Gov. Scott’s blind trust and a company with a massive pollution problem

By Dan Christensen, FloridaBulldog.org 

Gov. Rick Scott

Gov. Rick Scott

When Gov. Rick Scott put $133 million of his assets into a blind trust two years ago, he included his shares of Mosaic, owner of the Central Florida fertilizer plant where 215 million gallons of contaminated wastewater recently drained into an aquifer that provides drinking water for millions of Floridians.

Scott’s ownership interest in Mosaic was relatively small – he valued it at about $14,000 on the list of assets he placed in the blind trust – yet it provides another example of how the governor’s sprawling personal finances conflict, or appear to conflict, with his official duties.

Does Gov. Scott still have an ownership interest in Mosaic? Has it increased? On Wednesday, his office released a statement saying the governor is unaware of any sales, purchases or changes in the trust because it is “under the control of an independent financial professional.”

The trustee is New York-based Hollow Brook Wealth Management, whose chief executive is longtime Scott crony Alan Bazaar.

U.S. Securities and Exchange Commission documents filed earlier this year state that Bazaar also serves as an advisory board member of G. Scott Capital Partners, the private equity firm co-owned by First Lady Ann Scott and run by a trio of the governor’s former employees at Richard L. Scott Investments. Both the governor and Mrs. Scott have been substantial investors in Scott Capital’s investments.

Republican Gov. Scott’s handpicked Secretary of the Department of Environmental Protection, Jon Steverson, is now overseeing Mosaic’s response to the massive dump of contaminated water that occurred in late August when a 45-foot wide sinkhole opened at Mosaic’s New Wales fertilizer manufacturing plant in Mulberry, about 55 miles east of Tampa.

The Mosaic plant sinkhole in what was a large pond atop a gypsum stack. When the sinkhole opened, millions of gallons of acidic wastewater drained into an aquifer used for drinking water. Photo: WFLA Tampa

The Mosaic plant sinkhole in what was a large pond atop a gypsum stack. When the sinkhole opened, millions of gallons of acidic wastewater drained into an aquifer used for drinking water. Photo: WFLA Tampa

“Governor Scott will hold all responsible parties accountable for their actions and has directed the Department of Environmental Protection (DEP) to expedite their investigation,” Scott’s communications director Jackie Schutz said in a Wednesday statement. “Governor Scott has also directed the Department of Health to partner with DEP in their investigation to ensure all drinking water in the area is safe. We know Mosaic has taken responsibility, but our job is to ensure 100 percent safe drinking water.”

Earthjustice is a large nonprofit environmental law firm. Informed that Gov. Scott previously disclosed his ownership of Mosaic stock, Senior Associate Attorney Bradley Marshall said, “We’re always concerned about the governor’s ties to industry. We certainly do think the governor has not been a good protector of the environment in Florida. We’ve already seen veterans at DEP fired for doing their jobs.”

Mosaic, based in Plymouth, Minnesota, is a Fortune 500 company (NYSE: MOS) with extensive operations in Florida, where it employs 4,000 workers. According to the company’s web site, it mines phosphate rock from nearly 200,000 acres of Mosaic-owned land in Central Florida and potash from mines in Canada. The products are processed into crop nutrients that are shipped around the world. Mosaic’s revenues last year were about $9 billion.

Mosaic politically active

Mosaic Fertilizer LLC, the company’s principal operating subsidiary in Florida, is politically active. State records show it fields a team of 14 executive branch lobbyists in Tallahassee. Since 2008, Mosaic entities have contributed about $1.9 million to political candidates and causes, with about $840,000 going to the Republican Party of Florida and the Florida Republican Senatorial Campaign Committee, records show.

In October 2015, Mosaic Fertilizer LLC agreed to a nearly $2 billion settlement with the U.S. Environmental Protection Agency (EPA) regarding charges that its New Wales facility and other plants in Florida as well as Louisiana improperly handled 60 billion pounds of hazardous waste. Specifically, EPA inspectors found that Mosaic had mixed certain types of highly corrosive substances like sulfuric acid from its fertilizer operations with phosphogypsum and wastewater from its mineral processing. Sulfuric acid is used to extract phosphorus from mined rock.

Phosphogypsum is the radioactive byproduct that’s created when phosphate is turned into fertilizer.

An EPA press release at the time said the settlement “will ensure that wastewater at Mosaic’s facilities is properly managed and does not pose a threat to groundwater resources.’’

Gypsum stacks at a a phosphate plant in Florida Photo: Engineering and Mining Journal

Gypsum stacks at a a phosphate plant in Florida Photo: Engineering and Mining Journal

The sinkhole formed beneath one cell of a mountainous phosphogypsum stack topped with a 250-million-gallon pond filled with acidic wastewater from the fertilizer manufacturing process.

According to the company, plant workers noticed a decline in the water level on Aug. 27. While Mosaic quickly notified the DEP and the EPA, no public announcement was made until Sept. 15.

“A sinkhole formed under the west cell that we believe damaged the liner system at the base of the stack,” said the company’s initial press release. “The pond on top of the cell drained as a result, although some seepage continues.”

Mosaic went on to say it “immediately implemented additional and extensive groundwater monitoring and sampling regimens and found no offsite impacts.”

Company officials who appeared Tuesday before the Polk County Commission reiterated, “No water from the stack has migrated off our property.” The company also apologized for not notifying the public sooner.

Gov. Scott’s blind trust – his second while in office – was created under the terms of a secret trust agreement signed in June 2014. His office has declined to make the agreement with the trustee public.

Scott acquired Mosaic while in office

Gov. Scott acquired his Mosaic investment while in office. His first blind, created in April 2011 a few months after he was sworn in, disclosed no ownership of Mosaic shares.

Florida’s qualified blind trust law was passed by the Legislature and signed into law by Scott in 2013. The idea was to prevent conflicts of interest by blinding public officials and the public to their holdings, and also afford those who use them immunity from prohibited conflicts.

“The Legislature finds that if a public officer creates a trust and does not control the interests held by the trust, his or her actions will not be influenced or appear to be influenced by private considerations,” the law says.

But Florida’s blind trust law, crafted with mega-wealthy Gov. Scott in mind, did not contemplate that such a trust could at times become a see-through entity, making it ineffective.

For example, in March 2014 Florida Bulldog reported that SEC records showed Gov. and Mrs. Scott had recently sold $17 million worth of shares in Argan (NYSE:AGX), a company whose principal subsidiary builds and operates power plants in Florida and elsewhere.

Florida Bulldog reported in July 2014 about Scott ownership of shares in a natural gas pipeline firm, Spectra Energy, looking to build the $3-billion Sabal Trail pipeline across North and Central Florida.

In 2013, Florida’s Public Service Commission – five members appointed by Gov. Scott – unanimously approved construction of Spectra’s controversial pipeline venture with Florida Power & Light. Florida’s Department of Environmental Protection subsequently approved it, too.

What didn’t become known until the following year, however, was that Scott had investments totaling $110,000 in Houston-based Spectra and DCP Midstream Partners, a natural gas limited partnership 50 percent owned by Spectra. Scott only disclosed those interests in June 2014 when he closed his first blind trust and created his second blind trust while qualifying to run for re-election.

Florida’s ethics laws generally prohibit public officials like the governor from owning stock in businesses subject to state regulation, or that do business with state agencies. A similar prohibition exists on owning shares in companies that would “create a continuing or frequently recurring conflict” between an official’s private interests and the “full and faithful discharge” of his public duties.

The governor has said he was unaware of his Spectra investments because they were in his blind trust.

In February, Florida Bulldog reported that in 2012 Scott owned a $210,000 stake in a private equity firm that owned Fort Myers-based 21st Century Oncology when it was awarded a unprecedented 25-year, no-bid contract to supply radiation oncology services to taxpayer-supported Broward Health. An all-Republican board of commissioners appointed by Scott and his Republican predecessor made the award.

A spokeswoman for the governor said Scott wasn’t aware that 21st Century had sought the Broward Health contract and that no one at the private equity firm, Vestar Capital Partners, or 21st Century, had asked him to try to influence the hospital district’s selection process.

Broward courts accused of nurturing double standard of justice for poor, minorities

By Dan Christensen, FloridaBulldog.org 

Broward Chief Judge Peter Weinstein, left, and Public Defender Howard Finkelstein

Broward Chief Judge Peter Weinstein, left, and Public Defender Howard Finkelstein

A letter from the U.S. Justice Department urging state judges across the country to eliminate “common” court practices that illegally trap poor defendants in cycles of debt and jail is reverberating in Broward with accusations that courts here favor the well-off.

Broward Public Defender Howard Finkelstein once again is leading the charge for systemic reform as evidenced by a series of testy recent written exchanges with Broward Chief Judge Peter Weinstein. Among other things, Finkelstein wants the courts to scrap the use of so-called “convenience bail bonds” the poor often cannot afford, and accuses judges of fostering a “double standard” of justice by ignoring the disparate treatment of minorities and the indigent.

“This jurisdiction’s practices have effectively institutionalized racism by disproportionately incarcerating poor minorities for decades,” Finkelstein concluded Sept. 2 in his most recent letter to Weinstein.

In an interview on Friday, Weinstein replied, “I don’t know where he gets that from. Every judge ascribes to the saying that justice is blind and ignores race, creed, national origin and gender in ruling. Howard can absolutely write what he wants, but that doesn’t necessarily make it so.”

The Department of Justice’s March 14 letter, signed by Deputy Assistant Attorney General Vanita Gupta, followed a gathering of judges, court administrators, lawmakers, prosecutors, defense attorneys and others last December to discuss fines and fees imposed by state and local courts. The letter said the convocation, held in the wake of the department’s investigation of racially troubled Ferguson, Missouri, “made plain that unlawful and harmful practices exist in certain jurisdictions throughout the country.”

U.S. Attorney General Loretta Lynch described those illegal practices as “the criminalization of poverty.”

The letter explained it was issued to help the courts ensure that they operate fairly, noting the illegal enforcement of court fines and fees can have “profound” effects on low-income persons accused of “misdemeanors, quasi-criminal ordinance violations or civil infractions.”

“Individuals may confront escalating debt; face repeated, unnecessary incarceration for nonpayment despite posing no danger to the community;

lose their jobs; and become trapped in cycles of poverty that can be nearly impossible to escape,” the nine-page letter said. “To the extent that these practices are geared not toward addressing public safety, but rather toward raising revenue, they can cast doubt on the impartiality of the tribunal and erode trust between local government and their constituents.”

A caution from Justice

Among other things, the letter cautioned that courts “must not employ bail or bond practices that cause indigent defendants to remain incarcerated solely because they cannot afford to pay for their release.”

Finkelstein, a state constitutional officer, filed a public records request with the Broward court to obtain a copy of the Justice Department’s letter. Weinstein later explained that he “did not provide the letter to any stakeholder as it was addressed to the courts to assist with review of local practices and procedures.”

Weinstein said Friday he’s waiting on Florida’s Office of the State Court Administrator. “They’re reviewing it and will come back and advise us,” he said. “But I really don’t believe we are doing some of the things we are accused of. We don’t put people in jail because they can’t pay a fine.”

According to Finkelstein’s Sept. 2 letter, however, “Individuals are often held in jail following a magistrate hearing for a minor offense simply because they cannot afford to post the bond.”

Beyond the fundamental question of fairness is the impact that bond requirements have on Broward’s chronically overpopulated jail system, which has been under a federal consent decree and monitoring for decades.

In July, the Sun-Sentinel reported the findings of court-appointed jail population expert Dr. James Austin, who said Broward’s jails typically house 4,500 to 4,600 people, with 5,144 beds, but when the population exceeds 85 percent of capacity – or about 4,400 inmates – the system becomes strained.

According to the paper, Austin’s report went on to say that at the time of his analysis in 2015 about 300 inmates were being held on bonds of $100 or less.

The Eighth Amendment to the U.S. Constitution says “excessive bail shall not be required, nor excessive fines imposed.” Federal courts have interpreted that to mean that a defendant’s bail cannot be set higher than an amount that’s likely necessary to ensure his presence at trial.

Defendants charged with first-degree misdemeanors like petty theft or possession of a small amount of marijuana must post a $100 bond to get out. Those charged with a misdemeanor of the second degree, such as disorderly intoxication or loitering will need $25.

But even those small amounts can be difficult to scrape up for the homeless or the otherwise down and out.

‘Follow other jurisdictions’

In his summer correspondence, Finkelstein urged Weinstein to “follow other jurisdictions and begin implementing the release of misdemeanants without monetary bond.” He cited Calhoun, Ga., which in January “implemented recognizance release procedures” following a federal judge’s order.

The chief judge responded to Finkelstein that Broward judges do consider non-monetary releases “and divert as many individuals as possible to the Broward County Sheriff’s Pre-Trial Release Program.” The program includes screening, assessment and, for those who get out, monitoring.

Yet current bond practices that allow moneyed defendants to post a bond and walk free until trial “disproportionally affects minorities and the indigent,” according to Finkelstein.

“Diverting individuals to the pre-trial release program creates a double-standard wherein those with money are not required to be supervised by the Sheriff’s Office, while those without money require supervision,” Finkelstein wrote in his Sept. 2 letter.

In Friday’s interview, Weinstein said he is opposed to releasing all misdemeanor defendants on their own recognizance, noting that a “staggering” number of warrants are issued every year for defendants who fail to show up for trial.

“Whether to release is within the discretion of the judge,” Weinstein said. He cited domestic violence as a crime that is inappropriate for such treatment.

“Domestic violence may be a misdemeanor, but the amount of psychological abuse and previous physical abuse that a spouse may have suffered may place them at risk of serious emotional harm an even death,” Weinstein said.

In 2015, following complaints from State Attorney Mike Satz’s office, the court revised its bond schedule to require misdemeanor defendants charged with violent offenses such as battery, arson and domestic violence to appear before a First Appearance court judge before being eligible to post bond.

Finkelstein, however, argues that Broward’s bond schedule should be abandoned and that all defendants should be brought before a First Appearance court judge “to allow for individualized release conditions.”

“Individual determinations, however, require a 24-hour magistrate. This circuit has decided not to place such a ‘hardship’ on the judiciary, but instead place the true hardship on the indigent,” Finkelstein wrote.

Jack Nicklaus, partners pay $400K to settle charges they filled wetlands at golf club

By Francisco Alvarado, FloridaBulldog.org 

The Bear's Club golf course in Jupiter.

The Bear’s Club golf course in Jupiter.

Golf legend Jack Nicklaus has given up a legal battle over federal accusations that his companies violated the Clean Water Act by disturbing environmentally protected wetlands in The Bear’s Club, a private golf course community he built 17 years ago.

Last month, U.S. District Judge William P. Dimitrouleas signed off on a consent decree between the federal government and The Bear’s Club Founding Partners Ltd, four related companies and three of Nicklaus’ development partners to settle a lawsuit filed last October by the Department of Justice. The defendants are required to pay a $400,000 civil penalty and offset the environmental impact done to two patches of wetlands in The Bear’s Club 369-acre property that were filled.

Eugene Stearns, a Miami-based lawyer representing The Bear’s Club Founding Partners, told Florida Bulldog that his client did not admit to any wrongdoing. “The $400,000 is a fraction of what it would cost to litigate this case to its conclusion,” Stearns said. “It was a business decision, and The Bear’s Club believes it didn’t violate any federal law.”

South Florida U.S. Attorney Wifredo Ferrer said in a statement that the $400,000 penalty “sends a message to anyone who fails to abide by our nation’s environmental laws that they will be held accountable for their non-compliance.”

He added: “When wetlands are filled in violation of the Clean Water Act, the loss is felt not only today, but by all generations to come.”

In 1999, the U.S. Army Corps of Engineers issued Nicklaus and his business partners Ivan Charles Frederickson and Robert Whitley a permit allowing them to fill certain wetlands in their massive Jupiter property for the purpose of building a residential golf community. However, the Corps also required The Bear’s Club to preserve certain wetlands in their natural state.

According to its web site, the 270-acre The Bear’s Club was founded in 1999 by Nicklaus and his wife, Barbara. Nicklaus is chairman of the board. Membership is by invitation only.

In the complaint, government attorneys accused The Bear’s Club and its developers of filling close to an acre of wetlands in 2010 without permission from the Corps. The prosecutors alleged it was done to relocate a tee box, improve golfing conditions on the club’s 15th hole and make room for the development of five residential lots. Nicklaus and company ignored the Corps’ denial to modify the original building permit, which included an easement agreement to set aside several acres as protected wetlands, the lawsuit alleged.

Stearns disputed the government’s interpretation of what the original 1999 permit allowed The Bear’s Club to do on the property. He said his client was allowed to make changes to conservation easements as long as he received approval from the South Florida Water Management District. Stearns said The Bear’s Club did not have to go back to the Corps.

“The Bear’s Club got state approval and paid state mitigation fees,” Stearns said. “Then the feds came along and were like, ‘Oh no, we didn’t approve it.’ ”

Stearns also criticized the Corps for going after The Bear’s Club for what he called “minor infractions” when the federal agency should be focused on minimizing the impact of the contaminated runoff water from Lake Okeechobee.

“Who is pumping waste into the Indian River every day?” Stearns said. “Yet, here we are talking about two tiny areas of a golf course that is the perfect marriage between the environment and private development. The Bear’s Club has preserved more wildlife and nature than it has taken away.”

9/11 terrorists, submersibles and an untold Fort Lauderdale story

By Dan Christensen, FloridaBulldog.org 

A submersible diver propulsion vehicle like those purchased by a 9/11 hijacker.

A submersible diver propulsion vehicle like those purchased by a 9/11 hijacker.

On September 12, 2001, Fort Lauderdale businessman Bill Brown’s morning routine began like most others. After dropping his young daughter off at day care, the widower drove to work at his marine accessories store, The Nautical Niche.

What Brown says happened next was anything but ordinary. The parking lot of his store at 2301 S. Federal Highway was filled with federal agents and police.

“As soon as I arrived, they asked if we could go inside and talk,” said Brown. “They gave me a name and asked me who the person was. I wasn’t familiar with the name and I said, ‘Why do you ask?’ An agent said that he and several other men were the ones who flew into the World Trade Center and the Pentagon” the day before.

Confused, Brown replied that he knew nothing about the attacks. “Well, your phone number was the most prominent on his call list and it looks like you had a substantial relationship together,” an agent said. “We want to know his association with you.”

Agents from the FBI, CIA, U.S. Customs and Immigration were present that morning, but it was the FBI that took the lead, Brown said. They copied his sales records and later had Brown take a lie detector test in which he was asked only a couple of questions about his patriotism.

“I gave them complete access to our computer and anything I had,” Brown said. “We come to find out…they were customers of mine.”

Bill Brown

Bill Brown

Brown said it was determined that one or more hijackers had purchased between four and eight K-10 hydrospeeder submersibles in multiple transactions at a cost of $20,000 apiece. The now-retired Brown, 60, recalled that one or two of those high performance diver propulsion vehicles was shipped to Singapore, while another was sent to a location in the Northeast U.S. He recollects that shell companies were used in some transactions.

“They were sent all over,” said Brown, who told the South Florida Business Journal in 2002 that his store, which catered to the desires of super-rich yacht owners, had gross revenues of more than $6 million in 2000.

Brown, who Florida corporate records show sold his business in 2007, does not recall the shipping addresses, or the names of the recipients for those pre-9/11 transactions. Nor does he remember the name of the hijacker(s) who purchased them, either in person or via the internet.

A ‘significant cell’ broken

Brown does remember, however, that an FBI agent later told him the Singapore sale was traced back to its recipient and that “a significant cell” of terrorists was broken up as a result.

The FBI in Miami declined a detailed request for comment. Instead, a spokesman suggested that a reporter file a Freedom of Information request, a process that can take years.

The matter remained out of public view for 15 years until Brown came forward after seeing an advance newspaper article about Thursday’s 9/11 panel discussion at Nova Southeastern University hosted by the Florida Bulldog. He said investigators from the 9/11 Commission, or its predecessor, Congress’ Joint Inquiry into 9/11, never contacted him.

The Joint Inquiry’s co-chairman, former Florida U.S. Senator Bob Graham, said in an interview that he was unaware of the FBI’s 15-year-old investigation of the submersibles purchase by a 9/11 hijacker.

“This is potentially significant. Why were we not made aware of this? You’ll need to ask the FBI why they didn’t feel, as they apparently felt with information about what happened in Sarasota, that this wasn’t worthy of sending up the line.”

Graham referred to an FBI investigation of a Saudi family in Sarasota who moved abruptly out of their upscale home about two weeks before the terrorist attacks, leaving behind their cars, clothes, furniture and other personal items.

Florida Bulldog, working with author Anthony Summers, disclosed the existence of that investigation in September 2011, and reported that agents found evidence – including gatehouse entry logs and photos of license plates – that Mohamed Atta and other hijackers had visited the residence of Abdulaziz and Anoud al-Hijji. Reports later released by the FBI said the family had “many connections” to persons associated with the terrorist attacks.

The FBI quickly identified the hijackers using flight manifests, information in recovered baggage and documents found where the hijacked jets crashed in New York, Washington and Pennsylvania. Some names, like that of ringleader Mohamed Atta, appeared in news stories the next day.

What plans the al Qaeda hijackers or their leaders had for the submersibles is not known. However, in 2003 the Christian Science Monitor reported that “one of the biggest concerns” of U.S. officials at the time was that terrorists were targeting ports and ships. The newspaper cited a Department of Defense exercise “Impending Storm” that simulated several types of ship-borne attacks on U.S. cities.

al Qaeda and mini-subs

In 2013, CNN reported about a 17-page letter found at Osama bin Laden’s Pakistan compound that laid out a detailed al Qaeda strategy for attacking targets in the U.S. and Europe. The letter was written to bin Laden in March 2010 by senior al Qaeda planner Younis al-Mauretani, and among other things discussed using “mini-submarines” to plant explosives on undersea pipelines, CNN said.

Brown kept no business records after he sold The Nautical Niche, and his story is not documented in local public records. For example, Fort Lauderdale police have no record of a service call to The Nautical Niche on September 12, 2001. A department records official, however, said that back then calls to assist another agency were sometimes not documented.

Brown has talked privately about his experience over the years.

“He told me about the incident that happened to him back then,” said Broward Assistant State Attorney Tim Donnelly. “His dad worked in the Kennedy Administration.”

Donnelly was the prosecutor who tried and convicted Robert Stapf in September 2001 for the 1998 stabbing murder of Brown’s wife, Caron.

“I was on the witness stand in trial,” said Brown. “Someone came crashing in the courtroom’s back door screaming, ‘We’re under attack! Someone flew into the World Trade Center!”

Donnelly recalled that Judge Dan True Andrews quickly suspended court for the rest of the day. The next morning, the feds were waiting for Brown at The Nautical Niche.

Brown’s former bookkeeper and sales assistant, Adelle Savage of Delray Beach, said he told her what happened shortly after she began working at The Nautical Niche in 2002 or 2003.

‘I can attest to that’

“In the course of conversation…he told me about how when he arrived that morning all the cops and agents were there. They thought he was connected before they realized that he had no idea who he was selling to,” said Savage. “I can attest to that.”

Savage also said that on several occasions Miami FBI agents David Grazer and George Nau came to the store to see Brown. Brown identified the same agents in a separate interview, saying he “maintained a relationship with the FBI handlers who kept on eye on me.”

“Obviously, my life was at risk for cooperating with the feds. We didn’t know if some of these people were still down here or what,” Brown said.

Brown described The Nautical Niche, which displayed a yellow submarine in its front window, as a kind of Sharper Image for yacht owners. The Business Journal’s 2002 story reported The Travel Channel had “included The Nautical Niche on its list of places for a show called, ‘How to Spend a Million.’ ”

Brown said his clientele were often billionaires, like Microsoft co-founder Paul Allen, and included various Middle Eastern royalty, including members of Saudi Arabia’s ruling House of Saud.

The Nautical Niche’s sale of the submersibles that interested federal agents, however, was different from the company’s other large transactions because the purchasers paid cash. “They would go to my bank and make counter deposits,” said Brown. The amounts deposited were about $5,000, low enough to avoid federal reporting requirements.

At the time of the sales, Brown didn’t question the transactions. “In the yachting business there’s a lot of anonymity. You don’t ask questions. People like their privacy.”

All Aboard Florida’s plan for passenger train service from Miami to Orlando in jeopardy

By Ann Henson Feltgen, FloridaBulldog.org all-aboard-florida

All Aboard Florida’s plan to operate regular passenger train service between Miami and Orlando is in jeopardy following a federal judge’s order questioning the company’s ability to borrow $1.75 billion in taxpayer-subsidized federal bonds to pay for the project.

At the same time, in a lawsuit filed by two Florida counties looking to block the project, the judge found that the U.S. Department of Transportation (DOT) ignored federal law when it issued bonding authority for Phase II of the private rail project from Cocoa to Orlando.

Another hearing in the case is set for Sept. 13, the same day DOT and All Aboard Florida (AAF) must file their formal answers to the complaint.

Phase l of the ambitious project, creating a passenger route and terminals at three stops along the Florida East Coast railroad line between Miami and Cocoa, is well underway. It is Phase II that is now precarious.

AAF, whose parent company – Florida East Coast Industries – is owned by the hedge fund Fortress Investment Group, approached the state more than two years ago with a plan to build and operate a privately owned railroad that would allow passengers to travel from Miami to Cocoa and from there to Orlando. AAF claims that trains would shave at least an hour off the drive time by car.

Railroad depots are under construction in Miami and Fort Lauderdale; a second set of tracks is being installed, and new engines and passenger cars are being built. AAF estimates that both phases will now cost more than $2.9 billion, excluding the cost of easements and land purchases it has already made.

But a lawsuit by Martin and Indian River counties, which challenged DOT’s bonding authority in federal court in Washington, D.C. in April 2015, has gained traction as their attorneys fended off DOT’s motion to dismiss the case while uncovering evidence that All Aboard Florida has little or no money in hand to begin Phase II construction.

Judge finds ‘legitimate questions’

On Aug. 16, after listening to both sides, U.S. District Court Judge Christopher R. Cooper said the evidence he saw raised “legitimate questions” about AAF’s commitment to Phase II without obtaining DOT’s private activity bonds.

Private activity bond-based “financing is not just the ‘current financing plan’ for the project – it appears to be the only financing plan,” the judge said.

Cooper’s finding allowed the two counties to continue to pursue their lawsuit alleging DOT violated the National Environmental Protection Act (NEPA) as well as federal law by approving $1.75 billion in tax-free bonds.

AAF, contacted several times by Florida Bulldog with requests for comment, did not respond. A U.S. Department of Transportation spokeswoman said the agency would not comment on pending litigation.

Any project that qualifies as a major federal action, which this project does according to the judge’s ruling, must comply with NEPA. The act provides for project reviews in this case by the Federal Railroad Administration, U.S. Army Corps of Engineers, U.S. Coast Guard, Federal Aviation Administration, Federal Highway Administration, U.S. Fish and Wildlife Service and the National Marine Fisheries Service.

An Environmental Impact Statement analyzes “a wide range of potential environmental and other consequences of the project and identified and evaluated measures that would avoid, minimize or mitigate impacts that would result from the project,” according to court documents.

A draft of that document was made public and comments taken, but then it was basically shelved, according to Indian River County Attorney Dylan Reingold.

“The evaluations were completed, but no record of decision was ever published,” said Reingold.

That action took place after AAF applied for a $1.6-billion loan through the Railroad Rehabilitation and Improvement Financing program in early 2014. Such loans are for the development and improvement of railroad tracks, equipment and facilities. The loan wasn’t approved, and AAF court filings say the company is no longer seeking that loan.

All Aboard Florida’s plan

In August 2014, AAF made another attempt at financing. It asked the U.S. Department of Transportation for $1.75 billion in tax-exempt bonds, which would mean up to $600 million in lost tax revenue over 10 years, according to court documents.

Four months later, DOT provisionally agreed to finance the $1.75 billion using tax-exempt private activity bonds (PABs). But the agency added several conditions, including a requirement that the bonds be sold by July 1, 2016, a deadline later extended to Jan. 1, 2017. The project must also complete the NEPA environmental review and prohibited from using the bond proceeds until 45 days following the issuance of the final environmental impact statement.

According to attorney Reingold, however, “they did this backwards. You have to go through a full NEPA analysis and Historic Preservation evaluation before authorizing allocation of funds.”

While DOT took the position that NEPA review was not required because the project is not a major federal action, Judge Cooper disagreed.

“The Court finds that the project does constitute major federal action,” he wrote in his ruling.

Without waiting for the NEPA findings, All Aboard Florida attempted three times last year to sell the bonds, each time with different terms, according to the judge’s findings. There were no takers, according to court records.

“NEPA is far more important than people realize,” said Steven Ryan, an attorney representing Martin County in this case. “This is a major procedural violation of environmental law.”

AAF initially told the court that it had $405 million in private debt funding held in escrow to begin construction of Phase II. In later court filings, however, AAF officials said that the $405 million is not for Phase II along with an apparent explanation of what the money is to be used for. The explanation was redacted from the public record.

That change was troubling for the court.

“Contrary to the court’s earlier understanding, [documents] do not show that AAF had already arranged financing for a significant portion of Phase II’s cost,” the judge wrote.

The need for taxpayer-subsidized bonds

AAF has said it can finance the project without government funding, yet also that it would be difficult if not impossible without the taxpayer-subsidized bonds.

AAF president Michael Reininger stated in a deposition that not approving the sale of the tax-exempt PABs “would certainly disrupt the current financing plan, make the project more expensive to complete and may delay its progress.”

In a letter to Paul Baumer of DOT’s Office of Infrastructure Finance and Innovation that emerged during discovery, Reininger went further, calling the funding a “linchpin for completing our project” and “a crucial factor in ensuring our project is financed and completed.”

According to The Bond Buyer.com, there is little interest in the market for high-risk, high-return bonds for a variety of reasons.

The owner of AAF’s parent company apparently cannot help. Court documents state that Fortress’ market capitalization has shrunk by nearly half in the past 14 months.

Likewise, Florida East Coast Investments, AAF’s parent company, has significant debt obligations coming due in three to four years, according to court documents.

While AAF appears to have no funding for Phase II, it does have equity in train stations, which it could sell, according to Ryan.

“You know, all along AAF has claimed that this is a private entity, but it is totally dependent on subsidies,” he said. “They should knock off this fiction. They have their hands in every government pocket they can find.”

Miami U.S. Attorney’s Office accused again of spying; A ‘mole’ in the defense camp?

By Dan Christensen, FloridaBulldog.org 

Defense lawyers Marc Nurik, left, and J. David Bogenschutz

Defense lawyers Marc Nurik, left, and J. David Bogenschutz

For the second time this summer, Miami federal prosecutors stand accused of spying on the defense – this time in the case of an alleged $28-million, international sweepstakes fraud.

As described in court papers, the “invasion of the defense camp” appears to have begun in February when one of four defendants in the case cut a secret plea deal with the U.S. Attorney’s Office and began working undercover.

The informant, John Leon of Wilton Manors, participated in defense team strategy sessions for three months as a government “mole,” obtaining documents and listening to privileged discussions about witnesses and other sensitive defense matters and reporting back to the government, the documents say.

The fallout: defense accusations that the case has been irretrievably “tainted” due to constitutional violations of the attorney-client privilege.

“For a period exceeding two months, Leon, acting as a government informant with the government’s acquiescence, invaded the defense camp where he learned critical defense strategies by actively participating in numerous meetings, after already accepting a government plea and agreeing to cooperate,” say court papers filed by attorneys Marc Nurik of West Palm Beach, J. David Bogenschutz of Fort Lauderdale and Marshall Dore Louis of Miami.

Assistant U.S. Attorney H. Ron Davidson, while acknowledging that defendant Leon became a covert “government cooperator,” told U.S. District Judge Darrin P. Gayles in a July 8 pleading that Leon “never shared privileged information with the United States, the United States never asked for privileged information and the defendant’s motion lacks any merit.”

The judge, however, has sided so far with the defense. On Aug. 3, after an initial hearing, he ordered the government to turn over to the defense all “rough notes” of interviews of Leon by Internal Revenue Service agents who helped build the government’s fraud case. The defense had sought the agents’ notes, contending the government had “carefully sanitized” memos of interviews with Leon produced to the defense.

‘The ends of justice’

The same day, Judge Gayles also granted a continuance in the case and reset the trial date for Nov. 28, saying “the ends of justice outweigh the interests” of a speedy trial.

What’s expected to follow this fall is a full-blown hearing on whether felony charges of mail fraud, money laundering and conspiracy should be dismissed against the remaining defendants – Matthew Pisoni, Marcus Pradel and Victor Ramirez – due to government misconduct.

“An evidentiary hearing is exactly what is required to determine how to resolve these blatant [constitutional] violations, and the appropriate sanction for these pervasive violations,” attorneys Nurik and Bogenschutz said in court papers.

U.S. Attorney Wifredo A. Ferrer’s office declined Florida Bulldog’s request for comment.

In June, prominent Miami defense lawyer Howard Srebnick accused both the FBI and the U.S. Attorney’s Office of spying on the defense in a $55- million Medicare fraud case by illegally and obtaining copies of confidential defense documents. More specifically, it was alleged a government-approved copying service had surreptitiously provided agents with duplicates of documents culled by the defense team from 220 boxes of evidentiary records in preparation for trial.

The Florida Bulldog reported last month that those allegations of government misconduct dissipated weeks later when the U.S. Attorney’s Office abruptly gave all three defendants generous plea deals involving no prison time. The defendants had each faced lengthy jail terms if convicted.

The copying service, Imaging Universe, was fired. The U.S. Attorney’s Office conducted an internal inquiry, but declined to make public its findings. Srebnick withdrew his motion with the accusations after securing a deal for his client. Consequently, the judge never ruled on the merits.

The alleged scam

Pisoni was president of the now-defunct Mail Tree, Michael McKay, Spin Mail and other Florida companies that the government contends were used in the fraud. Pradel, Ramirez and Leon worked with him in the alleged scam.

The four were indicted together on May 7, 2015 for participating in a sweepstakes scheme that began in 2006. The indictment says victims were falsely notified by mail that they’d won a substantial prize, but needed to pay a fee of up to $50 to redeem their winnings.

Authorities have said the defendants collected more than $25 million from hundreds of thousands of victims in the U.S. and abroad, using shell companies and international bank accounts to lauder their loot.

Even before they were indicted, the four had learned they were under investigation “and circled the wagons in a Joint Defense Agreement,” the government said. A JDA is a contract in which defendants extend the attorney-client relationship among them to facilitate the sharing of privileged information.

But last winter, unknown to his fellow defendants, Leon and his Fort Lauderdale attorney, Omar F. Guerra Johansson, began plea negotiations that resulted in his Feb. 17 plea agreement with the government.

“His cooperation was kept covert because Leon was cooperating with the government against a non-charged defendant,” prosecutor Davidson wrote. “Moreover, the government specifically instructed Leon not to share privileged information.”

Leon’s plea deal became public on April 20 when the indictment against him was dropped and a single new conspiracy charge was filed. He’s now facing a maximum penalty of five years’ imprisonment. Before, like the others, he faced a maximum of 80 years in prison.

Miami-Dade Mayor Carlos Gimenez’s son rose to the top skirting lobbying rules, critics say

By Francisco Alvarado, FloridaBulldog.org 

Mayor Carlos Gimenez, right, and his son, Carlos Gimenez Jr.

Mayor Carlos Gimenez, right, and his son, Carlos Gimenez Jr.

As his father rose to power from county commissioner to strong mayor, Carlos Gimenez Jr. has climbed his way to the upper echelon of South Florida’s lobbying corps representing prominent clients like Donald Trump, the PGA Tour and American Traffic Solutions, the nation’s largest red-light camera operator.

Along the way, junior has been investigated three times for violating county ethics rules by concealing his lobbying activities involving Miami-Dade Mayor Carlos Gimenez as well as other county and municipal elected officials. While the probes ultimately found no wrongdoing by junior, critics insist he exploits his family name on behalf of his clients.

Alfred Santamaria, one of six candidates running against Gimenez in the Aug. 30 primary, told FloridaBulldog.org that the mayor’s son provides a clear-cut reason why Miami-Dade should adopt a rule that bans companies and individuals doing business with county hall from hiring the relatives of elected officials.

“Carlos Gimenez Jr. has worked at firms that represented companies getting contracts worth tens of millions of dollars for airport work, roads and red-light cameras,” Santamaria said. “I think it is unethical, not moral and clearly a conflict of interest.”

Gimenez Jr. did not return two messages on his cell phone seeking comment. Michael Hernandez, the mayor’s spokesman, said his boss is not concerned about allegations made against his son because Gimenez “prides himself on operating in a very transparent manner.”

Hernandez added: “Mayor Gimenez is very proud of his son’s professional success which has come due to his hard work, education, dedication and talent and is in no way related to his father being elected as the county commissioner representing District 7, or as Miami-Dade County mayor.”

According to his LinkedIn page, Gimenez Jr.’s career began in 2000 as an associate for the now-defunct law firm Steel Hector & Davis, where his father also briefly worked. When Gimenez was elected county commissioner in 2004, his son went to work for Bilzin Sumberg, a Miami law firm specializing in government relations, land use and zoning. Four years later, Gimenez Jr. moved to his third law firm, Becker & Poliakoff, where he was a senior attorney until February 2013. Since then, he’s been vice president and general counsel for Balsera Communications, a Hispanic-focused public relations firm founded by Alfredo Balsera, a prominent Democratic fundraiser for Barack Obama and Hillary Clinton.

Balsera Communications President David Duckenfield did not address the allegations against Gimenez Jr., but told Florida Bulldog in an email statement that the mayor’ s son was hired based on his qualifications.

‘Well known and respected’

“Carlos brings to our firm top notch experience in real estate development and crisis communications, having worked for the some of the best law firms in Miami,” Duckenfield said. “He is well known and respected among his professional peers.”

Recently, however, Gimenez Jr. stirred up controversy when he and a Balsera colleague tried to convince three candidates running in a Miami-Dade School Board race against his aunt, Maria Theresa Rojas, to drop out.

Documents from the Miami-Dade Commission on Ethics & Public Trust show that Mayor Gimenez has sought several legal opinions about how he should conduct county business involving firms employing junior, 39, and his other son Julio, 37, who has worked for two construction firms that are frequent county vendors.

Gimenez Jr. is currently registered as a lobbyist In Doral, where he represents Trump and the PGA Tour, and in Miami, where he represents more than a dozen firms. He is not a registered lobbyist with county government.

For instance, on March 27, 2007, then-Ethics Commission Executive Director Robert Meyers advised Gimenez, at the time a county commissioner, to abstain from voting on a rezoning application because junior was part of the team representing the developer.

Four years later, shortly after Gimenez was elected mayor, he asked for another ethics opinion. This time, Meyers advised him to delegate the power to award contracts involving Munilla Construction Management to one of his deputies or get a county commissioner to sponsor an item awarding those contracts because the firm employed Julio Gimenez. Meyers also advised the mayor to recuse himself from making any recommendations or decisions when Gimenez Jr. lobbied any arm of county government.

During the five years Gimenez has been mayor, the ethics commission has delved into allegations Gimenez Jr. cloaks his lobbying work by not filing required paperwork identifying him as a representative for vendors and developers seeking to influence the decisions of government officials, including his father.

According to a 2012 ethics commission report, investigators received a confidential tip in October of the previous year that Gimenez and his son held discussions about initiating a red-light camera program in Miami-Dade with executives from Horsepower Electric, a subcontractor to Gimenez Jr.’s client American Traffic Solutions. The report states Gimenez and Horsepower Vice President Humberto Ortiz were interviewed, but not Gimenez Jr.

The mayor and Ortiz vehemently denied they discussed red-light cameras during their meeting, which took place at Horsepower’s main office in Hialeah. They said the mayor was there to collect a campaign check for his political action committee.

Gimenez could not recall if his son, who represents American Traffic in the City of Miami, attended the meeting, but the mayor was adamant that he was not involved in implementing a red-light program in unincorporated Miami-Dade, according to the report.

“He said that, dating back to his tenure as a county commissioner, he has recused himself from any deliberations on the matter as a result of his son’s representation of ATS,” the report states.

In 2014, Joe Centorino, the ethics commission’s current executive director, sent an investigator in mid-May to meet with Susan Fried and Armando Gutierrez, two well-known lobbyists who had pulled him aside during a county commission meeting to complain that Gimenez Jr. and four other individuals who worked on his dad’s campaign “were lobbying on the big Water and Sewer bond issue and had not registered as lobbyists,” according to another investigative report.

Fried alleged that Gimenez Jr. and the four others told potential clients, “I’ll charge you $150,000, and avoid the lobbying registration, but they lobby anyway under the name of public relations,” wrote ethics investigator and former Miami Herald columnist Robert Steinback. Fried could not provide specific details, but said Gimenez Jr. and crew “have infiltrated everywhere, including the mayor’s office,” Steinback wrote.

No ‘hard evidence’

Gutierrez was unable to provide names or any firsthand knowledge, Steinback added. Steinback closed the probe shortly after checking the sign-in logs for the 13 county commissioners and finding none of the names of the alleged shadow lobbyists, including Gimenez Jr. “Given the lack of specificity of the original complaint, this investigator could not turn up hard evidence of lobbying on the part of the subjects,” Steinback wrote.

When contacted by Florida Bulldog, Fried and Gutierrez declined comment.

Steinback opened another investigation into Gimenez Jr. on Aug. 27 2014 after an anonymous female called in a tip that the county mayor’s son had bragged to her that he had lobbied six of seven council members in North Miami Beach about a proposal to build luxury floating homes off the city’s coastline by his client, Dutch Docklands. Steinback reviewed the city’s lobbyist log the following day and determined Gimenez Jr. was not registered to represent Dutch Docklands.

In late September, Steinback interviewed three council members, who denied meeting with Gimenez Jr., as well as Frank Behrens, Dutch Dockland’s vice president, who claimed junior’s role was to “address residents of Eastern Shore,” a residential neighborhood in North Miami Beach.

“[Behrens] said that the company has endeavored to be very careful about lobbyist registration,” Steinback wrote in his report, adding that he subsequently spoke to Gimenez Jr.

“It turns out Gimenez Jr. registered with the city as a lobbyist on September 15, 2014,” Steinback wrote. “He stated that he then sent letters to two city commissioners, which he acknowledged would qualify as lobbying contacts, on Sept. 17.”

Nevertheless, Steinback concluded there was no evidence suggesting Gimenez was improperly lobbying city officials.

Gimenez Jr.’s name would pop up again in a fourth ethics investigation that was completed in June of last year. This time, it was junior’s most famous client, Donald Trump, and his dad who were being accused of breaking the county’s lobbying rules when the Republican presidential nominee made an unsolicited offer to take over management of the Crandon Park Golf Course in early 2014. Gimenez told ethics investigators he stopped being involved once Trump submitted a formal proposal because junior represents the billionaire developer in Doral, an independently run city not under the county’s control.

“Gimenez said he immediately recused himself from involvement in the Trump proposal out of an abundance of caution,” the investigative report states. “But not because he is required to since his son does no lobbying work for Trump in the county.”

Three lobbyists, who spoke to FloridaBulldog.org on the condition of anonymity because they fear being blacklisted, said the only way to catch Gimenez Jr. breaking the rules is with good old-fashioned surveillance and wiretaps. “It’s amazing that Carlos Jr. is able to get away with this scam of not being a lobbyist while trading on the name he shares with his dad to do exactly that,” one lobbyist said. “But since we’re in Miami, people just kind of shrug and accept it.”

“Of course, it’s still going on,” another lobbyist said. “Unless you are dishonest with him and his clique, you can’t beat them. It’s not endemic to the county. I believe it happens in most of the municipalities too.”

Santamaria, Gimenez’s opponent, agreed. “The mayor and his inner circle are very sophisticated,” Santamaria said. “”They know how to work the system very well.”

Gov. Scott’s undisclosed interest – via First Lady – in Zika mosquito control company

By Dan Christensen, FloridaBulldog.org 

Gov. Rick Scott and First Lady Ann Scott

Gov. Rick Scott and First Lady Ann Scott

Florida Gov. Rick Scott has an undisclosed financial interest in a Zika mosquito control company in which his wife, Florida First Lady Ann Scott, owns a multi-million dollar stake through a private investment firm she co-owns.

The company is Mosquito Control Services LLC of Metairie, LA. According to its web site, MCS “is a fully-certified team of mosquito control experts – licensed throughout the Gulf Coast, including Louisiana, Georgia, Mississippi, Alabama and Florida.”

On June 23, Gov. Scott signed an executive order allocating $26.2 million in state emergency funds for Zika preparedness, including “mosquito surveillance and abatement, training for mosquito control technicians and enhanced laboratory capacity.”

It is not known whether MCS, whose services include monitoring and aerial spraying, stands to benefit from Florida government funds. Company manager Steven Pavlovich holds an active Florida “public health applicator” license with the Department of Agriculture and Consumer Services through April 2019, but MCS is not a registered state vendor. The Department of Health contracts with two other two mosquito control vendors.

MCS did not respond to two requests for comment.

Ann Scott’s large stake in MCS is via G. Scott Capital Partners, an investment firm that boasts $291 million of client assets. The firm manages several private equity funds and various “family accounts primarily comprised of trusts and family entities,” according to U.S. Securities and Exchange Commission records.

The Florida Bulldog reported in 2014 that Scott Capital, as it is known online, is operated by a trio of men who once worked at Richard L. Scott Investments, the private equity firm where Gov. Scott made millions for himself and his family putting together big-money investment deals when he was in the private sector.

Scott Capital posts its portfolio online. All nine listed companies are current and former investments of the governor and/or Mrs. Scott, including Mosquito Control Services, described as providing “mosquito abatement services primarily to municipalities.”

The SEC requires investment companies like G. Scott Capital Partners to file periodic disclosure reports. The firm’s most recent report, filed in March, shows that the three-employee, Connecticut-based firm caters to a handful of high net worth individuals – less than 25 – who invest directly and through various pooled investment funds.

A mosquito control investment

The firm’s latest fund is GS MCS, LLC, a Delaware company formed two years ago this month to recapitalize and take control of Mosquito Control Services. The current value of the fund is just under $10 million and the fund has nine beneficial owners, SEC records say. The owners’ names were not disclosed.

The managing director of G. Scott Capital Partners is Gregory D. Scott – no relation to Gov. Scott. He directs the firm’s investments, as he did when he led the private equity group at Richard L. Scott Investments from 2000 to 2012.

A screenshot from the web site of Mosquito Control Services LLC.

A screenshot from the web site of Mosquito Control Services LLC.

Gregory Scott owns 50 to 75 percent of the Delaware holding company that owns 100 percent of G. Scott Capital, according to the SEC. The First Lady owns the rest through the Frances Annette Scott Revocable Trust, which owns Tally 1, a Delaware company that in turn owns 25 to 50 percent of G. Scott Holdings LLC.

Gregory Scott has described Ann Scott, an interior decorator and owner of AS Interiors LLC, as a “passive investor” in G. Scott Capital.

Gov. Scott has not disclosed his ownership interest in his wife’s investments. Florida law, unlike federal law, does not require state public officers to disclose the assets or income of a spouse or minor child.

The governor’s office on Tuesday declined to discuss the matter or make Gov. Scott or the First Lady available for an interview.

The Republican governor, a multimillionaire, puts his personal investments in a “qualified blind trust” that his office has described as being overseen by “an independent financial professional.” Florida public officers who use such a trust to “blind” themselves to the nature of their holdings get in exchange immunity from prohibited conflicts of interest under a law that Gov. Scott signed in 2013.

FloridaBulldog.org has reported, however, that the person overseeing Gov. Scott’s trust is yet another former employee at Richard L. Scott Investments and that the trust has been ineffective in keeping the governor’s assets secret.

When Gov. Scott opened his current blind trust in 2014 – the second of his administration – he was required to disclose the assets he put into it. His current mix of assets is not known, but the Florida Bulldog reported last year that the blind trust has in the past coordinated stock transactions with the First Lady’s trust a family partnership.

The Solantic transfer

When Gov. Scott took office in 2011, he transferred tens of millions of dollars in assets to his wife, including a $62-million investment in the walk-in clinic chain Solantic. Mrs. Scott reportedly sold the family’s stake in Solantic that same year.

Gov. Scott’s transfer of his Solantic shares came amid an uproar about perceived conflicts of interest. Florida ethics laws generally prohibit public officials from having an ownership interest in companies that do business with the state or are subject to state regulation.

In 2013, Gov. Scott had an undisclosed ownership stake in Houston-based Spectra Energy when Florida’s Public Service Commission – five members appointed by Gov. Scott – unanimously approved construction of the controversial $3-billion Sabal Trail natural gas pipeline by a joint venture of Spectra and NextEra Energy, parent of Florida Power & Light.

The governor’s investment in Spectra became known about a year later when he filed a lengthy list of his assets as of Dec. 31, 2013 when he closed his original blind trust and opened a new one while qualifying to run for re-election.

FloridaBulldog.org reported in July 2014 that Gov. Scott’s list included a $53,000 stake in Spectra Energy and a $55,000 stake in DCP Midstream Partners, a natural-gas limited partnership 50 percent owned by Spectra Energy.

The governor’s investments included numerous other oil and gas assets, including a $712,000 stake in Texas-based Energy Transfer and its affiliates and subsidiaries. Through other subsidiaries, giant Energy Transfer owns a 50 percent interest in the Florida Gas Transmission pipeline, which delivers nearly 65 percent of the natural gas consumed in Florida.

Gov. Scott has had other conflicting investments.

FloridaBulldog.org reported in February that in 2012 Scott owned a $210,000 stake in the private equity firm that owned 21st Century Oncology when the all-Republican governing board of taxpayer-supported Broward Health awarded the company an unprecedented 25-year, no-bid contract to supply radiation oncology services. The governor appoints Broward Health’s board members.

A Scott spokeswoman has said the governor wasn’t aware that 21st Century had sought the Broward Health contract prior to its award in January 2012 and that no one at the private equity firm, Vestar Capital Partners, or 21st Century had asked him to try to influence the hospital district’s selection process.

Accusations of spying by FBI, U.S. Attorney’s Office dissolve amid generous plea deals

By Dan Christensen, FloridaBulldog.org 

Defense attorney Howard Srebnick, left, and Assistant U.S. Attorney James V. Hayes

Defense attorney Howard Srebnick, left, and Assistant U.S. Attorney James V. Hayes

Weeks after being accused of spying on the defense in a $55-million Medicare fraud case, the Miami U.S. Attorney’s Office gave all three defendants generous plea deals that closed the case and made the misconduct accusations go away.

At the same time, the government quietly fired the Fort Lauderdale-based copying service at the center of the scandal. Imaging Universe had improperly supplied the government with duplicates of documents that defense lawyers cherry-picked out of 220 boxes of seized records while searching for evidence helpful to their clients.

The U.S. Attorney’s Office investigated the matter, but declined a request by FloridaBulldog.org to make public its findings.

Dr. Salo Schapiro, the 71-year-old former medical director of Biscayne Milieu Health Center, faced up to 100 years in prison and $55 million in liability when he was indicted for conspiracy and health care fraud in September 2014. But last June 20 – less than three weeks after the Florida Bulldog reported the story – prosecutors who once had trumpeted the case allowed psychiatrist Schapiro to plead guilty to a single count of making a false statement.

Schapiro’s punishment: a $10,000 fine. He continues his medical practice in Boca Raton, but no longer takes Medicare patients. His online biography does not mention his felony conviction.

Dr. Salo Schapiro

Dr. Salo Schapiro

Schapiro’s two co-defendants, indicted on similar charges, got similarly light treatment.

Nurse practitioner Marlene Cesar, 64, of Allentown, PA, pleaded guilty July 1 to stealing less than $1,000 in Medicare benefits and was fined $150. On July 28, 74-year-old mental health counselor Sonia Gallimore, who like Schapiro was from Broward, was placed on pretrial diversion for six months.

“The story is in the results,” said Schapiro’s Miami attorney, Howard Srebnick.

Srebnick and his associate, Rossana Arteaga-Gomez, raised the matter in court filings in late May. Their motion argued that the government had a practice of secretly obtaining copies of documents the defense had flagged as important and asserted it was not the action of “just one rogue [FBI] agent or prosecutor.” Rather, the motion said, it appeared to be “an office-wide policy” of both the U.S. Attorney’s Office and the FBI that has gone on for “at least 10 years.”

Several days of hearings, open and closed, were held before Miami U.S. District Judge Marcia Cooke. They culminated with Schapiro’s combined guilty plea and sentencing hearing June 20 on the reduced felony charge.

Credibility in question

After negotiating the plea deal for his client, attorney Srebnick withdrew his motion at the hearing. He said its allegations “were based solely on the statements and emails of the owner of the copy service, whose credibility, at a minimum, has come into question during this litigation.”

U.S. Attorney Wifredo Ferrer issued this statement:

“When we learned of the copy service issue, our prosecutors immediately notified the defense lawyers.  Unintended circumstances can arise — the test is what you do when faced with such circumstances.  Here, rather than resolve the matter privately, we were completely open and transparent.  We urged the defense to air it in public.  Ultimately, the defense counsel acknowledged that they had no information the prosecutors had looked at any of the materials in question and that the prosecutors in the case acted appropriately and ethically.”

U.S. Attorney Wifredo Ferrer

U.S. Attorney Wifredo Ferrer

The owner of Imaging Universe is Ignacio E. Montero. He did not return several phone messages seeking comment.

The motion said Montero told attorney Arteaga-Gomez that he’d provided the U.S. Attorney’s Office “duplicate copies of the discovery documents selected by defense counsel in other cases” for the past 10 years.

Court papers alleged that Imaging Universe and Montero gave the government CDs containing duplicates of documents Schapiro’s defense team had culled from the 220 boxes of records agents had seized from Biscayne Milieu. The records were stored at an FBI warehouse in Miramar, where defense lawyers who wanted copies of such records were required to use Imaging Universe.

The government later acknowledged that Imaging Universe did supply the FBI with duplicate CDs of what it had copied for Schapiro’s defense team, but said the discs “were never requested by any agent, prosecutor or anyone else on the government’s behalf.”

No ‘pervasive’ spying

Assistant U.S. Attorney James V. Hayes was the lead prosecutor on the case. He has said in court papers that he was unaware of the duplicate CDs until an FBI agent disclosed their existence in April. He and co-counsel Lisa H. Miller, a Justice Department fraud attorney, said they immediately told “Montero to stop and began an internal inquiry.” They also said “no pervasive practice of receiving or recording defense discovery” was found.

Still, the government sent out notifications about what happened to lawyers for a number of unidentified defendants. Officials declined to say how many attorneys were notified.

Defense lawyers recently raised a similar issue “of government invasion of the defense camp” in at least one unrelated case involving an allegedly fraudulent sweepstakes scheme.

Prosecutor Hayes informed Srebnick on April 22 that FBI Agent Deanne Lindsey “had been surreptitiously receiving the CDs,” according to the defense motion. “Hayes proposed to immediately destroy the CDs,” but the lawyers instead asked that he give them to the defense, “which he did.”

“Covertly cloning defense counsel’s work-product to obtain a tactical advantage is nothing short of ‘shocking to the universal sense of justice,’ ” Srebnick and Arteaga-Gomez wrote.

Court records show that between June 8 and 16 U.S. District Judge Cooke held a series of open and closed hearings about the matter. Early on, the judge indicated she would make a ruling on the motion and even asked both sides what possible remedies were available should she find “pervasive” misconduct by the government.

But the judge never ruled on the merits of the defense motion. The matter became moot when Srebnick withdrew it after prosecutors offered Schapiro the plea deal and he accepted.

Owners at South Beach’s Shelborne fight $30 million assessments, foreclosure

By Francisco Alvarado, FloridaBulldog.org 

The Shelborne Wyndham Grand South Beach

The Shelborne Wyndham Grand South Beach

For the past four years, about 40 investors and snowbirds who own 42 rooms in a landmark oceanfront art deco hotel have been locked in a pitched court battle with one of Miami Beach’s most politically connected families to keep their units.

An ongoing civil lawsuit in Miami-Dade Circuit Court alleges that Miami Beach developer Russell Galbut, along with relatives and business associates, broke Florida condo association laws by passing nearly $30 million in illegal assessments for renovations at what is now the Shelborne Wyndham Grand South Beach. That works out to roughly $107,142 per room.

The group, 10 of whom spoke with a reporter but asked that their names not be used, claim Galbut stacked the condo association’s board with flunkies and is trying to take control of the entire building by initiating foreclosure proceedings against them for refusing to pay what they believe are outrageous assessments. They also alleged that their rooms were demolished without their consent during the renovations, resulting in the City of Miami Beach revoking their certificates of occupancy until they fixed their units.

“They are using the old game of charging us exorbitant assessments to push us out,” said one New Yorker who purchased two rooms in the late 1990s as an investment. “There is a conspiracy to take our deeds for peanuts. Their end game is to own all the units.”

Galbut is not a defendant in the case, but a Galbut company that owns 100 rooms and 57 commercial spaces at the Shelborne is a defendant. Other defendants with Sherborne Property Associates are four shell companies Galbut controls, his cousins Keith Menin and Joan Brent and the Sherborne Ocean Beach Hotel Condominium Association.

Ronald M. Rosengarten of the Greenberg Traurig law firm represents Sherborne Property Associates. 

“While it is true that friends and supporters of the Galbut family projects may sit on the board, the Galbut family does not ‘control’ their votes,” Rosengarten said. “Currently, Galbut family related entities only have a minority interest in the Shelborne, owning less than one sixth of the units and certainly do not control the units.”

Rosengarten said court records also show the Galbuts’ renovation of the Shelborne “has been a financial boon for the unit-owners and not a fraud.”

Built in 1940, the iconic hotel at 1801 Collins Avenue was entirely owned by Galbut and his relatives in the 1980s. A decade later, the Galbuts began selling some of their units to outside investors when the property was converted to a condo-hotel, according to the 10 owners and Rosegarten. The new owners were allowed to rent their rooms to tourists through a Galbut entity that managed the hotel or other companies that provided booking services.

Galbut family big political contributors

Galbut family members and companies they control have contributed tens of thousands of dollars to political committees supporting Miami Beach city commission candidates. Through six companies he controls, Russell Galbut also has raised $10,000 for a PAC supporting Miami-Dade Mayor Carlos Gimenez’s re-election. Three Galbut family members have contributed a combined $15,100 this year to Republican congressional candidates including Sen. Marco Rubio, and Republican U.S. Reps. Carlos Curbelo and Ileana Ros-Lehtinen.

Things began going awry in 2010, a year after management of the Shelborne was handed over to Menin Hotels, a company controlled by Galbut and his cousin, Keith Menin, the lawsuit states. From 2006 through the beginning of 2015, Menin also served on the condo association board. The lawsuit alleges Menin and the board voted in favor of a $15 million renovation in 2011 to redo the Shelborne’s common areas, from the hotel hallways to the lobby to the pool deck without obtaining approval from at least 75 percent of the unit owners as required by state law.

Yet the non-Galbut owners still got a bill for the $15 million through a series of special assessments between 2011 and 2012.

“Keith Menin knows the Menin Alterations are unlawful,” the lawsuit states. “But he caused or allowed the partnership to make them anyway.”

The lawsuit also claims that Joan Brent, the other Galbut cousin who served on the condo association’s board from November 2011 and June 2013, knew the Menin Hotels renovation was unlawful.

Barely a year later, Galbut and his alleged surrogates signed an agreement with Wyndham Hotel Management allowing them to market 125 rooms and the common areas of the hotel under the Wyndham brand, the lawsuit states. The non-Galbut owned-rooms were not part of the deal.

Despite just finishing the $15 million update to the building, the condo board initiated another renovation project in the summer of 2014 in order to meet Wyndham standards, the lawsuit states. This time, the non-Galbut owners were assessed a combined $28.7 million, according to the complaint.

Again, the condo board did not obtain consent from 75 percent of the owners, the lawsuit alleges. It also says Galbut, Brent, Menin and their allies on the board devised a plan to lie to the non-Galbut owners about the extent of the renovations – saying only that they were replacing the Shelborne’s windows and making repairs required by the City of Miami Beach.

In the ensuing months, the lawsuit say, the non-Galbut owners learned that the scope of the work was much bigger than they were told and that the developer and his cohorts barred them from entering the hotel, preventing them from seeing what was actually happening in the building.

“While the property was closed, the conspirators caused or allowed the structure to be completely gutted,” the lawsuit states. “By closing the property, the unit owners were simultaneously deprived of the use and income generated by their residential units.

Many Shelborne owners “forced to sell”

Predictably, many members could not afford this wave of special assessments with or without the building being closed so they were forced to sell their units.”

The lawsuit also notes that Shelborne Property Associates obtained a $125 million loan around the same time the deal with Wyndham was signed. The proceeds were used to buy rooms from non-Galbut owners who wanted out, the lawsuit alleges. Court and property records confirm that Galbut-owned shell companies purchased 120 units at the Shelborne since 2012, the complaint alleges.

“There were not $125 million worth of units for sale when Shelborne Property Associates obtained this financing,” the lawsuit alleges. “But SPA knew that the association was about to levy tens of millions of dollars of additional special assessments against its members, and close the condominium property for over a year.”

The purchases gave Galbut controlled entities 75 percent ownership of the Shelborne, and the board the necessary majority to approve the Wyndham renovation after the construction had already begun.

A non-Galbut owner who identified himself as “Jackie” said Galbut and his accomplices are squeezing them out because they don’t want to pay them fair market value for their rooms. “They saw that Miami Beach real estate in general was skyrocketing, especially beachfront hotels,” Jackie said. “Rooms have been going for $700,000 to $800,000 a room. That was the case with Raleigh Hotel, the SLS South Beach and the Shore Club.”

According to a review of some of the Shelborne units purchased by Galbut-related entities in the last four years shows rooms have sold for an average between $150,000 and $250,000. Rosengarten countered that non-Galbut owners who sold rooms to his client got good deals.

“Property records evidence that the overwhelming majority of transfers occurred in sales whereby the owners received vastly greater prices for the units they sold compared to what they paid for them,” Rosengarten said. “In other words, the condo owners were not victims but were beneficiaries of the increasing valuation which resulted from maintaining and improving the building.”

Adding insult to injury, construction workers entered their units without their consent and destroyed their rooms, the non-Galbut owners allege. “When we finally gained access to our units, we found our rooms completely wrecked,” said the New Yorker who owns two rooms. “They demolished my kitchen, my bathroom and my living room. They never repaired the damages.”

The owner said city inspectors flagged his units for 20 life safety violations and told him he couldn’t use the rooms until he fixed it. He spent close to $25,000 per room after paying nearly $40,000 in special assessments, he said.

Another owner, a retiree who lives in Atlanta, said she had to dip into her 401K to finance her repairs. She had plans to live out her retirement in her Shelborne unit.

“In anticipation of losing my unit, I tried to buy a house,” she said. “But I was denied a mortgage when the bank saw I was shelling out these huge sums of money and that my income had dropped to $50,000 a year. All because of the Galbuts.”

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