By Tim Elfrink
By Kyle Munzenrieder
By Kyle Munzenrieder
By S. Pajot
By Tim Elfrink
By Tim Elfrink
By Kyle Munzenrieder
THE RETURN OF CRAZY JOE CAROLLO
Within hours of his election this past November as a Miami city commissioner, Joe Carollo was busy extracting promises from his colleagues to appoint him chairman of the Miami Sports and Exhibition Authority. More commonly known by its acronym MSEA (pronounced mee-suh), the sports authority is a ten-year-old agency responsible for issuing the bonds that paid for construction of the $58 million Miami Arena. MSEA is still repaying those bonds using money generated by a one-percent tax levied on all hotel guests who stay in Dade County.
Each year MSEA receives its share of the tax revenue, pays off its bond obligations, and stores the remaining money in a reserve fund to cover any arena shortfalls. In the past, MSEA and its thirteen-member board operated in relative obscurity, but the organization's recently recognized wealth has thrust it to center stage. The sports authority has more than $22 million in the bank. By comparison, the City of Miami has a reserve fund of less than $5 million.
Carollo successfully lobbied his colleagues and was appointed chairman of MSEA. At first his interest looked like old-fashioned political vengeance, payback time for those who had supported his opponent in the city commission race, Victor De Yurre, MSEA's outgoing chairman. The agency's executive director, William Perry, and its attorney, Christopher Korge, were both De Yurre's friends and allies. Carollo approached his new responsibilities with all the subtlety of a sawed-off shotgun -- he fired Korge and forced Perry to resign.
The bureaucratic shakeup seemed a questionable way for Carollo to reintroduce himself on Miami's political stage, especially considering that he had spent months on the campaign trail assuring voters he was not the same man they had thrown out of office eight years earlier, the man whose nasty reputation for political bloodletting was well deserved. Carollo's scorched-earth tactics at MSEA threatened to resurrect his "Crazy Joe" image.
But there was nothing crazy about Carollo's thinking. And he wasn't acting alone.
During last fall's Miami commission campaign, Carollo had picked up an unexpected ally -- County Commission Chairman Art Teele. In a mailing to blacks throughout the city, Teele noted that Carollo may not be the most popular candidate in the African-American community, but the chairman was going to support him anyway and he encouraged others to do the same.
Carollo's victory cemented a political alliance with Teele that flourishes still. Following the election, during the Three Kings parade through Little Havana and the Martin Luther King Day parade in Liberty City, the two men sat side by side in a convertible, waving to the crowd, smiling and laughing -- the Thelma and Louise of Dade County politics.
Knowledgeable observers saw Teele's endorsement of Carollo as a carefully calculated investment, one he could later cash in and put to good use during the upcoming county mayor's race. After all, Teele had employed a similar strategy when he helped elect Miriam Alonso to the Miami City Commission in 1989. Alonso then threw her support behind Teele when he first ran for county commission in 1990, and helped lift him to a surprising victory over incumbent Barbara Carey.
This time, though, Teele didn't have to wait a year to see a return on the faith he'd placed in Carollo.
Months before Carollo was elected, Teele had been searching for a way to finance the construction of a new sports arena in downtown Miami, which he believed was the only way to keep the Heat from moving to Broward. But he was having difficulty coming up with the estimated $200 million a new arena would cost. He did, however, identify one potential source of money: the millions MSEA had squirrled away in its bank account. Those funds had been untouchable when De Yurre was chairman of the sports authority. That changed dramatically when Carollo took over.
Carollo's raid on MSEA might have evoked more outcry if the sports authority hadn't been perceived as a bastion of cronyism and financial exploitation; few people were willing to challenge Carollo when he declared that the authority was in need of a thorough housecleaning.
"Shortly after being appointed to MSEA, I started running into all sorts of deficiencies," Carollo recalls. "The bottom line is that it was basically an institution that was being run by Chris Korge. Bill Perry, even though he was the executive director, took his orders from Korge. They were pretty much doing anything they wanted without any scrutiny."
Over the years, MSEA's budget had ballooned from $438,000 in 1986 to $1.2 million in 1995. City Commissioner J.L. Plummer, a long-time critic of the agency, complains that when he was chairman of MSEA three years ago, he found many wasteful spending practices. "They had three memberships to the Downtown Athletic Club, which were costing $100 a month for each membership," he recalls. And even though the authority had its own skybox at the Miami Arena, Plummer says $12,000 per year was being spent to purchase floor-level seats for all the Miami Heat games. MSEA officials, according to Plummer, were also submitting exorbitant expense reports for $200 and $300 lunches at Joe's Stone Crab and Buccioni. In addition both Plummer and Carollo were shocked by Perry's and Korge's salaries. Bill Perry, who was De Yurre's chief of staff before becoming MSEA executive director, was earning close to $100,000. Korge, one of Dade's most influential lobbyists, was receiving $110,000 as MSEA's part-time attorney, plus another $65,000 to act as its lobbyist.
Carollo also discovered that Perry had unilaterally changed the authority's rules governing sick leave, a change that allowed MSEA employees to cash in their unused sick days. A major beneficiary of Perry's new policy: Bill Perry, who promptly issued himself a check for approximately $6000 in accrued sick leave. "I understand my decision may give some people cause for concern," Perry says. "But I made that decision as a benefit to the authority staff. I thought it was important to keep people working rather than having them take the time off."
Other MSEA transactions also appeared suspicious to Carollo, including the 1994 purchase of a warehouse near the arena for $1.1 million. The sellers were a group of investors, one of whom was a former law partner of Korge. The authority then leased back to the owners the adjacent parking lot for $64,000 per year to run the parking concession, which is now being operated by Korge's friend and fellow lobbyist Rodney Barreto. "I didn't even know he was running the lots," Korge claims.
Carollo remains skeptical. "The whole deal smelled," he says. "We didn't need a warehouse. What we were keeping there for the arena was total junk that we should have sold off for a few hundred bucks. And after buying this property, we give away its most important asset -- the parking lot."
Of greatest concern to Carollo, though, was the deteriorating relationship between MSEA and the Miami Heat. For years the basketball team had expressed contempt for their current arena -- too few skyboxes, bad neighborhood, lousy parking -- and had repeatedly threatened to leave. If Miami was willing to build them a new home, fine, if not, they would look elsewhere.
During De Yurre's tenure as MSEA chairman, he took the position (along with Korge and Perry) that the city should not capitulate to the team's threats. If the Heat's owners wanted to move north to Broward, that was up to them. But as long as they remained in Dade County, the only arena in which they would play was the existing Miami Arena. MSEA had even offered refurbishments of up to $90 million for such things as skyboxes and increased floor-level seating. But the team's owners weren't interested, and the two sides seemed at an impasse.
Another point of contention between the Heat and MSEA concerned a company called Decoma Miami Associates. In 1986, before the arena was even constructed, Decoma invested seven million dollars in the project and thus became MSEA's joint-venture partner. Their partnership agreement gave Decoma the right to negotiate all leases for the arena's tenants (such as the Heat and the Panthers) and to manage the day-to-day operations of the facility. MSEA would act as a sort of governing board, and would be required to approve any lease before it became final.
The landlord-tenant relationship between Decoma and the Miami Heat was always strained, but it worsened two years ago when Wayne Huizenga purchased a controlling interest in Decoma and Leisure Management, Inc. (LMI), a subsidiary of the Houston-based firm. (Decoma had assigned to LMI responsibility for the arena's daily operations.) From Carollo's perspective, Huizenga was now in a dangerously powerful position to undermine his efforts to keep the Heat in Miami.
With such possible threats looming, Carollo believed it was essential for MSEA to remain as independent as possible and to have an attorney whose affiliations did not raise troubling questions and whose loyalty lay exclusively with the sports authority. Instead Carollo found the relationships among MSEA, Decoma, and LMI entirely too incestuous for his liking. For example, the commissioner says he was "shocked" to learn that Korge, in addition to being MSEA's attorney and lobbyist, was also on Huizenga's payroll as a lobbyist for LMI. "He was making money from both sides," Carollo notes.
Additionally, Korge's pal Barreto, who controls many other prime parking lots around the Miami Arena, is also registered as a lobbyist for LMI. Another Korge confidant, John Blaisdell, was once the executive director of MSEA before jumping ship to work for Decoma and LMI.
Carollo says he quickly realized that he didn't know who he could trust and he wasn't sure about Korge's true allegiances. (Korge claims he only represented Decoma and LMI when their interests coincided with MSEA's, and that his first responsibility was always to the sports authority.)
IT'S WAYNE'S WORLD AND WE ARE MERELY VISITORS
Regardless of Carollo's ultimate motives -- to empty the authority's coffers for a new arena, to punish political foes, or to clean up a troubled agency -- by late January he had more than enough ammunition to oust both Perry and Korge. Their departure, and his unfettered control of the agency, allowed Carollo to make available $15 million from MSEA toward a new arena.
A little more than two years ago, when Steve Clark was elected mayor of Miami, one of the first crises he faced was the fate of the arena. At that time plans for Blockbuster Park, often referred to as Wayne's World, were moving forward rapidly, and the prospect of a new, sports-oriented theme park on the DadeABroward border almost certainly spelled disaster for Miami's downtown venue. The Heat and the Panthers, it seemed, were destined to move north.
County commissioners, who had won guarantees that part of the Wayne's World project would be built in Dade, showed little interest in the pending dilemma of an abandoned Miami Arena, and they certainly were not giving any thought to building a new downtown arena.
Mayor Clark was merely hoping to mitigate the coming apocalypse. At a meeting in early 1994, attended by Clark, Korge, Huizenga Holdings vice president Jim Blosser, and Huizenga attorney Bob Traurig, Blosser discussed splitting the Panther's season between the old Miami Arena and the proposed Wayne's World arena. Two months later, on May 9, that group got together again, this time joined by Miami City Manager Cesar Odio. The talk turned to the Miami Heat.
According to those in attendance at the meeting, Huizenga's representatives told Clark that if the Heat did leave South Florida, Huizenga was confident that the National Basketball Association would award the city another franchise. There was even talk that Huizenga might try to purchase the Heat, or perhaps buy the new franchise. The basketball team would be based at Wayne's World, but Huizenga's representatives said they were willing to split a portion of the Heat's games with the downtown arena, just as they were willing to do with the Panthers. Everyone at the meeting agreed that cooperation was needed between the Miami Arena and Huizenga's ambitious venture to the north.
Then Korge came up with a novel idea: Huizenga should take over control of the Miami Arena. That way he could easily coordinate events -- including games and concerts -- between the two facilities, increasing the likelihood that neither would suffer too badly from competition. "I'm not going to deny that it may have been my idea," he says. "It was fairly spontaneous. And Odio thought it was a great idea. He kept talking it up."
Huizenga jumped at the idea. In July 1994, he bought a controlling interest in both Decoma and LMI. A month later Huizenga's brother-in-law, Whit Hudson, announced that he had just spent $60 million to acquire the Heat.
Within six months, though, Hudson's deal had fallen apart, and Micky Arison stepped in and bought the team. And then the Wayne's World project died after Huizenga sold Blockbuster to Viacom for eight billion dollars.
The only piece of the puzzle that remained in place was Huizenga's control of the Miami Arena. And what had once seemed to be a great idea quickly became a major problem.
For one thing, having Huizenga control arena operations antagonized Micky Arison and the Miami Heat, which views itself as a sort of sports outpost, surrounded and constantly threatened by Huizenga's evil empire. The attempt by Huizenga's brother-in-law to buy control of the team was, in Arison's mind, further proof of Huizenga's need to control everything around him.
Rather than fostering cooperation and coordination between the Miami Arena and a sports facility to the north, such as the one planned for Sunrise, Huizenga has used his control of Decoma and LMI in ways that have worked against the city's interests. Last year, for example, the Heat offered to extend its current lease at the Miami Arena -- which expires in 1998 -- by four or five years in hopes that the extra time might allow for a solution to the building's physical drawbacks.
The proposal included a ten-percent rent increase over the $600,000 the team currently pays each year. The city and MSEA were willing to accept the offer, but Huizenga, by virtue of his control of Decoma, was able to veto the plan and he demanded nothing less than three million dollars per year from the Heat.
Another problem associated with Huizenga's control of the arena was the now infamous "noncompete" clause in Decoma's contract with the city. Some Miami officials believed the clause prohibited them from building a new arena, or even from talking to the Heat about a new arena.
Dumbfounded city officials voiced shock and amazement that somehow Huizenga had hijacked their arena and had left them powerless to do anything about it. This past December City Manager Odio seemed to be surprised. "We didn't know that Huizenga would buy that contract," he said, suggesting that the city, like everyone else, had been caught off guard by Huizenga's supposed treachery.
In fact, Odio knew perfectly well that Huizenga was interested in taking control of the Miami Arena by investing in Decoma and LMI. After all, he promoted the idea after Korge suggested it at their meeting the previous May. The manager's disingenuous public statement prompted Huizenga Holdings vice president Jim Blosser to write a letter to Odio, scolding him for having "a most selective memory."
By repeatedly expressing anger and frustration that Huizenga was thwarting their efforts to negotiate with the Heat to counter Broward's momentum, Odio and other city officials only aggravated their problem. As their desperation grew, so did the asking price for buying out Huizenga's management contract, which they believed was the only way to get out from under the noncompete clause. Not only did they hand Huizenga a gun to hold to the city's head, they graciously loaded it as well.
Soon Huizenga found himself in a supremely advantageous position. He could either extract a huge ransom by selling the Decoma/LMI management contract to the city, or he could drag out negotiations so long that the Heat would have no choice but to accept Broward's offer to share a new arena with the Panthers.
Only one thing stood in Huizenga's way: City Commissioner Joe Carollo.
THEY HAD NOTHING TO SELL, BUT THEY WANTED MILLIONS ANYWAY
By early February, having dispatched Christopher Korge and Bill Perry, Carollo assumed full control of the Miami Sports and Exhibition Authority, which placed him at the center of the Decoma/LMI debate.
Carollo was the only commissioner to criticize the buyout effort as lunacy, especially considering that it would undoubtedly be a multimillion-dollar expense. Though he is no legal scholar, it struck Carollo as ludicrous that the City of Miami and its elected representatives couldn't even talk about building a new arena for the Heat. His efforts to persuade others to his point of view were in vain. Odio and Commissioner J.L. Plummer in particular were intent on resolving the matter financially. On the very day the city commission voted to go to court in an effort to have the noncompete clause of the Decoma contract declared null and void, Carollo attended a Heat game in the company of Micky Arison, a defiant challenge to Huizenga's unspoken threat to sue.
Back at MSEA, Carollo asked Miami lawyer Joseph Portuondo to act as interim attorney. Portuondo quickly adopted Carollo's hard-line approach. In a blistering March 23 letter to Odio, he asserted that the city was being foolish. "The City of Miami has effectively entered an injunction against itself!" Portuondo wrote. "It is frustrating to me to see the Broward County manager negotiating with our teams, and our tenants, to steal them away from us while you feel that you cannot talk to them."
By the time Decoma negotiations began in mid-February, city officials were talking about a buyout price somewhere between $14 million and $19 million, all of that money expected to come from MSEA's bank account. Mayor Clark appointed Plummer as the commission's representative in the negotiations, but Portuondo attended the closed-door sessions as well. "I just had a terrible feeling about the whole situation," Portuondo recalls. "We were outgunned and outmanned by the Decoma team. It just seemed like everything was all very one-sided in favor of Decoma, and it just didn't make sense to me."
The first session took place February 11 in the office of County Manager Armando Vidal. In addition to the manager, Plummer and Odio were there, as was Mayor Clark's aide Lael Schumacher and attorney Ron Krongold representing the city. Also attending: former MSEA executive director and current Decoma vice president John Blaisdell, as well as several attorneys and other representatives for both Decoma and LMI.
When Portuondo strolled through the door, he caught the group by surprise as no one was expecting him. Then he surprised them again by asking that the meeting be postponed because he was still reviewing material regarding the proposed sale. When the others balked, he became adamant, noting that no sale could be completed without the sports authority's approval. "It's our arena," he reminded them. "It's our money."
Plummer went ballistic. "It was an animated discussion," Portuondo recalls. "Plummer was threatening to abolish MSEA, threatening to take away MSEA's budget." Plummer says he was angry because several of the Decoma officials had flown in from Houston for the meeting, but he denies that he threatened to abolish MSEA -- at least not over that one incident.
Soon the Decoma team left the room and the meeting broke up. "It was kind of a nasty ending to my first meeting," Portuondo concedes. "But once I was in this thing for about a week, and I looked at the agreements, I realized these [Decoma] guys had nothing to sell. The noncompete clause was unenforceable. We could negotiate with the Heat if we wanted. But the whole attitude on the part of Plummer and Odio seemed to be, 'Just give them some money to get rid of them and avoid any possible litigation.' And I kept thinking that was crazy."
Undeterred, Plummer and Odio continued negotiating, and struck a tentative deal with Decoma the week of March 18 for $14 million. The city commission was scheduled to vote on it the following week, but in the intervening days the city's negotiating team was surprised to see that Decoma had inserted language into the purchase agreement that would have given approximately four million dollars' worth of lease concessions to the Florida Panthers during their remaining years at the arena.
Portuondo saw this as "undeniable proof" that Huizenga was trying to use his control of Decoma to his hockey team's advantage. "You will recall that the only defense offered by Decoma for this [lease] provision is that they are 'sports fans,'" Portuondo wrote to Odio on March 23. "How insulting! A child can see that the only reason Decoma wants this provision included is to ensure that their Florida Panthers can play in the Miami Arena until such time as the new [arena] in Broward County is ready."
On March 26, as the city commission was set to vote, the Decoma purchase agreement was quietly withdrawn, which may have been exactly what Huizenga wanted. Portuondo, Carollo, and even Knight-Ridder chairman Tony Ridder all say they believe Huizenga was not bargaining in good faith. "I believe the real negotiating goal of Decoma was to paralyze city officials," says Portuondo. "And that was designed to do two things: to get the most money possible for Decoma, and to keep the negotiations going as long as possible in order stop the city from building a new arena. There is no doubt in my mind that Decoma clearly wanted to push the negotiations beyond the March 29 deadline [imposed by Broward], thereby forcing the Heat to go to Broward."
Carollo agrees: "They [Huizenga and Decoma] never in their wildest dreams thought that Dade was going to be able to put it together and keep the Heat here in Miami."
The decision to abort all negotiations with Decoma was finally reached on Wednesday, March 27. Portuondo was supposed to pick up Carollo in front of the Miami Herald building so the two could watch the Heat play the Los Angeles Lakers. Carollo was upstairs discussing plans for a new arena with Ridder. Portuondo's arrival prompted a three-hour discussion about whether the city really needed to buy out Decoma before a new arena could be built. Until that time, Ridder had supported a purchase of Huizenga's contract as a way of avoiding legal entanglements. But after Decoma had the gall to insert language favoring the Panther's lease, he decided that enough was enough and declared, "The deal is off the table."
WAYNE HUIZENGA IS ANOTHER GREEDY CORPORATE PIG
In Wayne Huizenga's world of billion-dollar deals, risking a few million in a game of chicken with Dade County and the City of Miami was worth the gamble. Some of Huizenga's partners in Decoma, however, now believe they got shafted. "The truth is that we are considering some legal action with the other minority partners," says Jorge de Cardenas, who owns about three percent of Decoma. "They didn't even talk to us. Huizenga did whatever he wanted without any concern for the rest of us, and so right now we control an arena with no tenants [after 1998]."
De Cardenas, president of the Miami public relations firm The Creative Group, has been an investor in Decoma since 1986, long before Huizenga's involvement. He says he still isn't sure what happened. "On Friday night we had a deal. Everyone shook hands, everybody was happy. The Heat was going to get a new arena. Wayne was going to get his money. We were going to get some money. We were all going to make some money. It seemed like a good deal for everybody. A win-win situation. Then on Monday everything went sour. I guess somebody got greedy."
That somebody, de Cardenas believes, was Wayne Huizenga. "The responsibility of the general partner is to do what is in the best interests of the company and the minority partners," de Cardenas says. "Instead he was worrying about his other companies." According to that interpretation, Huizenga sacrificed the financial interests of Decoma in an effort to win a sweeter deal for the Panthers and to improve the chances that he would get the Broward arena he really wanted. (Decoma vice president John Blaisdell could not be reached for comment for this story.)
Carollo says he has no intention any time soon of making a deal to purchase Decoma's arena-management contract. But if the city eventually does decide to do so, Carollo doubts that the price will be anywhere close to the $14 million once offered. "I'm not interested in discussing any buyout until after construction begins and the Heat are firmly here," Carollo says.
"It's been a good investment," de Cardenas adds. "We have made money, but all of that is going to be over in a couple of years. We should have sold when we had the chance. Something that was worth at least $14 million a few weeks ago is now worth nothing."
Next week in Part 3: Ego, ego everywhere, nor any drop of sense.
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