MIAMI INTERNATIONAL AIRPORT

Miami International Airport hotel operator under criminal investigation

 

The county inspector general disclosed the criminal investigation in an unusual memo, prompted by an upcoming bid for the hotel-operator contract.

pmazzei@MiamiHerald.com

The company that runs the hotel at Miami International Airport is under criminal investigation by the Miami-Dade state attorney’s office and the Office of the Inspector General for allegedly fraudulently billing the county.

In a Jan. 2 memo outlining the joint investigation to Jose Abreu, director of the county’s aviation department, Inspector General Christopher Mazzella wrote that he could provide only general contours of the ongoing probe because of potential, forthcoming criminal charges against the hotel operator, H.I. Development.

The unusual memo was prompted by an earlier letter from H.I. Development defending the company’s performance after harsh public criticism from Abreu. The county is going out to bid for a new hotel management contract, and Abreu has said that he would not recommend H.I. Development if it were to bid.

“Let me be clear that the criminal investigation under way, which is being conducted jointly by the OIG and the State Attorney’s Office, is very serious,” Mazzella wrote. “Indeed, it is expected that criminal charges will be filed in the near future.”

In his Dec. 12 letter, sent to Abreu and commissioners on a transportation committee, H.I. Development President Andre P. Callen addressed some of the complaints on a laundry list Abreu had aired against the company, including an allegation that five administrators were dismissed as a result of the billing probe. Callen wrote that the company had not dismissed anyone of its own accord, and added that no senior company personnel have been arrested or charged.

“Five H.I. Development employees were escorted out of the airport, but only√ at the request of the Miami-Dade County Aviation Department and not√ at the request of law-enforcement personnel,” he wrote.

“It is our understanding that at least three of the five H.I. Development employees were cleared by the County’s Inspector General; nonetheless, the Aviation Department has refused to allow even those three employees to return.”

The county pays H.I. Development a flat management fee and reimburses the operator for expenses. Mazzella did not delve into how the company may have defrauded the county, or what dollar amounts might be involved.

Callen, however, referenced three hotel renovation expenses probed by the inspector general or questioned by the aviation department: a wallpaper purchase, a bathtub refinishing project and a bathroom mirror replacement project.

The inspector general could not account for the wallpaper purchase, the letter says, but an inventory of the wallpaper exists. And while the aviation department considers that there were problems with the completion and billing of the bathtub and bathroom mirror projects, both were “fully completed and properly billed,” according to the letter.

NO SPECIFICS

Mazzella did not mention specifics, saying only that the investigation began after the aviation department notified the inspector general of possible billing fraud.

“In investigating the allegation, the OIG discovered many issues and concerns with H.I. Development’s overall management of the MIA Hotel,” Mazzella wrote. “The OIG also discovered issues with [the aviation department’s] oversight of H.I. Development’s compliance with the management agreement.”

Mazzella declined to comment beyond the memo, saying it was intended to clarify the status of the investigation, which began more than a year ago, in light of the hotel operator’s letter. H.I. Development also declined to comment.

The Tampa-based firm has run the 263-room hotel since 1989 — and, under a separate contract, the hotel’s conference center and restaurant.

Since 2002, the hotel agreement has been extended on a month-to-month basis while the county figured out its long-term airport lodging plans.

Last year, the aviation department issued a request for proposals for a new, restructured 10-year hotel contract in which the county would only pay the operator a management fee and no longer reimburse expenses — including for costly employee health insurance. H.I. Development didn’t bid, citing concerns with trying to predict health-insurance costs over a decade.

However, once the county began negotiating contract terms with the apparent winning bidder, Turnberry Miami, it agreed to reimburse Turnberry for health-insurance costs — an about-face that H.I. Development’s lobbyist, Miguel De Grandy, protested at a transportation committee meeting last July.

The commission agreed with De Grandy. It threw out the bid altogether and instructed the aviation department, which had acknowledged problems with the initial bid, to start over, this time reimbursing health-insurance costs.

In an interview last week, Abreu, who plans to retire from the county on March 31, acknowledged that it is common in the industry to reimburse hotel operators for insurance costs.

But he said the department had followed a prior inspector general recommendation favoring lump-sum management fees, which are easier to oversee and audit.

STANDS BY CRITICISM

And he stood by his criticism of H.I. Development.

“If they come out on top this time, I’m still not recommending them,” Abreu said Friday.

An annual external audit that the aviation department requires for its vendors has not been completed for the hotel operator for the past two years because of problems related to the investigation, said Anne Lee, the department’s chief financial officer.

Her office is also reviewing H.I. Development’s workers’ compensation insurance premiums, Lee said, because the rate of claims is higher than the industry standard. A high rate “often indicates a lack of effort to minimize claims,” Lee said, adding that it’s too soon to draw conclusions from the review. Abreu had raised workers’ comp as one of the issues that concerned him about the company in his comments to commissioners last year.

In his letter, Callen, the company’s president, said that as of Dec. 12, H.I. Development remained unaware of any investigation into workers’ comp.

“Workers’ compensation is formulaic and based on a company’s gross payroll and mandatory, state-published rates,” he wrote.

He also addressed another incident mentioned by Abreu: the 2011 arrest of a former hotel payroll clerk. Marta Jordan was charged with cashing more than $120,000 in false payroll checks. She pleaded guilty and was sentenced to two years of house arrest and 28 years of probation, court records show.

Callen said it was the company that identified the problem and notified law enforcement. H.I. Development returned the funds to the aviation department.

“In the end, there was no loss of public money whatsoever,” he wrote.

Callen concluded his letter by highlighting the company’s improved revenues in 2011, and noting that the aviation department has denied H.I. Development’s requests to grant its employees budgeted pay raises.

Abreu dismissed that complaint. “Not only did county employees not get raises — we actually got a pay cut,” he said. “Nobody’s getting raises.”

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