Very Big Bucks
Like many trade associations, the owners and operators of duty-free stores around the world get together once a year for a convention that provides opportunities to study industry trends, listen to presentations from their peers, and to pass around business cards in that never-ending endeavor known as networking.
This year's gathering, held in Orlando this past April, included the usual mixture of hard work, sightseeing, and relaxed cocktail chatter. By some accounts, the subject of the most intense gossip, the topic that apparently elicited the greatest amount of curiosity, was the duty-free battle being waged at Miami International Airport (MIA). For the first time in its history, Dade County had decided to select an operator for its fifteen duty-free stores through a competitive bidding process. Until now those stores, which only serve passengers flying out of the country and which do an annual business of nearly $50 million, had been run by Greyhound Leisure Services.
Greyhound's 27-year reign over the duty-free contract at MIA has been the result of a highly questionable business arrangement, a vestige of old-style politics in which a handful of Anglo bureaucrats and politicians could dole out such gifts with relative ease. But as the ethnic and racial makeup of Dade County changed, Greyhound's unchallenged monopoly was bound to come under scrutiny. Three years ago, when Hispanics and blacks for the first time constituted a majority on the county commission, the company's future appeared to be downright bleak.
Some commissioners, in fact, have been openly anticipating the expiration of Greyhound's current contract later this year so that a new company might be brought in, a company that would include Hispanics and blacks among its owners. (Greyhound has not had any minority owners.) Almost two years ago Commissioner Natacha Millan addressed the need to open up the process to competitive bidding. "I just believe that is good government," she said during an aviation committee meeting. "I think that's fair." Greyhound's competitors from around the globe have been equally eager to bid on what is potentially one of the most lucrative airport contracts anywhere.
Then something happened that left the duty-free conventioneers in Orlando shaking their heads in disbelief at the seeming insanity of Dade County. No sooner had the commissioners finally opened up the contract to bid than they severely restricted the number of firms that could compete. And they did so not as a matter of airport policy but as a matter of foreign policy.
Federal law already states that no American company can do business directly with Cuba. But this past April 4, the Dade County Commission decided to dramatically expand that concept by declaring that no company even related to another company that does business with Cuba (or that simply sells products originally made in Cuba) could be awarded the duty-free contract at Miami International Airport. This meant that if an American company is owned by a larger, international duty-free firm, and that international firm sells Cuban cigars in any of its airport stores anywhere in the world, the American subsidiary could not be awarded the Miami contract, even though the American company has no dealings whatsoever with Cuba.
The new rule had the effect of eliminating from competition virtually all the international duty-free companies, because Cuban cigars (and to a lesser extent Cuban rum) are a mainstay in stores at nearly every major airport in the world. Disqualifying the largest and most respected duty-free companies in turn gave a tremendous advantage to a few politically well-connected firms, an advantage some industry insiders believe may have been the true motive behind the so-called Cuban cigar rule. "People were certainly talking about it," says a duty-free executive who attended the Orlando convention and asked not to be identified. "For a long time now the reputation for Dade County has been that it is very difficult to get a clean shake down there. It's a nice airport, in a great market, but the politics are impossible to deal with."
Those politics are not limited to the peculiarities of Dade's diverse ethnic community and its predilection for placing foreign policy concerns ahead of the interests of local taxpayers. Dade politics also includes the posturing of lobbyists and lawyers who market their access to decision-makers in such a way that outsiders come to believe the quality of their proposals is less important than the people they hire to plead their case. "Politics" also refers to the hypocrisy of a minority-participation program that supposedly provides opportunities for struggling black and Hispanic entrepreneurs but which in reality is cynically manipulated to add influential names to proposals in hopes of swaying commission votes.
With that sort of atmosphere surrounding governmental business transactions in Dade, it's no wonder some of those attending the convention in Orlando raised a toast to their good fortune in having nothing to do with Miami International Airport. "We may indeed be developing a reputation that in order to win a contract in Dade County, you have to hire certain local lobbyists and certain local lawyers and local minorities," admits commission chairman Art Teele. "That's not a good reputation to have. And I think the duty-free bid does nothing to enhance our reputation as a world-class city, and probably does a lot to hurt it. There is that negative perception with a lot of people that hometown rules always apply here and that outsiders don't stand much of a chance.
"In the future," Teele adds, "we've got to be a little bit more sophisticated in our approach."
Though the duty-free conventioneers did not know it at the time, the real kicker to Dade's tortured search for a new airport vendor was yet to come. After all the politicians' grousing and complaining about how Greyhound Leisure Services had unfairly monopolized the contract for decades, and how a new company was essential if MIA were to boast a world-class duty-free operation, county commissioners are now poised to award a ten-year contract to none other than Greyhound Leisure Services.
County Manager Armando Vidal has recommended Greyhound, and the final decision will be made at next Tuesday's county commission meeting. But the battle is far from over. At last count more than 40 people had registered to lobby commissioners on the issue -- no surprise given what's at stake. During the course of the ten-year contract, gross sales at the duty-free shops are expected to top $700 million, making it the largest single contract in the airport's history.
"I can tell you that everyone in the industry is watching this process with absolute amazement," says Doug Newhouse, news editor of the London-based trade magazine Duty Free News International.
Industry insiders are not the only ones amazed. Even certain county commissioners seem a bit confused at how the selection process could have gotten so turned around that they have ended up right back where they started A with Greyhound in the driver's seat.
The first duty-free shop at Miami International Airport wasn't really a shop at all but rather a simple card table, set up by a World War II pilot named Capt. Ed Mehrige. After the war, Mehrige flew as a pilot for Pan Am out of Miami. In 1958 he signed a contract with the county that allowed him to set up his card table in the terminal building and sell cartons of cigarettes to outbound passengers on international flights. Steadily his business grew, and in 1968, Greyhound Leisure Services, a subsidiary of the Greyhound bus line, bought out Mehrige and inherited the airport contract. During that decade of growth, the business became far more sophisticated -- and profitable.
Duty-free shops are unique at the airport. Operators such as Greyhound can import and sell a variety of merchandise without paying state and federal taxes or import duties because -- in theory at least -- the goods never enter the U.S. market. They are sold only to airline passengers whose destinations lie outside the United States. This results in savings to the customer of up to 30 percent. Tobacco products, liquor, jewelry, and perfumes are favorites among duty-free operators, whose customers make their selections from display samples but don't actually receive the merchandise until they are about to board their international flight.
During most of Greyhound's tenure, the aviation director for Dade County was Dick Judy, who ran the airport with unprecedented autonomy and personal authority. On those occasions when the contract was about to expire (the last time was in November 1985), Judy would simply recommend to the county commission that it be extended, and commissioners historically acceded to Judy's wishes. Moreover, Steve Clark, who was county mayor during much of that time, was a champion of Greyhound's interests.
With their extended contract due to expire again this November, Greyhound executives reached an agreement early last year with members of the county airport staff whereby the company would take on three minority partners in return for an extension of the company's contract into the year 1998.
As they had in the past, Greyhound officials were relying on the ability of the aviation director to push the proposed agreement through the commission with little notice or fanfare. But Dick Judy was no longer aviation director, and Steve Clark was gone from the commission. Instead the job of campaigning for Greyhound's extension fell to the current aviation director, Gary Dellapa, who has displayed none of Judy's desire or ability to finesse such a deal.
Greyhound's plan went before the county commission's aviation committee on February 22, 1994. Feeling confident, and expecting quick approval, Greyhound's president, J.P. Miquel, strode to the podium and outlined the agreement for commissioners. "About a year ago we were approached by the staff at the airport," Miquel began. "They were asking us to take on some minorities in our business, and we accepted." In return, Miquel explained, he wanted the contract extended again.
Whether or not he intended it to sound like a threat, Miquel's presentation seemed to be received that way by certain commissioners. Natacha Millan in particular appeared to be confounded. "Does that mean, sir, you have not been giving anything to minorities?" she asked. "You're going to start now?"
"That is correct, ma'am," Miquel replied. "It's never been requested or asked for from us [to include minorities]."
The committee chambers fell silent.
"Well," committee chairman Pedro Reboredo finally said, "does anybody wish to say something?"
"I have some serious problems with that statement," Millan responded.
Sensing disaster, one of Greyhound's lobbyists, prominent Miami attorney Hank Adorno, rushed to Miquel's side and gently nudged the diminutive Frenchman away from the microphone. Adorno then began furiously backpedaling. Miquel had misunderstood the question, he said. There was some sort of communication problem. Greyhound really was a good corporate citizen. "Their heart is in the right place," Adorno pleaded. But it was too late. The issue was dead. There would be no three-year extension.
Greyhound's problems, however, were only just beginning. The county subsequently hired a Chicago-based firm, the Unison Consulting Group, to analyze the airport's restaurant and retail operations. The resulting report, delivered in early 1995, was extremely critical of Greyhound.
Besides contending that the company had done an inferior job marketing itself to passengers, Unison's report noted that in most airports, between 30 and 50 percent of all international passengers purchase something at a duty-free store, while only eleven percent of MIA's international passengers are enticed into a sale. In terms of actual dollars, Miami also lagged far behind in comparison to similar airports. For example, the average sale per international passenger in Los Angeles was $23.60; in San Francisco it was $14.41; and in Orlando it amounted to $12. Miami averaged only $6.72 per passenger.
Given the animosity toward Greyhound among certain commissioners, and the unflattering Unison report, a bidding frenzy among international duty-free firms seemed inevitable. This past March the county commission approved the general procedures under which they would select a new operator. Companies would first be ranked by a selection committee according to their qualifications. The top three firms would advance to the second round, during which each would submit a sealed bid stating the percentage of the operation's gross revenues they would be willing to pay the county.
As part of a competitive bidding process, commissioners normally are required to select the best bid, or highest percentage. In this case, however, they decided to give themselves a little political wiggle room. Under the terms of a proposal by Maurice Ferre, which was adopted, commissioners could select an inferior bid in this situation as long as it was within ten percent of the highest bid.
On April 3, 1995, county aviation officials held a pre-bid conference at the airport, and the response was overwhelming. Numerous firms requested documents. Representatives of organizations from Switzerland, England, and Brazil flew in personally to pick up materials and ask questions. It quickly became clear that the world's most experienced and profitable duty-free companies would be bidding. But within 24 hours, all that changed.
The next day, April 4, as the county commission's regularly scheduled meeting was about to adjourn, Commissioner Javier Souto introduced the Cuban cigar rule. His words steeped in Cuban patriotism, Souto declared it immoral to do business with any firms that indirectly lend financial support to the Castro regime. Placed in such an emotional context, the proposed rule was approved without much thought or discussion of its ramifications. But the pool of potential bidders shrank suddenly and dramatically.
For Robert Hendry, the Orlando-based chairman and CEO of Weitnauer America, a subsidiary of the Weitnauer Trading Group in Switzerland, Souto's amendment was a death sentence. "They've lost the opportunity to have the best in there, and in the long run that will cost the county money," he says. "I don't think the United States government should try and tell companies in other countries what to do. And I certainly don't think any American city or county should try to tell other countries and other companies what to do. It doesn't look good. It doesn't lend itself to Miami looking like the great international city that it is."
Hendry says his company's Swiss owners couldn't stop selling Cuban tobacco products right now even if they wanted to. Contractual obligations with various airports around the world require them to stock specific merchandise, including Cuban cigars. "We just can't tell our partners that because we feel this way about Cuba, you are going to have to suffer financially," he explains. "They would think we lost our minds."
Doug Newhouse, of the Duty Free News International, says other well-established companies found themselves in the same position as Weitnauer, including Aldeasa, the state-owned Spanish firm that operates duty-free shops throughout Spain and Latin America, and Allders International, which controls the contracts for Heathrow and Gatwick airports in London and serves more duty-free customers than any company in the world.
"These are serious guys," Newhouse says of the duty-free organizations excluded from the bidding. "Not to have them upping the ante is unfortunate. Allders has bid up to 50 percent for contracts in Europe. That's nothing to them if they want to establish themselves in an area."
Undaunted, Allders still hoped to qualify for the MIA bid process but was eventually rejected. An appeal to a local hearing examiner was unsuccessful, and company officials are now considering a lawsuit against Dade County. "What I resent," says Luis Lauredo, a Miami partner in the proposed Allders venture, "is how the ideals of elected officials and community leaders, sincerely working for a free and democratic Cuba, are sometimes manipulated by those who are simply pursuing a commercial interest, and whose only 'ideal' is making a buck." Lauredo's oblique comment refers to a widely held perception that has not diminished over time -- that the Cuban cigar rule was adopted not as a gesture toward Cuban freedom but rather to ensure that most duty-free competitors were eliminated from consideration.
Only three firms survived the Cuban cigar rule: Greyhound, whose airport duty-free operations are limited to Miami, Fort Lauderdale, and Chicago; Brasif Services, a Brazilian company that stated it was willing to stop selling Cuban cigars in its Brazilian airports if it won the contract; and a Miami subsidiary of Duty Free International (DFI), which claims not to sell Cuban products anywhere in the world.
At the time it was proposed, the Cuban cigar rule clearly seemed to favor DFI. Given the widespread belief that Greyhound's days were numbered, and the relative weakness of Brasif's experience, the contract appeared to be DFI's for the taking. And indeed the company amassed a formidable team to accomplish that. Among the local minority partners DFI solicited to add political clout to its proposal are Maritza Pereira, wife of former county manager Sergio Pereira; state Rep. Kendrick Meek, who is also the son of Congresswoman Carrie Meek; Edward Lasseville, the son of long-time political Hispanic consultant and pollster John Lasseville; and Julio Rebull, Sr., a political consultant with close ties to several commissioners, notably Natacha Millan and Javier Souto. Together DFI's minority partners would own 25 percent of the business.
In addition, DFI recruited equally high-profile lobbyists, including Phil Hamersmith, who has run election campaigns for three current commissioners; and Joseph Bober, who was chief of staff for former commissioner Sherman Winn and also served as an aide to commission chairman Art Teele. Even former county manager Sergio Pereira has signed on to lobby for his wife's company. DFI also hired the politically entrenched law firm of Eckert Seamans Cherin & Mellott, whose stable of well-heeled commission arm-twisters includes Charles Papy, Al Dotson, Jr., and Eileen Mehta.
"We've been watching and waiting for this contract for years," admits Julio Rebull, who denies playing any role in the Cuban cigar issue. "I was as surprised as anyone by that," he says. "People think that I am a kingmaker. But on this issue I have been very careful. I respect [Commissioner] Souto and he has his own way of thinking."
With its team in place and the field narrowed, DFI, its partners, and its lobbyists had reason to be optimistic. But the Greyhound that DFI is competing against in 1995 is not the same bungling Greyhound that appeared before the county aviation committee a year earlier requesting an extension. "This was a desperate company, which figured all of the odds were against them," says DFI lobbyist Hamersmith. "And they went out and got every bit of political talent that wasn't already tied down."
Greyhound's principal minority partner -- if they are awarded the new contract -- will be Sergio Pino, former president of the politically potent Latin Builders Association (LBA). Under Pino's tenure, the LBA set new standards in contributing to county commission election campaigns, and his own influence at the airport is legendary. (Three years ago, in a highly unusual deal, commissioners awarded him the contract to operate newsstands at the airport even though his company did not receive the highest ranking.)
Another Greyhound minority partner is Carole Ann Taylor, who for more than five years was an aide in the Miami mayor's office, first for Maurice Ferre and later for Xavier Suarez. She currently operates Bayside To Go, a retail shop at Bayside Marketplace. Yet another minority partner is Maria Argudin, who is the assistant Miami city clerk. Also on the minority team is public relations specialist Jorge DeCardenas.
Greyhound actually had the luxury of turning away powerful minorities who were looking to attach themselves to such a lucrative project. For example, Greyhound's president, J.P. Miquel, confirms he was approached by Carlos Herrera, who currently heads the Latin Builders Association as well as being president of Homestead Air Base Developers, Inc. Herrera's long-time friend, Armando Gutierrez, tried to get hired on as a lobbyist. "I talked to Greyhound," Gutierrez acknowledges, "but by then they already had their team together. We kept hearing that there was no room at the inn."
As it is, Greyhound's registered lobbyists include the respected Easton "Dusty" Melton, who has been the company's principal government spokesman for years; Dewey Knight III, son of the former county manager; David Kennedy, who was Miami mayor from 1971 to 1973; and Marie Petit, veteran aide to Commissioner Maurice Ferre.
Greyhound's law firm, Hanzman Criden Korge Hertzberg & Chaykin, may be one of the newest in Miami, having only formed in October, but it's already one of the most politically well connected at county hall, with a direct line not only to commission offices but into the county manager's office as well. Among the principals is Chris Korge, one of the most effective lobbyists in Dade, and former federal prosecutor Steve Chaykin. The firm also recently hired George Lopez, former chief of staff for Commissioner Alex Penelas and one of County Manager Armando Vidal's closest friends. This past summer, Vidal's teenage son worked as an errand boy in the law office.
Caught somewhere in between these two political behemoths was the Brazilian contender, Brasif Services. As the company's vice president, it was up to Eduardo Pereira (no relation to the former county manager, or for that matter to anyone important in Dade County) to guide Brasif through Dade's maze. "It was the first time we bid here in the United States," says Pereira. "We certainly learned a lot."
The initial thing they had to deal with was the Cuban cigar rule. "For us, as Brazilians, selling Cuban cigars is not a big problem," Pereira says. "We do sell Cuban cigars in our Brazilian airports, but we promised to stop if we won the contract. We understood the rules. If you want to bid, you have to accept the rules of the game."
And while Pereira isn't complaining, he does note that the other bidders didn't appear to actually follow all the rules. "I guess here in the United States it seems that it is quite normal that people are allowed to change their proposals," he says with some bemusement. "I would have thought that they would have been disqualified, but not here."
When it came time to assemble its team, Brasif did not solicit as partners any prominent local minorities, opting instead for a slate of blacks and Hispanics with specific experience in the duty-free industry. Nor did the company believe it needed to employ lobbyists. "We hired them because we were advised that it would be extremely important to hire lobbyists," Pereira says. "It was all very strange for us. We've never done that before. We are not an American company. We don't want to deal with politicians. We wanted to win through competence, not political influence. But we were told we basically had to hire lobbyists."
That advice came from Brasif's South Florida attorney, Ronald Shapo. (Shapo did not return calls seeking comment.) It was Shapo, Pereira says, who decided to hire lobbyists Michael Benages and State Rep. Beryl Roberts-Burke, who is also the ex-wife of Commissioner James Burke.
When the selection committee, appointed by County Manager Vidal, ranked the three firms according to qualifications, Greyhound took first place, Brasif second, and DFI third. The rankings shocked DFI's president, Al Carfora. "We were very surprised," he says. "That same day we made a presentation to Delta Airlines for their terminals at JFK -- and we won those."
Carfora and partner Julio Rebull both blame the selection committee, specifically because none of its members had previous experience with the duty-free industry. "I don't think the most appropriate questions were asked," says Carfora. "There seemed to be a lack of desire, or a neglect, really, to understand what makes for a world-class facility."
Adds Rebull cryptically: "We felt there was something going on with the selection committee."
On the face of it, it does seem odd that Greyhound, a company the county's own consultants found to be inadequate, was suddenly ranked tops among its limited competitors. But given DFI's presentation before the selection committee, it is also easy to understand why the voting members were not impressed. DFI wasted 10 minutes of its allotted 30 by screening an inane video about the company, covering many of the same points Carfora had made in his opening remarks. When DFI officials did finally get around to talking about the operations at MIA, their suggestions for improving sales were silly and simplistic ("We'll let people touch the products"). And by the time a DFI representative began discussing minority participation, only two rushed minutes remained.
Arguably the best presentation was made by Allders International, which, just before being formally disqualified by the county attorney over the Cuban cigar rule, outlined not only a comprehensive overhaul of the duty-free shops, and a more aggressive marketing strategy, but also proposed a special job-training program for minority youths that would have offered nearly 300 jobs to inner-city kids.
A few days after the selection committee's rankings were announced, county officials opened the sealed bids stating the percentage each firm was willing to pay the county. Once again Greyhound finished first with a bid of 35.1 percent. DFI came in second with a bid of 33.1 percent. And Brasif was a distant third, having bid only 28 percent.
Brasif soon reported that it would not file a protest, thanked everyone for an interesting experience, and formally bowed out of contention. "We lost and we have to accept that," says Eduardo Pereira. "Naturally we didn't protest. We felt that wouldn't be right."
DFI, in contrast, promptly hired one of Brasif's lobbyists, Michael Benages, and declared that it would be fighting the selection of Greyhound with everything it could muster. It filed a formal bid protest, arguing that Greyhound hadn't complied with all rules and requests for documents. The issue went before a hearing examiner, but DFI lost.
Meanwhile, based on the committee rankings, and most importantly on the bid percentages, county manager Vidal has recommended to commissioners that Greyhound be awarded the contract. In order to overturn that recommendation and win the contract, DFI must persuade two-thirds of the commissioners -- nine of thirteen votes -- to support its point of view. As DFI and Greyhound square off, all those lobbyists and politically connected minority partners must begin earning their keep.
Chris Korge grows absolutely indignant at the suggestion that lobbyists have undue influence over Dade County. He doesn't even like the term lobbyist when describing his occupation. "I am a government litigator," Korge says, his voice leaping through the phone line with an aggressiveness that has made him one of Dade's most sought-after corporate advocates. "That's what I am. I am an expert in bidding and local government law. And people hire me because I'm good at what I do."
But Korge's perceived brilliance isn't the only reason people hire him or any other lobbyist. "Why do you hire lobbyists?" Korge asks rhetorically. "Because you know your opposition is going to hire them and so you'd better have someone on your side." In addition to being articulate spokesmen, they also offer familiarity with complex procedures and access to complex personalities. A politician's ego is a tricky thing around which to navigate. Ask J.P. Miquel. Since the fiasco of his aviation committee appearance last year, the Greyhound president has sworn he'll never attend another county commission meeting.
For this pending fight, Korge and his fellow Greyhound lobbyists are sitting pretty. DFI must lock up a two-thirds majority to wrestle away the contract, meaning Greyhound only needs the support of five commissioners to win.
It is DFI's lobbyists who will now have to go nuclear, and they already have. The campaign against Greyhound is being based in part on a racial and ethnic plea: For too many years, goes the argument, Greyhound ignored Dade's minority communities. In fact, it only took on black and Hispanic partners when that became necessary to keep the contract.
"I'm going to go to the radio," Rebull vows, referring to Miami's Spanish-language talk shows. "I'm going to make a very strong campaign on the irregularities of the process. I'm going to let the people know about Greyhound. I'm going to let them know what their commissioners are going to be voting for. How can a commissioner like Bruce Kaplan, for instance, say that minorities are not supposed to be window dressing, and then consider voting for Greyhound?"
Already enlisted in DFI's battle strategy is radio personality Marta Flores, who for months has been speaking out about the pending duty-free contract and what a fine operator DFI would make. (Apparently DFI would also make a fine place for Flores's son to work. Julio Rebull confirms that he and Flores have spoken about getting her son a job with the duty-free company. "I know him," Rebull says of Flores's son, "and I'm definitely trying to help him get a job.")
Both Rebull and lobbyist Phil Hamersmith have been attacking the minority participation on Greyhound's side, with particular attention paid to Sergio Pino, who made his fortune in the wholesale plumbing business. "What does Sergio Pino bring to this deal?" Rebull huffs. "Showers? Plumbing? I know he donates a lot to political campaigns, but I don't know what else he brings to the table."
Greyhound president J.P. Miquel defends Pino's inclusion. "He's a contractor," Miquel says, "and there is going to be a lot of renovation. That's going to be his work."
DFI, of course, is vulnerable to the same kind of criticism. For instance, the only airport-related work experience listed on the resume of DFI partner Kendrick Meek is this: During summer vacations in high school and college he worked as a baggage handler at MIA.
DFI president Al Carfora says Meek, a former captain in the Florida Highway Patrol, was selected solely for his background in security and law enforcement -- not because he is a state representative or the son of such a prominent politician. "If you want to draw political connections as to how we drew up our minority teams," Carfora says, "that's up to you."
DFI's Hamersmith, however, is a bit more candid. "Look, I'm not going to kid you," he says. "One of the reasons, but certainly not the only reason, Kendrick is a partner is because he is a well-known African American and obviously his name gives us some political clout." And to some extent, Hamersmith admits, the same holds true for Maritza Pereira and Edward Lasseville, neither of whom have any experience in the duty-free industry. "We're not going to pretend it's not there," says Hamersmith, referring to the practice of selecting minority partners more for their "political clout" than their business acumen. "And I'm not faulting Greyhound for doing it either. But it is a matter of amount."
Meek is circumspect in his comments. "Some folks may look at it and say all of the folks on the team are there because they know someone on the commission," he says. "But I'm comfortable with being a part of this group. I'm not a county commission regular. This is my first time going through this process. They first talked to me before I was even elected." In addition, Meek stresses, he has not used his position in Tallahassee as leverage against commissioners.
DFI has also been arguing that Greyhound has simply held the duty-free contract, under questionable circumstances, for too long. "They've been there longer than Castro," says Rebull. "They've been there since the Eisenhower administration." But even on this point, DFI is vulnerable. The company now controls the duty-free shops at the Port of Miami under a contract, like Greyhound's, that was never competitively bid.
In 1987 the county commission awarded the sweetheart, no-bid seaport deal to a company called Miami Duty Free, one of whose principal partners was Julio Rebull. Five years ago DFI purchased Miami Duty Free and inherited its contract. Under the terms of that contract, DFI was only required to pay the county three percent of gross sales during its first two years of operation. In the third and fourth years, that figure rose to four percent, and in the fifth year it was raised to five percent. After ten years, the figure will increase to ten percent. (Still a long way from the 33 percent DFI was willing to bid at the airport.)
The county manager who recommended that commissioners approve the no-bid contract was Sergio Pereira, who is now a lobbyist for DFI and whose wife would be an ownership partner should the company win the contract from Greyhound. In 1987 Pereira predicted that the seaport duty-free contract would earn the county more than $200,000 in its first year alone. The actual figure turned out to be a mere $22,000. During the fiscal year that ended June 30, 1995, DFI sold more than $1.8 million in merchandise but was only required to pay the county $126,000.
DFI's original contract to operate at the seaport expired on June 30, 1993, but rather than open the process to bidding, then county manager Joaquin Avino and the county commission agreed to extend it an additional five years.
Even with regard to the vaunted Cuban cigar issue, DFI has an embarrassing admission to make: One of its largest stockholders is a German company called Heinemann, which is itself in the duty-free business in Europe and sells Cuban cigars in its Frankfurt stores. DFI president Al Carfora notes that the company is openly traded on the New York Stock Exchange and has no control over who buys its stock -- therefore it should not be penalized by Dade's cigar rule.
Nevertheless, when Greyhound officials recently discovered Heinemann's financial interest in DFI, they immediately flew a company representative to Frankfurt to buy Cuban cigars and snap photos. The receipts from that purchase will likely be presented to commissioners, and ultimately the county attorney will have to rule on DFI's continued eligibility.
No matter which company the commission selects on Tuesday, October 3, a sense of uncertainty will linger: Had the process been more open, would Dade taxpayers have been better served? If there had been more competition from established and respected international firms, would political influence have been less important than business expertise? And importantly, how badly has Dade's reputation already suffered?
If this duty-free episode were an isolated incident, it might eventually be forgotten. But as Miami International Airport braces for the possibility of a major expansion in its retail and restaurant space (from its current 200,000 square feet to more than 400,000 in the next five years), the county commission seems doomed to continue conducting business in a manner that draws only ridicule and resentment from the larger world of private enterprise.
In its report delivered in March of this year, the Unison Consulting Group warned commissioners that if changes to the system weren't implemented soon, the county would not achieve its goal of building a world-class airport, and perhaps more importantly, it could stand to lose hundreds of millions of dollars in potential revenues. (Last year the airport grossed $135 million in sales from its shops and restaurants. Unison says that figure could soar to more than $500 million per year in the next decade -- if the county follows its recommendations. By law, all such money, including duty-free revenues, must be used for airport improvements.)
Unison's Judy Byrd tried to tell commissioners, as politely as possible, that they were a major part of the problem. "We cannot meet the goals and objectives under the existing structure," she asserted before introducing a novel idea: removing the county commission from airport business and replacing it with a "retail authority" composed of business leaders experienced in airport concessions.
One after another commissioners praised the overall vision of the Unison report (which cost the county $750,000), but condemned its most dramatic proposal: the creation of the autonomous decision-making body. Commissioners complained it would simply become another layer of bureaucracy. A few suggested exploring the idea of hiring a megadeveloper to take control of the airport. Yet six months after Unison's report was issued, neither a retail authority nor the concept of a master developer has seen any progress. At that March meeting Commissioner Pedro Reboredo offered a comment that may help explain why: "We are not here to talk so much about an authority, because I sense that some of us might not want to relinquish the power we have.
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