Insiders profit, travelers suffer
Miami's tourism industry is threatened by politicians who run the airport for the benefit of cronies - not millions of passengers
10/17/1999 3:27 PM
09/08/2014 5:33 PM
Miami's tourism industry is threatened by politicians who run the airport for the benefit of cronies - not millions of passengers.
Miami International Airport, rated among America's worst for passengers, is being used by Miami-Dade politicians as a billion-dollar piggy bank to enrich their friends and campaign contributors.
They manipulate rules so favored firms get airport deals. They delay for years other airport services, such as luggage carts, because companies haven't cut in the right people. They dictate everything from where rental car companies line up along the counter to how many firms will clean airport bathrooms.
Miami-Dade Commissioner Pedro Reboredo once put it succinctly: "The main problem is us - politicians - involved in the process."
A Miami Herald investigation proves that's true. From thousands of MIA files and hundreds of interviews emerges a portrait of an airport where political deal-making is more important than developing an inviting hub for travelers. The result: an airport that is threatening the region's economy and viability as a hemispheric commercial center.
Virtually all major deals at MIA go to companies that give political contributions and employ lobbyists who are key fund-raisers and advisors for county politicians. Outsiders, including American corporate giants such as Disney, can't get in.
Major companies seeking work at MIA frequently are forced to give a piece of their deals to politicians' allies who have no experience in airport work.
Example: Jorge de Cardenas, a lobbyist and campaign strategist with no background in retail sales, drew regular checks from his cut of the airport's duty-free deal - while serving time in prison for his role in a Miami bribery scheme.
Minority hiring programs are sometimes exploited. In one case, a politically active multimillionaire with a waterfront home and a 54-foot yacht was slipped into a lucrative deal as a "disadvantaged businessman."
Companies with the right connections get MIA's millions without ever going through a bid process. Firms offering long-distance phone cards and baggage wrap at the airport have operated for years on no-bid "test permits" - despite evidence they don't offer travelers the best deal. Travelers at MIA pay $6 to get a medium-size bag wrapped. In San Francisco, the charge is $3.
Politicians shape contract specifications to help favorites. Some companies are given so many extra points for being locally based that outsiders who offer far better prices can't get MIA's business.
In the case of a parking management contract, that meant a company partnering with a local businessman tied to several county commissioners got more points than a national company that offered a price 44 percent better.
Reforms have done virtually nothing.
A "cone of silence" that was supposed to reduce lobbyists' influence after projects are advertised has failed. Much of the lobbyists' efforts go into shaping contract specifications - an activity that happens before the cone of silence descends.
In many cities, aviation experts run the airport. At MIA, politicians - encircled by a phalanx of lobbyists - micromanage an operation that rings up hundreds of millions of dollars in yearly sales.
The result of their manipulations: an airport that is threatening the area's tourism industry, which creates 300,000 jobs, and the community's role as a hemispheric commercial center.
MIA is becoming an expensive place for airlines, which help to finance the airport through landing fees and pass costs on to travelers. Many airlines and passengers are now flying into Fort Lauderdale because it's cheaper. Last year, for the first time, more domestic passengers started or ended their trips in Fort Lauderdale than in Miami.
Many international passengers are also bypassing Miami if they can, with MIA's share of traffic to and from South and Central America dipping between 1993 and 1998.
Those who stop in Miami often don't like what they see, surveys show. Retail concessions, the most politically connected deals at the airport, offer limited opportunities for eating and shopping. Several popular chains - common at airports elsewhere - haven't been able to get in because they lack political pull.
Passengers rank MIA near the bottom of the nation's airports, according to a survey by Air Marketing Services. "It's a disgrace, " said President Ira Weinstein, whose company has surveyed passenger satisfaction at 150 airports for 15 years.
THE LURE OF MONEY
The airport's prominence and volume of business are temptations for public officials
Why do politicians get so involved at the airport? One word: money.
MIA has a $5.4 billion construction program. The Aviation Department shells out $500 million a year. Concessionaires pull in $300 million.
"If this were a mill town, the airport would be the mill, " said Ric Katz, a political consultant. "It's the biggest employer, the biggest budget. It's just a huge cookie jar - just too tempting."
The pressure of lobbyists and the amount of money in play lead to all sorts of dealing, said Rick Elder, Gary Dellapa's predecessor as airport director. Elder wrote to The Herald, but declined an interview request.
Elder complained that he was told "to reevaluate a bid process that 'didn't come out right, ' to cater to certain special-interest groups and to hire relatives of the elected.
"I refused on all counts, " he wrote, "and, of course, I brought the anger of my elected and appointed bosses upon my own head. . . . Special interest groups and lobbyists force contracts and contractors onto county department heads who know that they must treat them like they are special, because they, too, are - connected."
At MIA, each example of political manuevering ends up costing travelers. Companies cover costs of hiring lobbyists and cutting in politically connected players by raising prices.
"They have to boost their prices . . . by 30 or 40 percent in order to make a dime, " said ex-county commissioner Bruce Kaplan, who left office last year amid legal troubles unrelated to the airport.
These additional costs will be passed on by airlines to passengers.
In the next few years, MIA is likely to join JFK and Newark as the most expensive airports in the country for airlines. The more expensive it gets, the more tourists and discount airlines likely will go elsewhere - and the more the Miami-Dade economy will suffer.
It's whom you know, not how much you know or contribute, that is often decisive.
If passengers aren't winning at MIA, who is? Often, a small group of political insiders who reap millions in airport spoils without ever showing up for work, investing significant cash or bringing industry experience to the table.
Developer Sergio Pino is one of the main fundraisers for Miami-Dade Mayor Alex Penelas and has contributed to at least 11 of the 13 commissioners. Last year, at Penelas' request, he hosted a $238,000 fundraiser for Commissioner Miriam Alonso.
One of the largest builders in South Florida, Pino owns a waterfront home, a 54-foot yacht and has a net worth of at least $19 million.
Yet in 1995 he was cut into the airport's duty-free shops, which pull in nearly $60 million a year, to meet airport rules requiring firms to hire minority partners. In the eyes of Miami-Dade County, Pino qualified as a "disadvantaged businessman."
With his business interests now pulling in more than $32 million a year, Pino no longer qualifies as a minority entrepreneur but he's kept his place in the duty-free deal: the county decided he could stay in under a grandfather clause.
Pino readily acknowledges his political ties, but said his team won because it offered the best return. His inclusion as a disadvantaged businessman? "I didn't make the rules, " he said. "I played by the law. .... To me, it was a business opportunity."
Lobbyist Jorge de Cardenas, a political consultant who has worked on the campaigns of at least seven commissioners over two decades, was cut into the same deal for no other reason than to ensure votes at County Hall.
"We are lobbyists. In consideration for that, I think we receive a percentage of their revenues, " the lobbyist's son, Luis, said in a sworn statement to the county explaining his father's 4 percent stake. De Cardenas' firm received $67,000 in duty-free fees over three years. He transferred ownership in the contract to his son after serving time in a Kentucky federal prison for his role in a Miami bribery scheme.
Much of the time, the politically connected players are brought in using programs intended to boost struggling minority businesses.
The Federal Aviation Administration requires that 10 percent of non-construction concessions be awarded to minorities, and Miami-Dade ordinances require that sometimes 20 or 30 percent of contracts be given to disadvantaged blacks, Hispanics and women.
"These programs were meant to assist and develop minority businesses so they can compete in the marketplace without a set-aside program, " said Lenneal Henderson, a professor at the University of Baltimore who has worked with the U.S. Small Business Administration on minority business concerns.
He decried any program when a minority gets "rented" to help a company win a contract. "Any program that doesn't provide a real opportunity, that's just favoritism."
The intent of the programs has been perverted at MIA, where the politically connected sometimes do little more for their money than get votes for the project. The FBI is suspicious. Investigators recently tried to persuade an airport businessman to secretly record a shakedown attempt - one of many that agents believe may be going on at MIA.
Ex-commissioner Kaplan: "Everybody is afraid of being called a racist, and so they don't raise objections, but so much business is done under minority empowerment, and it's often . . . pork barrel, rather than legitimate businesses. Amazingly, you see the same names over and over again - all politically connected, and surprisingly multi-talented."
A national chain won its airport contract after taking in minority partners with political ties.
A case study is the airport's $29 million-plus restaurant contract held by Host-Marriott. The national chain won the Miami deal after partnering with several politically connected minorities.
William Perry III, a political player close to Mayor Penelas and several commissioners, gets a percentage of the Host-Marriott contract and of the airport's parking management contract.
Lobbyist Dewey Knight 3rd, a veteran of the Penelas mayoral campaign, and Paula Gomez, the wife of BellSouth lobbyist Tito Gomez, also have pieces of the Host Marriott deal. None listed experience in food vending before they signed on to the Host contract in 1994.
"Part of the game, " said Edward Wilcox, who manages Host-Marriott's MIA program.
He said the practice of using the minority business program to cut in politically connected players also plays out at other airports - but it goes on with a vengeance at MIA.
"Usually we win these contracts based on our history and ability to generate concepts that the passengers want. We had to go beyond that in Miami, " Wilcox said.
"In my opinion, there is more interest paid in minority participation than in the quality of retail. More interest is paid in who than in what is going in there."
Mayor Penelas said he wasn't aware his friends Perry and Knight had airport contracts. Perry defends his roles, but admits that political connections help. "All we're trying to do is be small businessmen, " Perry said.
Knight said he is friends with politicians, but that he earns contracts on merit. "Who are they going to take?" Knight asks. "Enemies?" Gomez could not be reached for comment.
Originally, Perry and Knight each received $65,000 a year from Host. The deal is changing. Now, each has to borrow $2 million - through loans guaranteed by Host - so that they can run stores that will gross $1.1 million annually. SLOW-GOING CONTRACT A deal to provide luggage carts was finally done, and a political contributor got a piece of it. Without the political connection, some deals don't get done at the airport - no matter how much passengers suffer. Consider the saga of Smarte Carte, the national chain that provides rental carts for luggage. For years, MIA was the only major U.S. airport without carts.
Miami Dade commissioners held up the contract while political supporters, including former Miami City Commissioner Armando Lacasa, demanded that Smarte Carte give him half the deal. The Minnesota-based company refused.
For years, passengers went without carts while politicians argued over such fine points as the experience baggage cart bidders needed. Then-Commissioner Maurice Ferre was pushing for easier rules that would help his friend, Lazaro Albo, qualify. Ferre said he was trying to help a small businessman "compete with the big guys."
Finally, in 1998, the deal moved forward. Smarte Carte gave a 20 percent interest to Antonio Junior, a banker and an emerging political player who has contributed money to at least 10 county candidates.
When a Herald reporter dropped by Smarte Carte's offices to ask for Junior, the general manager said, "He doesn't work here."
Smarte Carte President Brad Stanius said Junior is an "investor" in Smarte Carte, not an active participant.
He said Junior got 20 percent of the deal by putting up $8,000 in cash and borrowing $32,000 from Smarte Carte - a loan on which he only has to repay interest. For this, Junior is being paid roughly $5,000 a month for the length of the five-year contract.
Junior is close to Commissioner Barbara Carey-Shuler. In 1996, he loaned her campaign $20,000. Election laws limit loans to $500 per candidate. Junior said he was unfamiliar with the law when he paid $20,000 in cash to get-out-the-vote campaign workers. Carey-Shuler said Junior was just trying to cover campaign expenses when she was unavailable to sign checks. He was repaid.
"These actions were never intended to violate campaign laws, " Carey-Shuler wrote after Herald questions. Although Carey-Shuler voted for the Smarte Carte deal, she notes she was not on the commission when Junior first began talks with the company.
Junior said he gets airport deals because he has proven himself as a solid businessman. He's been at the airport since 1991, when he became president of Quality Aircraft Services, one of several ground-handling firms that benefits from a commission rule restricting airlines from handling the service themselves.
As for Smarte Carte, he said he serves as the company's MIA liaison, because he knows how the system works. He said he meets with the company "quarterly."
Carey-Shuler said it's unfair to criticize minorities for getting work at the airport.
"For years, the airport was controlled by white Anglos, and minorities couldn't get anything there. We learned from them. You have to know somebody to get in the door."
THE NO-BID ROUTE
A firm whose top executives were political donors got a $2.2 million deal for 3-D simulations
The system also works for big-time political donors, who sometimes reap MIA's millions without bid - for work of questionable value.
Engineering & Construction Services, for instance, received $2.2 million in no-bid work creating 3-D construction simulations to spotlight potential design flaws.
The company and its two top execs have contributed $190,000 to Democratic campaigns in recent years - most of it after winning MIA business. More than $163,000 went to the Democratic National Committee, and several thousand went to the 1996 mayoral campaigns of Penelas and Arthur Teele.
For a while, the company's lobbyist was Chris Korge, a major fund-raiser for the DNC who has held South Florida fundraisers for President Clinton and Vice President Al Gore. The most influential lobbyist at MIA, he also raises money for Mayor Penelas.
Gary Dellapa, the airport director, said MIA staffers may have broken rules by ordering architects to hire ECS as a subcontractor. "County rules prohibit us from doing that, " he said. "It could lend itself to fostering an image of favoritism."
MIA's top planner questioned the deal and said it should have gone to bid. "The department acquired the equipment, but we don't know how to operate it, " said Manuel Rodriguez, MIA's Manager of Development.
"We didn't use it, " said architect James Palma of Rodriguez & Quiroga, whose firm was ordered to hire ECS. "Quite frankly, we're architects, we can visualize these things."
Some professionals, like architect Ronald E. Frazier, hired to design MIA's Satellite E, said they have found the 3-D simulation useful.
ECS President MJ Parker said politics have nothing to do with her airport work. She said ECS offers a useful product, and that Rodriguez & Quiroga was "pleased with the results."
"Seeing is believing. Some architects live by this, " she said.
Recently, Fort Lauderdale's airport decided against 3-D simulation for its expansion program. Reason: Too expensive. AIRPORT PAYS A PRICE Deals made without bidding cost MIA millions of dollars and often bring poorer service. No-bid deals at MIA often mean higher prices and poor service. The airport loses millions.
Prime example: The plastic covering that some travelers like to get wrapped around their suitcases to deter theft. Starting in 1994, three firms slid in through temporary "test permits" - no-bid deals that were supposed to last for only a short time to see if passengers wanted the service.
MIA staff recommended competition in 1995, but politicians stalled and the firms lined up lobbyists to represent them.
Meanwhile, complaints rolled in about rude workers and prices. MIA's vendors currently demand $6 to wrap a medium-sized bag, compared to a flat rate of $3 per bag at the San Francisco airport.
MIA finally decided to put bag wrap out to bid in 1998. Faced with competition, the three vendors are proposing far greater returns to MIA. Before competitive bidding, all three firms combined paid MIA only $220,000 a year. Now, Quick Packing alone is offering the airport $1.5 million a year.
Bag wrap companies say they're offering more because the new contract gives them the entire airport and higher volume. "We do feel we can make more sales .... being the only ones, " said Henry Ramos, an executive with Secure Wrap of Miami, another firm now offering more to MIA.
Phone card bids have been stalled even longer. After four years of "test permits, " the airport hasn't even begun to seek competition for three politically connected companies that sell plastic cards for long-distance calling.
Customers aren't happy. In one recent six-month stretch, records show, phone card complaints ranked No. 2 of all consumer gripes at MIA, trailing only general rudeness.
A British traveler put $20 into a machine - and received no card. He called the 1-800 number to complain and got a recorded message. A traveler from Alaska lamented that it cost him $19 on a $20 card to talk to Cuba for 11 minutes.
In a test, The Herald purchased a $10 Communitel card at MIA and a $10 card from a nearby Shell Station. The MIA card gave 20 minutes of calling within the United States. The non-airport card provided more than three times as much.
The firms claim such complaints are rare. "The three companies there have provided good service, " said Pedro Pelaez, whose Communitel does more than $1 million a year in MIA business. He said his cards are more reliable than those sold in gas stations.
Like the others, the company returns 15 percent to the county, well below what some other airports get. At Los Angeles International, says a spokeswoman, the airport gets 33 percent to 35 percent of phone card sales.
Pelaez said phone card companies in Los Angeles charge 30 percent more for domestic calls. "The airport is getting its fair share, " he said of MIA. Pelaez, one of Penelas' top fundraisers and a steady campaign contributor to county commission races, is also owner of Quick Packing, the bag wrap company that offered to increase payments to MIA seven-fold when it faced competition.
How much more he might be willing to pay on phone cards is unknown. After four years, MIA is still only talking about competition. LOCAL ANGLE PREVAILS A company's location is often given greater weight than the amount of its bid. Long before contracts go out for bid at MIA, specifications get shaped to help favored companies.
Price is often a secondary factor, The Herald found in a review of 30 consulting, service and concession contracts.
What's more important? Being local. Many city and county governments give a bidding advantage to local companies, but as with other techniques, Miami-Dade politicians have twisted the process so that, if one company is local and the other is not, the dollar amount of the bid is often irrelevant.
Example: William Perry, who ran the Miami Sports Authority for a while, then ran against his friend, Penelas, for mayor in the 1996 election. He siphoned off votes from Penelas' main opponent in Miami's black community, Arthur Teele.
Four days before he received 2 percent of the vote, Perry and Central Parking, a Tennessee company, formed a joint venture to win MIA's parking management contract.
Perry's group won because it was given a bonus for being local. It didn't matter that its proposed management fee - $6,000 a month - was 44 percent higher than the $4,166 offered by AMPCO, a Los Angeles company. Specifications were structured so that, no matter what the dollar amount, being local counted more.
Dennis Nasabal of AMPCO, the losing bidder, says other airports sometimes give a little extra weight to local companies, but nothing like MIA does. AMPCO doesn't do local or minority joint ventures because such moves give the appearance of hiring front-men in order to get deals, Nasabal said. AMPCO prefers giving work to minority sub-contractors for specific jobs, such as providing uniforms or janitorial service. That way, there are real people doing real jobs, Nasabal said.
That's not the way it works at MIA. When a Herald reporter went to the parking management office and asked for Bill Perry, the receptionist said, "We don't have anyone here by that name."
Perry says he drops by Central's offices "periodically" to confer about personnel matters. He considers himself a parking expert because he had a slice of Central Parking's contract at Bayside.
Still, he acknowledged that his connections have been helpful. "Knowing people in politics can give you a little edge, " Perry said. "That's the American way."
Because of such machinations, the airport's politics are renowned nationally.
"The way things are done down there has probably pushed us away, " said Chris Howley, vice president for Tennessee's Republic Parking System. "They seem to be much more political than I have experienced throughout the rest of the country."
His firm offered the lowest price to operate the airport's employee bus shuttle service. It didn't get the job. The third lowest bidder did, thanks in part to bonus points for being local.
Politicians claim they have been cleaning up their own mess. In 1997, Mayor Penelas abolished commission committees - "costly venues for delay, " he called them. Commissioners had used committee sessions to delay projects that didn't have the right players and to manipulate contract specs.
Then, in 1998, the county commission approved a much ballyhooed "cone of silence" that barred lobbying of staff from the time the county advertised projects until the county manager recommended a winner.
Neither reform has worked. Mayor Penelas, who helped push through the cone of silence, said the county has invested millions in its fight against corruption. But "I don't think we've gone far enough, " he said, calling the volume of airport lobbying "outrageous."
A prime example: The $15-million airport janitorial contract that expired last October. It should have been put out for bid a year ago, but commissioners keep haggling about the specifications.
Seven times, the commission has delayed the process. Instead of committee meetings, it held "workshops."
At least eight lobbyists are already involved. All of this has come before the "cone of silence" begins.
Robert J. Wood, president of current vendor RisComp Industries, said lobbyists - he wouldn't name them - keep suggesting he hire certain subs to help him keep his janitorial contract. "We get calls. 'Gee, you've got to do business with this person.' We don't have that situation in other parts of the country."
For the moment, RisComp has emerged the winner. While commissioners continue to examine argue about the specs, they granted the firm a year-and-a-half extension of its contract. No bid, of course.
Herald staff writers Tom Dubocq, Barbara De Lollis and Ina Paiva Cordle contributed to this report.
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