Volsky on “Coral Gables Expects to Sue Biltmore”

GEORGE VOLSKY

CORAL GABLES EXPECTS TO SUE BILTMORE

After almost three years of secret and apparently unsuccessful discussions with the Biltmore’s  managing company over its failure to pay Coral Gables the hotel’s rent, the city attorney’s office says, for the first time, that the city is “in anticipation” of litigating the thorny multimillion debt.

According to incomplete city records, the Seaway Corporation, which has been operating the Biltmore for decades, owes Coral Gables more than $6 million, not counting interests customary charged in prolonged non-payment cases. Seaway disputes that total stating that it had spent more than twice on the hotel’s historic preservation, the work it contends was supposed to have been done by the city. Coral Gables, in turn, states that under its management contract with Seaway, that company is obliged to fund hotel preservation.

The tactical option of taking Seaway to court was mentioned in a letter  dated July 12, 2011. Singed by Assistant City Attorney Lourdes Alsonsin, it  was in response to my June 21, 2011 freedom of information request  for documents and emails pertaining to the city-Seaway discussions. These talks, privy to the five members of the City Commission, the city manager and the city attorney, have been kept secret from the residents and taxpayers of Coral Gables.

“On June 21, 2001, you requested a document written by Elizabeth Hernandez (who resigned Dec. 20, 2009 as city attorney but continues to be paid by Coral Gables as its legal consultant) regarding the public not being informed of discussions by the Commissioners regarding the Biltmore or an audit by Price Waterhouse Coopers, LLP. There is correspondence from Ms. Hernandez dated March 10, 2011 which discusses a report. This correspondence is exempt from release at this time pursuant to the Public Record Act. In particular, Florida Statutes, Section 119.07 (1)(d) provides that documents reflecting a mental impression, conclusion, litigation strategy or legal theory prepared by the attorney or the agency and was prepared exclusively… in anticipation of litigation is exempt from disclosure until the conclusion of the litigation. As such, the correspondence dated March 10, 2011 shall be available to the public upon termination of any possible litigation,” Alfonsin wrote.  (The  last sentence of the letter is odd, one legal expert said, explaining that in filing a lawsuit against Seaway, the city would have to disclose its legal arguments for financial redress.)

City Attorney Craig Leen, stating that so far he has not asked the commission’s ascent to initiate a lawsuit against Seaway, said that   Alfonsin’s use of the words “in anticipation of litigation” meant that his office “expected” the Biltmore case be decided by the courts. (According to various dictionaries, “in anticipation” also means “looking forward to.”)

Asked for comments, City Manager Patrick Salerno replied he was not authorized, presumably by the city legal office, to speak about the Coral Gables-Biltmore discussions.  The same was the answer of Mayor James Cases. During his election campaign, Cason had publicly  chided former mayor Don Slesnick for not acknowledging  that the Biltmore managers  were not paying their rent and for doing  nothing about it.

Indeed, many residents baffled why Hernandez invoked a Florida law to throw a mantle on secrecy over the Biltmore case, which is  similar to others being dealt with by the city in full sunshine.  For decades, Coral Gables as a landlord has confronted tenants who, like Seaway, had failed to fulfill their financial and other obligations under mutually agreed contacts. All landlord-tenant problems – except the Biltmore’s – have been and are being dealt with and resolved in open, documented negotiations. Following the accepted real estate sector legal procedure, delinquent tenants are given a written notice to pay or vacate the premises. Those who refuse to do so, regardless of the reason, are taken to court to be evicted, a legal action previously authorized by the city commission in an open session.

Thus on the face of it, the city-Seaway discussions do not concern “litigation strategy or legal theory,” or national security; they are only about money, in the simple Shakespearean phrase: “to pay or not to pay that is the question.” And PriceWaterhouseCoopers was retained, on January 25, 2010, at a very high fee,  to inform the city and its taxpayers about the state of the Biltmore operations, not what to do about the debt, let alone whether to litigate it.

Therefore, some knowledgeable residents are expressing concern about the Biltmore-Coral Gables secrecy that Hernandez in effect has only recommended  – and which Leen does not have to agree to. They believe that the secrecy’s real reason could be keep hidden some still undisclosed aspects of business and personal relations between Seaway on the one hand and Slesnick, former city manager David Brown and their close ally Hernandez on the other.

It appears, for examples, that the Slesnick-Brown administration strangely lacked alacrity in confronting the Biltmore’s non-payment issue. Prior to the last April election, a mayoral candidate, Coral Gables attorney Tom Korge challenged Slesnick to explain why he, Brown and Hernandez for months did not respond to urgent entreaties for a meeting by the Seaway attorney Danny Ponce. While Biltmore was still paying its rent, Ponce asked the trio to consider a revision of the hotel rent contract  because Seaway had difficulty fulfilling it.

Only after Slesnick, Brown and Hernandez  showed no interest to talk to Seaway, the Biltmore managing company stopped paying rent. Korge repeated his charge, which he said was based on a statement by Ponce,  during two pre-lection debates with Slesnick. The former mayor  ignored Korge’s challenge; he neither denied nor explained his inaction.

About Stephen E. McGaughey
International consultant in economic development programs and projects

2 Responses to Volsky on “Coral Gables Expects to Sue Biltmore”

  1. Seaway is technically in default of a long standing agreement in which the city skims 3.5% off the top of all Biltmore income, regardless of costs of upkeep and maintenance. The Department of the Interior, who gave the property to the city for $1, has clearly stated that the priorities for the historic Biltmore are “Preservation Before Profit” effectively rendering the previous agreement between management and city moot. Without undue bickering, it’s time to move forward with a new agreement that allows the city to share in profits — when real profits are accrued in excess of expenses. Citizens should insist that under such an agreement, all profits earned by the city should be exclusively dedicated to historic preservation of the Biltmore and other key historic assets in the city.

  2. Eli White, Tampa, FL says:

    There would be very few who would look after the Biltmore with more care, diligence and passion than Gene Prescott. This hotel is his life and his atttention to all details of the property are quite unusual for an owner with many other interests and concerns. Think back to 1992 when the hotel was boarded up. It had a reputation of failure and inability to function in a changing marketplace of new competition. Hundreds of interested operators looked at the property and determined that the risk was far greater than the potential returns, therefore, walked away without offering a bid for the management agreement with the city. Over the last 19 years since acquiring the right to operate the hotel, Prescott and his team have exhibited a willingness to not only accept risk but have far beyond what would normally be expected. Dignitaries don’t just show up but generally respond favorably when courted in the manner Presoctt operates. The city should be grateful for having someone with the ability to deliver positive PR and acolades on the so-called City Beautiful. To remain beautiful, the powers to be had better not let their prize jewel return to the boarded up condition of 1992. It is time to revisit the agreements and allow the property to continue making strides to prosper and survive for generations to come.

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