Turbulence Over HABDI
During HABDI's regular monthly board of directors meeting in March, Augustine Ajagbe announced his desire to add to the seven-member panel Dick Judy, the controversial former aviation director for Dade County. Although it looked like Ajagbe's proposal, several other board members suspected it was really the handiwork of HABDI's president, Carlos Herrera, Jr., who they feared was trying to load the board with individuals loyal solely to him.
For the past nine months, HABDI, which stands for Homestead Air Base Developers, Inc., has been undergoing a very quiet yet tumultuous internal power struggle that is likely to result in three of the four founding members being pressured to sell their stock in the company and resign from the board. One of the original partners, Virgilio Perez, is already gone, and the future involvement of Camilo Jaime and Clayton Rudd remains very much in doubt. Insiders say only Herrera seems secure.
This power struggle has turned friends into bitter rivals, as was evidenced during the March board meeting held in the offices of HABDI's attorney, Ramon Rasco. According to sources present at the meeting, once Ajagbe made his idea known, Jaime immediately accused Herrera of being behind the plan and argued that Judy would be nothing more than Herrera's puppet. As Jaime continued his verbal barrage, Herrera, sitting at the head of the long conference table, grew incensed and screamed at Jaime, "How dare you accuse me of trying to fuck you!"
Since HABDI was awarded the exclusive right by the county commission to privately develop more than 1300 acres of the air reserve base in South Dade, the project has dominated every aspect of Herrera's life. His other businesses have faltered, and the ensuing pressure is one reason that he and his wife briefly separated earlier this year, friends and business associates say. "Carlos has always been a difficult guy," says a person who has worked closely with him, "but I think this particular project has overwhelmed him. It has taken over his mind and his body." Herrera has staked so much on HABDI that he knows its future will forever define him in this community. Which could be why during last month's board meeting he was not going to allow anyone to challenge his authority -- not his partners and certainly not the man whom he once considered one of his closest friends.
Jumping to his feet, Herrera threw off his glasses and charged toward Jaime. Herrera, according to the witnesses, then hurled a wild punch intended for Jaime, but mistakenly struck attorney Rasco on the side of his head. Quickly, several of the other board members grabbed Herrera to restrain him.
Jaime recoiled in shock. "For two years we were like brothers," Jaime shouted, his voice, shaking according to those present, "and now you are attacking me."
Herrera, his own face flush with anger, remained livid. "Nobody is going to take this away from me!" he screamed in Spanish. "Nobody is going to take this away from me!"
Herrera did not return phone calls last week seeking his comment. Rasco, citing attorney-client privilege and the confidentiality of board meetings, also refused to speak about the incident. Camilo Jaime acknowledged the altercation took place but was reluctant to discuss the details. "I basically told him that I felt the balance of the board of directors was being manipulated by him into his own favor," Jaime recalls. "And Carlos took it personally." He says Herrera apologized to him several days later. "Right now we are still on speaking terms with each other," Jaime adds, "but basically we are not close any more."
The larger issue, of course, is whether the months of infighting have diminished HABDI's ability to develop the base. "I don't believe it has hurt HABDI because this struggle has been kept confidential, until now," Jaime says. "But it has wasted some of our time, time we could have spent looking for tenants and taking care of real business."
Board member Clayton Rudd agrees. "I think there is a lack of communication between the board members," he says. "There is a lack of intrinsic friendship that I think was once there between shareholders. And I think it gets down to just nobody getting together and saying, 'Here is what we need to do; we need to move this thing forward.'"
No project is more important to the long-term economic vitality of South Dade than the redevelopment of Homestead Air Reserve Base. Following Hurricane Andrew, which leveled most of the facility, the federal government decided to maintain only a small portion of the complex for military use and offered the rest of the site to Dade County. Last year the county commission gave final approval to a 70-year lease to HABDI, which plans to develop the base into a general-purpose airport. Envisioned are hotels, office complexes, and retail shopping centers. Initially the airport would emphasize cargo traffic, but it would eventually include passenger flights as Miami International Airport becomes overburdened.
The county's decision to grant HABDI the lease remains highly controversial, as it was done without competitive bidding and without the commission even reviewing alternative proposals. Critics charge that the commissioners handed the deal to HABDI because its president, Herrera, was also president of the powerful Latin Builders Association (LBA), a group that has donated tens of thousands of dollars to the political campaigns of commissioners over the years.
Although the lease agreement between the county and HABDI has been contemplated for nearly three years (HABDI was given the exclusive right to develop a plan for the base in July 1994), environmental concerns have delayed the formal transfer of the facility from the federal government to Dade County. County officials won't accept certain portions of the base until the level of contamination -- from oil and fuel seeping into the ground and nearby canals -- is documented and an agreement is reached regarding who will pay for the cleanup. Additionally, environmental groups from across the nation have opposed redeveloping the base and argue that such growth, without adequate advance study, could severely damage Biscayne Bay and Everglades National Park.
The base may be in a temporary state of limbo, but county officials are still dismayed that HABDI has not taken the necessary steps to prepare for its eventual transfer. Why hasn't HABDI produced architectural renderings of what it envisions for the base? Why haven't HABDI officials held town hall-style meetings in South Dade to keep the public informed and to solicit comments regarding its projected development? Why hasn't HABDI produced a marketing plan or a list of tenants? Why hasn't HABDI held a symposium to attract potential investors from South Dade?
The current strife among HABDI's partners may be the reason. "Everybody may be pulling for their own interests," says HABDI board member Manny Romero, "but I still think everyone is pulling for the project."
More troubling, however, is the revelation that several prominent investors who had pledged to bankroll the project have recently withdrawn their support, in part, according to knowledgeable sources, because they did not have confidence in Herrera's ability to manage the endeavor. In February 1996, as a way of calming county commissioners afraid that HABDI would not have the financial wherewithal to fund the project, HABDI produced a letter from Donaldson, Lufkin & Jenrette (DLJ), a Wall Street banking house, that said it would "work with HABDI to provide ... not less than $100 million."
But sources familiar with the negotiations say that DLJ is no longer interested in HABDI. As a requirement for putting up the $100 million, the Wall Street firm wanted to assume control of the Florida corporation and install people who knew how to develop and manage an airport. DLJ offered to keep Herrera on as the titular head of the project and provide him a minority share of the company, but Herrera refused. (A DLJ spokeswoman declined to discuss the matter last week.)
Miami investment banker Paul L. Cejas, who earlier this year was identified by Hispanic Business magazine as one of the wealthiest Hispanics in the United States with a net worth of $99 million, was also interested in providing needed capital to HABDI, but he too withdrew because of Herrera's unwillingness to loosen his control over the company, according to informed sources. (Cejas didn't return phone calls seeking his comment.)
In addition to these setbacks, HABDI is also facing a previously unpublicized lawsuit by a group of African Americans, who claim that HABDI has failed to live up to its agreement to allow blacks an opportunity to purchase 25 percent of HABDI's stock. HABDI officials made that concession to county commissioners last year -- along with another pledge to offer up to 24 percent of the company's stock to South Dade residents -- to mollify concerns that this was going to a Cuban/Hialeah takeover of the air base.
A group of blacks formed a partnership known as the Miami Franchise Development Corp. to raise money in the black community to purchase HABDI stock. But according to the lawsuit, filed in November, the group was not allowed to review the necessary financial documents from HABDI that would allow them to determine if the price sought was fair. HABDI counters that it did provide all of the information the group needed to make its decision, and Miami Franchise simply chose not to invest in the project.
Adding further distraction, Herrera and HABDI are now caught up in the Clinton administration's campaign finance scandal. In January Herrera, who donated thousands of dollars to both Clinton and the Democratic Party, bragged to the New York Times (just as he had boasted to me in a column published in June of last year) about his access to the president and to then-transportation secretary Federico Pena. Herrera credited Miami's Marvin Rosen, the embattled former finance chairman for the Democratic National Committee, for providing him with the necessary access.
Even with all of HABDI's current problems, the project may still be a success. But these recent, largely unnecessary complications bolster critics of the county commission and its decision to turn over such a valuable piece of property to a group that has little experience in airport development. HABDI's flounderings should be particularly worrisome to Mayor Alex Penelas and Commissioner Natacha Millan, since they were two of the group's strongest supporters. And as more details emerge regarding the development's struggles to get going, that criticism is likely to grow.
When I first approached Rudd and told him what I had learned about the conflicts within HABDI, he was upset. But his anger quickly passed, and he seemed eager to move out from Herrera's shadow and tell someone of his role in the origins of the development. Rudd is something of the forgotten man within HABDI, with most people believing the concept was Herrera's idea. "I am the creator," Rudd says. "After Hurricane Andrew I went to the base. While others saw destruction, ruination, and devastation, I was looking at it saying, 'Well we now have an opportunity to bring it back.'"
Rudd knew, however, that the project would require more financial backing than he personally was capable of providing. So he contacted Virgilio Perez, who in turn brought in Herrera and Jaime. At that point the four men were equal partners. "As capital requirements began to expand, then of course the respective positions had to be modified," he adds.
Rudd won't comment on the specific numbers involved, but sources familiar with the deal say that Herrera and Jaime each initially put in $600,000, and that under the original shareholders' agreement Herrera and Jaime were each given 40 percent of the company, while Rudd and Perez received a 10 percent stake apiece. Rudd says he could line up the tenants once Herrera and Jaime secured the lease. "The other fellows had to fund the project with lawyers and whatever needs to be done," he said. "They had to get the lease. I am not a wealthy man. But I had the experience, I had the vision, I had everything. I put it all together. But I didn't have a big pocketbook, I didn't have the connections with the commissioners."
Although it had been widely speculated in the press throughout 1995 that developer Pedro Adrian was a partner in HABDI, the truth of the matter, according to current board members, is that he did not commit himself to the project until January 9, 1996 -- the night before the county commission was scheduled to vote to approve the deal. Although Herrera and Jaime's pockets may have been deeper than Rudd's, they were not deep enough to satisfy the requirements imposed by the county commission that HABDI's partners have at least eight million dollars in ready cash to put into the project. Herrera and Jaime needed Adrian, and following a tense negotiating session between the three men, Adrian finally agreed to join the group.
Still unsure that he would have the necessary votes during that January 10, 1996, commission meeting, Herrera wanted to impress the board with yet another surprise investor. Just minutes before the board convened, HABDI announced that it had added as a partner American Logistics Services Inc. (ALS), which was owned in part by the giant defense contractor Raytheon Corp. Word that Raytheon had joined forces with HABDI gave Herrera's group an air of legitimacy, and several commissioners cited the multibillion-dollar company's involvement as being one of the most positive signs of HABDI's ability to see this project through.
With its new partners, HABDI ownership was divided among seven individuals and one corporation. Herrera and Jaime each now owned 23.6 percent of the company; Rudd and Perez controlled 5.9 percent apiece; Adrian assumed 20 percent of the business; Manny Romero and Augustine Ajagbe (added before the commission meeting to give HABDI's board the appearance of having South Dade and black representation, respectively) each were given 3 percent shares; and ALS now held a 15 percent stake.
HABDI's cohesion was short-lived, as it did not take long before the group's infighting began. In March 1996 Herrera announced the first cash call for stockholders -- one million dollars. Each stockholder had to pay a portion of that sum based on his ownership interest in HABDI. But according to sources familiar with HABDI's finances, Jaime, who under the cash call owed $236,000, and Perez, who owed $59,000, had trouble making their payments. It soon became clear that Perez would not be able to keep up with HABDI's demands for money. But Perez did not leave the group quietly. Sources say he threatened to sue HABDI for his time and effort in the project, and a settlement was reached last summer whereby Perez was given $160,000. Perez refused to comment for this story.
HABDI's need for operating money has become a major source of friction among board members. The group has had to spend nearly one million dollars in legal fees alone. Dick Judy's consulting contract with HABDI costs the group $10,000 a month. In addition Herrera is drawing a salary from HABDI of $350,000 a year, according to sources familiar with his contract. HABDI is also leasing a Mercedes for Herrera. "That's really brutal," says one source. "Some of these guys are barely hanging on, trying to maintain their investment in HABDI, while Carlos is drawing such a large salary." Herrera reportedly demanded that the board pay him the salary, and boasted to the board that it was his political contacts that won HABDI the lease. None of the other partners are drawing a salary from HABDI.
Jaime says he believes that Herrera, working in concert with Adrian, is trying to force the group's other investors off the board so they can control the company. Rudd last week confirmed that he has reached a deal to sell his stock to ALS. "I felt that it was not prudent for any one particular group to have a majority. I didn't want to have Pedro and the --" Rudd pauses, deciding not to finish his thought about Adrian and Herrera. Later, in what appeared to be another reference to Herrera and Adrian, he adds, "I have an agreement with ALS, and I believe that the concepts of ALS are more closely aligned with my development theories." (But even ALS is not the same ALS it was back in January 1996. Several months after the commission vote, Raytheon sold its interest in ALS.)
After the tumultuous March board meeting, the group met again last week, and Jaime acknowledges that Adrian and Herrera were going to buy out his shares in the company. Jaime says his previous attempts to sell to other possible investors were stymied by Herrera and Adrian. "By buying my stock they will now have a majority of the stock and the board," he notes. The group also voted to make Judy a board member.
Yet despite the apparent reconciliation, the underlying tension that led Herrera and Jaime nearly to blows remains. Indeed, Jaime announced to the board last week that he recently went out and bought a bullet-proof vest.
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