A Deal to Dial For
When it comes to protecting his business interests at Miami International Airport, local entrepreneur Pedro Pelaez counters threats with the ferocity of a Lennox Lewis left hook. In 2001 Pelaez lost a bout with the Miami-Dade Aviation Department when his now-defunct company, Quick Packing, Inc., failed to gain a lucrative multimillion-dollar airport contract to wrap luggage in theft-deterrent cellophane, though he'd offered the county more money than the winning bidder, Secure Wrap of Miami. Before conceding defeat Pelaez relentlessly pummeled aviation department bureaucrats and Secure Wrap's principals with allegations of impropriety and unfair play. As a result of his tenacity, Miami-Dade Mayor Alex Penelas and county commissioners allowed Pelaez to go a full twelve rounds even though the county's bid process had technically knocked him out in the third.
Today Pelaez is the featured fighter in another match involving a complicated, lucrative business at Miami International Airport. This time the pugnacious 55-year-old Cuban-American businessman is battling to hold on to his prepaid phone card empire at the airport. "The aviation department wants to screw me again just like they did [in 2001]," he growls. "They don't like me because they know I don't play games. When I fight, they know I prepare for all-out war."
Pelaez's company, Communitel, Inc., came in third place behind rivals Latin American Enterprises, Inc. and WTN, Inc. in a bid to win a new, singular prepaid phone card vending contract from the county. These three companies have also sold prepaid phone cards at the airport since 1995 under temporary one-year test permits issued by the aviation department. During that span, the vendors have flourished under three different county aviation directors. Now just one will get the opportunity to remain in business at the airport. After a scathing 2001 report by the Miami-Dade Inspector General's Office concluded the aviation department did not accept bids for a phone card vendor as required by county procedures, Miami-Dade Aviation Director Angela Gittens recommended only one company get a new contract to sell phone cards in the airport terminal. And that company is not Communitel. (Gittens makes award recommendations to County Manager George Burgess, who then relays his own opinion to the county commission, which has final approval over county contracts.)
Since it was first advertised via public notice in several business periodicals in June 2002, the aviation department's bid to select a sole prepaid phone card vendor has served as a bruising exercise in how companies and lobbyists go about winning government contracts and how county commissioners superintend the airport to help out friends and political supporters. It is a situation that has at least one county commissioner clamoring for an independent airport authority to wrest control of MIA away from elected officials. "If we get out of the business of awarding contracts then we won't have these problems," says County Commission Chairwoman Barbara Carey-Shuler. "We can pass a billion-dollar construction project without uttering a word, but we'll get worked up about a minor procurement issue like this one."
For more than a year, Pelaez has methodically jabbed away at Gittens's decision to award the contract to Latin American Enterprises (LAE). The telecommunications minimogul hopes to deliver the knockout blow by exploiting the ongoing troubles of LAE's owner, Juan José Pino, the target of a public corruption probe in Argentina who also doesn't pay his fees to the county on time.
Pelaez views the commission as the appropriate agent to undo an injustice by rejecting LAE and awarding the contract to Communitel. "I have been at the airport for [nine] years doing the right thing," Pelaez relates, "paying my fair share, reporting what I had to report to the county, and producing more revenues than the other two companies I compete with. Why should I lie down and let the system walk all over me unfairly?"
Miami International Airport (MIA) encompasses 3230 acres and employs more than 36,000 people, a thrumming little city unto itself. According to aviation department figures, the airport put $9.5 billion into Miami-Dade County's economy last year. Currently MIA is undergoing a $4.8 billion expansion that will add an additional 2.7 million square feet to the airport's 7.4 million-square-foot, horseshoe-shaped terminal. Scattered throughout the terminal are dozens of restaurants, cocktail lounges, hair salons, pharmacies, and shops, which together kicked in $43,135,497 in revenues to the aviation department last year.
In charge of this behemoth is Gittens: a spirited career bureaucrat whose decisions are as quick, decisive, and jarring as a Sugar Ray Leonard punch combo. She was tapped by former County Manager Merrett Stierheim in March 2001 to replace Gary Dellapa. Stierheim, a bull of an autocrat himself, wanted a customer-oriented professional willing to square off with political insiders who do business at the airport, one of the county's primary economic engines. Since her arrival, Gittens, with the Miami Herald and local business groups including the Greater Miami Chamber of Commerce in her corner, has won several key matches with county commissioners over her apolitical decisions regarding airport procurement.
During the past three years, one of Gittens's top fiscal priorities has been to make sure MIA has only one phone card vendor. Typically, private businesses need to win a county contract in order to snag a piece of the action at the airport, though the aviation department will occasionally issue temporary one-year permits so that companies can test the market for particular products or services. Such was the case in 1995, when the aviation department issued separate test permits to Communitel, LAE, and WTN. Under normal county procurement rules, a single phone card vendor should have been selected by bid in 1996 when the test permits expired. Instead the three companies all continued to operate.
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."
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."
Pino was unavailable for comment despite several attempts to contact him via de Grandy, who says his client is always traveling and difficult to reach. Pino may be laying low for other reasons. The telecommunications entrepreneur is under investigation for allegedly laundering money as part of the illicit enrichment of Ramon Hernandez, who served as the personal secretary to former Argentine President Carlos Menem, according to a series of articles in El Nuevo Herald and El Clarin, Argentina's largest daily newspaper. In a telephone interview with New Times, an Argentine anti-corruption official confirmed an ongoing investigation of Pino, Hernandez, and others. Investigators are poring over numerous transactions involving Pino and Hernandez, including property purchases in Miami and wire transfers that allegedly link the two men, says Marcelo Colombo, investigations coordinator for Argentina's anti-corruption office, an agency within the country's Ministry of Justice. Pino's main accuser is a former lover, Maria Teresa Bisso, who worked as LAE's marketing director until 1997. According to her statements, Pino "would not withstand an audit to justify his income and expenses." Recently Norberto Oyarbide, the Argentine federal judge presiding over the case, subpoenaed records for several telecommunications companies Pino owns, including LAE.
Pino, a former Argentine federal police officer who immigrated to Miami in 1983, also provoked the wrath of a Miami-Dade Circuit Court judge. According to court records, Pino's ex-wife, Claudia Rasso, sued him in 2001 for his refusal to pay her $500,000 as part of their 1998 divorce settlement. Pino was supposed to pay her the money upon the sale of LAE to Ursus Telecom, Inc. that year.
Judge Alejandro Ferrer held Pino in contempt for refusing to allow Rasso's attorney access to Pino's personal and company bank records. During the May 2001 civil court hearing, Ferrer admonished Pino for his evasiveness. "I don't know you from Adam. You could be laundering money or hiding money from your wife or be completely aboveboard. There's no way for me to know ... I only know there's enough reason for me to feel suspicious about what has gone on up to now."
Pino also has problems paying his fees to the aviation department on time. According to the department's finance division, vendors are supposed to pay fees to the airport on the first of every month. On June 10 of last year, a month before county bureaucrats first recommended awarding the contract to LAE, the aviation department's commercial operations manager, Patricia Ryan, sent Pino notice that he owed the county $58,096. "Although we have called your office on several occasions, you have not responded accordingly," Ryan wrote in a letter to Pino. On June 25, LAE chief financial officer Sergio Rodriguez finally delivered two checks for $20,833 each to the aviation department. In December Pino's company paid the balance of $16,430 to the airport.
A recent review of financial documents and copies of checks filed with the aviation department shows that LAE has paid its fee at least a month late for the past six months. For example the company did not pay its November bill until December 15 -- coincidentally a day before the county commission meeting in which Burgess was to seek, for the second time, approval to negotiate a contract with LAE. Reached on his cell phone, Rodriguez claims he was unaware the company was paying its fees late. "Whenever we're supposed to pay, that's when we pay," Rodriguez asserts.
De Grandy argues that Pino's problems have nothing to do with the county's bid requirements pertaining to the new phone card contract, and says Pelaez is tossing around red herrings to prevent LAE from winning the contract. "If [Pelaez] thinks county commissioners should consider this defamatory information, then why doesn't he bring it up during a public forum so I can have an opportunity to respond?" de Grandy fumes.
In October de Grandy fired off a letter to Carey-Shuler regarding Communitel. The lawyer, who is LAE's only lobbyist (as opposed to Pelaez's five), informed the chairwoman that it had been brought to his attention that "having lost twice on the merits before two neutral [arbitrators], Communitel has re-engaged its lobbying campaign to derail the county manager's recommendation" to award LAE the phone card contract.
De Grandy's distaste for Pelaez's tactics stems from an entanglement three years ago. De Grandy represented Secure Wrap of Miami, the company that was awarded an airport contract to enshroud luggage with layers of theft-deterrent cellophane. Pelaez owned a rival firm, Quick Packing, Inc., that lost to Secure Wrap even though Pelaez offered more money to the county during a lengthy bid process. In the qualifications portion of that bid, Quick Packing was placed fourth by a county selection committee. The aviation department allowed Secure Wrap, which came in first in qualifications, to match Quick Packing's $1.5 million proposal.
During the course of that bidding war, the county, seemingly abruptly, decided to conduct an audit of Secure Wrap, Quick Packing, and a third company, Riveri Strapping, Inc., which operated at MIA under the same test permits as the phone card companies. De Grandy claims Pelaez unleashed his lobbyists to raise questions about the finances of the three baggage wrap companies in order to force the audit, which delayed that contract award by several months.
When the recommendation was finally approved by the county in February 2001, Pelaez convinced Miami-Dade Mayor Alex Penelas to veto the contract award, which caused another month's delay. When the commission subsequently overturned the mayor's veto on March 9, 2001, Pelaez sued the county in Miami-Dade Civil Court to stop the contract from going to Secure Wrap. On August 8, 2001, the judge dismissed Pelaez's complaint, bringing an end to the rigmarole, nearly four years after the county had advertised for bids.
Pelaez, de Grandy says, is using the same tactics to delay the county's decision on the phone card contract so Communitel can continue doing business at the airport indefinitely. He predicts that Pelaez, having lost in the county's arbitration process known as a bid protest hearing, will launch a full-blown sleaze campaign behind closed doors to solidify support among county commissioners. "If that doesn't work, he may go ask the mayor for another veto."
Pelaez sits in Enriqueta's Sandwich Shop on NE Second Avenue. The sweet smell of mojo criollo fills the air as Pelaez digs into a plate of masa de puerco and moros y cristianos. Between bites Pelaez explains his version of the phone card ruckus at Miami International Airport. "I'm not asking anyone for any favors," Pelaez insists. "I'm just defending my right to make a living."
Pelaez is no stranger in Miami-Dade County's most rarefied political circles. His list of connected friends extends from real estate developer Armando Codina to former Miami Mayor Xavier Suarez. In the early Eighties Pelaez staked his place as one of the leaders of the Latin Builders Association as well as by helping Suarez win his first term as mayor. Since then Pelaez has raised money for several big-name local pols, including Penelas. Pelaez has also claimed a good number of government contracts. In 1992 he partnered with Universal Aviation to win a ground services contract at MIA. The same year, Pelaez and his brother-in-law formed PZ Construction and with two out-of-state partners won a chunk of a $15.2 million federal contract to dispose of debris from Hurricane Andrew.
In 1994 and 1995 Pelaez got into luggage wrapping and phone cards at MIA. He admits less interest in political fundraising since losing the baggage wrap contract. In fact Pelaez, still sore over that debacle, only recently spoke again with Penelas following a lengthy freeze. Pelaez remains bitter about the way the local media and his opponents portrayed him as a canny political insider who only made money because of his connections. "I'm not a criminal," Pelaez grumbles. "I'm not a delinquent. Everything I've done in my life has been by the book."
Pelaez does indeed raise valid questions about LAE's ability to meet its $1,081,495 annual guarantee to the county.
He worked out spreadsheets comparing the amount of revenue produced by each phone card vendor based on monthly reports the companies submit to the county. Those reports, broken down by individual machines, show Communitel produces the most money for the county. With 22 phone card machines, Communitel paid the county $198,873 from January 2002 through February 2003. During the same period, LAE paid the county $185,531 and WTN ponied up $166,414. Those two companies each operate 28 machines for a total of 56 (78 including Communitel) phone card machines at MIA. Pelaez says the fact that Communitel has historically produced more for the county should be taken into consideration in selecting a winning bid.
He speaks freely of his frustration with Gittens. "She has not been helpful," he complains. "She's hard-headed. She digs in her heels and won't budge. She says, 'Whatever is in the past is water under the bridge. We're going to start fresh with the new contract.' Well, that's bullshit."
Unable to persuade Gittens that he, on the basis of his record at MIA, should be awarded the contract, Pelaez has been tapping old connections with county commissioners. Gittens and Burgess first recommended the county award the phone card contract to LAE during the July 8 county commission meeting. In the days leading up to that meeting, Pelaez lobbied county commissioners to allow him to continue with his appeal before a county arbitrator, as well as requesting a financial audit of the three phone card companies. The commission granted his request. The arbitrator dismissed Pelaez's appeal, but he is still seeking the audit.
Pelaez recently met with Barbara Carey-Shuler, who told New Times she will not allow the aviation department to present LAE with a contract award until staff does the audit, even though the companies already provide annual audited financial statements to the county. "Before they bring it back to us, they better have an audit done," Carey-Shuler insists. "How are we supposed to believe what these companies are telling us?"
Pelaez also pursued Commissioner Bruno Barreiro, who wrote memos to Burgess demanding an update on the audit. But Pelaez knows when to call for backup. To that end he hired lobbyist Thomasina Williams, a local attorney and friend of Commissioner Betty Ferguson, who coincidentally fired off a December 8 memo to Burgess asking what county agency would be conducting the audit and what the scope of the inquiry would entail.
Pelaez's all-star lobbying team also includes Fred Balsera, a former Penelas aide; Esther Monzon-Aguirre, a former aide to Commissioner Natacha Seijas; Sergio Pereira, a former county manager; and Sylvester Lukis, the county's former congressional lobbyist. "Some people want to make lobbyists look like members of al Qaeda," Pelaez says. "But lobbyists are one of the oldest industries in this democracy. They help me expose what is wrong with the system."
In a December 16 memo to county commissioners, Burgess reiterated his support of Gittens's decision to award the contract to LAE. He informed county commissioners, however, that the county's Audit and Management Services Department would review the audited financial statements submitted by the three phone card vendors "to further assess the propriety of the gross revenues reported to the county."
With several rounds in his favor, lobbyists in his corner, and county commissioners as the fight judges, it looks like Pelaez just might have a come-from-behind win in his latest rumble at MIA.