Updated 11 months ago
Miami investment scams are so widespread that federal agencies have decided to team up.
By David Villano
In a place where early pioneers amassed fortunes selling swampland, it comes as little surprise that south Florida is one of the nation's capitals of investment fraud. While rankings are not available, law enforcement officials say only New York and San Francisco report anything close to the number of investment fraud cases as in south Florida.
Earlier this year, calling investment fraud in south Florida "near epidemic," U.S. Attorney Guy Lewis announced that the officials of the U.S. Attorney's Office are working with the FBI, the IRS, the U.S. Securities and Exchange Commission and the U.S. Postal Inspection Service to combat the problem. Their work is already paying off. In January, a Miami man was accused of bilking 105 investors out of $1.7 million in an oil- and gas-drilling scheme; four others were charged in an alleged $18-million currency-trading scam. In another case, a Boca Raton man was charged with bribing brokers to promote certain stocks, artificially inflating their value. Similar cases have produced a handful of other arrests.
Some of the most common schemes involve bogus startup companies that promise hefty returns to early investors. Such boiler-room operations, which often target the elderly with high-pressure sales calls, typically close up shop and disappear within weeks. In March, for example, a Fort Lauderdale man was charged with 63 counts of fraud and other charges for soliciting $14 million in startup capital for a family internet service -- Families On Line -- that allegedly did not exist.
But the scam du jour, Justice Department officials say, is the so-called "pump and dump." Typically, telemarketers heavily promote a penny stock. In some cases, the stock is also promoted via a barrage of junk e-mail. After the price rises, the perpetrators abruptly sell off their own shares. Earlier this year such a scheme operating from West Palm Beach netted $3 million before federal agents closed down the operation.
Eric Bustillo, securities fraud coordinator for the U.S. Attorney's Office in Miami, says south Florida is ripe for investment schemes because of its large retiree population and because it is awash in foreign capital brought here by Latin American residents and visitors eager to invest.
And, of course, the region has no shortage of veteran white-collar criminals. The culture of fraud and corruption runs deep here. To compound the problem, investment scamsters have an unusually high rate of recidivism. "We arrest these people, shut them down, but we keep seeing them again and again," says FBI spokesperson Judy Orihuela. "As long as the demographics are right for this kind of activity, we'll always have people looking to take advantage."
In the News - Miami-Dade
Coral Gables -- Just weeks after a management shakeup that included the resignation of CEO John X. Watson, Sunglass Hut (Nasdaq-RAYS) has agreed to be acquired by Italy's Luxottica Group in a deal worth about $653 million. The Coral Gables-based retailer has struggled in recent years despite an aggressive expansion plan. Its stock, which topped $35 five years ago, trades at about $11.
Miami -- United Parcel Service has broken ground on a $30-million package processing facility at Miami International Airport. When completed, UPS' Americas International Hub Facility will cover nearly 20 acres, including buildings acquired with its recent purchase of privately owned Challenge Air Cargo. UPS expects to add 150 jobs.
As part of a restructuring plan, air-conditioning distributor Watsco (NYSE-WSO) has announced it is dropping unprofitable product lines and closing seven unnamed branches. The Miami-based company, with 315 branches in 30 states, is searching for ways to boost efficiencies after reporting lower-than-expected earnings in 2000.
Spain's Heptium Group, which provides content and services to the internet industry, has relocated to Miami. The company expects to create 30 jobs.
Miami Beach -- Carnival Cruise Lines' (NYSE-CCL) new cruise ship, Carnival Spirit, is promising one indulgence no competitor can offer: Joe's Stone Crabs. The 88-year-old seafood landmark expects to serve more than 15,000 pounds of claws on board the ship in its first year. Joe's is aggressively marketing its legendary brand name. Last year, it inaugurated online service, promising overnight delivery of fresh crab claws packed in ice.
Miami-Dade -- West Miami-Dade's 1.4 million-sq.-ft. Dolphin Mall has opened, hoping to tap into south Florida's tourist trade. When fully completed early this summer, the outlet-style mall will include 200 shops and restaurants and a 3.5-acre outdoor theme park. Nearby Sawgrass Mills outlet mall in West Broward County is among the state's top tourist draws, attracting more than 10 million visitors last year.
In a clear rebuff to newly appointed County Manager Steve Shriver, Miami-Dade commissioners defeated a proposal to raise the maximum value of contracts the county manager could award without commission approval from $500,000 to $5 million. Critics called the plan a power grab by Shriver. Supporters argued that it would streamline government by depoliticizing county spending.
Miami Lakes -- Pro football coaching legend Don Shula is on his way to the big leagues of the restaurant business. Early this year, Miami Lakes-based Shula's Steak House chain announced plans to open six restaurants at Wyndham International hotels across the U.S. Wyndham owns a 49% stake in Shula's. The deal will bring the number of Shula's Steak Houses to 23.
Overcoming the Odds
Florida's sugar producers took their lumps from Mother Nature but came out on top this season.
By Pat Dunnigan
Despite a growing season marred by both freeze and drought, Florida's big sugar producers reaped hefty crops this year. Both Palm Beach-based Florida Crystals and The Sugar Cane Growers Cooperative of Florida in Belle Glade reported record production for the harvest that ended in March. U.S. Sugar in Clewiston posted its third-best harvest. This at a time when sugar prices are on the rise -- selling for between 21 cents and 22 cents a pound, up from a low of 16 cents a pound last year.
The growers say that although cane was damaged by January's freeze, the fact that it was followed by four to six weeks of unseasonably cool temperatures served to "refrigerate" the cane and delay the onset of decay. That gave the companies time to harvest before serious damage could set in.
"Generally after a freeze, you begin to lose a lot of sugar," says Jorge Dominicis, a spokesman for Florida Crystals, which produced 800,000 tons, up from 730,000 tons in 2000.
The Sugar Cane Growers Cooperative also had a record harvest, producing 395,868 tons, up from 356,295 tons in 2000.
U.S. Sugar in Clewiston did not break last season's record crop of 856,000 tons but managed to produce 815,000 tons, spokeswoman Judy Sanchez says. "We're coming off three record seasons." If not for the freeze, Sanchez says, "we might have seen a spectacular year."
As for the drought, which has sugar farmers getting by on about 30% of their usual water supply, Dominicis says the effect probably won't be known until next year's harvest. But, he says, sugar cane is generally more drought tolerant than the rest of the state's agriculture. "Sugar cane is actually a very hardy crop," he says.
Continued drought, however, will take its toll, the growers say. "We might be looking at an extremely damaged crop next year," says Sanchez.
In the News - Southeast Florida
Boca Raton -- Communications software provider Artesyn Technologies (Nasdaq-ATSN) has acquired Real Time Digital, a Wall, N.J.-based developer of software for the telecommunications industry, for an undisclosed amount.
Sensormatic Electronics Corp. (NYSE-SRM) has announced the acquisition of BEC Technologies, an Orlando-based software and hardware provider for fiber-optic networks. The price was not disclosed.
Boynton Beach -- The Allstate Insurance Co. has announced plans to close a 64-employee claims office in Boynton Beach as part of a cost-cutting merger of offices around the state. All but one of the employees will move to a Margate claims office.
Delray Beach -- Office Depot (NYSE-ODP) hired a new advertising agency, New York's BBDO, which will introduce a new ad campaign this fall. The move ends the company's long-term relationship with Miami-based Gold Coast Advertising Associates, which created the "Takin' Care of Business" campaign in 1992.
Fort Lauderdale -- The Spherion Corp. (NYSE-SFN), in partnership with Accenture, formerly Andersen Consulting, has launched an internet recruiting subsidiary, Enthusian Corp. Wayne Mincey, formerly president of Spherion's global alliances division, has been named president of the new venture.
Palm Beach -- Private bank Brown Brothers Harriman & Co. has named Bill Greenman portfolio manager. Greenman previously held the same position at Gabelli Asset Management.
Palm Beach Gardens -- Former Catalfumo Construction and Development Vice President Jeffrey L. Moore and MJ Anderson Cos. founder Michael J. Anderson have gone into business as Anderson-Moore Construction Corp., a commercial general contractor and construction management company. The company will focus on medical, warehouse, retail and industrial projects.
South Florida -- The South Florida Regional Planning Council and the Eastward Ho! Brownfields Partnership, a regional collaboration of public, private, non-profit and philanthropic organizations, has been awarded a $2-million revolving loan fund that will be used to assist in the cleanup and reuse of brownfields sites in Miami-Dade, Broward and Palm Beach counties.
West Palm Beach -- Ocwen Financial Corp. (NYSE-OCN) subsidiary Ocwen Technology Xchange has named former Bank of America executive Arthur D. Ringwald as its chief executive officer. Ocwen Financial services sub-performing and non-performing residential and commercial mortgages.