

“She has not, I don’t think until this day, addressed any of the neighbors up there at all,” said Gunn, the attorney who has lived in a house on Ballyntyne since before the street was paved.

Casa Diablo strip club

Along with the Casa Diablo strip club in Portland, Lee is listed as the manager of C.D. Property Management of Lake Oswego.

Casa Diablo, which opened in 2008, is purported to be the first vegan strip club in the world. The Portland club serves only vegan food and does not permit dancers to wear animal products onstage.

As one of the owners of Casa Diablo, Lee has been involved in a string of controversies.

In 2012, the club was under investigation by the Secret Service for defacing currency by inking $2 bills to make them appear dipped in blood.

In 2015, Lee and business partner Johnny “Diablo” Zukle were named in a lawsuit by dancers Matilda Bickers and Amy Pitts, claiming they were not receiving minimum wage and were subjected to touching by customers and bouncers.

Zukle was initially involved in the Morrow Mansion project, but his current involvement is in question.

“At the first hearing, Ms. Lee said, ‘This man here speaks for me, he’s my partner,’"Gunn said. “He has not showed up since.”

Lee’s involvement with Casa Diablo has been a point of concern for neighbors of the mansion, according to her attorney, Andrew Cole.

“Opponents have raised the specter that we are going to convert this property for some nefarious purposes, and that’s not true,” Cole said. “We’ve looked at the code and we’re trying to apply the code to our operation.”

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Bed and breakfast or boutique hotel?

One of the reasons given for denial by the Marion County Commissioners is the land use code specifies a bed and breakfast can be operated with a maximum of five people at a time.

As the mansion has nine bedrooms, the county would have a hard time monitoring how many of the bedrooms were being used for the permitted purpose and the mansion would end up becoming a boutique hotel.

And Marion County’s commissioners found Lee’s proposed bed and breakfast use doesn’t meet the definition of bed and breakfast since it's unclear if she lives at the mansion.

Cole filed an appeal of Marion County’s denial to the Oregon Land Use Board of Appeals on Nov. 26.

A spokesperson from the Oregon Land Use Board of Appeals said their response brief is due Jan. 22 and oral arguments will take place about two weeks later.

“A bed and breakfast is supposed to be a subordinate use,” Robert Gunn said.

“The way that Ms. Lee described everything, this was not only a bed and breakfast on steroids, it’s a bed and breakfast first and her home second. I’ve been to Marriotts that have less amenities.”

bpoehler@StatesmanJournal.com or Twitter.com/bpoehler