On Aug. 23, 2005, a chartered Gulfstream jet landed in Miami carrying a famous passenger: music mogul Sean "Diddy'' Combs.
Diddy flew in to host MTV's Video Music Awards at the AmericanAirlines Arena, where the hip-hop impresario known for his vast fortune and extravagant tastes handed his diamond-studded wristwatch to a fan in the crowd. Another luxury plane took him back to New Jersey the following night.
The round-trip flight cost more than $87,000, including $1,070 for in-flight catering.
But Diddy didn't pay the bill. Neither did MTV.
A nonprofit poverty agency picked up the tab -- using tax dollars set aside to help Miami-Dade County's poorest residents.
That agency, the Miami-Dade Empowerment Trust, was founded by county leaders in 1999 to take aim at the backbreaking poverty in nine designated "empowerment zones'' - among the most destitute neighborhoods in Florida.
As part of the largest federal poverty initiative in decades, the trust received $68 million in federal, state and local grants to pursue a broad and ambitious plan that included financing affordable housing, providing job training and improving social services.
Its central mission in revitalizing the county's poorest areas, however, is to create jobs by luring new businesses and supporting existing employers with grants and low-interest loans.
But for nearly a decade, the trust has squandered millions of tax dollars on risky ventures, bad loans and insider deals - in many cases without creating a single job - a Miami Herald investigation has found.
The newspaper examined 164 trust projects intended to boost businesses and found that six of every 10 dollars spent - a total of $9.2 million - went to questionable deals, failed companies and projects that yielded no jobs.
While the agency has started several children's programs, provided needed housing and helped some businesses stay afloat, it also steered nearly $1 million to companies tied to County Hall lobbyists, a well-known campaign donor, a county commissioner's sister and a city mayor. Some deals went to the trust's own board members.
The agency paid for a series of lavish block parties. It bankrolled a wannabe pop singer and a group of aspiring hip-hop producers. It purchased eight large fiberglass roosters.
All along, the trust filed exaggerated and misleading progress reports with the U.S. Department of Housing and Urban Development - heralding successes that never happened and erasing failures.
HUD didn't notice. Although the agency was supposed to monitor the trust's progress, HUD inspectors failed to conduct periodic reviews, visiting the trust offices only once in eight years.
Now, with the national empowerment zone program set to expire in 2009, the local communities targeted by the trust - including Liberty City, Overtown and Allapattah - continue to struggle, with no improvement in the poverty level this decade, according to census and demographic data compiled by a private research firm.
Meanwhile, only a fraction of the promised jobs ever arrived. To this day, the trust can't say how many.
"If they had properly spent all the federal funds that have come down here to fight poverty, our streets would be paved in gold," said Annette Eisenberg, a community activist who sits on an Empowerment Trust advisory board. "The record is so bad, I'm really ashamed to be a part of it."
The Miami Herald spent a year culling through thousands of agency records, court files and other documents in a first-ever examination of a federal empowerment zone program, uncovering top-to-bottom mismanagement and waste that went largely unnoticed both in County Hall and in Washington.
Among the findings:
The trust operated like an open checkbook, often handing out grants and loans without receiving invoices to support the costs. The agency can't account for at least $3.3 million in expenses because of shoddy record-keeping and lax monitoring.
In some cases, businesses double- and triple-billed the trust for the same expenses without anyone noticing.
Trust board members and other insiders also benefited personally. More than $400,000 went to six companies tied to board members and members of its advisory councils, records show.
One member of a trust advisory board received a $50,000 business loan just three months after he filed for bankruptcy -- then his company double-billed the trust for $3,500, records show.
The trust managed a $12.3 million loan portfolio without heeding basic practices to safeguard taxpayers' money: Background checks were incomplete or, in some cases, nonexistent. Collateral was sometimes forgotten. Some loans were handed out without even an application.
The result: 47 percent of the loans approved by the trust board since 2000 were either overdue or written off through May, with some loans delinquent for more than four years. In a few cases, the trust couldn't even find the borrowers.
Along the way, the trust has steered money to projects benefiting political insiders.
In one case, the trust swooped in with an 11th-hour loan to save the home of former lobbyist William Perry III from foreclosure. Another $200,000 loan went to a company co-owned by lobbyist Sandy Walker -- the sister of former assistant county manager and current county commissioner Barbara Jordan.
The breakdowns went largely unnoticed by the trust's 18-member board, which approved most of the agency's grants, loans and contracts with scant debate. Over the past eight years, the volunteer board has approved 446 resolutions and rejected none, records show. All but five of its votes were unanimous.
Despite its mistakes, the trust told HUD that it has brought about 1,900 new jobs to Miami-Dade's poorest communities. Yet, the agency has no records to support that claim. A Miami Herald review of 15 of the trust's reports to the feds this year could confirm only eight of 310 claimed jobs.
The trust's president, Aundra Wallace, refused requests to be interviewed for this report. Board Chairman T. Willard Fair said he needed to more time to research the matter before answering questions; however, he did not respond to subsequent emails and phone messages.
Other board members defended the agency.
"There were some mistakes made, but I feel like the intentions overall were good," said Gary Ferguson, a Homestead jeweler on the board since 2000.
County leaders have tried to distance themselves from the trust, officially cutting ties with the nonprofit on July 10 -- two weeks after The Miami Herald exposed widespread problems with a proposed biopharmaceutical park supported by the trust.
A county audit released Friday cited the biotech park among a litany of botched deals and overdue loans that drained the trust's coffers.
"We can't get out of this fast enough," Miami-Dade County Mayor Carlos Alvarez said last week.
County officials say they had only an "administrative or ministerial'' relationship with the trust. Alvarez, who gained strong-mayor powers in January, said he was told that the county could not veto trust projects and that he could not fire trust employees, although they are paid through the county payroll.
"It's bizarre," Alvarez said. "If we can't control the trust, I don't want to be held responsible for its actions."
But for years, the county failed to question how the trust spent much of the nearly $35 million in local tax dollars that went to the agency since it was founded.
Every check the trust sends out must first go through County Hall - and county officials have never once stopped a trust check. Even after County Manager George Burgess killed the biotech project this summer, his staff let through a $75,000 check to a firm tied to the deal.
County commissioners, meanwhile, approved some of the trust's biggest deals - and its biggest failures, including six-figure loans to a debt-ridden radio station, a now defunct Canadian diaper store, and a failed acupuncture clinic.
Records show that Commissioner Dorrin Rolle pushed for more than $600,000 in trust money for a Liberty City nonprofit that used most of it to pay for extravagant block parties - complete with booze, bands and a stand-up comedian.
Local leaders cheered when HUD selected Miami-Dade along with 14 other urban areas for the federal empowerment zone program in a 1999 White House ceremony hosted by then-Vice President Al Gore.
Flush with federal grants and tax incentives, the effort was supposed to spark new jobs, social services and affordable housing in nine of Miami-Dade's most desperate areas: Allapattah, East Little Havana, Liberty City, Melrose, Overtown, Wynwood, Florida City, Homestead and Miami's Central Business District. Neighborhood groups convened to recommend the best projects in each area.
"It is the most significant economic development program in the history of this community -- by far," then-County Mayor Alex Penelas said at the time.
To manage the program, county leaders created the nonprofit Empowerment Trust, with a staff of 16 employees paid through the county and overseen by a volunteer board. But the trust's staff failed to keep accurate financial records, while the board continued to approve risky projects with little scrutiny, rarely questioning the agency's course.
Even projects that weren't designed to attract new businesses or create jobs were approved without debate -- including deals involving trust board members.
CELEBRITY TRAVEL TRUST ALLOTTED MONEY FOR CHARTER FLIGHTS
In 2004 and 2005, the board agreed to pay $175,000 to ferry celebrities to the MTV Video Music Awards on charter flights arranged by Executive Air Services - a company run by trust board member Fabio Alexander.
The trust's tab included flights for Diddy, singers Shakira and Eve, and actor Owen Wilson. In return, the poverty agency was supposed to receive advertising and media exposure, records show.
Diddy and Shakira declined to comment, and Eve and Wilson did not respond to queries through their representatives. MTV also declined to comment.
Alexander abstained from voting on the contracts, and his company paid about $19,000 for some of the MTV flights in 2004, records show. But his company also got some perks: 18 backstage passes, party invitations, and a suite with catering and an open bar, records show.
Alexander declined to comment for this report.
No board members objected to the MTV flights. Board member Sallye Jude said she didn't remember the MTV deal, although records show that she voted for both contracts. Board member Veldrin Freemon also said she didn't recall the arrangement, although records show that she approved the 2004 deal.
"I really do not recall being there or it being discussed," Freemon said.
It wasn't the only time the trust devoted money to a deal involving Alexander.
In 2003, the board agreed to loan $100,000 to Silver Moon Entertainment, an obscure music label that counts Alexander as a minority owner. Then, too, Alexander abstained from voting.
Silver Moon did not promise new jobs - and there's no evidence it delivered any. It was devoted to promoting the singing career of "Margarita," the 33-year-old wife of Silver Moon's chief executive officer, Jeff Reis, a former employee of Alexander's.
The company predicted $1.6 million in revenue by 2006. Trust staffers were even more optimistic: They projected $3.2 million by 2005. Both were wrong.
Silver Moon's net income last year: $178.55, records show. Twice, the trust restructured the loan at Silver Moon's request as the company fell into arrears by as much as $45,000.
There were other problems. The trust's files contain no receipts to show how Silver Moon spent the $100,000 - contrary to trust policies. The trust also paid Silver Moon an extra $22,000 without approval from the board, records show.
The trust's records have no information about the singing career of Margarita, whose primary business is selling designer bra straps. Margarita Reis and her husband did not respond to interview requests.
At least four other trust deals benefited companies with ties to board members and members of neighborhood advisory groups advising the agency.
The trust gave a $50,000 grant in 2000 to Floors to Doors, a Homestead company co-owned by board member Gary Ferguson, according to trust records. Ferguson said the company has seven employees.
Ferguson said the grant application was filed by his partner and noted that it was one of many for Homestead businesses. Although he said he had recused himself from all votes on the deal, trust records indicate that he twice voted for the project. In fact, the board held a third vote so he could abstain, records show.
Board member Veldrin Freemon's employment agency has received more than $200,000 since 2004 to supply office workers to the trust. The trust produced no records showing that the contract was disclosed to the trust board.
Freemon said that her company provides temporary workers to the trust and several other county agencies under a countywide contract, and that she played no part in the trust selecting her firm.
She said she never asked whether the trust board should have approved the arrangement - although the trust's bylaws say that any potential financial conflicts must be disclosed.
"It never came up," Freemon said. "Any entity of the county can call our agency and request personnel."
FAULTY PRACTICES U.S. AGENCY CITES POOR DOCUMENTATION
With little supervision from the board, the trust's staff approved payments without board consent, passed out funds without required documentation, and lost track of costly developments.
A HUD report cited the trust in 2002 for "inadequate documentation," but the federal agency never followed up. The problems persisted.
Under the trust's own rules, businesses cannot be reimbursed without providing receipts or canceled checks to verify the expenses.
Yet, The Miami Herald found 26 instances where that was ignored, with the missing records reaching $2.8 million in undocumented expenses since 2000.
In 2001 and 2002, the trust approved two contracts worth a total of $825,000 to Per Scholas Inc., a nonprofit computer rehab and training agency, to renovate a new training and recycling facility in Liberty City. The improvements never took place.
Instead, the trust records say, the money went to a job-training program that helped 19 people find work. That's $45,000 a person, more than three times the cost of four years' tuition at Florida International University.
The trust provided no invoices for the money, or any records identifying the 19 people.
Repeatedly, the trust paid off large invoices largely on faith, with no supporting records, The Miami Herald found.
There was $150,000 to HealingEdge Wellness Center, a defunct acupuncture clinic; $100,000 to an educational company called Hidden Curriculum Education; $150,000 to a television production company called Bato Productions; and $300,000 to the Florida Free Trade Area of the Americas Foundation. The trust could provide no records to confirm how those agencies spent the money.
Even when the trust had invoices to support payments, it didn't always detect problems.
In at least four cases, businesses or nonprofits double-billed and even triple-billed the trust for the same expenses.
The Martin Luther King Economic Development Corp. received an extra $17,000 by submitting the same invoices more than once, records show. A clothing business called Breeze Express did the same thing, gaining an extra $3,500, records show. The company also billed the trust $850 for rent - although the business was located at the owners' house.
The trust was even double-billed on its largest economic development project: the planned biotech park in Liberty City.
The development company on the project, Poinciana Partners, drew down more than $500,000 in trust money using invoices that had already been paid, The Miami Herald reported in June. Those payments are now being investigated by the Miami-Dade state attorney's office.
The company's majority owner, Dennis Stackhouse, was arrested last week on charges of illegal campaign contributions to local candidates. Prosecutors continue to investigate the project's finances.
LOAN STANDARDS SHAKY ALMOST HALF OF LOANS DEEMED UNCOLLECTIBLE
The shoddy record-keeping and lax monitoring also spilled over into the trust's loan portfolios, multimillion-dollar pools of cash that were supposed to help local businesses grow and lure larger companies to empowerment zone neighborhoods in need of living-wage jobs.
The practice began in 2000 with some of the agency's earliest loans -- $5,000 ''microloans'' awarded to small-business owners "on the basis of [the] recipient's character," according to a county report. It continued with loans reaching into the hundreds of thousands.
In some cases, the trust gave out loans without requiring an application. At other times, it gave extension after extension to borrowers, masking practices that would jeopardize most commercial banks.
Through May, 47 percent of the trust's loans -- worth more than $1.7 million - were deemed uncollectible or were overdue for more than 60 days, trust records show.
Two years ago, the trust board wiped 23 bad loans off the books, totaling $1 million. Sixteen of the trust's 82 loans have ended with the agency taking the business owners to court.
More than once, the trust loaned money to companies already being pursued by creditors, sometimes with little or no collateral.
Fergo Universal Clothing was facing a $124,000 court judgment in June 2002 when the trust approved a $200,000 loan. Nothing was noted in the trust's files about the debt or the underlying lawsuit.
Six weeks after the sports-apparel maker received the trust's money, police seized its inventory and equipment by court order. The company later folded, and the owner filed for personal bankruptcy.
The same thing happened a year earlier, when the trust loaned $75,000 to the Overtown Manufacturing Co. - six months after the company was ordered to pay $126,000 in two lawsuits. That company folded, too, and the owner ended up in bankruptcy court.
Even when the trust was explicitly told about a company's troubled finances, the agency loaned the money anyway.
In one of its largest deals, the trust agreed in 2003 to invest $500,000 with the Haitian Broadcasting Network, a radio broadcaster.
Although it was described as a business "expansion," the deal offered no new jobs, records show. In reality, it was a bailout for a company drowning in debt.
The risks were clear: The company, which broadcast as Radio Carnivale, couldn't even pay the fees for renting air time -- at least $300,000 at the time of the loan.
What HBN had was clout: Its majority owner, Dr. Rudolph Moise, is a well-known political donor, giving nearly $61,000 to candidates and committees since 1996, records show.
"This was to help me buy time," said Moise, who hoped to ultimately buy his own radio station. "One of the reasons I got the loan was because of my credibility in the community."
County commissioners also approved the deal, with the money coming from a county-backed investment fund run by the trust. Despite the risks, the trust secured only the company's assets as collateral, without a guarantee from Moise personally.
"I wouldn't have guaranteed it," Moise said, adding that the company's assets were worth far less than the loan amount.
The loan wasn't enough to save Radio Carnivale. Thirteen months later, it went off the air. Both the trust and the owner of the transmission tower took Moise's company to court.
Moise did guarantee his company's debts to the transmission company. Last month, he agreed to pay $600,000 to settle that lawsuit.
The Empowerment Trust's debt remains unpaid. Moise said he plans to repay it someday - "even though I don't have to."
Miami Herald staff writer Rob Barry contributed to this report.