Published: Oct. 3, 2007 Breach of Trust
Rent has doubled for Leon Athouris, who owns a tailor shop in Liberty City that he is struggling to keep open in the face of new development. C.W. GRIFFIN/MIAMI HERALD STAFF
Millions for deals, not for merchants
Money meant to help small businesses in Liberty City went to risky real-estate ventures and for parties and travel.

Leon Athouris opens his tailor shop at 9 a.m. every weekday and works until 3:30 p.m. before heading to his maintenance job at Jackson Memorial Hospital, where he toils until after midnight.

"My business can't support my home," he said from his narrow storefront shop at Northwest Seventh Avenue and 62nd Street, known as Dr. Martin Luther King Boulevard.

For a quarter of a century, Athouris has operated in the heart of Liberty City, employing local residents on a street corner marked by shuttered shops, dilapidated buildings and images of King, the civil rights leader who spent his final days fighting poverty.

During the past year, Athouris has seen his rent double in the face of three massive developments that were supposed to create jobs and lure businesses to this intersection.

Now the tailor wonders whether he can keep his small concern going. "We are in a very difficult position," he said.

The developments were funded in large part by the Miami-Dade Empowerment Trust, a county-created nonprofit that has received $68 million in public money to help people like Athouris.

But the trust's investments at Northwest Seventh Avenue and 62nd Street reveal a pattern of favoring insider firms above mom-and-pop enterprises while banking on risky real-estate ventures that undermined the agency's own mission, a Miami Herald investigation found.

Johnny Cheeley, cutting Willie Bean's hair, says his Mop City shop lost three employees after getting news he would have to move. PETER ANDREW BOSCH/MIAMI HERALD STAFF

During the past eight years, the trust provided just $267,000 to seven small businesses around this intersection while dividing up nearly $3 million among a politically connected nonprofit, an out-of-town development company that has been slammed by the county's inspector general, and a local developer caught up in a scandal over the county housing agency's headquarters.

Along the way, the trust failed to properly monitor the millions in public funds it handed out. Now hundreds of thousands of dollars are unaccounted for, while tax money set aside to help the poor went to block parties, travel, entertainment and other questionable expenses.

Of the three developments the trust funded, one is on hold, another has languished for years, and the third - a shopping mall - is filled with vacancies.

Meanwhile, Joel Darvin had to move his secondhand furniture store on Northwest Seventh Avenue after his rent went up amid what appeared to be a real-estate boom fueled largely with public dollars set aside to help businesses like his.

"The rent was too high. I moved two months ago and lost $17,000 already," Darvin said from his new shop at 320 NW 71st St.

A review of hundreds of records and nearly a dozen interviews shows that the trust's strategy for this historic street corner hurt the very people it was supposed to help while millions in tax dollars earmarked for small businesses went to botched deals that failed to create promised jobs.

Consider:

• At the request of County Commissioner Dorrin Rolle, the trust granted the Martin Luther King Economic Development Corp. more than $630,000 since 2003 to redevelop its headquarters on the southwest corner of Northwest Seventh Avenue and 62nd Street.

Yet, the nonprofit has done little to transform the shabby building into a new $14.5 million incubation center for small start-up businesses and retail stores.

Instead, the MLKEDC paid Rolle's former chief of staff, James McQueen, $75,000 in consulting fees while spending tens of thousands on block parties and cultural events, footing the tab for all 12 of its board members - and McQueen - to attend a conference in San Francisco, and holding board retreats at upscale resorts in Key Biscayne and Key Largo.

• The trust paid more than $351,000 to Atlanta-based Red Rock Global for predevelopment expenses on an $86 million transit hub that was supposed to include retail shopping, office space and 165 apartments across the street from the MLK building on Seventh Avenue.

The county scrapped the plan after former transit director Roosevelt Bradley notified Miami-Dade's inspector general of questionable invoices submitted by Red Rock.

A review of the trust's files by The Miami Herald found that the agency paid Red Rock before signing a contract and that nearly all of the expenses lacked documentation justifying the charges.

• Across the street from the proposed transit hub, on Northwest 62nd Street, the trust put $1.4 million into a shopping mall that was supposed to create 200 permanent jobs for Liberty City residents but is filled with vacant storefronts months after opening.

Built by Peninsula Edison Plaza LLC, a local concern operated by Otis Pitts Jr. - a partner in a company under fire over the housing agency's Hometown Station debacle - the $13 million shopping center was funded entirely with public money.

'I take that as a pure insult, to see them put a Foot Locker across the street when we sell shoes right here,' says Tyrone Greene. C.W. GRIFFIN/MIAMI HERALD STAFF

Yet, many preexisting businesses in the neighborhood say they can't afford rents at the mall. Even worse, some feel that the shopping center attracted businesses that directly compete with long-established concerns.

From his store across the street, Tyrone Greene watched as Edison Plaza went up and a Foot Locker shoe store moved in. For 45 years, Greene's family has run Greene Dreams Shoe Repair, selling shoes and "saving soles" in Liberty City without any assistance from the trust or the county.

"I take that as a pure insult, to see them put a Foot Locker across the street when we sell shoes right here," said Greene, who took over the business after his father died seven years ago. "Our business is a landmark in this community."

Greene's wife, Paulette, said they tried applying for assistance from the trust two years ago but were turned down because their business is 270 feet outside the empowerment zone.

Yet, the trust has handed out $3.6 million in loans and grants to businesses lying outside the zone - including Edison Plaza, where the Foot Locker is nearly 500 feet away from the zone.

LARGER STRATEGY | TARGETING BLIGHT ALONG AREA'S GATEWAY

The trust's investments were part of a larger strategy aimed at revitalizing the Seventh Avenue corridor, an urban thoroughfare viewed as the gateway to Liberty City.

Headed by the trust and a handful of local nonprofit groups, collectively called the 7th Avenue Corridor Initiative, the plan was supposed to wipe away blight that has plagued the area for decades.

Unlike other empowerment zone neighborhoods - where most of the trust's money went to small businesses - the trust's focus in Liberty City has been on major real-estate developments.

Otis Pitts Jr. helped build Edison Plaza, replacing this building on Northwest 62nd Street. The new mall is filled with vacant storefronts. C.W. GRIFFIN/MIAMI HERALD FILE

In 2001, the agency invested $1.6 million to double the size of a tofu manufacturing plant in Liberty City called Leasa Industries. The expansion is a rare bright spot in the trust's record. Leasa hired 10 more workers since 2001 - although the expansion was supposed to create 65 jobs.

"The Empowerment Trust has helped me a lot," said Leasa's owner, George Yap. "I now have the space and the facilities to provide more product to my customers."

But across the street from Leasa, the trust put more than $3.3 million into a proposed biopharmaceutical park without monitoring the project or the money. The park is now at the center of a sweeping criminal investigation after a Miami Herald series in June exposed widespread problems with the project, including more than $500,000 in double billings and fake invoices submitted by a company controlled by Boston developer Dennis Stackhouse.

In fact, for every $1 the trust provided in loans and grants to small businesses in Liberty City, more than $20 went into multimillion-dollar bricks-and-mortar projects that never materialized, are years behind schedule or failed to create promised jobs, according to a Miami Herald analysis.

PROJECT LAGGING | PARTIES AND PERKS, BUT NO NEW BUILDING

Across the street from Joel Darvin's shuttered furniture store on Northwest Seventh Avenue, the Martin Luther King Economic Development Corp. received hundreds of thousands of dollars from the trust for a redevelopment project that is years behind schedule.

Since 2003, the trust's board has passed four resolutions providing the MLKEDC with more than $630,000 for economic development activities in Liberty City and to convert its headquarters at 6100 NW Seventh Ave. into a $14.5 million business incubation center.

After nearly every resolution, however, the MLKEDC asked to change the scope of its contracts with the trust. And each time, the trust's former chief executive officer, Bryan Finnie, or current CEO Aundra Wallace obliged - without their board's consent, records show.

Instead of going toward a new building, tax money paid for block parties and other public events, phone and electric bills and perks for the MLKEDC's board - including $10,000 for a conference in San Francisco and a $7,000 retreat at an oceanfront resort in Key Largo called the Mariners Club.

In 2005 alone, the trust reimbursed MLKEDC for eight different events, including celebrations on Labor Day, Memorial Day and Columbus Day.

MLKEDC's president, Cornelius Shiver, said the trust was merely a "pass-through'' for grants approved by the County Commission, and the money was always intended for the nonprofit's "cultural events," which include a festival marking the anniversary of King's assassination.

However, Shiver could not explain why the trust's board voted to steer this money specifically for redevelopment projects. Trust officials have declined to comment.

A review of receipts submitted to the trust also revealed at least $17,000 in double billing, including invoices for sound systems, party supplies and a disc jockey for one event.

Shiver said the trust never informed him of double billing, but if it happened, it was unintentional. "People make errors," he said.

David Chiverton, the nonprofit's director, said the public events and celebrations "brought the community together and highlighted businesses along Seventh Avenue."

He said the trip to San Francisco was also in line with the MLKEDC's mandate. "It was a training opportunity to look at other successes from across the country and to familiarize ourselves with similar communities."

Another $75,000 from the trust went to pay a consultant with ties to County Commissioner Dorrin Rolle, who appointed the trust as the fiscal agent for county funds provided to the MLKEDC, records show. Rolle did not respond to e-mails and phone messages seeking comment.

Little has been done to transform the MLK Economic Development Corp., 6100 NW Seventh Ave., into a business center. C.W. GRIFFIN/MIAMI HERALD STAFF

James McQueen - Rolle's former chief of staff - and the MLKEDC entered into a $20,000-a-year consulting contract for the MLK Business Center project on Jan. 7, 2003 - the same day the trust passed its first MLKEDC resolution.

Two years later, Miami-Dade's auditor began raising questions about McQueen's contract after the auditor found the trust's files contained no work product or other documentation to show what McQueen had done for the money.

McQueen later submitted a list of meetings he had attended regarding the MLKEDC's $5 million allocation for the MLK Business Center from the voter-approved Building Better Communities bond program.

Yet, records from the county office overseeing the bond program show that the MLKEDC repeatedly failed to submit budgets, tenant lists and other documents to the county on time.

Although voters approved the project in 2004, the MLKEDC didn't submit a development proposal to the county until May 2007 -- more than four years after it hired McQueen to prepare documents related to the project, find a developer and lure tenants.

"I was never required to itemize my time as much I was required to keep the Board and staff apprised of the task and objectives that were entrusted to me," McQueen said in a response to questions e-mailed to him from The Miami Herald.

REPORTS NOT FILED | TRUST DID NOT ASK FOR ACHIEVEMENTS

Under contracts signed with the trust, the MLKEDC was supposed to file reports detailing its achievements with public dollars. But the trust could not provide any reports since 2003.

In September 2006, Chiverton wrote a three-paragraph letter to the trust describing the nonprofit's accomplishments - for its 2003 contract.

"I would like to take this opportunity to provide you and Miami-Dade County with the status of our contract from 2003-2004," Chiverton wrote.

The main accomplishment outlined in the letter: the MLKEDC's payoff of a $155,000 private mortgage. What Chiverton didn't mention: The nonprofit had taken out a new $750,000 mortgage the day before submitting the letter.

"Our report correctly focused on the money allocated," Chiverton said. "The $750,000 was not in any way related to the county money."

Yet, the MLKEDC now wants to use county bond money to pay off that loan, according to project budgets it has submitted to the county.

It wasn't the first time the MLKEDC received public funds to improve the MLK Business Center.

In 1982, the nonprofit received a $400,000 loan from the city of Miami to redevelop the business center. By 2006, little had been done to upgrade the building and the city had filed a civil lawsuit against the nonprofit to recoup its money.

The trust approved a resolution in January 2004 providing the MLKEDC with $100,000 in county money to pay off part of the city loan. When the city refused to accept partial payment, the MLKEDC used $80,000 for block parties complete with bands, booze and a stand-up comedian. The other $20,000 went to "board training," which included the conference in San Francisco.

The city loan was paid off in September 2006, two weeks after the MLKEDC took out the $750,000 mortgage.

Meanwhile, the MLK Business Center redevelopment is years behind schedule, while the property remains saddled with debt.

Shiver insists the redevelopment will take place -- with McQueen as a developer along with Otis Pitts.

Across the street from the MLK Business Center, the Empowerment Trust pumped more than $351,000 into the Martin Luther King Transit Village, a project billed as an economic juggernaut that would breed scores of living-wage jobs for Liberty City residents.

Instead, the trust failed to monitor the hundreds of thousands it doled out in predevelopment expenses for the project, which stalled and is now in limbo.

In November 2005, the agency hired Atlanta-based Red Rock Global to develop the transit village without a competitive bid and began to pay the company tens of thousands of tax dollars with little or no documentation.

Red Rock's first invoice included more than $20,000 for "reimbursable expenses" - including travel, entertainment and meals.

Although the bill was created a week before the trust's board approved the deal and more than five months before it signed a formal contract with Red Rock, the trust's CEO, Aundra Wallace, paid the bill anyway - a violation of county procurement rules, which the trust was supposed to follow.

During the next eight months, the poverty agency would dole out nearly $40,000 in travel, meal and entertainment expenses for Red Rock employees without receipts provided for backup, according to trust files reviewed by The Miami Herald.

Red Rock received at least $45,000 for overhead expenses, $37,000 for developer fees - even $73,000 for construction-related expenses - although there hadn't been a single brick laid, nail pounded or permit application submitted for the project. The county hadn't even acquired land for the project.

Joel Darvin was forced to move his furniture store after his rent went up amid an apparent building boom fueled with public money. PETER ANDREW BOSCH/MIAMI HERALD STAFF

In a written response, Red Rock's attorney David Milian said all of the expenses were justified under the company's contract with the Empowerment Trust, a contract that allowed Red Rock to bill without receipts.

He said Red Rock was chosen from a pool of developers established by the trust through a bidding process. But, according to trust documents, the list included just one other developer, and Red Rock did not compete specifically for the transit village - an $86 million mixed-used project that was suppose transform the neighborhood.

Milian said Red Rock fulfilled all of its responsibilities under the contract and that the county is now trying to use the company as a scapegoat for the failed transit project.

In June 2006, Red Rock sent a bill to the county's transit agency, which was involved in overseeing the bus depot that would be part of the development.

Then-transit director Roosevelt Bradley asked the county's inspector general to review the bills after questioning how Red Rock got the contract and whether the company had actually done any work.

A year later, the Office of the Inspector General issued a scathing report detailing what it deened as questionable invoices and the trust's monitoring of the public's money. Red Rock is appealing the inspector general's report.

Soon afterward, the county terminated its agreement with the trust, canceled the $86 million transit village plan and is now considering whether to move forward on a much smaller scale.

For many business owners, however, the damage had already been done.

In the wake of the trust's transit-hub proposal, the corner's largest property owner - Hialeah-based RPC Properties - began to increase rents, a move that has already forced at least one business owner from the area.

Johnny Cheeley's Mop City Hair Styling Center -- a Liberty City institution for 35 years - lost three employees after he was told that he'd have to move his shop to make way for a now defunct government-funded development.

"That had an impact on my business because some of our clients went with [the three barbers]," Cheeley said.

RETAIL CHAINS | MANY SHOPS IN MALL REMAIN SHUTTERED

While long-standing mom-and-pop concerns struggle to eke out an existence in Liberty City, the trust pumped more than $1.4 million into a strip mall on Northwest 62nd Street, across from the proposed transit village.

By seeking out national retail chains, the development was supposed to create 200 permanent jobs.

But months after its completion, many of the shops remain shuttered.

The landlord is a company called Edison Marketplace Group, a partnership of two nonprofits - Tacolcy Economic Development Corp. and Belafonte Tacolcy Center, both part of the 7th Avenue Corridor Initiative.

The developer on the project is Peninsula Edison Plaza LLC, run by Otis Pitts Jr. - a former police officer who is one of the few active builders in the area.

Since 2002, Peninsula and the nonprofits have received nearly $13 million in public money to build the shopping mall.

Tacolcy's president, Carol Gardener, said that Edison Plaza is a rare success story in Liberty City - a badly needed project where taxpayers can see results. She said any business in the neighborhood can apply to move in - as long as it can pay the rent.

"Edison Plaza is a good thing because you know where the money went. The buildings are there," she said. "The strategy is to bring in national retailers that will draw customers to mom-and-pop stores in the area."

But owners of those mom-and-pop stores who can't afford the rents at Edison Plaza wonder why millions in public money went to a real-estate deal instead of to established businesses struggling in one of the least affordable counties in the nation.

"We're trying to keep the dream alive on Martin Luther King Boulevard," said Tyrone Greene, of Greene Dreams Shoe Repair. "The Empowerment Trust has done absolutely nothing to help."