Once hailed as the "magic mineral," asbestos was widely used in the United States throughout much of the Twentieth Century. It was placed in ceiling tiles because of its superior acoustical qualities; it was sprayed onto beams and girders to provide greater strength and support; and it was piled into tiny gaps behind walls as a fire-proofing agent. But by the late Seventies its use was banned, after tests showed it caused lung cancer and other diseases.
What had once been a thriving industry was replaced by another: asbestos removal. Today it continues to prosper. According to figures recently cited in the Asbestos and Lead Abatement Report, the industry's newsletter, asbestos-removal companies across the United States are expected to do more than $20 billion in business during the next two decades.
In Dade County, one firm stands uniquely poised to capitalize on this burgeoning market: MCO Environmental, Inc. Owned and operated by Cruz and Julio Otazo, MCO has been engaged in asbestos removal in South Florida only since 1988. But the Otazos have been aggressive in pursuing new business, and their company has grown rapidly.
In addition, "Cuqui" Otazo, as she is widely known, has in recent years become one of Dade County's most visible and politically well-connected Hispanic businesswomen. She was the first woman elected to the board of directors of the Hispanic American Builders Association; she served on the board of directors of We Will Rebuild; and she was a founding member of the Coalition of Hispanic-American Women. Last year, when the newly expanded county commission was elected, she contributed to the campaigns of several commission hopefuls. Since then she has emerged as a key player in the efforts of minority- and female-owned Dade companies to guarantee themselves a greater share of county business.
While Cruz Otazo A a former day-care operator with a master's degree in Spanish language and literature A is listed as the president and owner of MCO Environmental, it is her husband, Julio, who provides the actual expertise in asbestos removal. A tenured professor in the construction management department at Florida International University, he has been teaching full-time at the school for twenty years. During that time, he has also owned several construction-related companies of his own, but perhaps none as potentially lucrative as MCO.
After just five years in the asbestos business, MCO counts among its major clients the Dade County Public Schools, the City of Miami, and the Dade County Aviation Department. The company's work for the aviation department, in particular at Miami International Airport, has brought it both a substantial amount of money and an increasing amount of attention.
In 1992 MCO won bids for a series of asbestos-removal projects involving hangars formerly occupied by Eastern Airlines. The combined value of the bids MCO won amounted to slightly less than two million dollars. But now, more than a year after completion of its work, the firm is demanding that the county aviation department pay it an additional $13 million above its original bids. MCO claims the additional payments are justified because of delays and other difficulties it encountered. Julio and Cruz Otazo have submitted nearly a thousand pages in supporting documents, hired an attorney to press for a speedy resolution, and have threatened legal action against a competitor who has raised questions about their claims.
The county bureaucrat charged with responding to the Otazos' demands is Narinder Jolly, acting assistant director for facilities at the aviation department. Jolly appears eager to reach some sort of negotiated settlement with the Otazos, even though he admits he has not carefully examined the voluminous material they have delivered. But in forming his judgments about the amount of taxpayer money to which the Otazos might be entitled, Jolly explains that he will rely on a report being prepared by one of the aviation department's consultants, as well as the advice of the county attorney. A decision likely will be made within the next couple of months and ultimately it will have to be approved by the county commission.
Based on its past practices, the aviation department's analysis of MCO's multimillion-dollar payment demand will not necessarily include line-by-line scrutiny of the claims. Nor will it automatically involve a review of the the company's history of business at Miami International Airport. But a detailed analysis, while time-consuming, would disclose numerous discrepancies and highly questionable assertions. A review of MCO's business history would also show that, far more frequently than do other asbestos contractors operating at the airport, it demands additional money after completing its work.
The Dade County Aviation Department currently restricts to three the number of companies allowed to bid on asbestos-removal contracts. Those companies are MCO Environmental, DPC General Contractors, and Wayne Blackwell, Inc. When any of them wins a contract, they are expected to complete their work in exchange for the amount of money they bid. Occasionally, though, unanticipated delays or additional work can complicate this straightforward proposition. In those cases, the contractor submits what is commonly referred to as a "change order," which describes the nature of the problems and the added costs resulting from them.
Such change orders were the subject of a recent aviation department survey, and the results were revealing. Of 42 asbestos-removal projects competitively bid between 1990 and January 31, 1994, the survey showed:
Wayne Blackwell, Inc. was awarded $630,319 worth of work. After having begun the projects, the company received less than $21,000 in change orders, an increase of three percent over its original bids.
DPC General Contractors won nearly two million dollars' worth of work and received only $12,000 through change orders, an increase of six-tenths of one percent over its original bids.
MCO Environmental, during the same period, successfully bid on contracts worth more than five million dollars. But change orders ended up adding another $512,000 to the final price tag. That represents an increase of ten percent over the company's original bids.
The survey also showed that while MCO garnered 66 percent of the airport's asbestos-removal business by undercutting competitors' prices, it took home 94 percent of the money paid by the aviation department as a result of change orders.
MCO's competitors express concern with those figures. Asbestos work at the airport has become extremely competitive; it's not unusual for a mere two- or three-percent difference in bids to separate winners from losers. If one firm consistently bids low in anticipation of making more money through subsequent change orders, then that firm would have an unfair advantage. Says DPC General Contractors founder Buddy Klein: "Then the process is no longer competitive, and that's our concern." It is also one of the reasons DPC is moving away from taxpayer-funded contracts. "The style to do government work is you've got to bid it very cheap to get it, then you've got to work your change orders. And I don't mean necessarily illegally, but you work your change orders," Klein says. "You just don't let [the government agency] get by with anything. You've got to hammer them with change orders to make up for that little [profit] margin. And that's not our style. We prefer to give somebody a price and then go in and get the job done without any change orders."
New Times spent a month examining some of the projects for which MCO has already received more than $500,000 in change orders. In addition, the newspaper undertook an analysis of the company's pending demands for another $13 million. Nearly 2000 pages of documents were scrutinized, and more than two dozen people were interviewed, including former MCO employees. Some of those people harbor no antipathy toward Julio and Cruz Otazo or MCO, but others admit to animosity. Most did not want their names used in this article for fear of possible repercussions, though some say they would be willing to cooperate with investigators should the need arise.
Requests to interview Julio and Cruz Otazo were denied by the couple's Miami attorney, who said he did not believe it was in his clients' "best interest" to speak to the press. The attorney, David Swimmer, instead asked that New Times submit written questions. Six pages of detailed questions were presented on March 4, and several days later the attorney responded in writing: The Otazos would not cooperate or answer any questions. "Quite frankly," Swimmer wrote, "when we first spoke, I had hoped that you were seeking the truth and that your story would not be slanted or biased. I no longer hold that hope."
One of the most recent projects for which MCO received additional money was also supposed to be among the company's most modest. Yet it ended up being one of its most profitable.
In 1992 the airport's Burger King outlet, located in Concourse E, needed work done to its ceiling. The state and federal regulations regarding asbestos are simple: If asbestos-laden material is discovered in an area about to undergo renovation or demolition, a licensed asbestos abatement firm must be summoned before construction work begins. In the case of Burger King, the amount of asbestos fireproofing material to be removed was small A about 216 square feet.
On August 7, 1992, bids for the project were opened. Wayne Blackwell, Inc. bid $52,000, DPC General Contractors bid $37,000, and MCO Environmental won the project for $28,360.
MCO began work on October 31 and finished in three days A a good bid for a legitimate project that was efficiently accomplished. Several months later, however, Burger King's renovation plans changed slightly, and a small amount of additional asbestos would have to be removed. The aviation department had two choices: It could either ask for new bids from the three contractors or it could consider the new work an extension of the original contract and issue a change order (also known as a "project order modification"), thereby allowing MCO to finish quickly. It opted for the latter. Airport officials contacted the firm, explained that there was some additional asbestos (approximately half as much as in the original project), and asked MCO to submit a cost estimate. MCO was happy to oblige.
In a letter dated March 29, 1993, Julio Otazo provided his assessment of cost and time requirements. "We will need three to four mobilizations and work Friday afternoon to Monday morning on each mobilization to complete the new job," Otazo wrote. The cost for the twelve-day project, Otazo added, would be $71,400.
Airport officials were taken aback by the price and asked Otazo to itemize his estimate. "You see, first we gave them a price without knowing that they wanted a breakdown," explains Tom Sellers, a former project manager with MCO who helped prepare the Burger King estimate. "And then they said, 'Geez, this is outrageous. Show us what this $71,000 entails.' So we sat down and came up with $71,000 in charges."
According to Sellers, it took Julio Otazo about an hour to prepare the document. First Otazo assumed that completion of the work would require four weekends of three days each. And because the work would be done at night and on weekends (as the airport requested), he would charge the county overtime rates for his workers, supervisors, and even himself.
From there the rest was easy. Otazo estimated that either he or his wife would be on the site at least an hour a day during each of the twelve days at a rate of $112 per hour. Cost: $1344. Tom Sellers, as project manager, would be present eight hours a day at $52 per hour for each of the twelve days. Cost: $4992. Two supervisors would be required eight hours every day, each at $37 per hour. Cost: $7104. And four regular employees would work eight-hour days at $30 per hour. Cost: $11,520. Projected cost for labor alone: $24,960.
Materials and equipment would include use of the company truck for nine days at $55 a day, sixteen cases of asbestos suits (a total of 384 suits) for a total cost of $672, sixteen cases of disposable cloth towels for $512, and $8500 worth of air filters. Estimated total: $25,000.
Insurance and bonding would run $11,000. Julio Otazo then tacked on an additional $11,000 for what he described only as the company's overhead. Rounding out the estimate was an entry for $7231, which Otazo listed as the company's profit.
The total cost, according to Otazo, was $79,539. He then argued that since MCO had agreed to do the job for a mere $71,400, the aviation department was actually saving more than $8000 on the true cost of the work. After county officials and their consultants studied the proposal and agreed to accept it, MCO began the second phase of the Burger King project on Friday, May 28, 1993, at about 10:00 p.m.
How much time was actually needed to complete the job? According to aviation department records, as well as interviews with MCO employees, the work was finished in less than ten hours, over a single night A one shift, as opposed to the twelve days Otazo had charged the county. "All of this is jacked way up there," admits Tom Sellers, the former MCO project manager who left last year to start his own asbestos-removal company. "We knew all along there was no way in hell it was going to take four weekends, three days per weekend, to get the work done. We knew we could finish it in the first weekend."
Adjusting Otazo's estimates for the amount of time the job actually took, the true cost of the project was probably closer to $9000. What happened to the rest of the money? Several MCO employees say that at about the time the project was completed, Julio Otazo began driving a Range Rover. Two employees claim that Otazo boasted he was able to afford it thanks to the Burger King job.
Julio and Cruz Otazo refused to answer questions about the Burger King project. And although a host of aviation department officials and their consultants reviewed Otazo's projections, the department remains at a loss to explain why it agreed to pay so much money for so little work. Aviation department spokesman Chris Mangos notes that because the contract was awarded as a "lump sum" agreement, MCO was entitled to the full amount whether the work required one day or twelve. But Mangos concedes that the department remains at a disadvantage in evaluating all asbestos projects. The reason? Not a single aviation department employee has been trained and certified to enter asbestos work areas, which makes it impossible for the department to inspect ongoing jobs. "This has become something of a problem for us," Mangos admits. "It's a difficult situation. It leaves us out of a circle -- the construction field -- where normally we are very familiar with the work going on."
Though the Burger King project constitutes only a fraction of the taxpayer money MCO Environmental has received as a result of change orders over the past four years, the company's methods employed in justifying its charges to the county are similar to those used in its pending claims for $13 million A but obviously on a much grander scale.
Miami International Airport's Building 25 is enormous. On a recent visit, two cargo jets and the Florida Marlins team plane were being serviced inside the hangar, and none of the aircraft came close to touching each other. By comparison Building 24 is a much less impressive structure. About one-tenth the size, it abuts Building 25, and the common walls allow free passage between the two.
When Eastern Airlines shut down in January 1991, these two hangars along NW 36th Street were among the buildings the former giant vacated. In order to attract a new tenant, the airport needed to do major remodeling, which meant both buildings needed to be cleaned of asbestos. Initially the aviation department wanted to put out the job for bid as one large contract. But Julio and Cruz Otazo objected, arguing that the project was too big and that because MCO Environmental was still a relatively small firm, it wouldn't be able to meet the requirements and therefore would be excluded from bidding. To accommodate MCO, airport officials divided the work in the two buildings into five separate contracts, listed as projects A, B, C, D, and E.
When the proposals were unsealed in early 1992, MCO was the low bidder on projects B, C, and D. DPC General Contractors won the job for portions A and E. MCO's bid for its three projects amounted to $1.2 million. DPC won its two phases with a total bid of $1.1 million.
Both companies were told to begin work in April. The contracts required them to be done in 60 days. DPC finished in 64 days and sought a single change order totaling $12,000. MCO began about a week after DPC but did not complete the job until November, nearly five months late. And because the firm was still at work in August, it suffered complications arising from Hurricane Andrew. In the course of the project, Julio Otazo notified county officials he would be preparing a claim for additional compensation due to the increased time and the fact that more asbestos had been discovered than originally anticipated. County records, however, indicate that Otazo never submitted a written estimate of just how much more compensation he might have been seeking.
In February 1993 Otazo submitted his first claim: an additional $1.7 million. The aviation department sent the claim to two private consultants for evaluation. Both rejected the majority of MCO's charges. "Our analysis indicates the county may owe the contractor some additional payments on a few selected items in the claim," wrote Joseph Gaudet, vice president of the consulting firm Gaudet Associates in his August 1993 report. "However, many portions of the claim seem to be overstated in regards to quantities of materials that the contractor claims to have abated. The biggest problem we had in conducting the review is the fact that the contractor did not submit the claim until all the materials in question had been removed. This caused the conditions in question to be unobservable. This being the case, the burden of proof should lie with the contractor in verifying the amounts of material in question."
Aviation department officials notified MCO of Gaudet's findings, and the company responded this past December. Instead of addressing the consultants' objections, Julio Otazo submitted a new claim in which his demand rose from an additional $1.7 million to a staggering $7.4 million.
Wayne Blackwell, president of Wayne Blackwell, Inc. and a competitor of Julio and Cruz Otazo, was recently informed of MCO's newest claim. His reaction: "You're kidding, right? It's a joke, right?"
New Times analyzed in detail the Otazos' complicated, 400-page claim. One aspect of the document deserves special attention: a four-month period between May and September of 1992.
Almost immediately after beginning work in April 1992, MCO's workers discovered hidden areas of asbestos on the second floor of Building 25, asbestos that was not accounted for in the original contract. The company suspended work on that portion of the building and began protracted negotiations with the aviation department regarding more pay for more work. In the meantime, MCO continued removing asbestos elsewhere in buildings 24 and 25.
It took four months of haggling, but finally the two sides reached an agreement: MCO would receive an additional $155,000 to remove the unexpected asbestos. But today, as part of his revised $7.4 million claim, Julio Otazo is also demanding payment for that four-month period when negotiations were under way and work on the second floor was suspended. Otazo wants the aviation department to pay his company $1.2 million for not working. In other words, he is asserting that it cost MCO nearly eight times more to do nothing than it did to actually remove the unexpected asbestos.
How did Otazo arrive at the $1.2 million figure? Among other things, he is charging the county $19,452 for the 23 employees and three days it took to "demobilize" the second floor. Demobilization usually occurs at the end of a job, when a contractor returns his equipment to his office or warehouse. In this case, however, MCO continued working elsewhere in buildings 24 and 25. Because of that, a complete demobilization would seem unnecessary, and indeed company employees interviewed by New Times say some of the equipment on the second floor was simply moved to other areas, not back to the company's office and warehouse. (Otazo is also charging the county another $19,452 for "remobilizing" the second floor when work resumed.)
But the cost of mobilizations is hardly worth noting when compared to the amount of equipment and manpower apparently required to oversee an area where no work took place for four months. Otazo is demanding $313,813 to maintain the second floor during that period. According to his documents, MCO needed three workers at $20 per hour, eight hours a day for 99 days to do general "upkeep" on the floor. The second floor also required the presence of a supervisor at $25 per hour, four hours a day for 99 days; a senior supervisor at $35 per hour, two hours each day for 99 days; a project manager, also at $35 an hour, for one hour each day over 99 days. Even Julio Otazo himself, at a rate of $75 per hour, was there an hour each day for 99 days to keep watch on a floor where no work was being done.
Like all airport asbestos contractors, MCO is required to keep a daily log of the work it does, a kind of job-site diary. In addition to MCO's reports, the aviation department hires a consultant to inspect job sites and file independent daily logs. Neither MCO's nor the consultant's reports during those four months make mention of any employees regularly working on the second floor. Furthermore, MCO employees who worked on buildings 24 and 25 confirm that no regular activity took place on the second floor during the time work was suspended. Once or twice each day a supervisor would check MCO's unmanned negative-air-pressure machines (a type of filter that vacuums out contaminated air) to make sure they were operating properly and to take asbestos readings. New Times asked Julio and Cruz Otazo to clarify the number of employees used in maintaining the second floor, but they refused to respond.
(MCO's asbestos workers actually earn substantially less than the Otazos claim. The company's payroll records reflect that workers earn between six and eight dollars per hour, and supervisors earn about ten dollars an hour. While it is not uncommon for companies to charge the county at higher rates than their employees take home in order to cover various expenses, Julio and and Cruz Otazo refused to give New Times a detailed breakdown of how they arrived at the hourly rates they are now charging.)
The cost of those negative-air-pressure machines is also part of Otazo's claim. He is charging the aviation department for seventeen machines, each at a rate of $55 per day for 126 days. The total cost: $117,810. Industry sources, however, say the machines probably cost MCO less than $10,000 to purchase outright. The company buys much of its machinery from Miami-based Needham Industries. An official at Needham says that over the years, MCO has purchased close to 200 negative-air-pressure machines for its various projects. Rather than brand-new machines, MCO normally buys used equipment, the official explains, each costing between $200 to $500. At $500 apiece, the seventeen machines would have cost MCO only $8500.
But even assuming MCO purchased new machines for the airport project, the figures still don't add up. The Needham official says a brand-new negative-air-pressure machine costs between $1200 and $1500. At the top price of $1500 for each of the seventeen machines, the total comes to $25,500. (Moreover, when the airport job was completed, MCO was able to keep the machines for use on other projects.) New Times asked Julio and Cruz Otaza how much they paid for the machines they charged the county $117,810 to use, but the Otazos refused to respond.
In addition to the seemingly exorbitant rental rate MCO is charging the aviation department, the company is also including another $17,042 in "profit" it believes it deserves for providing the machines. With the inclusion of insurance, other miscellaneous costs, and $22,228 in "overhead," MCO is demanding $187,458 for the equipment it kept on the second floor while no work was being done.
Julio Otazo also claims that MCO incurred $277,746 in "extended" overhead expenses associated with the second floor during the four-month period in question. Apparently those increased expenses themselves created even more overhead, because Otazo adds another $49,584 in overhead on the overhead. Otazo then states that his company is entitled to make a profit of $38,015 on those overhead expenses. How did he arrive at all these figures? Otazo refuses to release the information publicly because, as he argues in his claim, it is drawn from MCO's private financial records. According to his claim, he is willing to share the information with aviation department officials if they are interested. (The aviation department's Narinder Jolly says that no airport officials have made such a request.)
Compounding all these costs is something Otazo refers to as "loss of business opportunity" and lost gross profit. Otazo's claim argues that MCO had to remain prepared to resume work on the second floor as soon as negotiations with the county were concluded. Because of that, the company was prevented from bidding on other projects during the four-month period work was suspended. The estimated losses, according to Otazo, amounted to $419,567. Once again, however, Otazo will not publicly disclose how he arrived at this figure. New Times asked Julio and Cruz Otazo to identify the specific business opportunities they missed during those four months, but they refused to respond.
Total costs claimed by MCO as a result of the four-month delay on Building 25's second floor: $1.2 million.
According to MCO's claim for $7.4 million, the problems on the second floor were minor in comparison to the handicaps it suffered on the overall project at buildings 24 and 25. And targets for blame were plentiful: the Dade County Aviation Department, the airport's consultant, bigoted inspectors, the United States Army, even Mother Nature.
Because the company's work was not completed by the June deadline, and in fact dragged on into the fall, MCO was forced to cope with the added aggravation of Hurricane Andrew. Just one example: The company claims it incurred costs of $89,663 to secure its equipment before the storm, to unsecure it afterward, and then to clean up the work areas. But there was more. The U.S. Army took over MCO's field trailer at the airport, and soldiers regularly broke the locks on MCO's asbestos Dumpsters in order to discard their own trash. The aviation department "was fully aware of this situation, but I was advised to try and do the best I could under the extenuating circumstances and to cooperate as much as I could with the Army, which I complied [sic]," Julio Otazo wrote in MCO's claim. Cooperation came with a price A specifically, $20,837 for what Otazo described as "Army interference."
As if the hurricane weren't enough, a faulty freight elevator cost MCO $329,753 in additional manpower to transport bags of asbestos, according to Otazo. And the summer rains of 1992 caused more headaches A very expensive headaches.
A leaky roof over buildings 24 and 25 added $372,185 to the cost of finishing the job. Every serious rainstorm forced the Otazos to divert their workers to the cleanup and filtering of contaminated water. Julio Otazo claims that following each "heavy downpour," the company used a minimum of 60 workers eight hours a day for three full days to clean up the mess. And, he says, there were nine such downpours. Otazo is charging the county more than a quarter of a million dollars for that 60-man work force alone. In addition, the cleanup efforts required seven supervisors and the full-time attention of Julio Otazo himself.
But Otazo's otherwise meticulously prepared claim neglects to identify on which days those 67 employees were required for cleanup. Also, only one of the nine "heavy downpours" is dated: June 29, 1992. Daily logs kept by a county consultant at the job site show 52 employees working on June 30, 49 on July 1, and 51 on July 2 A but never the 67 claimed by Otazo. Furthermore, the consultant's logs do not indicate whether all these employees were working to clean up storm water.
A complete review of the consultant's logs covering eight months reveals only one other three-day period during which an unusually high number of employees were working, and those figures were 40, 55, and 60 A again not the 67 claimed by Otazo. The records show that MCO's normal daily work force ranged between 20 and 30 employees.
In a memo written to the airport's consultants, Julio Otazo himself raised further questions regarding the manpower devoted to rainstorm cleanup. "We are getting heavily flooded on the fourth, third, and second floors in Building 24 every time it rains," Otazo wrote on June 25, 1992. "It was so much water (rain) yesterday that a ten-man crew has been removing water for the last two days. Thanks, Julio."
Another payment MCO is demanding from the county is described in Otazo's claim as "overinspection." To guarantee that work is done to the county's specifications, as well as to ensure that a contractor abides by state and federal regulations governing asbestos-removal procedures, the aviation department's consultant A in this case a company called PSI A sends an inspector to the site every day. During the project involving buildings 24 and 25, PSI cited MCO Environmental for what the consultant considered to be problems. On one occasion, for example, the inspector found notably high levels of asbestos in an area that already should have been clear. On another occasion, MCO's work was judged to be inadequate, and the firm was required to redo certain portions of the job. MCO has alleged that the citations were not justified but were the result of inspectors who were prejudiced against a company owned by a Hispanic female. The Otazos are now demanding $152,577 for the time it took to satisfy PSI's inspectors.
All of this Athe hurricane, the Army, the rain, the bigoted inspectors, as well as a number of other problems MCO claims to have encountered A conspired to delay the project for nearly five months, according to Julio Otazo's claim. Those delays were extremely costly to the company. How costly? In addition to the $419,567 in lost business opportunities caused by the delay on Building 25's second floor, Otazo is demanding another $2,067,773 because of delays in other parts of the building.
The aviation department's heart was in the right place. In 1992 Greenwich Air was willing to double the size of its maintenance and repair operation, hire a score of new employees, and give a little boost to the local aviation community, which was still reeling from the closings of both Eastern and Pan Am. All Greenwich asked was to move into Building 21 quickly. The aviation department couldn't say no.
But there was a problem. The department was planning to remodel this old Eastern hangar. In fact, airport officials had already accepted a bid from MCO Environmental to remove the asbestos at a cost of $755,745. That contract, however, was bid on the assumption that the building would remain empty, which makes working conditions easier and cheaper.
Despite the change in plans and the presence of Greenwich Air, MCO proceeded with the work, though an extra four and a half months was required to complete it.
In January 1994, more than a year after the job was finished, Julio Otazo submitted a claim to the county that reflected MCO's willingness to work under more difficult conditions. Otazo is demanding an additional $5.7 million.
In many ways Otazo's claim document for Building 21, which is nearly 500 pages long, is even more a mystery to the lay reader than the documents submitted for Building 24 and Building 25. For one thing, almost two-thirds of the total claim (about $3.8 million) is based on information the Otazos say is confidential and not open to public inspection.
Among the demands based on such confidential information is $1.6 million for lost business opportunities and gross profit from jobs the company was unable to undertake because Building 21 proved to be more difficult. New Times asked Julio and Cruz Otazo to identify the specific business opportunities they missed, but they refused to respond.
Combined with the alleged losses from buildings 24 and 25, the total amount of gross profit MCO was forced to forgo in 1992 adds up to $4.1 million. According to industry standards, gross profits represent up to 30 percent of revenue for a highly profitable company. Using that figure, Otazo appears to be claiming that MCO, had it not been hamstrung by its airport projects, would have won approximately $13.7 million worth of contracts in eight months during 1992.
While MCO critics are skeptical of that claim, county officials could easily check it and other assertions made by Julio and Cruz Otazo if they would simply audit MCO's financial records. On claims totaling more than $13 million, such a request would not be out of line, says David Sever, president of DPC General Contractors, an MCO competitor. "In my experience, when we had a much smaller claim with a federal agency, their analysis of our claim was based on an audit of our books and our expenses," Sever explains. "Has the airport even attempted to substantiate any of this through some sort of audit?"
The answer is no. In fact, Narinder Jolly, the acting assistant director responsible for settling MCO's claims, says he's not even sure if the aviation department or its consultants have requested the confidential financial information MCO says it is willing to release to airport officials.
In filing nearly 1000 pages of documents in support of MCO's claims, Julio Otazo has buried the aviation department under a mountain of paper. He has included everything from National Weather Service rain measurements to numerous photographs depicting working conditions. Memos, letters, notes A all are included. The material weighs almost ten pounds.
Should MCO succeed in all its demands, the result will be a far bigger payday than the actual job of removing asbestos ever could be. In fact, simply preparing the claims could prove to be a highly lucrative venture. Julio and Cruz Otazo want the county to pay MCO nearly $200,000 for the time and effort spent assembling claims materials for buildings 21, 24, and 25.
That material is now being reviewed by Dade Aviation Consultants, whose job is to advise county officials about a range of matters. The consultants will then issue a recommendation. But from there the process traditionally becomes a matter of negotiation, not investigation. The aviation department has a history of being more concerned about the cost of a negotiated settlement than with determining the validity of a contractor's change-order claims. Under such a system, it makes sense for contractors to inflate their claims and to approach their business not as profits from contracts, but profits from change orders. Furthermore, the aviation department does not legally require that contractors' change orders be accurate. Assistant County Attorney Deborah Mastin, who is based at the airport, explains that every contract agreement is entered into with "implied good faith." Violation of that good faith doesn't necessarily qualify as a criminal act. Disputes can be settled through civil lawsuits, though at the Dade County Aviation Department, negotiation is more common. Cargo Building 2142 is a case in point.
In 1991 MCO was the low bidder on an asbestos-removal project at Building 2142, but soon ran into problems such as power outages that suspended work. By the time the project was completed in mid-February 1992, the company had made it clear the delays were going to cost the county. MCO originally bid the project for $274,110. A year later the firm submitted a claim for an additional $289,000.
On September 21, 1993, Julio and Cruz Otazo met with three county officials: George Canelas, aviation department project manager; Alejandra Parapar, acting chief of miscellaneous construction contracts at the airport; and Chany Almazan, acting deputy chief of miscellaneous construction contracts. After some negotiation, an agreement was reached. The county would pay MCO $142,000.
The aviation department's file for Cargo Building 2142 contains no information about the nature of that settlement or details regarding which of MCO's claims were being honored and which were being rejected. But the settlement obviously pleased the Otazos; a week later Julio Otazo wrote Canelas to thank him and the generous members of his department: "We praise you and the representatives from [the Dade County Aviation Department], Ms. Parapar and Mr. Almazan, for your very professional behavior, fairness, and willingness to close this claim in a satisfactory manner both to the Owner and the Contractor."
Otazo had reason to be pleased. The $142,000 settlement with the aviation department was far more than either of the county's two paid consultants believed MCO deserved. After Otazo submitted his original claim for $289,000, department officials asked consultant PSI to analyze the numbers. The consultant argued that Otazo had failed to prove most of MCO's claims and thus the company was due only an additional $45,124. The department then sought a second opinion from Dade Aviation Consultants. Again the consultants found Otazo's claim to be largely unproven, but their assessment of reasonable costs was higher than PSI's. "Some entitlement is due this contractor," John Parrott wrote on behalf of Dade Aviation Consultants. "We believe that the amount of this entitlement should fall somewhere between $45,000 and $90,000." (None of the consultants working for the aviation department would speak to New Times about MCO's previous or pending change orders.)
In December George Canelas wrote a memo to his supervisor, Narinder Jolly. Canelas, however, did not mention the fact that the settlement with MCO was far greater than the consultants' recommendations. Instead Canelas simply noted that MCO had been asking for $289,000 and the aviation department had settled the claim for a mere $142,000.
Jolly, the airport's acting assistant director for facilities, today says that his staff has reviewed MCO's various projects and change orders, and has found nothing irregular. "Each request was evaluated on its own merits," Jolly adds. "Only what was justified was approved."
Not every public client of MCO Environmental has been so accommodating as to prompt letters of praise from Julio and Cruz Otazo. The Dade County Public Schools, for example, has been much more rigorous in questioning MCO's actions and claims. Ironically, this more disciplined relationship has taken place amid a seeming conflict of interest.
The school district's department of asbestos management is headed by Ralph Cruz-Mu*oz, who oversees the annual bidding process that determines which asbestos-removal firms do business with the school district. In addition he supervises the inspectors responsible for ensuring that contractors perform their jobs properly. He is also married to Julio Otazo's cousin. "It has never gotten them one iota of work," Cruz-Mu*oz states emphatically. "Actually, I've had some of my biggest problems with them."
In spite of that family relationship, or perhaps because of it, Cruz-Mu*oz and his staff have been extremely tough in their dealings with MCO, especially when it comes to billing practices the company commonly uses at the airport.
This past August, for example, MCO was called into an emergency situation at Frances S. Tucker Elementary School, where a construction project had accidentally released asbestos fibers into the air. The contamination had to be cleaned up immediately and left no time to negotiate a contract. MCO stepped in and finished the work in nine days.
The next month Cruz Otazo submitted a detailed bill for the work: $41,013. About $12,000 of that charge was for materials, including more than $7000 for air filters and face masks. Today that page of Otazo's claim is heavily marked with red ink, as are all other pages -- a sign of the school district's displeasure.
A district inspector questioned Otazo's billing for many materials, and noted at the bottom of one ink-red page: "These items were not replaced during the job or are reusable and remain the property of MCO. Filters were not replaced in those amounts shown; some were not replaced at all, or if replaced, will be used by MCO on other jobs." Otazo tried to charge the district for five cases of duct tape at $68 a case; the inspector contended MCO only used one case. Otazo also attempted to bill the district for four cases of spray glue, eleven pails of caulking material, 40 gallons of mastic remover, and eight rolls of disposable asbestos bags. Again the inspector asserted that all of Otazo's claims were inflated and determined that the company only deserved to be compensated for one case of spray glue, two pails of caulking material, fifteen gallons of mastic remover, and two rolls of disposable asbestos bags. By the time the inspector was done with the materials list, the price had been slashed from more than $12,000 to less than $1600.
In addition to materials, Julio Otazo also wanted MCO to be compensated for its equipment. Nearly $7000 of the $41,000 bill was for machinery, including approximately $4000 for eight negative-air-pressure machines. The school district inspector placed a large red X through the entire page and noted: "Equipment owned by the company and reusable on other projects."
Finally, labor charges came to $21,908. Here again the school district uncapped its red pen. Analyzing the time cards for each employee, the inspector discovered several employees whose time was being charged to the Tucker Elementary emergency project but who were actually working other jobs for MCO.
In the end, Otazo's $41,000 bill was cut to $19,576. "They tried to play some games," Cruz-Mu*oz says flatly, "and they hit a wall."
MCO Environmental once again hit a wall this past November when the school district called upon the company for another high-priority asbestos removal, this time at Miami Jackson Senior High, where rain-damaged ceilings required repair. MCO began its share of the work on November 19 and was supposed to finish by December 6. But the company got bogged down from the outset.
The school district inspector assigned to Miami Jackson repeatedly cited MCO for not complying with asbestos-removal procedures. The company stopped and restarted the project a couple of times, yet never completed it. District officials also claimed the company didn't assign enough manpower to do the job in a timely manner.
Following a series of heated phone calls between Cruz-Mu*oz and MCO's office, the company was replaced. "They were asked to leave," Cruz-Mu*oz acknowledges. A new contractor was hired and finished the project in less than six days.
Cruz-Mu*oz says he had no choice but to replace the Otazos. "I don't care of they are cousins of my wife," he explains. "I'm trying to be as fair as possible. They have to do the job right or they won't get to do it at all." Cruz-Mu*oz does note that "for the most part MCO has done decent work" for the school district. He credits the firm with a willingness to take on jobs other contractors don't want because the pay is low or the work is difficult. MCO, he adds, was also available for work during the school district's time of need after Hurricane Andrew (a situation that would seem to contradict the Otazos' claims that troublesome airport contracts prevented them from seeking other jobs following the storm).
For her part, Cruz Otazo blames the school district for her company's failure to finish the Miami Jackson High project. In a letter to Cruz-Mu*oz dated December 3, 1993, in which she announces that MCO was going to "close down" the job site, Otazo said the district's inspector, Charles Armpriester, "embarked on a crusade to obstruct our operations." Cruz-Mu*oz says the charge is ludicrous. But perhaps not as ludicrous as what the school district received several weeks later A a bill from MCO demanding full payment for the Miami Jackson project in the amount of $13,282. That claim is still pending.
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