FBI Investigated North Miami Beach Water Deal, City Attorney Confirms

North Miami Beach City Attorney Jose Smith (fourth from left)
North Miami Beach City Attorney Jose Smith (fourth from left) City of North Miami Beach
Update 5/19: Smith provided an email from an FBI agent to Commissioner Beth Spiegel, who told Spiegel the federal investigation had closed as of February. Smith said he was not in possession of the full FBI case file.

Federal and state authorities probed North Miami Beach's pending deal to potentially privatize its water system, North Miami Beach City Attorney Jose Smith said Thursday.

"They found no wrongdoing," he added.

A separate source with knowledge of the probe, however, tells New Times the FBI is still investigating and has been in contact with potential witnesses within the past week.

The water deal is deeply controversial. The city is considering whether to retain ownership of the water utility but contract out the entire operation to a private company. Employees at the city water utility would transfer to the new company and would have to reapply for jobs. A progressive activist group funded by labor unions, For Our Future, has scheduled a protest outside North Miami Beach City Hall at 1 p.m today to oppose the privatization move.

So far, the city says CH2M Hill, a global engineering firm, has offered the best deal to take over the utility. The third-ranked company on the list, Veolia, is tied to the lead crises in Flint, Michigan; and Pittsburgh, Pennsylvania. (Veolia denies any wrongdoing in both cities.)

Smith added online last night: "This... has been the cleanest procurement in the city's history." The city will vote on whether to move forward with the plan at a commission meeting next Monday.

Speaking via email, Smith confirmed to New Times that someone in the city had filed a complaint with the FBI to investigate the deal. He did not reveal that person's name.

"In order to maintain the integrity of the procurement process, and avoid legal potential challenges, I assembled a team of superstar professionals and also spoke regularly with Joe Centorino from the ethics commission and the State Attorney's Public Corruption Unit. I wanted no last-minute surprises, as occurred in Miami Beach with the Convention Center... in 2012," Smith wrote via email. "When I learned that someone filed a complaint with the FBI, I called the agent to find out what was going on. He told me he had investigated allegations against a staff member but found no wrongdoing."

Representatives from CH2M, the engineering company involved in the process, did not immediately respond to a message from New Times. Nor did the State Attorney's Office.

There are questions as to whether Smith is attempting to root out a whistleblower within the city government. Records obtained by New Times show that on March 3, Smith filed a public-records request to obtain any communications North Miami Beach Commissioner Beth Spiegel had regarding the FBI. (Spiegel did not respond to a message from New Times this morning.)

Smith said he was trying to root out who had filed the complaint with the feds. Spiegel opposes the privatization deal. In Smith's records request, he claimed Spiegel suggested that CH2M be disqualified from bidding in the RFQ (request for quotation, which is a standard business process whose purpose is to invite suppliers into a bidding process a city).

Finally, I request that Commissioner Spiegel provide copies of any email, report, letter, notes, or other document(s) reflecting the name, address, employment, and telephone number of all person(s) known by her who have contacted or spoken with any State, County or Federal agency regarding the operation of the CNMB Water Utility. Additionally, I request all legal or ethics opinions, or other evidence, suggesting that CH2M Hill be “disqualified from bidding on the RFQ”, as discussed in her emails to the FBI, an issue she left “for another day."
Smith told New Times he was attempting to find out if anyone in the city was trying to smear fellow commissioners.

"It became apparent that people opposed to the solicitation were trying to sabotage or derail it by making spurious allegations against city staff," he said. "My public records requests to Beth Spiegel, who passionately opposes outsourcing the water utility, were intended to find out who those people were and clear the air.

A city audit last year showed that the utility — which also services Miami Gardens, Sunny Isles Beach, and Aventura — needed serious infrastructure upgrades. Rather than complete that work themselves, city officials warned last year that a privatization deal might be coming. News yesterday proved the water utility isn't functioning well: The utility issued a precautionary boil-water notice to residents yesterday morning after power went out at the treatment plant for a full minute.

But there's ample evidence to show that privatization deals don't necessarily make utilities cheaper or safer. A study by the nonprofit Food and Water Watch showed that in the ten largest cities where water utilities were handed over to private companies, customers' rates eventually tripled.

The third private company in line to negotiate with North Miami Beach, the French firm Veolia, oversaw the Pittsburgh water system in 2014, when cheap chemicals injected into the water caused lead to leech into a water supply servicing 81,000 homes. In 2015, the State of Michigan sued Veolia for fraud after the company published an allegedly false study claiming Flint's water was safe to drink. The state contends that study contributed to thousands of additional people's exposure to lead. Veolia denies wrongdoing in both cases.

Smith, meanwhile, declined to speak further with New Times until next week, "after all the facts are made public."

This isn't even the only investigation into North Miami Beach's city government that's ongoing: The state attorney's office still has an open investigation into the conduct of North Miami Beach Mayor George Vallejo. He confirmed the investigation himself on Twitter last year.

This is a breaking story. This post has been updated to include comments from an anonymous source.
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Jerry Iannelli is a former staff writer for Miami New Times from 2015 to March 2020. He graduated with honors from Temple University. He then earned a master's degree in journalism from Columbia University.

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