Who really stole those missing millions from the airport?
Written by Michael Lewis on August 6, 2014
Maybe you read the main story in the daily paper Friday: three managers of a small lounge at Miami International Airport were charged with funneling millions intended for the county to themselves.
What you didn’t read is that the only reason they were in a position to rip off the county was that the county commission for years has refused to let successive aviation directors switch lounge operators.
What you also didn’t read is that this isn’t the first airport concession where county money was lost after the commission told airport directors they couldn’t change operators.
And what for sure nobody is saying aloud is that as long as commissioners keep deciding on contracts that they shouldn’t get involved with, taxpayers are going to keep losing millions upon millions, whether through theft or simply overspending and waste.
What happened at the seven-worker lounge is this: nearly $2.2 million that should have gone to the airport wound up in the hands of three people. According to investigators, the three deposited about 20% of funds 11 airlines paid to redeem lounge vouchers into personal bank accounts.
The thefts had been going on more than two years – how much longer nobody knows. State Attorney Katherine Fernandez Rundle said it probably was longer but “we wanted to stop the bleeding now.”
Meanwhile, for more than two years the aviation department has been asking commissioners to oust the lounge operators and bring in someone else.
After commissioners blocked that, the aviation department tried to get commissioners to let airlines run the lounge and get the county out of the passenger lounge business altogether.
Either way, aviation officials told commissioners, the county would make much more than by keeping the current lounge operator.
For sure a change would have saved a stolen $2.2 million – maybe far more. And that doesn’t include what the county would have saved in the contract with a new lounge operator.
It was at a September 2012 meeting that commissioners rebuffed Jose Abreu, then aviation director, when he tried to get a new operator after an airport search.
Current operator International Airport Management Inc., a local firm that has run lounges at the airport for many years, was proposing a new contract charging a $614,875 yearly management fee plus $80,000 for its employee health insurance.
But airport officials wanted to bring in a well-known national manager, Gideon Toal Management Services of Fort Worth, TX, at a fee of only $219,000.
Commissioners, of course, blocked the ouster of a local company. They found a pretext in health insurance. If it hadn’t been that, it would have been something else.
A local operator of a county concession somehow makes lots of commission friends.
“I have a serious problem with this,” Commissioner Audrey Edmonson said during that 2012 hours-long debate as she rejected paying less than a third of the current bill. “This looks like an underbid.”
After looking at the loss from theft, it would have been a huge saving. But then, beyond any theft it also would have been a huge saving. Heaven forbid that the county pay less and avoid a multi-million-dollar theft too.
It isn’t that commissioners weren’t warned.
“I don’t have a dog in this fight,” Mr. Abreu told them as they refused to let him change operators, but “this is a Pandora’s box. It is a slippery road and it will have unintended consequences.”
Well, Pandora’s box is open, and it has had big unintended consequences.
Deputy Mayor Jack Osterholt also warned commissioners in writing with the proposal to change lounge operators that they could head off problems with a switch to the Texas firm.
“Gideon, he wrote, “has more and varied experience at multiple airports and described in better detail their cost-control procedures.”
You can bet that the nationally experienced firm wouldn’t have been sloppy enough to do what happened here. A police detective said that during a surprise audit of the current operator investigators found $49,000 in vouchers to the airlines on the office floor – a discovery that triggered the full investigation.
Again, this isn’t the first instance of commissioners keeping an airport concessionaire that the experts wanted out.
More than two years after Mr. Abreu heatedly tried to oust the operator of the county’s Miami International Airport Hotel, saying in front of the commission that he just plain didn’t trust the firm, the company remains in place – although three of its executives have been charged with trying to defraud the county of $215,000, a sum that seems too small to get the commission to permit a switch.
Now the county pays its own employees to watch the hotel operators at work because of lack of trust.
Airport officials started trying 11 years ago to replace that hotel operator and more than two years ago tried to waive competitive bids to switch fast. But a former state representative hired by the current operator got commissioners to block that process.
It’s well known here that contracts are decided not by what’s good for the county but by who knows whom, who represents whom and who gives to whom. A Jose Abreu can talk of lack of trust or a Jack Osterholt can write of cost controls, but as long as who knows whom, who represents whom and who contributes to whom are the key considerations, good county contracts will be a matter of luck, not skill.
Thefts at a lounge or fraud at a hotel are relatively small potatoes in a county that spends billions and wastes millions each year, but they’re symptomatic of what you get when commissioners make contract decisions they shouldn’t be involved in at all, and then make their choices for the wrong reasons.
The county administration isn’t perfect, but professionals are more likely to make good choices where big contracts are concerned than are politicians who might not know much about the operations but know perfectly well who their friends are.