Lawsuit against Miami Beach puts 2012 corruption scheme back in the spotlight

A lawsuit set for trial in June could shed light on a notorious episode of corruption in Miami Beach history at a time when the city is taking new steps to prevent future misconduct.

The suit, filed in Miami-Dade Circuit Court against the city of Miami Beach and seven former code and fire inspectors, blames city officials for failing to prevent the extortion of a South Beach nightclub owner. The corruption scheme ended in a dramatic 2012 FBI sting in which the club owner turned FBI informant doled out thousands of dollars in bribes and an undercover FBI agent posing as a club manager partied with city employees.

The club owner, Haim Turgman, says that the city allowed its employees to “coerce and harass” business owners and claims that he lost his club as a result of the extortion and the city’s failure to prevent it.

The corruption scheme prospered, the suit claims, because city officials ignored red flags and were “deliberately indifferent to a longstanding and widespread pattern and practice of corruption and extortion.” The suit cites a 2005 email to then City Manager Jorge Gonzalez and at least one city commissioner alleging that a code enforcement supervisor was taking bribes. It also says city officials failed to correct weaknesses in code compliance policies and procedures that were revealed in audits.

The 2012 extortion scheme was hardly the first or last corruption case in Miami Beach City Hall. Just last year, the city’s former chief building official, Mariano Fernandez, was charged with unlawful compensation and conspiracy for allegedly accepting free and discounted rooms from a hotelier who got permits and approvals from the official’s department. Fernandez has pleaded not guilty and is awaiting trial.

But Turgman’s suit, which seeks between $7 million and $10 million in damages, is moving forward as the city is in the process of creating an inspector general’s office in an effort to prevent waste and abuse.

Last month, Turgman filed a motion to compel Gonzalez and three former city commissioners to give depositions. The motion also seeks to compel the deposition of current City Manager Jimmy Morales, who was hired after the FBI sting, in order to question him about the steps the city has since taken to address corruption.

Miami Beach’s city attorney declined to comment on a pending lawsuit. In court filings, Miami Beach argued that Turgman can’t hold the city liable because he was “engaged in wrongdoing” directly related to his claims.

Gonzalez, who was not implicated in the corruption scheme but resigned a month after the FBI sting, disputes the allegations that city officials failed to take action to prevent corruption. The former city manager said that he always took corruption allegations seriously, citing as an example his collaboration with the state attorney’s office on an undercover operation that resulted in the 2008 arrests of three building department inspectors.

“We did a lot of great things. We fought corruption as well,” Gonzalez said of his tenure. “Sadly, there is corruption. I’m sure there is corruption there today.”

Turgman alleges that the extortion scheme dates back to 2006, when he first bought a nightclub on Ocean Drive and opened it under the name Chakra 5. The club, located at the northern end of Ocean Drive near the Royal Palm hotel, served Asian food and cocktails.

In his suit, the club owner claims that code compliance and fire inspectors began “harassing” him with excessive and unwarranted inspections and citations as soon as the club opened, shutting down his business on multiple occasions. Turgman was unable to challenge the city’s actions, the suit says, because the inspectors weren’t properly supervised.

In June 2011, the city’s lead code compliance inspector threatened to fine Turgman tens of thousands of dollars for promotional fliers found littering the ground outside the club and told the club owner that he could make the fine go away in exchange for a cash payment, according to the suit.

Turgman went to the FBI and agreed to secretly record his conversations with the inspector, Jose Alberto. Over the next few months, Turgman paid Alberto and other city employees thousands of dollars. An FBI agent posing as a club manager also made cash payments to city employees. The seven code and fire inspectors were arrested in April 2012. All pleaded guilty to conspiring to commit extortion.

By the time the FBI got involved, however, Turgman‘s business was already in shambles because of the city’s “harassing conduct and extortion,” the suit alleges. Turgman defaulted on his loan in 2010 and, after the FBI sting, the bank took possession of the club, which by that point had been renamed Club Dolce.

“I lost everything,” Turgman said. “I put all of my money into the building and into the nightclub,” he added.

Turgman filed the lawsuit in 2013, but it was dismissed in 2016. He appealed, and last fall an appeals court allowed part of the suit to go forward.

In court filings, Miami Beach argued that Turgman’s refusal to comply with city rules, which resulted in code violations, was the “sole” cause of his alleged damages and that he could have appealed any violations he felt were unwarranted.

Miami Beach also argued that Turgman can’t hold the city liable because he was “engaged in wrongdoing” directly related to his claims. Turgman owed the city unpaid resort taxes and agreed to a settlement that allowed his club to remain open as long as he made payments on the back taxes, but he had “no intention of honoring” the agreement and “fraudulently misrepresented” his involvement in the club, the city claims.

The city said that Turgman also didn’t have a valid business license in Miami Beach after 2009. (In court filings, Turgman’s lawyers dispute these allegations and say their client “properly and legitimately” operated his business “at all relevant times.”)

The suit includes emails and internal documents unearthed as part of the discovery process that Turgman claims should have prompted city officials to take stronger measures to prevent corruption.

In a 2005 email, for example, Alberto — who would later go on to participate in the extortion scheme — told Gonzalez and at least one city commissioner that a homeowner had reported that Alberto’s supervisor was taking bribes.

Gonzalez said that he has not read the lawsuit and has no recollection of Alberto’s 2005 email. Another email included in the suit shows that Gonzalez asked a staff member to set up a meeting so he could “get more info on what is going on,” but it’s unclear whether the meeting was held and whether Alberto was invited.

The suit notes that other city employees had previously been arrested for corruption, bribery or extortion and that a survey of city businesses and residents elicited “numerous complaints” of corruption and bribes.

City officials were also aware of problems with code compliance procedures before 2012, according to the suit, and did not beef up oversight of code compliance officers, leaving lower level employees without enough supervision. Code compliance administrators didn’t question incomplete inspection descriptions, for example, or high rates of nighttime inspections and repeated visits to the same businesses, the suit says, citing an audit conducted in response to the corruption sting.

Turgman wants to depose Gonzalez to find out what he did in response to Alberto’s 2005 warning. Turgman’s lawyers also hope to question former city commissioners Ed Tobin, Saul Gross and Deede Weithorn about any discussions they might have had with Gonzalez regarding the corruption allegations.

Gross and Weithorn declined to comment on the lawsuit. Tobin said that he was a strong advocate for rooting out fraud and corruption while serving as a Miami Beach commissioner.

The city has taken a number of steps to prevent misconduct since 2012, including expanding ethics training for employees and establishing a hotline for employees to report misconduct.