The new headquarters was supposed to include a mixed-use office, retail, residential and parking complex adjacent to the South Miami Metorail Station, above. (Charles Trainor Jr./Miami Herald)

AUDIT FINDINGS

Builder misspsent $3.2 million
A developer was supposed to build the county housing agency a new headquarters, but diverted $3.2 million and never delivered a building, a new audit has found.
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The developer who pledged to build a new headquarters for the Miami-Dade Housing Agency misspent $3.2 million in public money on excessive management fees and dozens of costs unrelated to construction - including a $355,000 payment on a personal home loan - according to a county audit obtained Saturday by The Miami Herald.

While the building project stalled, developer Raul Masvidal used the county's money to buy a sculpture of stacked teacups from a childhood friend for $287,000 - almost double the going price, the audit found. The sculpture was supposed to complement the new headquarters but has been sitting in storage for two years.

No headquarters was ever built.

County Auditor Cathy Jackson laid blame squarely with the Housing Agency, citing former Director Rene Rodriguez, for "passive" oversight of the troubled project.

Under Rodriguez's leadership, the Housing Agency in 2003 contributed $5 million for a new headquarters in South Miami by dipping into a fund specifically established to build homes for the poor.

"We understand the former Housing Agency director unilaterally decided his department would manage the project," Jackson wrote in her report, released to county officials late Friday. ". . . Housing Agency officials could provide little information to justify their actions and decisions."

A planned new office building for the Housing Agency includes a $287,000 bronze sculpture from Italy of stacked teacups called Space Station. (Miami Herald)
SCANDAL EXPOSED

The audit comes five months after The Miami Herald reported the project was at least 18 months behind schedule and about $8 million over budget, with costs that appeared unrelated to the new headquarters.

The project's developer is Hometown Station Ltd., whose general partners are Masvidal and developer Otis Pitts. Earlier this month, 65-year-old Masvidal - who serves on Miami-Dade's Public Health Trust and was an advisor to former Miami-Dade Mayor Alex Penelas - was arrested on felony battery charges after allegedly punching the artist who created the teacups sculpture.

Artist Julio Larraz, who went to grade school with Masvidal in Havana, said the dispute was over unpaid loans he made to Masvidal, though Larraz said the sculpture was paid in full.

The development team's limited partners included Oscar Rivero and Alben Duffie, both involved in other troubled Housing Agency deals.

Last summer, when problems with the new headquarters surfaced, County Manager George Burgess announced he had struck a deal with Hometown Station to cancel the project and recoup the county's money. But no proposal was ever brought to the County Commission for approval, and so far, no money has been returned. Burgess said he wanted to wait for the results of the audit and ongoing criminal investigations.

Neither Jackson nor Burgess could be reached for comment. But in a memo to county commissioners sent Friday, Burgess promised to "aggressively pursue recovery of the $5 million . . . by any and all legal means available."

THE DEVELOPER'S SIDE

Hometown Station's attorney, George McArdle, said the county's money was properly spent. He said the audit created an "arbitrary distinction" between expenses for the Housing Agency headquarters and the overall project, which included a mixed-use office, retail, residential and parking complex adjacent to the South Miami Metrorail Station. Hometown Station won development rights in 1999.

McArdle said county officials understood that the $5 million would, in part, cover predevelopment expenses incurred before the Housing Agency decided in 2003 to put a headquarters on the site.

"The developer had worked on other prospective uses of the property, and like any other development, those expenses had to be paid," McArdle said.

But in the audit, Jackson said she "unequivocally" disputes that argument. Hometown Station signed a lease with the county that stated the $5 million was to be used only for the construction of the new headquarters, she said. The audit found Hometown Station paid hundreds of thousands of dollars for expenses that had nothing to do with the building, while funneling money to other questionable costs, including:

  • Paying Masvidal's company $493,000 to manage the project, even though no building was built. Of that, $258,000 was paid for oversight before the Housing Agency had signed on to the project. In invoices, the fees were justified as "land costs."

  • Paying Masvidal's business partner, Henry Marks, $281,513 for project management, again before the Housing Agency got involved. Hometown Station could not provide documentation for Marks' work.

  • Using $355,351 to pay a second mortgage on Masvidal's $1.8 million home in Coral Gables.

  • Paying $287,000 for a bronze sculpture of teacups called Space Station. The audit said Hometown Station had promised to donate one-of-a-kind artwork to the project as a "gesture of goodwill." But the county paid anyway. Making matters worse: Auditors found an identical sculpture by the same artist that sold last year in Boca Raton for $150,000. Hometown Station did not submit an appraisal to substantiate the $287,000 purchase price.

  • Spending $778,000 on architect, engineering and consulting services performed before the Housing Agency got involved in the project. Prior concepts included a hotel, movie theater and municipal building for the City of South Miami.

  • Said Jackson: "The absence of clear leadership and oversight significantly diminished county control over [the] project."

    McArdle countered that Bank of America oversaw spending of the Housing Agency's $5 million, and that the county approved a budget outlining how the money would be spent. "When the auditor comes in after the fact and looks back, the auditor can say, `I don't like the way this deal is negotiated' and advise the county not to do this again," McArdle said. ". . . But that's the way this deal was negotiated."

    THE HOME MORTGAGE

    McArdle defended the $355,000 in county money that went to pay down a second mortgage on Masvidal's home, saying Masvidal essentially was reimbursing himself money he had earlier contributed to Hometown Station expenses. "This is not a situation where someone is reaping personal gain," he said.

    But auditors questioned why the mortgage money went directly to Masvidal and his wife - not to Hometown Station. McArdle said the loan was made that way because the bank needed extra collateral, so Masvidal agreed to put up his house.

    McArdle said Hometown Station never promised to donate a sculpture. As for the price of the teacups, which was almost double what it went for in Boca Raton last year, he said: "[Masvidal] felt like he got a good deal."