By Terrence McCoy
By Allie Conti
By Chuck Strouse
By Scott Fishman
By Terrence McCoy
By Ryan Yousefi
By Ciara LaVelle, Kat Bein, Carolina Del Busto, and Liz Tracy
By Pepe Billete
Imagine you own a waterfront mansion that needs some fixing up. One day a friendly fellow knocks on the door and says he wants to rent your house for the summer. He promises to finish repairing the kitchen and build a brand-new garage while you go away on vacation. It seems like a great deal.
The friendly fellow puts his wife's name on the lease, not his. He doesn't pay the rent or the water bills, and you discover he owes a lot of money to the government in back taxes. He builds the garage -- your garage -- but then he uses it as collateral to get a big loan from a bank. He raises even more money by selling your house to some investors. Naturally the investors are furious when they realize they don't actually own a thing. Finally, your tenant declares bankruptcy and drags you into court with him.
Would you evict this friendly fellow?
No. Not if you're Dade County. Not if the tenant's name is David E. Graham and your waterfront mansion is Black Point Park and Marina in South Dade.
How this tenant moved into your house and made it a money magnet takes some explaining.
During the Seventies the concavity in South Dade's coastline known as Black Point was little more than a Friday-night anchorage for sailors tacking toward Key West, and an occasional port of call for drug smugglers. In 1972 a countywide referendum established the isolated site as the future home of a public marina, but it took eleven years to get the necessary permits and approval from state and federal governments.
Another vote, this time by county commissioners, turned the operation of much of Black Point Park and Marina over to a company called Marine Management, Inc. (MMI), on July 5, 1988. The county lease, which was to run for fifteen years with two five-year renewal options, gave MMI exclusive rights to operate a fuel dock, a bait and tackle shop, and a dry storage barn for 300 power boats. It also allowed the company to rent fishing skiffs and houseboats, run a scuba-diving concession, and provide food and beverage service. (The county continued to manage the marina's 217 wet slips by itself.)
In return, MMI agreed to build most of the marina facilities at its own expense on what was still comparatively vacant land. The company also agreed to pay the county $8000 per month rent, plus five percent of its gross revenues, a nickel for every gallon of fuel it sold, and a commission from vending machines it installed and on any sales of boats or engines.
On the face of it, the deal was a sweet one for MMI. Black Point is the biggest public marina in South Dade, the natural jumping-off spot for middle-class suburbanites who want to fish in the Gulf Stream or cruise the Keys. The boat barn, in particular, seemed to promise a cash bonanza, being the only enclosed dry storage boat rack between Maule Lake in North Dade and Tavernier, south of Key Largo.
The county was keenly aware of the economic value that control of the marina represented -- and the potentially damaging ways in which that value could be used. The lease reads: "Unapproved assignment, subletting, mortgaging, pledging or encumbering [of the lease] shall be grounds for immediate termination of this agreement."
Hurricane Andrew destroyed the marina in August 1992. The insurance money MMI received after the storm had to be used to pay back the company's original construction loan, according to county records. The owners of MMI apparently decided they didn't want to be involved in the lengthy rebuilding project and sold their stock to new owners on October 23, 1993. The old owners of MMI included Glenn Wright Jr. and Sr., a father-and-son team with a long history in the construction business in Broward. The new owner was a 42-year-old former typist and flea market manager named Tamea Behrendt.
In the coming years county administrators would sometimes wonder what role Behrendt actually played at Black Point. When they sent correspondence to her, it was answered by an attorney named David E. Graham. He sometimes seemed like a mystery too.
"We have received two written communications from Mr. David E. Graham related to our notices of default dated November 3, 1995," a county official wrote to Behrendt. "Although we are aware that Mr. Graham is a consultant to Marine Management, Inc., we are not aware that he represents Marine Management, Inc., in any manner. Please advise us as to the official role of Mr. Graham."
Sometimes Graham identified himself as general counsel for the corporation, occasionally as a vice president, documents show. "Because of his vast experience in assembling a creative and professional management team to promote and build marine activities, Mr. Graham has been selected to steer the efforts of Marine Management at Black Point," his resume states. Eventually county administrators became aware that the stocky, gregarious Graham was also Behrendt's husband.
Glenn Wright, Jr., one of the original owners of MMI, says he met Graham in the spring or summer of 1993: "He was acting as my attorney on some things at the time and he had a marina of his own that he was operating in Dania."
In the aftermath of Hurricane Andrew, MMI and county commissioners amended the original Black Point lease in a number of significant ways. The county agreed to reduce the amount of money MMI was required to spend on publicizing and marketing the marina, from $60,000 per year to $24,000. It agreed to waive the company's monthly rent for up to six months, until October 1, 1994, and it gave MMI a $5000 rent credit to help cover the cost of getting connected to the county sewer system.
Most important, county commissioners agreed to allow MMI to use the marina lease as collateral against a bank loan -- a marked departure from its previous opposition to encumbering the lease. The company needed money for reconstructing the boat barn and other parts of the damaged operation.
Final approval of the loan and the other lease amendments took from October 1993 until February 1994, a delay MMI would later blame on the political machinations of then-County Commissioner Larry Hawkins, whom the company contends wanted to award the marina lease to a helpful constituent in his South Dade district.
But finally MMI had the amendments it needed and received a $1.5 million construction loan from Ocean Bank, a Miami lender.
The loan from Ocean Bank wasn't the only money Graham was raising at the time. On the same day county commissioners signed the new lease with MMI, another set of documents was also being executed.
On February 1, 1994, three husbands and wives put their signatures on a partnership agreement. David Graham was there to witness the signatures -- he had expended considerable energy bringing the partnership about.
The partners all knew each other. That day they were happy because they no doubt believed they were going to make a killing on a great investment.
The six investors were Alan and Kathi Glist; Dr. Richard and Carol Phillips, respectively the son-in-law and daughter of Graham's business partner, Jacob Kushner; and Dr. David Korn, a cardiologist, and his wife Allyn. Dr. Korn and Dr. Phillips were colleagues at Mount Sinai Medical Center in Miami Beach. In the coming weeks three other people would join the partnership: Dr. Robert Goldberg, a Mount Sinai gastroenterologist, and his wife Patricia Etkin, a lawyer; and Maurice Gozlan, Dr. Goldberg's accountant.
According to a prospectus promoting the partnership, the venture was to be called Pirate's Point, Ltd. (PPL). A separate corporation, YS Marketing, Inc., owned by Graham's wife Tamea Behrendt, would own half of Pirate's Point, Ltd. and act as the general partner in the enterprise, taking care of the day-to-day operations. The investors would be limited partners, receiving a juicy twenty percent annual return on their investment money, plus some tax advantages related to the depreciation on two buildings.
One of the buildings in question was the 50,000-square-foot boat barn at Black Point Park and Marina. The other building was also a storage facility for boats, to be built on an adjacent piece of private property known as Pirate's Spa. The investors understood from the prospectus and from the partnership agreement that PPL was to be the "owner" of both structures.
Investor Patricia Etkin, one of the latecomers to the deal, says she didn't scrutinize the Black Point arrangement, or David Graham to the extent she otherwise might have. Her husband's medical partner, Dr. Phillips, introduced her to Graham. Phillips was married to the daughter of Graham's business partner and, according to one source, had shared Graham's Fort Lauderdale home after Hurricane Andrew. Etkin says she also assumed that Pirate's Point, Ltd. had the imprimatur of Dade County government, since the boat barn was located on public land. "It appeared to be something that had very little risk," Etkin recalls. "We always assumed the county was sort of overseeing this."
Not only did Pirate's Point, Ltd. not have the blessing of Dade County, as was legally required, it didn't even exist. In bankruptcy pleadings three years later, Graham claims he simply forgot to prepare the legal paperwork necessary to establish the limited partnership. It would be some time, though, before the investors discovered that fact, or before the county knew anything about the Pirate's Point venture. In the meantime, money began flowing toward Graham.
Korn, the Mount Sinai cardiologist, transferred $300,000 to Graham's trust account on October 15, 1993. Then the transaction began to get complicated.
The Korns say they were under the impression that their fellow investors had also each put up $300,000 of their own cash for the Pirate's Point partnership. But in fact the Phillipses and Glists got their $600,000 in the form of a loan from Comerica Bank of Fort Lauderdale. In December 1993, the Korns say, Graham asked them to put up $200,000 in stocks and bonds as collateral for a short-term loan he needed from a bank. The loan, they discovered, "was not a short-term loan to Graham, but was in fact a loan to third parties Carol Phillips, Richard S. Phillips, Kathi Glist and Alan Glist in the amount of $600,000."
Later, when payments weren't made on the $600,000 Comerica loan, the bank seized the Korns' collateral. The bank also sued Phillips and Glist, the loan signatories. Richard Phillips has since filed for personal bankruptcy.
In a civil suit filed later, the Korns claim they had given Graham their personal financial statements in 1993 because Graham had agreed to help them refinance their home. Graham took their financial statements to various banks and used them to obtain commercial loans instead, they claim.
"Graham on several occasions presented Plaintiffs with guaranties to execute and merely explained that the execution of these documents was a personal favor or was 'necessary as part of your investment in Pirate's Point, Ltd.,'" the lawsuit reads. "Based upon the advice received from Graham, and without being provided the entire documents, but merely the signature pages, Plaintiffs unwittingly and without being advised by Graham of the true nature of the documents, executed several guaranties of third-party indebtedness to banks."
The guaranties signed by the Korns include ones related to MMI's $1.5 million Ocean Bank construction loan and another from Continental National Bank of Miami obliging the doctor and his wife to a pair of marine forklifts. "Plaintiffs are now being called upon by several banks to satisfy these guaranties," the Korns say in their suit. "The total indebtedness guaranteed by Plaintiffs without their knowledge and based upon the representations and advice received from Defendant, Graham, is in excess of $1.8 million."
As for their original $300,000 investment in Pirate's Point, Ltd, the Korns report that they received several monthly interest payments, but then the payments stopped for good.
To say the Pirate's Point partnership soured some friendships might be an understatement. The Korns, Etkin, and Goldberg wanted their money back and let their feelings be known. The Phillipses and Glists, on the other hand, remained hopeful about the Black Point investment and sided with Graham in the developing feud.
"My husband and I received numerous threatening, hysterical telephone calls from the Korns at all hours of the day and night wherein they stated that they would involve other members of the family and the hospital administration," reads an affidavit filed by Carol Phillips. "They further stated that they would stop all referrals of business from Korn's medical partnership to my husband and his partner, Robert Goldberg."
Etkin, who with her husband Goldberg invested $75,000 in Pirate's Point on March 10, 1994, says it took months for her to realize something was wrong. She says she hounded Graham to produce records showing exactly where the money had gone, but Graham made up excuses about why records were missing.
Finally, in early 1995, Etkin traveled to Black Point to review the documents. She says Graham produced only a month's worth of canceled checks from the marina operation and claimed that the rest of the paperwork was with an accountant. "It was such a baloney story it was just unbelievable," Etkin recalls. Around that time, Etkin says she discovered that Pirate's Point, Ltd. had never been established under law.
"It is extremely embarrassing for someone with eleven years of bar investigation experience to fall completely prey to something like this, but it happened," Etkin says, referring to the fact that she worked as a prosecutor for the Florida Bar, the professional organization that monitors and regulates lawyers, until 1992.
Like Etkin, Goldberg, and the Korns, Maurice Gozlan says he never saw the promised return on his investment and didn't get his principal back.
In the early summer of 1994, Marcos Morjain, the president of Reel Deal Yachts of Miami, began talking to Graham about buying into the Pirate's Point limited partnership. Morjain says he wasn't so much interested in owning a piece of the Black Point boat barn as he was in obtaining a Bertram Yacht franchise for Dade and southern Broward and establishing a Bertram dealership at the marina. In a letter dated June 8, 1994, Graham promised to use his "best efforts" to make the dealership a reality once Morjain invested $125,000 in Pirate's Point, which he did.
"If you, for any reason stated or unstated, decide not to go forward with the acquisition of a Partnership interest, then and in that event your deposit will be returned in full upon ten days written notice," Tamea Behrendt wrote to Morjain. An addendum to the July 6, 1994, agreement, bearing Graham's name, reads: "Said sum will be held in escrow until written authorization is given by the payer (Marcos Morjain)."
Morjain did change his mind. But when he demanded his money back, he says he began getting the runaround. In responding to a Bar complaint filed against him by Reel Deal Yachts, Graham had an interesting explanation about how Morjain's $125,000 vanished from his attorney trust account.
"The failure of Respondent to obtain written authority to disburse the monies deposited was an oversight," Graham wrote. He went on to claim that Morjain had given him verbal authorization to disburse the funds. According to Graham, Morjain had changed his mind about buying into the Pirate's Point partnership, but wanted Graham to keep the $125,000 as a "loan" and be paid a whopping $10,000 per month in interest.
Graham didn't clarify why he would be idiotic enough to borrow money at an interest rate five times higher than the worst credit card. "Because the interest rate was usurious, Mr. Morjain requested and the Respondent agreed, to couch the loan in a form that would not appear to be usurious," Graham explained. Morjain denies the existence of the loan.
On December 22, 1996, Tamea Behrendt signed a settlement agreement with Reel Deal in which BP Fuel, Inc. -- yet another MMI affiliate company -- agreed to pay back the money, and she pledged the stock of MMI, as well as future revenues from fuel sales at the marina, to secure the agreement.
According to Morjain's lawyer, MMI quickly defaulted on the settlement agreement, and now Reel Deal is moving to enforce its "cash collateral rights," claiming that the yacht company is owed in excess of $196,000. The practical effect of this might be a public auction of MMI stock, with possible acquisition of the company -- and the county lease -- by Marcos Morjain. On the other hand, county administrators and attorneys say the settlement agreement between Morjain and MMI was invalid from the beginning because it was never approved by them.
Time and again, investors and creditors say, Graham claimed to be on the verge of raising large sums of money, usually by using the marina lease as part of yet another complex investment project.
In seeking to reach a settlement with Reel Deal, Graham noted in court papers, he signed a letter of intent with MacKenzie Equities, Ltd. and MacKenzie Ventures, Ltd. on October 1, 1995, to form a new corporate joint venture. "MMI would contribute its leasehold estate to the marina as its capital contribution towards the new corporation," he noted, apparently forgetting that such a change in ownership would require formal county approval.
Three weeks earlier, on September 21, 1995, Graham sent a letter to John Gengler of a company called Holding Capital Group (HCG) saying that "MMI has obtained the right to purchase the leasehold interest or corporate stock of Rickenbacker Marina, Inc." Graham proposed selling both marina leases to HCG for a total of $7.4 million and forming a new partnership, with MMI staying on as marina manager.
Graham's "right" to Rickenbacker Marina was news to Ram Melwani, a Miami businessman who operates the marina. Melwani says Graham approached him a couple of years ago and the two talked about Melwani selling his City of Miami marina lease to Graham. But negotiations soon broke down and a deal never materialized.
"I seem to remember backing away from it pretty early on," Melwani says. "It just didn't feel right. There was never an agreement of any kind."
Melwani's words echo those of Nicholas Christin, a lawyer hired by Miami Dolphins football coach Jimmy Johnson. Christin and Johnson took a boat trip to Black Point following last year's Super Bowl, and Graham later solicited the sports celebrity as a Black Point investor. "We never went through with the deal," Christin notes. "I heard Graham had been involved in some litigation up in Broward."
Since 1987, Graham has been a defendant in no fewer than 33 lawsuits in Broward County. One case alone runs to eighteen volumes of pleadings and involves a California firm, P.S. Marinas, that sued two of Graham's companies in 1990. At the time, Graham was involved in the operation of Harbour Towne Marina in Dania; P.S. Marinas owns a portion of the facility.
The Pirate's Point limited partnership is not the only episode in which Graham intersected with money and left its former possessors unhappy.
On April 3, 1995, without informing county administrators, Graham borrowed $90,000 from a Broward businessman named Harry Murray. To get the loan, Graham signed a promissory note and used the Black Point Marina liquor license as collateral, a violation of the county lease. Within a month he stopped paying back the loan, according to Murray. On February 13, 1996, a judge in Broward issued a final default judgment against Graham in the amount of $96,538 and said that the state court would "enforce and compel" the transfer of the liquor license as an award to Murray. To date Murray still hasn't been repaid for what he thought would be a short-term loan.
Again and again, county administrators threatened and cajoled its Black Point Marina tenant into living up to its end of the bargain. What Dade County never did when it had the chance was evict MMI, despite a litany of abuses.
On May 2, 1994, Metro Park Department interim director C.W. Pezoldt wrote to MMI president Tamea Behrendt listing eleven reasons why the company was in default of its lease. The reasons included failure to pay rent, taxes, late fees and percentages of gross revenues; failure to submit required monthly revenue reports, establish necessary performance and construction bonds, and operate the facility under an approved accounting system; and failure to provide proof of liability insurance. Pezoldt also mentioned receiving a letter from Continental Bank in which the bank informed the county that it held a security interest in some forklifts that MMI planned to use at Black Point -- another potential violation of the lease.
"Throughout our relationship as landlord and tenant, the Park and Recreation Department has made every effort to accommodate Marine Management, Inc.," Pezoldt noted. "We have gone far beyond the normal practices to allow you to achieve a successful project at Black Point Park and Marina. We did not insist that you reconstruct the bait and tackle shop after you modified it without approval. We have assumed the cost of bathroom cleaning and removal of trash when we did not have to.... At this point we are seriously concerned that you will not be the cooperative and complying tenant that you have promised you would be."
Pezoldt's concerns proved accurate.
On November 3, 1995, County Manager Armando Vidal wrote to Behrendt threatening to terminate the lease in fourteen days unless the company came up with $86,644.60 in unpaid utility bills, late fees, back rent, and bounced check charges. He also cited MMI for failing to make promised improvements at the marina, establish various bonds and insurance, or submit progress reports to the county for approval; and for failing to identify who its managers were and to submit monthly or annual CPA reports of gross receipts or marketing expenditures.
Vidal also said he was disturbed that MMI seemed to have undertaken an "unauthorized assignment [of the lease] to YS Marketing and perhaps to other entities to operate at the facility without county approval."
Graham wrote back on November 7 disputing some of Vidal's contentions and promising to correct acknowledged problems. Specifically, he said a performance bond -- designed to protect the public against unpaid obligations -- would be ready "by the end of the week."
On November 15, 1995, yet another county official wrote to Behrendt threatening to evict MMI from Black Point because of unpaid rent and state taxes, and the lack of the $96,000 performance bond.
The performance bond -- a recurring subject of warning letters from the county -- seemed to have a life of its own.
On April 11, 1996, Bud Daniels, then the chief of the park department's contract management section, wrote to Philadelphia-based Reliance Surety Company explaining that MMI was in default of its county lease to the tune of $93,626 in unpaid rent and $6085 in unpaid Florida sales taxes. Daniels reminded Reliance that it had signed a $96,000 bond with MMI on November 17, 1995, the purpose of which was to protect the county and the public against MMI's not paying its bills. Since the amount MMI owed now exceeded the amount of the bond, Daniels demanded that Reliance cough up the money.
On April 17, Reliance general counsel Frank Hucks called Daniels with some alarming news: The company claimed it was unaware it had ever approved a $96,000 bond for MMI. The bond Daniels had in his possession was never authorized by Reliance. "It is also obvious that the bond is improperly executed because the principal did not execute the bond at all, and someone purporting to have the power of attorney of Reliance Surety Company executed in the location where the principal should have executed the bond," Hucks wrote in a follow-up letter two days later. In other words, the signatures on the bond were in the wrong place, unknown to the bonding company, and completely invalid.
A close examination of the bond shows that it was witnessed by David Graham and Jay Kushner. No one from MMI signed the document in the space provided for a company representative; instead, the name of a Pompano Beach insurance agent, Daniel Gordon, appeared there. And the space provided for signatories from the surety company was a glaring blank.
In an April 18 letter to Hucks, Daniels noted that "your comment that the surety bond guaranteeing payments of our tenant, Marine Management, Inc., upon which we have relied, may be fraudulent is disturbing."
On April 16, five days after Daniels had first written to Reliance to cash in the MMI performance bond, the county received a $91,000 payment from MMI covering most of its debt. Once again, the operator of Black Point Marina had successfully forestalled eviction, and the county was willing to hope for the best.
Meanwhile, Graham was running into problems of a different sort. Investigators for the Florida Bar had begun to scrutinize his professional ethics, not for the first time. Records show that on September 21, 1984, Graham received a private reprimand from the Bar for minor misconduct stemming from a probate case. In 1973 he had been hired by a woman named Opal May Schreiber to help administer the estate of her husband. Seven years later a judge ordered Graham to hurry up and close the administration of the estate. The court repeated its demand in 1982 and 1983, but Graham didn't comply until early 1984.
"Your actions have discredited your entire profession," wrote Bar then-president Gerald F. Richman at the time of the reprimand. (By coincidence, Richman would later be drawn into the Black Point case, representing Graham's son.)
Now the Bar began a more serious investigation of Graham, alleging he had misappropriated and "converted to his own purposes" $265,000 from clients' trust accounts related to the Pirate's Point deal. On March 5 the Florida Supreme Court issued an emergency order suspending Graham's law license; on July 10 last year he became one of the 60 Florida attorneys in 1996 who lost their license to practice law.
In his case it occurred through a mechanism known as "disciplinary resignation." Facing disbarment, Graham was allowed to voluntarily resign his membership in the Florida Bar. "It allows the attorney to save some face, and it allows us to avoid the time and expense of a trial," notes John A. Boggs, director of lawyer regulation for the Florida Bar.
In considering two of the four complaints lodged against Graham, the Bar pointed out that in similar cases involving misuse of client funds, disbarment has been the typical sanction -- even in the event that money is paid back and the client is unharmed. "This Court has consistently held that misuse of trust account funds is among the most serious infractions a lawyer can commit." The trial counsel's recommendation to the board of governors: "Accept the resignation. It is the functional equivalent of disbarment."
Graham claims his troubles with the Bar are the product of a vendetta by Patricia Etkin, the Pirate's Point investor and former Bar prosecutor. In turning in his license Graham admitted to no wrongdoing. He called the Bar proceedings against him "onerous, and fractious of his emotional and financial condition" and "unnecessarily draining upon his health and resources," noting that he had recently undergone open-heart surgery.
Last spring Glenn Wright, Jr., one of the former owners of MMI, went to a judge in Broward County and asked that the state court issue an emergency order appointing a receiver to take over management of the marina lease. Among other things, Wright alleged that Graham was using a swirl of shell companies including YS Marketing, MMI, BP Fuel Inc., Marine Food Services, Pirate's Point, Ltd., and BP Limited Partnership to hide an embezzlement scheme and avoid paying investors and business partners like himself. Though Wright no longer owned MMI, he had a continuing interest in the operation. Court documents show that when he sold the company to Graham's wife, he was to remain as a consultant and also to share future revenues from the marina.
"The appointment of a receiver without notice [to MMI] is necessary to terminate the continuing and ongoing wrongful diversion and misappropriation of the income, revenues, monies, capital, and assets," Wright now warned. "If notice of the application [for receivership] is given, defendants are likely to abscond with, convert, secrete, conceal, dissipate, or divert the money, assets, income and revenues generated by the marina."
On June 14, 1996, an attorney named Harry Ward was appointed receiver by state court Judge John A. Miller. Six weeks later the court appointed Graham's son co-receiver with Ward. The two men began an escalating feud. Soon Ward complained to the court that Gregory Graham stubbornly refused to endorse routine checks to suppliers required to run the marina; Gregory Graham, a vice president of MMI, claimed that Ward refused to sign his paychecks, locked him out of the marina offices, and was wrecking the marina operation with the help of a hired consultant named James Dugan.
"Mr. Dugan has no experience related to marina operations [and] is just a friend of Mr. Ward," Graham claimed. "He regularly acts as a driver for Mr. Ward, who does not or cannot drive an automobile. Mr. Dugan has charged his meals and alcoholic drinks to the Debtor. In fact, he has charged the Debtor's restaurant for six-packs of beer, which he takes to his home or office."
Ward and Dugan had another view of things. Ward says he walked into a financial mess and did his best to correct it by repairing the fuel pumps to allow for accurate billing, fixing leaky water pipes and a broken ice machine that wasted $1000 per month, providing for the sale of live bait, and cutting back on entertainment expenses and "money-losing promotions" at the marina restaurant.
Ward estimated the leased portion of the marina was losing anywhere from $25,000 to $50,000 per year by not using proper cash registers and credit card processors, and he said he thought the restaurant had lost as much as $66,000 in 1995 alone. He noted several potential liabilities: the absence of skid slips in bathrooms and the continuing lack of a permanent certificate of occupancy at the boat barn. The latter was due to the fact that MMI hadn't finished installing the emergency fire sprinkler system and therefore couldn't get the building approved by county fire inspectors.
But Ward didn't keep his job for long. Six weeks later, on August 30, MMI filed for voluntary bankruptcy protection in federal court. By declaring bankruptcy, MMI put a sudden stop to the demands of dozens of unpaid creditors. Bankruptcy also prohibits Dade County from evicting Graham without the approval of a federal judge and stops Ocean Bank from foreclosing on its $1.5 million leasehold mortgage and taking control of the property or assigning the lease to another marina operator. Ironically, the original lease between the county and MMI states that declaration of bankruptcy is grounds for automatic termination of the lease.
To Wright, the former MMI owner, the bankruptcy filing was nothing more than a facile legal maneuver on Graham's part. "The filing of the bankruptcy was an effort to subrogate the rights of Mr. Ward, the state-appointed receiver." (Gregory Graham had by then "resigned his position in frustration," according to court pleadings. Seventy-two days after the case went federal, Harry Ward was replaced by a federal trustee.)
On March 3 MMI filed a disclosure statement and a business reorganization plan, two documents purporting to show how it would get back on its feet. The main feature of the plan? Borrow more money. MMI proposed to increase its Ocean Bank debt to $1.83 million, partly to pay its lawyers $130,000 and to finally install a $59,000 fire sprinkler pump.
MMI also spent a few paragraphs explaining how it got in trouble in the first place. Its failures were the fault of everything from Hurricane Andrew to Commissioner Larry Hawkins to construction delays to bureaucratic stonewalling to market vagaries -- in short, everything but its own business practices.
On April 17 Metro-Dade responded. The county suggested that MMI's disclosure was more of a nondisclosure, and reiterated a list of abuses suffered by the public during its relationship with MMI. Among other things, the county noted that MMI was now proposing to shift control of the company and the county lease by issuing preferred stock to new investors Carl Herndon and Mark Sweeney without alerting creditors that this would require prior county approval. Herndon, the owner of Blackfin Yacht Corp. in Miami, was to become the new manager and CEO of MMI under the reorganization plan, and Graham touted Herndon's participation in the National Marine Manufacturers' Association and a governor-appointed state marine advisory board. He didn't mention that Herndon's firm filed for voluntary bankruptcy protection last month. Nor, apparently, did MMI inform Herndon that he would soon be taking over the company. "This is news to me," says Herndon, noting that he specifically declined the job offer months ago in telephone conversations with Graham. "I can assure you that Blackfin and Black Point have no relationship whatsoever, and never have.")
The county also noted that MMI had permitted Blaylock Oil of Homestead and Sheltair Aviation Centers, Inc., to obtain liens on MMI's county lease, to the tune of $47,280 and $295,559 respectively. The latter company had leased luxury office space to MMI at Fort Lauderdale International Airport, some 50 miles north of Black Point Marina.
"MMI is in effect asking creditors to become investors, as it were, in MMI's Reorganization Plan," county attorneys wrote. "Many of the proposals in the Disclosure Statement (such as rent concessions or further encumbrances) require not only prior County Park Department approval, but a written amendment of the county lease."
Dade County's largest public marina continues to limp along under the care of a federal trustee, with Graham still in control of the lease. To date, more than 40 lawyers are directly involved in the legal proceedings. On one instance, describing the operation at Black Point, Judge Robert A. Mark called the floundering marina "a fish in a barrel that is not quite dead, but it smells pretty bad, yet the bankruptcy court is not quite ready to kill it."
As for the bankruptcy case, Mark described it as "a tangled web."
"Dave is extremely smart and very, very personable," says a lawyer who once negotiated a business deal with Graham and later wound up suing him. "If he threw you down a flight of stairs, you wouldn't realize it till you were at the bottom scratching your head."
According to workers at the marina, the boat barn has no functioning burglar alarm, owing to faulty wiring. Perhaps more serious in a building meant to house 300 fiberglass boats, the emergency fire sprinkler system still lacks a booster pump required by county code. (MMI's lease specifically prohibits "conditions posing a threat to health or safety of public or patrons and not remedied within fourteen days.")
The most recent hearing in the Black Point bankruptcy case was an intimate affair: only a dozen lawyers were present. One of them, Assistant County Attorney Eric Rodriguez, was visibly exasperated by his discovery that MMI had received two more code violation notices, had run out of fuel the previous Sunday, and had recently allowed its flood insurance to lapse.
"It's not something that can be taken lightly," Rodriguez noted, referring to the latest fire-sprinkler citation. "This is a county facility, and things like electrical and fire sprinklers are serious stuff. As for the insurance, I'm very concerned. There was almost a flood last week; we're in the middle of hurricane season, judge." Rodriguez added: "We're starting to see lots of problems with the management. And we're getting lots of customer complaints."
But finally Rodriguez and Ocean Bank attorney Joel Tabas backed down from their initial motion asking the judge to permit them to foreclose on the marina lease. MMI was once again given more time to fix the problems, and once again MMI's lawyer, Susan Lasky, promised a spectacular turnaround.
Tabas, the bank's attorney, was more somber, noting that a review of monthly revenue reports from the marina was "not in my view particularly encouraging." Tabas mentioned an appraisal conducted by the bank two years ago that put the value of MMI's operation at $2.7 million. Now he thinks the Black Point facilities may be worth substantially less. "I'm concerned about the direction of this case, or should I say the lack of direction of this case," Tabas noted, adding he thought MMI's management might be "impairing our collateral, and the county's relationship with the public who uses this facility."
Neither Graham nor MMI attorney Susan Lasky responded to interview requests for this story.
William Irvine became chief of contracts management for Metro-Dade's Park and Recreation Department in mid-November. He says it took a long time for the county to realize that Graham was in fact running the show at Black Point. It's unfortunate but understandable that county administrators knew nothing about Graham, he observes.
"It would appear from reading the file and seeing some of the events that have occurred that David Graham seemed to be the one operating and managing MMI and using his wife as a front person," says Irvine. "As such, he was not subject to a background investigation."
As for the litany of abuses -- the encumbrance of the liquor license, the murky ownership of the marina forklifts, the unapproved subsidiaries that include Pirate's Point, Ltd. -- county administrators knew about them only late in the game, Irvine says. "We began to have our suspicions about these things last June. We were unable to confirm our suspicions -- despite frequent requests for information from MMI -- until MMI filed its disclosure statement and reorganization plan in bankruptcy court and we realized that there were several additional breaches of contract.
"Once we were in a position to recognize what we were dealing with in the business practices being undertaken by David Graham, a lawsuit was filed in Broward County, a receiver was appointed, and immediately thereafter the case was moved to federal bankruptcy court," he says. "All those steps prevented the county from taking action. Prior to that, when we would cite Graham for defaults, they would be cured."
Irvine notes that the county uses private lessees and concessionaires to operate five of its six marinas. He says it's the most practical way to run such a business. Restaurants, for example, are difficult for government to manage and are best run by private sector operators.
Asked whether he believes Graham and MMI have manipulated and abused their landlord by capitalizing on government's slow reaction time and fragmented bureaucracy, Irvine says, "I would find it difficult to disagree with that statement."
If and when Ocean Bank forecloses on the lease, the bank will have three months to repair the problems at Black Point and either hang on to the property or sell it to another operator. In recent weeks creditors voted to reject MMI's reorganization plan, so now the field is open to others who may want to propose a takeover. MMI can also propose yet another reorganization plan.
"The lease part of the operation, yeah, I'd say its a shame," says one midlevel county administrator, who spoke on condition of anonymity. "The whole experience with Graham has left a bad taste in people's mouths. This guy has got more rabbits in his hat than a magician, and at this point it's like everyone's just grabbing at the money. It's a mess, frankly."
These days, a for-sale sign adorns Graham's comfortable waterfront home in Fort Lauderdale. Sources say he's developing a new venture farther north, in Palm Beach County.