Hallandale’s generous loans to private surgery center raise more questions about city program

http://www.browardbulldog.org/2012/05/hallandales-generous-loans-to-private-
surgery-center-raise-more-questions-about-city-program/

MAY 8, 2012 AT 6:15 AM

Filed under A1 TOP STORY, HALLANDALE BEACH{4 COMMENTS}

By William Gjebre, BrowardBulldog.org

Hallandale Outpatient Surgical Center, from its web site

The owner of a private, for profit surgical center received two $100,000 taxpayer-backed business loans from Hallandale Beach after city officials changed guidelines that previously had allowed for only one such loan.

City records show the Hallandale Outpatient Surgical Center, 306 E. Hallandale Beach Blvd., benefitted from the second $100,000 loan after the city doubled a cap that had limited such loans to a total of $100,000. Who authorized raising the cap, and why, is not clear because city records are incomplete.

The city’s Community Redevelopment Agency (CRA) administers the $200,000 in loans. But nearly a third of that money – $65,000 – amounted to a gift from taxpayers because the city has said the surgical center does not have to repay it.

The city awarded the low-interest loans even though the surgical center’s owner/manager, Dr. Lance Lehmann, reported annual wage income averaging more than $700,000 for three years prior to obtaining the first development loan in 2005.

For nearly a year, Broward Bulldog has reported about questionable CRA business loans and land purchases. The city’s management practices, including those at CRA, are now under investigation by the Broward Inspector General’s Office, which sent several agents to Hallandale Beach City Hall on April 10 to meet with city officials.

Hallandale Beach’s redevelopment agency is funded by property tax dollars and funds are allocated for community and business improvements.

Lehmann did not respond to repeated requests for comment.  However, CRA director Alvin Jackson said the medical center, which opened in 2006, has been an asset, making its loan repayments on time, improving the area, increasing the tax base and providing jobs.

“That’s a fine example of what should happen,” said Jackson, who was named CRA director 15 months ago, after the surgical center loans were approved.

Nevertheless, the city’s generous terms coupled with a lack of documentation in city files raise new questions about its troubled business loan program. Why was Hallandale’s cap on loans was changed? How did the surgical center become eligible for additional funds when it was a party to the cap on its first loan?

A WINDING TRAIL OF PAPERWORK

The CRA’s file on the medical center is a winding, yet incomplete trail of letters and memos. The records clearly show the city commission, which also sits as the CRA’s board of directors, approved the first $100,000 loan. The second loan appears to have been OK’d by City Manager Mike Good.

Lehmann initially sought a city loan of $213,000 in May 2004 after acquiring the property the year before for $1.1 million. He explained the loan was needed because of rising construction costs.

The loans were not based on need and Lehman’s substantial prior income was not an impediment to obtaining the loan, according to CRA officials. Applicants are checked only to determine their ability to repay.

City staff recommended a $75,000 loan. On November 3, 2004, commissioners approved a $100,000 loan, adding a provision that only $50,000 would have to be repaid if the complex created 10 new jobs. The loan carried a 2 percent interest rate.

Lehmann’s representatives stated the business would have 24 employees, including 13 new positions. The following May, the city issued a check for $100,000 to LJL Hallandale Holdings LLC, which lists Lehmann as manager, according to state corporation records.

At the time, $100,000 was the largest city loan a business could get and the surgical center was the first to receive the maximum, according to one city memo.

A memo in February 2006 stated that Lehmann inquired about borrowing additional taxpayer money, saying he was told to submit the request to then city manager Good.

The medical center formally requested the additional $100,000 April 2006, seeking the same terms as the original loan.

STAFF CONCERN ABOUT A NEW LOAN

City staff, meanwhile, expressed reservations about additional funding for Lehmann’s project. In memos to Good in February and March that year, then Development Services Director Marc Gambrill said city policies prevented additional loans.

Gambrill cited two written policies, including one that stated “a business may only utilize a loan program once per property.” He noted Lehmann had already received $100,000 loan for site preparations.

A month later, that concern had dissipated. On April 14, Gambrill wrote another memo noting that the city had doubled the loan cap to $200,000. He recommended the city manger approve the additional loan for Lehmann’s business, and handwritten notes indicate that Good later approved it.

The file is not specific, but the policy change was apparently set in motion earlier by the city commission. On Dec. 1, 2004 – a month after it approved the first $100,000 loan for Lehmann’s project – commissioners authorized the city manger to change CRA policy “to administer and change grants, loans and finances charges for all CRA related programs.” The changes were intended to give the city manager new “flexibility in meeting the needs of the community.”

A city check for the additional $100,000, also made out to LJL Hallandale Holdings LLC, was issued July 7, 2006.

The surgical center borrowed a total of $200,000, but must only repay $135,000. The city forgave half of the first $100,000 loan, and 15 percent of the second loan.

The surgical center began paying back the $50,000 on the first loan at two percent interest on July 1, 2005, $1,382 monthly, with the final payment on the 10-year loan due on April 1, 2015.

It pays the city $2,588 a month on the second 10-year loan. The interest rate is four percent and the final payment is due on April 1, 2016.

Both loans are backed by promissory notes signed by the company to repay the city funds. The medical center also signed an agreement to use the property mortgage as collateral.

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Everyone,

As you can see there has been a pattern of the misuse of your tax dollars -
"your tax dollars at work" with Mayor Cooper at the helm of the ship:

*       Changing the rules in the middle of the game to allow someone to
borrow double the allowable amount
*       The borrower has income of over $700,000 per year but Mayor Cooper
votes to aprove a 2% - 4% city for a loan of which $65,000 is forgiven
*       Paper work is contrdictory, mislesding or can not be found

Unfortunately, this has been the common practice in Hallandale Beach during
Mayor Cooper's tenure.

Sincerely,

Keith

Keith S. London
City Commissioner
Hallandale Beach

APRIL 17, 2012 AT 5:59 AM

Another black eye – Hallandale loses $75,000 in taxpayer money in botched business loan

Filed under A1 TOP STORY, FRAUD/WASTE/MISMANAGEMENT, HALLANDALE BEACH{NO COMMENTS}

By William Gjebre, BrowardBulldog.org

A firm that obtained a $75,000 business development loan from Hallandale Beach without signing a repayment agreement or providing collateral has defaulted, leaving the city unable to recover nearly all of the taxpayer-supplied money.

The loan default by Digital Outernet Inc. (DOI), headed by a Californian with past ties to the pornography industry and a local businessman who has since died, is the latest snafu to surface in the operations of the city’s Community Redevelopment Agency (CRA).

News of the soured loan comes as the Broward Inspector General’s Office opened an investigation last week into the city’s management practices, including those at the CRA, whose director are the five city commissioners.

“I was against it from day one; we are not in business to lose money,” said City Commissioner Keith London, who cast the lone vote opposing the loan three years ago. “It was never a sustainable, viable initiative.”

Commissioners approved the taxpayer loan in their capacity as CRA board members.

Digital Outernet was incorporated in November 2008. Four months later, it got the loan to buy equipment and materials. The plan it sold the city on: to setup television screens in local businesses and condominiums and sell advertising while also airing city and other information, such as job ads

CONTROVERSIAL HANDOUTS

The corporate loan was made during a time when the city was making numerous loans to local businesses, some controversial.

In 2009, the city administration also approved a $50,000 loan for a weekly newspaper, The Sun Times, forgiving half the loan ($25,000), even though two top executives earned $200,000 annually two years before the loan. Mayor Joy Cooper is a featured columnist.

The same year, the city erroneously forgave an extra $7,500 on a property improvement loan that Commissioner Anthony Sanders obtained before he was a commissioner. As a result, Sanders’ non-profit Higher Vision Ministries did not repay $15,000 on a $46,000 loan for property improvements at 501 N.W. First Ave. The city then brought the property for $235,000, even though the church only paid $45,000 for it in 2001.

Digital Outernet’s chief officials were local businessman John Hardwick and Steve Fecske, a Californian, according to state corporate and city files.

When the loan was approved, the Sun-Sentinel reported at the time, Fecske told Hallandale Beach commissioners he had been involved with a company that provided technology services to porn-connected websites, one of which featured star Jenna Jameson. He assured commissioners his pornography work was in the past.

Fecske is listed on LinkedIn, the professional networking web sit , where he is described as an “independent information technology and services professional.” He is currently associated with McKenzie & Co., Forensic CPAs in Los Angeles. He was president of Digital Outernet, Inc. from 2007-2010.

Fecske could not be reached for comment.

LOAN RECIPIENT OUT OF BUSINESS

On the current Florida Department of State Division of Corporations web site, Digital Outernet is listed as inactive.

While approved for a $125,000 loan, Digital Outernet only received $75,000. It had to meet certain city-imposed conditions to get the rest, but apparently did not do so.

However, one loan requirement was waived by the city: that the firm had to own its place of business; it was leasing. The loan also provided for 15 percent ($11,250) forgiveness, with the balance to be repaid at 4 percent (interest rate) over 10 years.

City records show it wasn’t long after funds were distributed that problems at Digital Outernet became apparent.

In June, 2010, the city sent a letter to Hardwick and Fecske denying their request for the additional $50,000. The letter pointed out the firm had missed its first two quarterly loan payments of $2,284 each, failed to sign a loan promissory note, and did not provide required financial reports and details on employee hires.

A month later, the city sent a similar letter.

CRA director Alvin Jackson said he met with Hardwick shortly after he became director of the CRA in January 2011, reminding him about the loan repayments and the documents and reports that needed to be filed with the city.

But state corporate records show that by then, the company had ceased to exist as a legal entity.

HARD TO TELL WHAT HAPPENED

Available city records do not explain what happened to Digital Outernet and the city’s $75,000. A recent report by an auditing firm criticized the CRA for failing to properly track loans and property acquisitions.

Jackson said the company made only one installment payment of $2,284 in July, 2010, adding that the firm appeared to go out of business with the death of Hardwick.

A member of the Hallandale Beach Chamber of Commerce, Hardwick, 41, suffered a stroke and died at Hollywood’s Memorial Hospital on May 22, 2011. Prior to becoming involved with Digital Outernet, Hardwick ran a barbershop/salon at 708 Foster Road in the city, the same location listed for DOI.

Jackson said the DOI file was sent to the City Attorney’s office for review and follow-up action. He said he was told that an investigator was sent to the Foster Road address to identify possible assets but none have been recovered, so far.

Jackson said he believed that Digital Outernet may have actually placed several television screens in local businesses, but he did not know for certain. The city file contained no information on the placement of the video screens.

The city “never got the balance” of the loan, Jackson added.

Broward Bulldog reviewed the city’s file. It makes no mention of Hardwick’s death and gives no indication that the city was trying to follow up by reaching Fecske in California.

The file also did not indicate what, if anything, the city attorney’s office did in the matter. There were no reports by the city attorney’s staff in the DOI file.

Local realtor Joe Kessel is listed as an official of DOI in one document in the city’s file. He said in an interview that he was “not involved” with the company and had long ago asked that his name be removed as a DOI associate. Kessel declined further comment.

Mike Good was the city manager at the time of the loan. The file contains a letter he wrote endorsing the DOI project. “The city supports the concept and advertising model offered by Digital Outernet, Inc., and seeks the support from our local business community as well,” Good wrote in his letter in December 2008.

Good, who was fired in June 2010, could not be reached for comment.

APRIL 12, 2012 AT 11:29 AM

http://www.browardbulldog.org/2012/04/investigators-focus-on-hallandale-beach-after-reports-of-questionable-city-loans-and-land-purchases/http://www.browardbulldog.org/2012/04/investigators-focus-on-hallandale-beach-after-reports-of-questionable-city-loans-and-land-purchases/

Investigators focus on Hallandale after reports of questionable city loans and land purchases

Filed under A1 TOP STORY, FRAUD/WASTE/MISMANAGEMENT, HALLANDALE BEACH{NO COMMENTS}

By William Gjebre, BrowardBulldog.org

Investigators with the Broward Inspector General’s office descended on Hallandale Beach City Hall this week following numerous reports of mismanagement of tax dollars.

On Tuesday, two OIG investigators spent nine hours at city hall seeking records and interviewing City Manager Mark Antonio and Community Redevelopment Agency (CRA) director Alvin Jackson.

“We were there,” confirmed Dylan Hughes, an assistant inspector general. “I can’t comment on the nature of an ongoing investigation.”

City officials had no immediate comment.

Broward’s Inspector General investigates suspected misconduct, “including fraud, corruption and abuse and gross mismanagement,” according to its web site. The specific focus of investigators at city hall was not immediately clear, but for nearly a year Broward Bulldog has reported about questionable city loans to local businesses and land purchases through the CRA. Hallandale Beach city commissioners also sit as the directors of the CRA.

Last month, a report by outside auditors described poor recordkeeping and oversight at the agency during the tenure of former longtime City Manager Mike Good. Good was fired in 2010, and commissioners asked for the audit weeks later.  On April 2, the city announced that it had selected Renee Crichton to take over as the next city manager when Antonio retires on June 29.

News of the Inspector General’s probe was welcomed by critics of city management.

“I’m delighted to hear that,” said activist Charlotte Greenbarg. “It’s long past due. What’s going on in Hallandale Beach needs a lot of investigation; it’s very welcomed.”

“I’m thrilled that Hallandale is being looked at by an independent agency,” said City Commissioner Keith London, who is running for the mayor’s seat. “I’ve been asking for this for about four years.”

The CRA was created in 1996 with a 30-year mission to facilitate redevelopment in the city. But while it has spent millions in tax dollars over the years, critics complain the city has little to show for it.

A number of controversial findings and actions regarding the city’s redevelopment agency have surfaced in the past year:

• An auditing firm reported in September that the CRA failed to properly track city land acquisitions totaling more than $28 million and loans to businesses exceeding $1.5 million.  Last month, auditors said the city also failed to provide them with $20 million in vendor contracts for review, limiting the scope of their audit report.
• The CRA acquired nine properties for $23.5 million during the past five years – taking them off the tax rolls – yet the city has enacted no plans for how to use eight of the parcels. The value of those properties has also fallen by $9.1 million.
• A local weekly newspaper that regularly features a column written by Mayor Joy Cooper – and has touted her in front page puff pieces – received a $50,000 CRA loan in 2009 that only required the paper to repay half of that amount. The loan was made even though the South Florida Sun Times’ two top executives had made annual salaries averaging $200,000 for two years prior to the loan.
• Last month, the Sun-Sentinel reported that city officials acknowledged they erroneously forgave an extra $7,500 on a property improvement loan that Commissioner Anthony Sanders had obtained in 2002 before he joined the commission. That meant Sanders’ nonprofit Higher Vision Ministries didn’t have to repay $15,000 of a $46,000 loan. In 2009, the CRA brought the property from Higher Vision for $235,000, with Sanders abstaining, triggering a controversy because the price was higher than two city appraisals, the newspaper reported.

City Manager Antonio, a long time city employee and city manager for approximately two years, would not talk about the Inspector General’s investigation. Through a city spokesman, he declined comment.

Mayor Joy Cooper did not respond to requests for comment.

CRA Director Jackson, who took over at the agency in January 2011, had no comment.

William Gjebre can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Dear Golden Isles Friends and Neighbors,

I wanted to provide an update and notify all of you the decorative street signs were “tabled”.

The vote was 3:2 London, Lewy, Sanders to table - Cooper and Ross to have decorative signs.

In the future, it will take three commissioners to bring the item up for reconsideration and then a subsequent vote to approve the decorative signs.  I must say as long as I am sitting on the commission this item has NO chance of receiving a positive vote from me.

Please thank your neighbors who sent many emails and also attended the 1:00 PM city commission meeting to participate and voice their opinions against this issue.

The only person who spoke in favor of this issue was Susan Lewis, Chairperson of the Golden Isles Safe Neighborhood District (GISND), who is Mayor Cooper’s representative on the district board.

Thanks again to everyone for their participation.  This is what community involvement is all about.

Regards,

Keith

(Background)

Golden Isles Safe Neighborhood (GISND) would be assuming ALL liability for the signs.  Now, Mayor Cooper is suggesting the Golden Isles Safe Neighborhood purchase an insurance policy in perpetuity to offset the any new liability she wants to encumber upon us.

The City Manager did not provide the insurance policy in the back up material for the City Commission or GISND residents to review.  The recommendation to purchase this policy down plays the risks of shifting the liability from 1.7 million people in Broward County to 1,000 people in the GISND.

In addition, the City Manager nor the Mayor provided an email train to and from Mayor Cooper and Broward County Traffic Engineering verifying ALL the libility shifting from Broward County to GISND in the agenda back up material but I do.