They called it "The Firm" -- a consulting business Miami city government employees were running from their desks at the Riverside Center administrative building.
On Thursday, police and prosecutors called it racketeering and organized fraud.
Police rounded up 10 current and former city workers Thursday and are planning to arrest an 11th when he returns from a vacation abroad.
All are accused of doing construction design and planning work for outside companies on city time, using city computers and equipment, and even visiting the sites in their city vehicles. All but one worked in the city's Capital Improvements department, which is responsible for things like building parks and fixing streets. Two who had been with the city since the mid-1970s recently retired.
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"We are arresting virtually an entire arm of city government," Miami-Dade State Attorney Katherine Fernández Rundle said during a news conference in the lobby of the city administrative building.
The Capital Improvements department has 48 employees, City Manager Pete Hernandez said. The 10 arrested worked together on city construction plans.
The 11th person who will be arrested worked in the zoning department. All are charged with racketeering, theft and fraud among other charges, and each potentially faces 23 to 95 years in prison and loss of their city pension.
The group put together construction plans and designs for clients from the Keys to Ocala, designing everything from shopping centers and day-care centers to private homes, Fernández Rundle said.
They even got the city to buy specialized equipment and computer software that the city had no use for -- so they could use it to do their freelance work, she said.
"These 11 city workers decided that their government paycheck was insufficient and that the taxpayers owed them more," she said.
City officials first discovered the scam more than two years ago. Former Assistant City Manager Alicia Cuervo Schreiber said she noticed capital improvements employees in the lobby looking over building plans that had nothing to do with the city. She took a closer look at the department.
"We started seeing there was no production coming out of [Capital Improvements]; meanwhile they were there working until 1 a.m. or 2 a.m.," she said.
Then the city received an anonymous letter warning "there's something going on in your department. They're running a company called The Firm," former City Manager Joe Arriola said.
Mary Conway, then department director, began investigating further but couldn't find much.
"At first we thought it was ineptitude or laziness or incompetence," said Conway, now chief of operations.
The investigation did turn up pornography on one computer in the office, and an employee was suspended for a few days, but there was nothing on any of the hard drives suggesting employees were doing anything but city business, Cuervo said.
"We didn't realize they were using flash drives," she explained.
City officials took the case to Miami Police, who also investigated. But at that point the state attorney's office declined to prosecute, and police agreed.
"It looked strictly administrative," Chief John Timoney said. "You find employees all the time doing stuff on company time."
CITY HIRES P.I.
The city hired a private investigator for roughly $100,000 to dig up more. When the investigator presented videos of employees traveling to private jobs during work hours, the criminal probe resumed.
Timoney assigned a sergeant and two detectives to the case. The officers were able to install a secret program in the employees' computers that took pictures of whatever was on each computer's screen every minute.
"We were able to calculate that they were spending 85 percent of their time on outside activities," Timoney said.
The computer images also enabled detectives to track down 24 projects the group worked on between March 19 and May 22.
Timoney doubled the size of the investigative team after learning that word of the probe had leaked out.
"Frankly, we thought, we've got to shut this down," Assistant State Attorney Joe Centorino said. "We're expecting more people to come forward when they hear about this."
One of the arrested employees, Jorge Fabregat, was interviewed by detectives on June 12. He admitted doing the work and gave the detectives a handwritten list of 31 projects he had worked on, according to the arrest affidavit.
Investigators described him as a "low-level" member of the conspiracy.
The investigation is continuing, with detectives looking at three other employees.
Mayor Manny Diaz told a lobby packed with reporters and city employees that his administration would continue to try to root out what he called the "bad apples."
"I pledge zero tolerance for this sort of abuse," he said.
City Commissioner Joe Sanchez said he was pleased the city initiated the investigation, though he said City Hall faces a difficult taskin keeping the public's trust. "There's a perception that we're all crooks," Sanchez said. "It's absolutely wrong."
Charlie Cox, head of the city's general employees union, said his phone Thursday rang "off the hook."
"Everybody's upset about it," he said.
Hernandez, the city manager, vowed to bring in extra help to get projects moving. He said he would look for consultants and shift other employees' responsibilities to pick up the slack.
While successfully completing many projects, the department has repeatedly found itself the target of criticism for shoddy work, delays and cost overruns.
Karen Cartwright, of Overtown, said she attended a groundbreaking for improvements to Gibson Park, at 401 NW 13th St., in October 2004. She says she was told the various planned upgrades -- which included swimming-pool renovations and a new roof for the recreation center -- would mostly be complete within a year.
"This is 2007, and it's not finished," Cartwright said. "I've heard so many excuses."
The department also has faced allegations of favoritism in awarding contracts.
A controversial no-bid Capital Improvements contract that benefited prominent City Hall lobbyist Steve Marin has grown by at least $21 million during the past two or so years. That and other cost increases have left the department cash-strapped -- placing about $39 million worth of planned projects at risk.
Meanwhile, The Miami Herald reported in 2005 that when Conway was the department's director, she was significantly involved in deciding which contractors from a preapproved list received city work -- a list that included her husband Scott's employer, Louisville, Ky.-based Corradino Group.
Corradino Group at the time had received more work than any of the other 22 firms on the list. But county ethics officials, noting that Scott Conway did not have an ownership interest in the company, said no ethics laws had been violated.