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HomeMy WebLinkAboutCC 1997-11-01 Minutesc I * IRCORI'll M %TE 1) ld c 9n Oof I A M'l SPECIAL COMMISSION MINUTES 9 METING HELD ON PREPARED BY THE OFFICE OF THE CITY CLERK CITY HALL WALTER FOEMAN CITY CLERK INDEX MINUTES OF SPECIAL MEETING November 1, 1997 ITEM SUBJECT NO. DISCUSS POSSIBLE LAWSUIT BETWEEN CITY AND FORMER EXTERNAL AUDITORS DELOITTE & TOUCHE -- APPROVE ENGAGEMENT OF TEW AND BEASLEY, P.A., AS COUNSEL TO CITY -- FOR LITIGATION PROCEEDINGS AGAINST DELOITTE & TOUCHE -- FURTHER APPROVING SAID ENGAGEMENT TO BE UNDER REDUCED HOURLY AND MODIFIED CONTINGENCY FEE ARRANGEMENT -- ALLOCATE $50,000 FOR EXPENSES FROM ACCT 92-10-02, MINOR OBJECT CODE 270. 2. PROPOSED FIRST READING ORDINANCE: AMEND SECTION 40-195 OF CODE FIREFIGHTERS AND POLICE RETIREMENT TRUST -- ADD SUBSECTION (G) -- AUTHORIZE $30,000,000 FOR INTEREST IN LIMITED PARTNERSHIP TO ACQUIRE / OWN / OPERATE FLORIDA MARLINS BASEBALL TEAM. LEGISLATION PAGE NO. R 97-784 11/1/97 FIRST READING ORDINANCE 11 /1 /97 11-15 . ID MINUTES OF SPECIAL MEETING OF THE CITY COMMISSION OF MIAMI, FLORIDA On the 1st day of November, 1997, the City Commission of Miami, Florida, met at its regular meeting place in the City Hall, 3500 Pan American Drive, Miami, Florida in special session. The meeting was called to order at 9:30 a.m. by Mayor Joe Carollo with the following members of the Commission found to be present: ALSO PRESENT: ABSENT: Mayor Joe Carollo Vice Mayor Tomas Regalado Commissioner Wifredo Gort Edward Marquez, City Manager A. Quinn Jones, III, City Attorney Walter J. Foeman, City Clerk Maria J. Argudin, Assistant City Clerk Commissioner J.L. Plummer, Jr. Commissioner Thelma V. A. Gibson An invocation was delivered by Mayor Joe Carollo, who then led those present in a pledge of allegiance to the flag. -------------------- ------------------------------------------------------------------------------------------- 1. DISCUSS POSSIBLE LAWSUIT BETWEEN CITY AND FORMER EXTERNAL AUDITORS DELOITTE & TOUCHE -- APPROVE ENGAGEMENT OF TEW AND BEASLEY, P.A., AS COUNSEL TO CITY FOR LITIGATION PROCEEDINGS AGAINST DELOITTE & TOUCHE -- FURTHER APPROVING SAID ENGAGEMENT TO BE UNDER REDUCED HOURLY AND MODIFIED CONTINGENCY FEE ARRANGEMENT -- ALLOCATE $50,000 FOR EXPENSES FROM ACCT 92-10-02, MINOR OBJECT CODE 270. Mayor Carollo: The special meeting that was called this morning, was called to discuss and possibly take action on two matters. One, is to discuss a possible lawsuit between the City and its former auditors, Deloitte and Touche. Secondly, to consider a proposed amendment to section Section 40-195 of the Fire Fighters and Police Officers Retirement Trust. Now, Mr. Manager, can you begin on item one, for discussion? November 1, 1997 Mr. Edward Marquez (City Manager): Mr. Mayor and Commissioners. Within your package you have a resolution which the administration recommends which would improve the retention of the firm of Tew and Beasley, P.A., to serve as counsel to the City of Miami in connection with the litigation against the former auditors, Deloitte and Touche. As you may recall, even before I started, Merrett Stierheim when he was serving as City Manager, was authorized to retain a law firm to investigate whether or not there was any liabilities regarding past auditors on the City, because of our financial crisis. Mr. Stierheim had interviewed a number of firms and had selected Tew and Beasley to be engaged for an investigative process. And, Tew and Beasley has completed that process and myself and Bob Nachlinger who are both CPA's (Certified Public Accountants) have been assisting in that process of review and we feel quite confident that there is cause for litigation against the auditors. Now, I am going to ask Bob to give you a brief presentation as to some aspects of the case and then Tom Tew from Tew and Beasley will address the Commission. Mayor Carollo: I have also... NOTE FOR THE RECORD: Commissioner Gibson and Commissioner Plummer were unable to be present. Commissioner Gort: Before, you go on... Mayor Carollo: Go ahead, Commissioner. Commissioner Gort: ... I have a question, Mr. Mayor. I think it's important. My understanding is, J.L., is out of town and... Mr. Marquez: Yes, J.L., is... Commissioner Plummer is up in the Washington, Virginia area. And, Commissioner Gibson had to leave on an emergency basis for a funeral. Mayor Carollo: And, for the record, Commissioner Plummer has been the most vocal member of this Commission, requesting for this matter to be brought up to this body as quickly as it possibly could have been. And, we have tried to do that without bringing something up to this body before the legal studies that needed to be done were completed. Mr. Marquez: Mr. Mayor, in addition, we have briefed totally, Commissioner Plummer and Commissioner Gibson. They both were indicating a favorably predisposition for the lawsuit. In fact, I will be reading into the record, Commissioner Plummer's, some of his concerns about the fee arrangement, which I will read at that point in time. Commissioner Gort: Well, I want to make sure we put that in the record and people will know that. Mayor Carollo: Sure. Last, but not least. Someone else that I would like to address this body, is someone that I invited to come today, that's Merrett Stierheim, who led the group of experts that came to our City in... during one of the times that the City of Miami needed the most help. Bob, go ahead. Mr. Robert J. Nachlinger (Assistant City Manager): Thank you, Mayor. Mayor and Commissioners, some of you had asked us before... 2 November 1, 1997 Mayor Carollo: Bob, hold on. We need for you to have a mike. Mr. Nachlinger: This one? Mr. Marquez: Yes. Mr. Nachlinger: It's working. Some of you have asked us before and we articulated the reason that we consolidated all the enterprise and internal service funds and proprietary funds of the City into the General Fund in 1986 when we got here. But, we have never showed you exactly what we were looking at. If you look here, in Fiscal, at the end of Fiscal 1995, over the past 11 years, the enterprise operations of the City, those business type operations had produced loses of 58.6 million dollars. And, during the same time period, the internal service funds, those captive companies that provide services to the rest of the City's operation had lost 17.8 million dollars. Clearly, these are not operating in a businesslike environment. Businesses don't lose money for 11 years and stay in business. At that point, we consolidated those operations into the General Fund, and wound up with a rather substantial General Fund deficit. What we are alleging is that when Deloitte and Touche came in 1989, there was... they would look back and see that over the past five years, these same group of funds had lost thirty six point three million dollars ($36,300,000). At that point, just as we did in 1996, when we got here, they should have said, enough is enough, City. You are not making any money. These are not proprietary operations and they should be consolidated in the General Fund of the City. Now, had they done that, these loses, maybe, wouldn't have gone away, but certainly, they would have been now in the General Fund of the City. In 1989, had they consolidated those enterprise and internal service operations into the General Fund of the City, they would have shown, initially, a negative fund equity in the City of one and three quarter million dollars in 1989. That's a violation of the law. You can't have a negative General Fund equity and be in compliance with State Law. Further, taking those same years, and operating those funds as if they were on a governmental fund basis, modified accrual, they would have produced these losses in red, each year in the General Fund. And, those loses would have totalled, by the end of 1995, a negative General Fund equity of eighty seven point eight million dollars ($87,800,000). That's what was truly the financial condition of the City, as of September 30, 1995, as opposed to the twenty-three million dollars ($23,000,000) that the General Fund was reporting in positive equity at that point. Essentially, we are saying, as our auditors, Peat Marwick has concurred with, in our presentation in 1996, that these funds should have been consolidated and we are alleging that Deloitte and Touche should have done the same for the City back in 1989. Mr. Marquez: Mr. Mayor, the bottom line point on all of this is, had a General Fund been showing negative amounts, Wall Street would have raised the alarm much earlier and the City should have been in a position to change its ways back then. Now... Bob, have you completed? Mr. Nachlinger: Yes. Mr. Marquez: I would ask Tom Tew, to come up and address the City Commission. Mr. Tom Tew: Mayor and Commissioners and administrative staff. Our law firm, together with an accounting firm of municipal expertise, have reviewed the position taken by your administration and concur that there is liability for negligence by your prior auditors in the accounting for the proprietary funds that they audited, reported, issued or compliance with auditing standards. The damages that we believed were suffered by the City, are those damages, if you take the annual losses or deficits in the General Fund and totalled them, that's approximately eighty-six to eighty-seven million dollars ($87,000,000) in losses that this City... we believe would not have incurred had the General Fund been reported in 1989 through 1995 at anytime in a deficit position. We believe that action would have been taken either by the City or by outside forces such as the bond rating agencies or by the State of Florida, as we in fact 3 November 1, 1997 witnesses in 1996, when the financial emergency of the City was disclosed by Mr. Stierheim's pro bono group of executives and municipal and accounting experts. And, therefore, we concur that there is liability. We concur with your staff, the independent, the auditing firm that we have engaged as experts to assist us, concurs with that finding. And, essentially, the numbers, we believe, speak for themselves. Vice Mayor Regalado: Have there been any similar cases, throughout the United States? Mr. Tew: We have at this point not looked at whether or not any other City got into this problem with its proprietary funds. We were looking at the accounting principles that should have been applied on this City because we believe it is so stark, that if you look across the board, thirty-six million dollars ($36,000,000) in losses, by the time they took over, we believe was enough of a red flag, that they should have said, as your new administration said, "Enough is enough." Because, I have found, and I have not looked for other cities, who have treated their proprietary funds in this way. We believe this treatment was in violation of your accounting standards. Vice Mayor Regalado: How about the City of Jacksonville? I know that there were some problems with their auditors. Mr. Tew: Well, it's hard in an initial investigation to determine the conduct of one auditing firm versus another. You really would have to get in and study both. We have studied this, based upon the accounting expertise that we have provided and which our firm has, and we believe on these basis, there is liability. I have not looked at Jacksonville. Because, unless you did a careful study it would be unfair to Deloitte and Touche and unfair to the City, to draw any parallels. I think each case stands on its own. Mayor Carollo: Tom, as I see the information that we have before us, today, your calculations coming from 1990 on, is for a combined total of between the Enterprise Funds and the internal service funds of 70 plus million dollars. Mr. Tew: Yes. In those funds, you would have had those deficits. But that is not the measure of damage, your Honor, Mr. Mayor. The measure of damages is, when you consolidate those losses in the proprietary fund with the positive balances reported in the General Fund, you end up every year with a negative balance in the General Fund. And, as you go out in time, those annual losses in the General Fund, build up to an accumulative amount of an excess of eighty-six million dollars ($86,000,000). And, that we believe, is the measure of damages that we would seek relief for, for the City. Because, basically, what we are saying is, that the audit reports that Deloitte issued showed from '89 through '95, every year, a positive General Fund balance. But, that's only because the proprietary funds were not accounted for in the General Fund, even though, as Mr. Nachlinger has stated, they were not self-sufficient, self... and the proprietary funds under the category of Internal Service Funds, were not operating under a break even basis or a cost reimbursement basis. In essence, the City's General Fund was not reimbursing those Internal Service Funds for the services they were providing for all the City's agencies. And, as a result, the loss built-up, in essence, in those funds, permitted a general balance, a positive balance in the General Fund. If you collapse those, as we believe the appropriate auditing approach was, as did Peat and as did your new administration, you... we believe would have avoided those annual losses from '89 to '95, because we believe corrective action would have been taken to eliminate those loses. As witnesses, in fact, by what this City Commission and Mayor had to do faced with the State Oversight Commission. Corrective action we believe, would have been taken, as soon as that General Fund went negative. Commissioner Gort: Let me ask a question. Looking at the operations that I always read, or at least I interpreted, they were profitable. The Orange Bowl, according to here, you show me the Orange Bowl lost money every year? 4 November 1, 1997 6 '0 Mr. Tew: Yes, sir. Perhaps, Mr. Nachlinger could put the chart back up, so... I think the Commissioner is speaking to that issue. That chart reflects all of the enterprise and proprietary funds, and I believe you have a miniature... Commissioner Gort: Right. No, I have a copy here. I was always on the understanding, that the Orange Bowl, Building and Zoning Department was self -sustained and there was... Mr. Marquez: These numbers are right out of the annual report, sir. Mr. Nachlinger: Yes, they are. The Orange Bowl, in some years did produce profits, two of the eleven years. However, as you know, on a proprietary fund basis, a general standard accounting basis, you also charge depreciation into the accounts. And, whereas, from an operational, just the cost of running it compared to the revenue taken in, it may have put the roots to profits, when you start depreciating the asset of the Orange Bowl, it's... well, by the... in the 11 year period, they have almost six and a half million dollars in losses and the total equity, the retained earnings in the Orange Bowl Fund was a negative five and a half million dollars ($5,500,000). It's a... It truly was not a self-sufficient operation. Vice Mayor Regalado: So, what would be the process, if we were to decide on this resolution? Mr. Tew: Well, the process, Mr. Vice Mayor, would be that our firm in conjuction with... conjunction with your City Attorney, would prepare and file a suit in the State Court of Dade County, seeking damages on the theory that we have just discussed. That's subject to the retention of our firm, which is a part of this resolution on the terms that Mr. Stierheim and our firm negotiated initially and have been reviewed again by the City Manager and are a part of the proposal. If both of those are adopted, then we would work with Mr. Quinn, to file the lawsuit. Mayor Carollo: Well, for the first time that I know of, in the City's history, we have a City Manager that is not only a former finance director of the largest governmental body of any County or City in the State of Florida. But, is also a Certified Public Accountant. For the first time ever, that I know of, the main Assistant City Manager that we have is also, former finance director from another large City, from Miami Beach, and is also a Certified Public Accountant. I believe that for the first time in a long time, we have the type of expertise, equal to none, that we have had in the past, from our top management people, that can give us the best expertise of an opinion as to what the recommendations would be for us to follow. And, this is what I would like to hear from the City Manager and from the Assistant City Manager. You are the two main experts that we have in the City of Miami to advise us. You are the two main professionals that we have placed our trust, to rely on your opinion. Both of you have a history of being true professionals, making decisions strictly through professionalism. At the same time, I would also like to hear from another professional, that was the one that had the courage to find out exactly what was the true financial situation of the City of Miami. That had the courage to bring dozens of other professionals from the private sector, from government, professionals in the finance field to help find out the true financial picture that the City of Miami was in. And, I am referring to, Merrett Stierheim. He had the courage that many would not have had to have brought out the real story, the real financial picture of the City and for that, I have to here publicly acknowledge that the work that he did in thanking him, on behalf of all the people of Miami, and apologize to him, for having put him in harms way, where he took so many unjust attacks, by the former, not professional individuals that some are in jail now, some are on their way to jail, that attacked him unjustly. Attacked the City unjustly. And, this man didn't need to take that job on. He had a... He had and has a fine job. We asked him to come in, to volunteer his time for this City. He did that. And, at times it seemed like it was everyday that he was getting attacked by some of those individuals. I fact, even to this day, he is still receiving attacks, only for having done what was right for this City. Only, for having the courage to stand up and set the truth. So, I would 5 November 1, 1997 also like to hear from Merrett Stierheim, so that he can publicly go through the process of what he had to do to... for us to be here today, in this process. Mr. Manager. Mr. Marquez: Just quickly. I have audited, assisted in the preparation of, prepared and signed off municipal financial statements for over the past 20 years. Currently, without a doubt, I believe we have a case against the former auditors. The fact that they did not consolidate into the General Fund, I think was a great disservice to the City. Mr. Nachlinger: Mayor, if... I, also would like to acknowledge Merrett's work, but the question you asked me directly is, my feelings about this lawsuit. And, I will tell you, when I came to work for the City of Miami, and I also came to work under Merrett as one of the people he called. I was absolutely appalled at what I found in the finances of this City. And, I absolutely recommend we file this lawsuit. It is a travesty the way this City was operated. And, some regress has to occur. Mr. Merrett Stierheim: Mr. Mayor, I thank you for the courtesy of inviting me. I sat here and I have been studying these figures and, of course, I came at it from a totally different direction. When you asked me to come in here, we didn't know at that point, how serious the situation was. There were concerns about the financing, but the City Commission had already approved a balanced budget on first reading. And, you personally said, "Merrett, would you please take the budget home and look at it, because we have got to adopt it in about 11 or 12 days." I forget exactly what it was. And, I looked at the financial report, the last audits. I picked up the last three audits and the last audited financial statement. And, of course, the sale of the pension bonds and the moving of those monies around, are what triggered it for me. Because, obviously, there was no money in that very, handsome, attractive budget, to pay the pension, the thirty-five million. And, that started my odyssey, if you will, over the next couple of months. What we had, was a City that, first of all, started eating its reserves, consuming its reserves. And, after it consumed the reserves, it went into its capital funds and began consuming capital funds. And, after it consumed capital funds, then it went out and sold bond, the pension bonds, and other bonds. And, I had a great deal of difficulty understanding why the external auditor did not raise those flags on some of those practices, early on. So, it was I, who came to you, as a body, this Commission, and recommended, and that's in memo form. It's a matter of public record. I recommended that you consider and authorize me to go out and interview firms, which I did, and I recommended Mr. Tew's firm, negotiated that contract, which you approved, which started his review process that has led to this presentation. He's come at it from a much more sophisticated accounting basis. But, it shows the systematic deterioration of the financial condition of the City. And, I have been out of the loop for some time, but it doesn't mean that I have lost my interest or concern over this matter. And, I think you have something before you that's very properly before you and calls for action. Thank you, Mr. Mayor. Mayor Carollo: Thank you, Merrett. And, thank you, very much for the work that you did for this City. The City has an internal debt with you, of gratitude. Mr. Gonzalez-Goenaga, you have a few minutes, sir. Mr. Manuel Gonzalez-Goenaga: Yes. Good morning. First of all, I have the greatest respect for Thomas Tew. I know he is an extremely knowledgeable and very, well respected in Washington. I wonder also if, besides the damage lawsuit, what about if there is an impending review by the Securities and Exchange Commission, and we are running an expert investment banker here. And, besides, what about suing also, joining the previous Commissioners, like one who is not present here, who has been here for 27 years, and, the ex -Mayor who has publicly said that he has never seen a financial statement of the City of Miami? What about the obligations? I know that damages is a matter, is an important essence in securities business in the damage issue. I know negligence is enough. Well, they were putting here, all of them, in a fiduciary capacity for the citizens of Miami. And, in my feeling, and I... some people here had 6 November 1, 1997 the courage, I had the guts to say this many, many years ago. And, I paid very dearly through ten arrests. Now, it is my turn. Let's sue. I think that, Mr. Plummer, Mr. Gort, and peers should be joined and I will make sure of that. Mayor Carollo: Excuse me, Mr. Goenaga... Mr. Gonzalez-Goenaga: I am sorry. I am leaving. Mayor Carollo: ...your time is up. Thank you. Mr. Tew, I don't know if this question should be addressed in part to you and in part to the City Attorney, but... What is the status that we know of the investigation that this City is under and the former administrators are under, from the Securities and Exchange Commission? Mr. A. Quinn Jones, III, Esq. (City Attorney): Mr. Mayor, I haven't been briefed or advised in that regard. I don't know if the Manager knows._ I only know what I have read, but I haven't... I really don't know what the status of it is. Mayor Carollo: OK. Mr. Manager. Mr. Marquez: Many, many months ago, we were asked for information from our records and we transmitted everything that they have asked for to the SEC (Securities and Exchange Commission). And, to the best of my knowledge, it's continuing. Bob, can you add anything to that? Mr. Nachlinger: No. Mayor, the SEC has been in contact with me and requested various records, as Ed has said, and we have been cooperating with them and supplying them with what they have asked for. As to the status of any actions against former members of the administration, I don't have any information on that. Mayor Carollo: The reason I am asking that question is, out of concern that this City's protected a much as it possibly could be. It's obvious that there are things there that are going to come back and haunt us. And, I just want to be sure that we can defend the City's interest as best as we possibly can. Commissioner. Commissioner Gort: Mr. Mayor, I would like to explain, because some statements were made there, that anytime any City does the bond issues, they contract professional individuals, like bond attorney out of the companies, and we made decisions relying on those professionals. Mayor Carollo: That's correct. Commissioner Gort: They are well paid for to inform us, and we make decisions according to that. So, I want to make sure, that a statement was there, that people realize and understand that. That if any responsibility falls, it falls on those professionals. They are the ones that gave the information to us in order to make the decision. We, as individuals make the decision according to the information we get. Mayor Carollo: Mr. Manager, Mr. Nachlinger, is there anything else that you need to state or present to this body or for that matter from the City Attorney? Is there any? Mr. Jones: I just want to make sure that you understand the fee arrangement that's incorporated as part of the resolution. What we have recommended is, a reduced hourly and modified contingency. Originally, there were three proposals that were presented to us. One was a pure contingency, meaning that they would receive a percentage based on the results. But, I think you have it in you package. But, I don't want to... I guess, there is really no need to go through it. 7 November 1, 1997 0 But, theoretically, what it would have... Again, what it would have meant, that they would have received a fee, a percentage of a fee, or should I say the fee would have been commensurate with a percentage of whatever amount was recovered. Ranging all the way from one million up to 120, if we were successful. The second arrangement of course, is a reduced hourly and modified contingency, which Mr. Tew basically, and his... would agree to bill at an hourly rate of one hundred and fifty dollars ($150) an hour, far beyond... I should have said, far below, what his standard rate is. And, of course, that takes into consideration, an associate, a paralegal and another... is it another partner? Another partner, of course, whose rate would also be reduced. And, of course, if we were to win... I should have said... let me back up. The total cost were based upon, at the high end, 5500 hours, low end, 47,000 hours with... Mayor Carollo: You are reading out of page two. Mr. Jones: Page two, that's correct. If you follow me. And, of course, if you follow them, the chart, the estimated total cost, if we were to win less than one million dollars ($1,000,000) on the high end would be eight hundred and seventy-seven thousand, eight seventy-five. On the low end, seven hundred twenty-nine, two seventy-five. The modified contingency would be, if we win between one and two, it would be based on the estimated total cost, which were based on standard rates. On the high end it would be, 1.3 and on the low end, just a little over one million. If we recover between two and five, it would be based on one and a half times the standard rates. And, of course, over five million, it would be based on two times the standard rates. And, of course, over five million it would be based on two times the standard rates. So, a little... 2.3 on the high end and two point, a little over two million on the low end. Mr. Marquez: Mr. Mayor, this is assuming a two-year trial. Mr. Jones: Yeah. Mr. Marquez: OK. And, the high end - low end is on the amounts of hours that Mr. Tew's firm would be working on the case. Mr. Jones: And, of course, the third proposal is basically a straight billing at Mr. Tew's standard hourly rate. And, of course, the estimated legal fees, were... I should say, at standard rates would be, on the high end 1.1 million with an estimated out of pocket on the high end of two hundred thousand and one hundred and fifty thousand on the low end. And, of course, these costs are based on the fact, whether we win or loose. So, you are talking about 1.3 on the high end and one, a little over one million on the low end. We recommend basically, the reduced hourly and modified contingency. Mr. Tew, can again share with you his concern as to why we came up with a recommendation to you of a reduced hourly and modified contingency. Mayor Carollo: Do you feel absolutely comfortable in recommending to this Commission? Mr. Jones: Yes, Mr. Mayor, I do. Vice Mayor Regalado: Tell me, what would be the time frame, your ideas of the process? Mr. Tew: Well, we were asked to do some estimates, and they were only that. And, before I get to that point, I want to mention that this is the same two proposals, contingency, and reduced hourly that Mr. Stierheim and I talked about and put into my initial proposal, that's, I guess, over a year ago. And, so, we have not changed, that Mr. Stierheim wanted to know what would be our fee arrangement in two steps? The first was the investigative step and the second was, all right, if we go forward. He tied me down properly, wanted to know what would be the pr365oposal to go forward, and what I put in that proposal was exactly what the City Attorney has mentioned. A contingency or a reduced hourly. So, what we are doing is following the 8 November 1, 1997 same procedure we started about. I left it to the City's leadership to determine which way they wanted to go. I was comfortable. In answering your question, Mr. Vice Mayor, in order to help the City get an estimate of cost on a reduced hourly basis, my partner, Mr. Rebak, and I sat down and did some estimates on the amount of hours that will be required assuming the case went through a normal period of discovery and it had a trial. And, my experience indicates that on a hindsight could be two plus years. And, I went through similar cases with my partners and extracted the time frame that those cases have taken, and then applied them to the reduced hourly by assuming, you can see from the percentages, which member of our firm would work on the case for what percentage of time. All the way from myself, Mr. Rebak, my partner, who has done this many times with me, in the County malpractice cases, and then, two associates of our firm and a paralegal. And, we spread that time out, based upon our experience and allow your City Manager and City Attorney to work those numbers in forming their recommendations. So, it could be with an extensive discovery schedule and a trial, which we could be talking about two plus years. Vice Mayor Regalado: Do you see any possibility of an out of court settlement? Mr. Tew: Well, I think that's strictly within the parameters of the two parties. And, since there isn't a lawsuit yet, and there has been no discussion of that, I think, brought to the City, that there may or may not be. But, I think, you need in estimating the cost of this, to assume that you will have a contested, a vigorously defended lawsuit. Their counsel, an excellent lawyer in New York, has talked candidly, with me, that they will vigorously defend themselves, and I expect that they will. And, I have to assume that that will be two years of hard discovery. I want to pick up something that the Mayor said. I think that there will be statements made, questions asked of current and past Commissioners, by the defendants, from my experience in these matters. And, I suspect that it will be a couple of years of hard work. Now, that could change. But, I don't think you can budget for those changes. I think you have to budget for the worst case or the longest discovery schedule, and a full trial. And, I have offered that to them to analyze the cost. Vice Mayor Regalado: Mr. Mayor, I move the resolution. Mayor Carollo: There is a motion by Vice Mayor Regalado... Commissioner Gort: Second. Mayor Carollo: ... to move the resolution that's before us, as recommended, not only by the City Attorney but by the City Manager and the Assistant City Manager. It's been second by Commissioner Gort. Mr. Marquez: I am sorry, for the record, I... Commissioner Plummer asked me to introduce when we are discussing the resolution. His preference as to fees would be a contingency basis. And, he would also ask that expenses be capped, or pre -approved. Out of pocket expenses be approved by the administration. I have discussed the latter with Mr. Tew, and he has no objections to the pre -approved expenses. Mr. Tew: That's correct. Also, reminding the Commission and the Mayor that, the City Attorney is co -counsel with us on this endeavor, and will work with us. And, obviously, any significant expenditure will be pre -approved by the City, such as... Vice Mayor Regalado: So, I modify my... this resolution to include, Commissioner Plummer's statement, and I so move. Commissioner Gort: Remember, there are two different things in there. 9 November 1, 1997 Mayor Carollo: Well, I know. There are two different aspects of it. Vice Mayor Regalado: I know, but if we were to... We are talking here... Mr. Marquez: The recommendation of the administration is to accept and modify contingency basis, which is on your page two. Vice Mayor Regalado: That's what I am saying. Mayor Carollo: Yes, on page two. That's what we are voting upon. Vice Mayor Regalado: All right. So moved. Commissioner Gort: Your amendment will be that all expenses will have to be... Vice Mayor Regalado: Approved by... Commissioner Gort: Approved by us. Vice Mayor Regalado: ... by the... that's right. Mayor Carollo: How complicated would that get, Mr. Jones? Mr. Jones: Sorry, Mr. Jones. Mayor Carollo: How complicated would that get in a process such as this? Mr. Jones: No, it shouldn't pose any difficulty. You know, I have worked with this before, with other lawyers, so it won't be... it won't pose a problem. Commissioner Gort: We can approve a fixed amount of expenditures. And, then, if they go beyond that, we can come back. Mr. Jones: Yeah, which is basically what I have asked for, initially here. And, of course, if I need, if we need additional funding, I will come back to this Commission and ask for approval. Mayor Carollo: Very good. All right, is there any further discussion, any further statements? Hearing none, can you call the roll. 10 November 1, 1997 • • The following resolution was introduced by Vice Mayor Regalado, who moved its adoption: RESOLUTION NO. 97-784 A RESOLUTION APPROVING THE CITY ATTORNEY'S ENGAGEMENT OF THE LAW FIRM OF TEW AND BEASLEY, P.A., TO SERVE AS COUNSEL TO THE CITY OF MIAMI IN CONNECTION WITH LITIGATION PROCEEDINGS TO BE INITIATED AGAINST DELOITTE & TOUCHE, FORMER CITY OF MIAMI EXTERNAL AUDITORS; SAID ENGAGEMENT TO BE UNDER A REDUCED HOURLY AND MODIFIED CONTINGENCY FEE ARRANGEMENT AS HEREIN SPECIFIED, WITH ALL EXPENSES TO BE APPROVED BY THE CITY ATTORNEY; ALLOCATING FUNDS THEREFOR, IN AN AMOUNT NOT TO EXCEED $50,000, FROM ACCOUNT NO. 92-10-02, MINOR OBJECT CODE 270. (Here follows body of resolution, omitted here and on file in the Office of the City Clerk.) Upon being seconded by Commissioner Gort, the resolution was passed and adopted by the following vote: AYES: Commissioner Wifredo Gort Vice Mayor Tomas Regalado Mayor Joe Carollo NAYS: None. ABSENT: Commissioner J.L. Plummer, Jr. Commissioner Thelma V. A. Gibson ---------------------------------------------------------------------------------------------------------------- 2. PROPOSED FIRST READING ORDINANCE: AMEND SECTION 40-195 OF CODE: FIREFIGHTERS AND POLICE RETIREMENT TRUST -- ADD SUBSECTION (G) -- AUTHORIZE $30,000,000 FOR INTEREST IN LIMITED PARTNERSHIP TO ACQUIRE / OWN / OPERATE FLORIDA MARLINS BASEBALL TEAM. Mayor Carollo: The second item that we have before us, today, for discussion and possible action. Commissioner Gort: Mr. Mayor, I hope that we can expedite this a little bit, I have to get out of here. Mayor Carollo: Excuse me? We will. It's a request from the Fire Fighters and the Police Officers Retirement Trust. I don't know if they have a representative here that can address this body. Mr. Russel Bjorkman: Would you like for us to identify ourselves? Mayor Carollo: Certainly. Please. 11 November 1, 1997 El Mr. Bjorkman: OK. My name is Russel Bjorkman. I am the Firefighters representative and the Vice Chairman of the Firefighters and Police Officers Retirement Trust. And, this is Jesse Diner. Mr. Jesse Diner: For the record, Jesse Diner. I am also one of the trustees on the Firefighters and Police Officers Pension Trust and a resident of the City of Miami, located at 644 Northeast 57th Street. Mayor Carollo: Go ahead. Mr. Bjorkman: OK. The... what the situation is, that the Firefighters and Police Officers Retirement Trust has been approved in principle about making an equity participation in the ownership of the Miami Marlins baseball team. The ordinance as it is now structured, doesn't specify our ability to take an interest in a limited partnership. What we would like to do is, amend the ordinance adding to Section 40-195G. Adding a section that would allow a limited partnership interest, specifically in the Miami Marlin, or Florida Marlin baseball team. The ordinance as it's stated does allow Venture Capital up to five percent of the fund assets. Once again, Venture... This is not structured as Venture Capital, this is structured as a limited partnership and we feel it best to have it specifically in the ordinance to allow the limited partnership up to thirty million dollars ($30,000,000), which would be less than three percent of the fund assets, and that's what this ordinance requests. There are a couple of things that I would like to read into the record because the authority to invest doesn't create the demand to invest. And -- excuse me -- at a meeting, a board meeting on Thursday, the letter that... accompanying this ordinance change, I would like to read that, please. "Attached hereto is proposed Amendment 2, Section 40-195." The amendment is nothing more than the authority to make a particular investment, if an only if, the board subsequently determines to make such investment in whole or in part. The board has made no decision at this time as to whether or not it will, in fact, make such investment, and the amendment doesn't mean that the board will ever make such an amendment." Any... the situation now is, there is a book on the table that says "The Florida Marlins." It hasn't been opened. We have not analyzed it. The board has not agreed to analyze it. The board has not agreed to analyze it. If this amendment passes and if the Police and Fire Pension Board wishes to open the book, and Major League Baseball, and the general partner allow us to look at the book, we would then go forward with a thorough financial analysis to see what the business aspects of the team ownership are. Commissioner Gort: At... Mr. Bjorkman: Yes, sir. Commissioner Gort: ... one time I remember you had a rule that if any investment did not produce within 90 percent of the median, automatically they would be fired. The money managers. You still have that in place? Mr. Bjorkman: Yes, sir. Commissioner Gort: You also put in place, according to what you are telling me, you are allowed to put in the other funds... Mr. Bjorkman: Venture Capital. Commissioner Gort: Venture Capital. Have you ever placed in Venture Capital, before? Mr. Bjorkman: We currently do not participate in Venture Capital. No, sir. 12 November 1, 1997 Commissioner Gort: OK. Mr. Bjorkman: No, sir. There... Commissioner Gort: But, I am glad you read the letter. I mean, this is just to give an opportunity to analyze, look. And, you will look at the feasibility of it, before the board will make a decision. Mr. Bjorkman: Absolutely. Commissioner Gort: Mr. Mayor, I don't have a problem. Mayor Carollo: All right. Mr. Vice Mayor? Vice Mayor Regalado: I don't have a problem. I welcome that. Mayor Carollo: Well, I would just like to make this statement for the record, that if the City of Miami's dollars would have been invested in the past, like the pension board for the firefighters and police officers, recently has been invested, we would be in great shape. So, whatever they would like to do in the future, they have my full confidence. And, all they are asking here is the right to invest up to a certain amount, if they so wish to do so in the future. They are not saying they are going to do it. They are not saying it's going to be any kind of an amount. They just want that right to do it. And, I have full confidence that whatever decision they make in the future, whether on this matter or any other matters that has to do with investing their hard earned pension dollars, that they are going to be making sound, financial decisions, like they have shown that they have made in the past. It's... Commissioner Gort: Mr. Mayor, I would like you to know. I did a lot of reading on the Gates case, when I first came in here. And, you can see that the changes when the new administration took over the pension plans. And, one of the biggest things they have is, they have within the ordinance, of all the Marlin managers, if anyone do not perform within 90 percent of the median, they are automatically fired. And, that's a great rule. Mayor Carollo: That is a very good rule. Mr. Bjorkman: In 1990, we had about three hundred and fifty-seven million dollars ($357,000,000). We finished our last fiscal year with well over nine hundred million dollars ($900,000,000). The fund is 100 percent funded. The seven of the nine trustees that govern the fund are the same today, as they were in 1990. There is nothing structurally that has changed in our philosophy. There has been a great deal of concern amongst our participants as to the political pressure here, I can assure everybody there is absolutely no political pressure on us. There are some time pressures, because in the structuring of a baseball team, it's just like a resort facility, you won't close it down in the peak season. They need to do some things for the team structure, if they are going to do it .before next season. Our interest is purely financial. It is a small business that gets a lot of free publicity. A lot of sports teams make money. That's what we would like to look at. Or, I can personally tell you, I would like to look at it, to see if it's financially feasible for us, and that's it. Vice Mayor Regalado: Thank you, very much. Mr. Bjorkman: OK. Thank you. Mr. Diner: Yeah. 13 November 1, 1997 0 Mayor Carollo: Vice Mayor. Vice Mayor Regalado: I commend your decision and I hope that this team will be owned by local people. And, I think that you, if you were to participate, it will contribute a lot to the South Florida areas, especially the City of Miami. And, I hope that many entities will follow your path. Mayor Carollo: Thank you, again. Is there a motion? Vice Mayor Regalado: Yes, there is a motion. Mayor Carollo: There is a motion made by Vice Mayor Regalado. Second by Commissioner Gort. Mr. City Attorney can you read the ordinance, please? [AT THIS POINT, THE CITY ATTORNEY READ THE ORDINANCE INTO THE PUBLIC RECORD.] An Ordinance entitled - AN ORDINANCE AMENDING SECTION 40-195 OF THE CODE OF THE CITY OF MIAMI, FLORIDA, AS AMENDED, THEREBY ADDING A NEW SUBSECTION (G) AUTHORIZING THE BOARD OF TRUSTEES (BOARD) OF THE FIRE FIGHTERS' AND POLICE OFFICERS' RETIREMENT TRUST TO INVEST UP TO $30,000,000.00 FOR AN INTEREST IN A LIMITED PARTNERSHIP TO ACQUIRE, OWN AND OPERATE THE FLORIDA MARLINS BASEBALL TEAM, AS HEREIN SPECIFIED; CONTAINING A REPEALER PROVISION AND A SEVERABILITY CLAUSE; PROVIDING FOR AN EFFECTIVE DATE. was introduced by Vice Mayor Regalado, seconded by Commissioner Gort, and was passed on first reading, by title only, by the following vote: AYES: Commissioner Wifredo Gort Vice Mayor Tomas Regalado Mayor Joe Carollo NAYS: None. ABSENT: Commissioner J.L. Plummer, Jr. Commissioner Thelma V. A. Gibson The City Attorney read the ordinance into the public record and announced that copies were available to the members of the City Commission and to the public. Mayor Carollo: Thank you, very much. This Commission meeting is now adjourned. 14 November 1, 1997 THERE BEING NO FURTHER BUSINESS TO COME BEFORE THE CITY COMMISSION, THE MEETING WAS ADJOURNED AT 10:08 A.M. JOE CAROLLO MAYOR ATTEST: Walter Foeman CITY CLERK Maria J. Argudin ASSISTANT CITY CLERK i = •.'�, I�IhI * : INCORf"=OKAYED � * j 15 November 1, 1997