A Deal to Dial For

A tenacious entrepreneur and county commissioners are hung up on the repercussions of a prepaid phone card bid

Comments (0) By Francisco Alvarado Thursday, Jan 15 2004

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When Communitel, LAE, and WTN set up shop at the airport nine years ago, the prepaid phone card business model was just taking hold in major airports with international hubs. Back then, phone cards, about the size and shape of a credit card (often emblazoned with soccer team emblems, nature scenes, and pop culture images), were a cheap and easy way for people to make long-distance phone calls while waiting at MIA. Instead of paying upward of a dollar per minute at public pay phones, travelers could buy phone cards, with charges of only a few cents per minute. Users dial a toll-free number, punch in a numeric code, and are connected.

Despite the emergence of wireless technology, Pelaez says international travelers still find value in using phone cards, since using a cell phone with a billing base in another country while in the U.S. can produce exorbitant roaming and long-distance charges. "It's cheaper to use your cellular phone to make a long-distance call within the 50 states," Pelaez notes. "But if you're coming in from France and decide to use your cell phone to make a call, it will probably cost you $3.50 a minute, or something like that. So it's more economically feasible for international travelers to use a prepaid phone card."

Miguel de Grandy is the lobbyist for phone card contract winner LAE

Jonathan Postal (top)

Phone card vendors at MIA (top) appeal to travelers going to or coming from Central and South America; Miami-Dade Aviation Director Angela Gittens says only one company will sell cards in the terminal

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Communitel's sales at MIA indicate that business is good. Nearly 15 million international passengers pass through the airport each year. Between 1998 and 2003, Communitel collected about $4.5 million in revenues. LAE and WTN generated about $4.1 million and $3.6 million respectively during the same period. The Miami-Dade Aviation Department gets a cut from each company's coffers. When the permits were issued in 1995, the department required the three vendors to pay the county fifteen percent of their revenues. Since April the companies have been required to pay 25 percent or $20,833 a month, whichever is greater. Between 1998 and 2003 Communitel paid $841,576 to the county, Latin American Enterprises paid $739,940, and WTN paid $688,319.

In late 2001 Christopher Mazzella, the county's inspector general, issued a report that found the aviation department had committed numerous violations of the county's bid and contract management procedures with the phone card permits. Mazzella's report noted that the department had allowed the three companies to add machines without approval from the county. He also questioned whether the phone card companies were underreporting their revenues. Mazzella recommended the aviation department conduct a financial audit of the three companies and that the county award a contract to a single vendor. Two years ago, the aviation department finally accepted bids for a phone card vendor based strictly on which company would provide the best return to the county. According to public records, WTN won by offering the county an annual minimum guarantee of $1,089,312. Communitel offered $1,080,009 and LAE offered $1,081,495. The total difference between WTN's winning bid and Communitel's bid is only $9303. Pelaez refuses to accept his defeat by such a narrow margin and decries Gittens's recommendation to award the new contract to LAE; it won by default after WTN, the top bidder, dropped out. Pelaez is demanding that the county conduct the financial audit of the three companies requested by the inspector general in 2001. He says he hopes an audit will reflect poorly upon LAE, and that county officials will subsequently award the contract to Communitel.

Gittens, however, maintains there is no need to further delay the contract award. "[Pelaez's] complaints about LAE are part of the normal course of business," she says. "He could argue this and that. But rather than get caught up in a pissing contest among vendors, I am more concerned with the experience of travelers going through Miami International Airport."

Gittens further notes that the contract was awarded solely based on price. The rules, she emphasizes, did not include bidders' past performance at the airport, nor disqualification based on ongoing criminal investigations. "To suggest that we now use other criteria to make the award decision is not the kind of thing we should be doing," Gittens insists. "That is exactly the reason why Miami International Airport has developed a reputation as a difficult place to do business with."

Gittens has backup from Burgess and Mazzella. On December 10 Mazzella issued an update to his 2001 report approving the new contract. He says an audit would be "impractical" and that "the Office of the Inspector General does not feel that the same imperative need for an independent audit exists today against the backdrop of an impending recommended contract award." The inspector general added that the proposed contract incorporates virtually all of his 2001 recommendations.

Although Mazzella declined comment about the report, he made it clear he believes Pelaez is unnecessarily delaying the contract award. "Unfortunately, a process that has been transparent, fair, and comprehensive is being undermined by questionable tactics that have included the circulation of divisive and misleading allegations of impropriety directed at the highest bidder," Mazzella wrote.

Since the summer of 2003, Miami lawyer Miguel de Grandy has absorbed the shock of body blows Pelaez has inflicted, intended for his client Juan José Pino, LAE's embattled owner. The imposing but genteel de Grandy, a scholarly man with a salt-and-pepper beard, is used to participating in big political brawls. His biggest conquest was his successful legal representation of the Republican Party during the 2000 presidential vote recount in Florida. The lawyer says Pelaez has vilified Pino, disseminating negative news stories about Pino's acrimonious divorce and his alleged role in an Argentine public corruption scandal. Although Pino faces serious charges in his home country, de Grandy notes that Pino has not been found guilty of any crime. "It's like shadow boxing," de Grandy says, describing how he responds to Pelaez's bombardment. "He comes up with a slander du jour every day about my client."