A case involving a fire-services fee has tarnished the administration of Miami Mayor Manny Diaz, who had received high marks for bringing a businesslike approach to running the city.

In 1998, Miami began charging property owners an annual fee to help offset the cost of fire-rescue services. The fee was later ruled illegal, but not before the city collected some $90 million from about 80,000 taxpayers. Seven plaintiffs sued for a refund, initially requesting class-action status for the case. But according to a ruling by Miami-Dade Circuit Court Judge Peter Lopez, City Manager Joe Arriola and attorneys for the plaintiffs conspired to settle the case secretly with just those seven plaintiffs.

Under the agreement, the plaintiffs were to share $7 million, but the settlement was to remain confidential until the statute of limitations lapsed, thereby minimizing the city's costs by cutting other taxpayers out of any settlement money.

Fallout from the scandal is wide. The Florida Bar is investigating Diaz, an attorney, for misconduct. The Bar also is investigating one current and one former city attorney, along with Miami-Dade attorney Hank Adorno, who represented the seven plaintiffs. "We're looking into possible misconduct, possibly a conflict of interest," says Tony Boggs, director of the Legal Division of the Florida Bar. Boggs declined to elaborate on the investigations but says he hopes to issue findings by next fall.

Arriola may be the first casualty. Already under fire from watchdog groups for failing to disclose a private real estate deal he entered with Diaz and City Commissioner Johnny Winton, Arriola has announced he will step down as city manager sometime this year. All have denied any wrongdoing in the case, which is now under appeal. An aide to Arriola and Diaz said the two are not commenting on the case.