Homestead may pull plug on land deal with tarnished Dade Medical College boss

Gary Mikelonis and Maggy Herrera, part time employees at Art South, pack up artist's work in anticipation of their closing, Friday, Dec. 6, 2013.
Gary Mikelonis and Maggy Herrera, part time employees at Art South, pack up artist's work in anticipation of their closing, Friday, Dec. 6, 2013. MIAMI HERALD STAFF

For more than a decade, Homestead’s ArtSouth complex was a cultural jewel in the city’s otherwise forgotten downtown. The arts-focused non-profit — which hosts monthly gallery shows and offers free art programs to children from poor families — was internationally recognized. Actor Gene Hackman, who has a home in the Keys, quietly signed up for a figure drawing class last year.

Then the Ernesto Perez revitalization plan came to town.

Perez, the founder and longtime CEO of Dade Medical College, pitched his for-profit school as the new anchor of Homestead’s historic district, joined by other surrounding businesses that Perez’s companies would also own. City leaders, in their eagerness to attract investment, enthusiastically supported Perez’s ambitions. The city even agreed to sell him 19 city properties at a dramatic discount —less than 40 cents on the dollar.

Since then, Perez has been arrested, his college has become the target of a criminal investigation, and ArtSouth has been financially crippled by Perez’s actions. Forced out of its home by Perez, ArtSouth may not survive past the end of the month.

“He said that we don’t fit in his vision for downtown Homestead,” said ArtSouth Chairwoman Janis Klein-Young.

Meanwhile, the Lucky’s Pub & Grub sports bar that Perez opened — he bragged it cooked up the best burgers around — has gone out of business after only eight months.

On Tuesday, Homestead’s increasingly disenchanted City Council will consider pulling the plug on the 19-property land sale with Dade Medical.

For Homestead, the choice is this: Start the redevelopment process once again from scratch, or trust the future of its downtown to Perez, a convicted sex offender who is once again in trouble with the law.

“There just comes a time when you have to move on,” said Homestead Councilwoman Judy Waldman, once a strong supporter of Perez.

Perez promised that an expansion of his existing Homestead campus — enabled by the land deal — would include spin-off cafes and bars, plus a theater. He said Homestead would come alive with a “college town”-type feel.

But Waldman’s feelings changed after it became public that Perez has a 1990 conviction for a sex crime involving a minor, and a new arrest this October for repeatedly hiding that prior conviction when filling out government forms. Perez’s old arrest led to a six-month prison sentence, as he pleaded no contest to battery and exposing his genitals to a child. Perez was also arrested in 2002 for aggravated battery during a Miami bar fight, though he avoided jail time then.

“People make mistakes in life and God is a forgiving God,” Waldman said. “But don’t hide it and get arrested again because of that.”

At the same time Perez pursued his deal with the city, the college’s real estate arm also bought some privately owned nearby land.

When Perez purchased the ArtSouth building in September, he demanded the non-profit increase its rent payments by almost 500 percent.

ArtSouth couldn’t afford that, and so Perez told them to move out by Dec. 31. To quell the community unhappiness, Perez said he wouldn’t cash ArtSouth’s final three rent checks. That $18,000 could be used to help them relocate.

Then, last month, Perez’s company reneged on that promise and cashed the checks. ArtSouth was financially devastated.

Perez’s decision came shortly after ArtSouth representatives complained to the media that they had been unable to find a new home. The negative publicity angered Perez, ArtSouth leaders say, and he retaliated by cashing the checks.

“It was a real shock,” ArtSouth’s Klein-Young said. “I know that it was vengeful, unfortunately.”

ArtSouth Secretary Beatriz Herrmann started crying when she talked about the non-profit’s free art programs for poor children.

“If they didn’t come to ArtSouth, nobody would ever know that they had that talent,” Herrmann said. “They are going to be deprived of something that they deserve to have...that’s why it’s upsetting.”

Some city leaders are horrified that Perez’s people pocketed the money.

“Wow,” said Homestead Councilwoman Patricia Fairclough, after hearing the news. “When you’re doing things like that, that’s vindictive, and it’s not with a pure heart, and it’s just not good for the city.”

Perez — who did not answer calls to his cell phone — resigned as Dade Medical CEO after his October arrest, but he remains the college’s majority owner. He has pleaded not guilty to two counts of perjury, a misdemeanor, and one count of providing false information through a sworn statement, which is a third-degree felony.

Regarding Perez’s 1990 sex crime against a 15-year-old girl, Waldman described its significance by first stating that she’s a mother.

But then she quickly added, “it would trouble anybody, whether they were a mother or’s got to bother you. It’s got to.”

Others, such as Homestead Vice Mayor Stephen Shelley, are turned off by the way that Dade Medical was chosen as a property buyer in the first place.

During Perez’s extensive lobbying of Homestead officials (while failing to properly register with the city as a lobbyist), the college leader hired the wife of then-Mayor Steve Bateman as his real estate consultant. Bateman — who was arrested in August on unrelated corruption charges — never disclosed this conflict.

“It essentially will always be a tainted project,” Shelley said. “Therefore I think the best thing we can do is start the process over.”

The Bateman situation was not unique. Dade Medical has a habit of showering money on politicians — close to a dozen elected officials have taken jobs at Dade Medical or received payment in some way. Perez has also spent at least $200,000 on political campaign contributions — including tens of thousands given to Homestead candidates.

Public records show that Perez’s cozy relationship with Bateman clearly impacted the negotiations with the city.

As recently as February of this year, Dade Medical representatives were stubbornly refusing to perform a required traffic study for the land they wanted.

“The mayor waived the traffic study,” is what the college said, according to city records. Bateman had no authority to grant such a waiver.

As Miami-Dade prosecutors investigate Dade Medical, one area of focus is Perez’s ties to Bateman. The former mayor, despite his recent arrest, ran for reelection in October.

He lost.

There are other lingering questions surrounding the college. Some students complain of overpriced degree programs taught by unqualified professors. Dade Medical’s nursing program has such bad scores on the licensing exam that the Miami and Hollywood campuses are both on state probation.

The Miami Herald also reported that Dade Medical gave free tuition to the sister-in-law of Miami state Rep. Carlos Trujillo — at the same time Trujillo championed legislation benefiting the school.

And earlier this year, the college secured a $7.2 million line of credit from Doral-based U.S. Century Bank. In the lengthy list of items that Dade Medical pledged as collateral, there is a section that reads in part: “All of the Debtor’s accounts (including, without limitation, all student financial assistant disbursements, receivables, grants, all notes, notes receivable, drafts, acceptances, and similar instruments and documents) both now owned and hereafter acquired.”

According to federal regulations, colleges are forbidden to use student aid dollars as collateral — a federal handbook on financial aid says that “under no circumstances” are colleges allowed to do this. Though the money sits in Dade Medical bank accounts, it isn’t truly the school’s property to pledge.

A key reason: some of the funds might be later disbursed to students, and some of the money might have to be returned to the government if students drop out.

In a joint interview, new Dade Medical co-CEOs Raul Mendez and Jonathan Janeiro disputed that the arrangement was improper.

They said the college “qualifies” students for loans up front, the paperwork is submitted while the students attend class but the loan proceeds aren’t delivered until after services are rendered, meaning the instruction has been provided, and the tuition earned. At that point, they said, the money belongs to Dade Medical and can be used as collateral.

“Schools can operate a couple of different ways, but this is how we do it,” Janeiro said.

Some financial aid experts said Dade Medical did nothing wrong, but others saw cause for concern.

“I think it’s a clear violation,” said Dan Madzelan, a former staff director for forecasting and policy analysis with the U.S. Department of Education.

In Homestead, Perez has had two years to fulfill the city’s requirements for closing on the land sale. That deadline is now up, and Perez is asking for a six-month extension.

Among Homestead’s closing requirements: Dade Medical had to submit approved plans for 25,000 square feet of new retail, medical, or classroom space.

Notably, there was no restriction in the deal to prevent Perez from reselling some of the land that he was getting at a huge discount. Dade Medical would pay $328,000 for property that was collectively valued at $865,425.

Though some on the City Council are ready to cut ties with Perez, Tuesday’s vote is hard to predict. The college still carries enormous political clout.

Councilman Jimmie Williams III said granting extensions is something that Homestead does routinely — and so Dade Medical should get one too.

Williams said the controversies surrounding Perez are irrelevant because he stepped down as CEO. Williams was not concerned that Perez is still the college’s owner.

“He is not on the board anymore and has no day-to-day function within the college,” Williams said. “To me, that says a lot.”

Williams also praised Perez for bringing restaurants such as Lucky’s, the sports bar, to downtown’s Krome Avenue. He was caught off-guard when told Lucky’s is now closed.

“Lucky’s Bar and Grill is closed?” he said.