Anti-poverty agency hypes phantom jobs

from The Miami Herald

A Miami-Dade anti-poverty agency touted successes that actually include failed firms and nonexistent jobs.

BY SCOTT HIAASEN AND JASON GROTTO

On paper, it's a Miami-Dade Empowerment Trust success story.

Four years ago, the government-funded poverty agency loaned more than $400,000 to four businesses -- a diaper store, a catering service, a pizzeria and a gas station with a cafeteria. The results: 47 jobs created or saved, according to a report submitted to federal officials in July.

Here's what the trust didn't tell the feds: The diaper store closed down. So did the pizza restaurant. So did the catering company. The gas station opened -- but the cafeteria hasn't yet. The real number of jobs: seven.

To federal monitors and to the public, the Empowerment Trust has portrayed itself as the successful steward of a massive economic-development machine, generating about 1,900 new jobs in Miami-Dade County's most impoverished neighborhoods.

But a Miami Herald investigation found that while the agency was receiving millions in tax dollars, it falsely reported the number of jobs it fostered for the poor -- claiming hundreds of new positions when no such jobs existed -- in violation of federal rules.

In progress reports filed annually with the U.S. Department of Housing and Urban Development, the trust repeatedly brought dead businesses back to life, conjuring jobs where none existed and cheering about jobs that had vanished -- the businesses long shuttered.

A review of 15 reports the trust submitted to HUD this year found that only eight of 310 jobs could be confirmed by trust records -- with more than half the companies out of business at the time the reports were filed.

The trust's files are so incomplete -- and in some cases inaccurate -- that it's impossible to say how many jobs it has created.

The trust's chief executive officer, Aundra Wallace, declined to be interviewed for this report.

Trust officials have called job creation their ''core strategy'' to breathe economic life into nine designated empowerment zone neighborhoods, among the poorest areas of Miami-Dade County.

But the trust's questionable claims and rosy projections have masked deep and persistent problems within these neighborhoods, where the number of families living below the poverty level -- 37.5 percent -- has remained nearly unchanged since 2000, according to census and private demographic data.

The trust's annual report to HUD is the only available measure of the nonprofit agency's progress in alleviating poverty -- a benchmark for county leaders and the public to appraise the empowerment zones, and a crucial document for the trust to remain in the federal program.

Since its creation in 1999, the trust has received about $68 million in government funds, including nearly $27 million from HUD.

HUD has said local agencies must provide ''accurate and complete'' information in their annual reports to ensure that empowerment zones are pursuing goals and spending money properly.

But in the past five years, the federal agency has done little to examine the trust or its projects to ensure compliance with its guidelines.

Since 2002, HUD monitors have only compared the trust's reports from year to year for signs of progress -- without independently verifying the trust's claims -- said Gloria Shanahan, a spokeswoman for HUD's Miami office.

''It's very basic,'' Shanahan said of HUD's oversight.

CLAIMS UNCHALLENGED

HUD monitors didn't notice that the Overtown Manufacturing Co. kept growing in the pages of the Empowerment Trust's reports -- even after the company had shut down.

In 2000, the trust agreed to invest $75,000 so the clothing company could expand and create 25 new jobs in one of Miami's oldest and toughest neighborhoods. But the company -- which made uniforms for the Navy and Coast Guard -- failed, and by late 2002, the owner shut the doors.

An internal trust memo from Feb. 20, 2003, noted that the business had closed. But in a report filed with the federal government five months later, the trust said Overtown Manufacturing was not only operating but flourishing, with 35 new workers.

The next year, it happened again: The trust claimed that Overtown Manufacturing was still thriving with 25 workers.

In 2005, almost three years after Overtown Manufacturing went under, the trust stopped mentioning the company altogether in its reports to HUD. This year, it finally conceded: no employees.

HUD officials expect local empowerment zones to accurately report the current status of their projects -- even if the businesses have failed -- said Robert Waters, of HUD's Office of Community Planning and Development in Washington.

But the trust was doing just the opposite for at least six years -- and nobody noticed in Washington or County Hall.

In 2001, for example, the trust told HUD of five new jobs created with a $250,000 investment with the Reality Network broadcasting company. One problem: The contract was never finalized, and the trust never paid a dime to the company.

Year after year, as the trust's coffers grew, so did the deceptions. And they continue to this day.

Just two months ago, the trust reported nine jobs ''created or retained'' at the Rosebriar Cafe in Wynwood, a wood-framed house from 1924 converted to a small restaurant with $290,000 in low-interest loans from the trust. The trust didn't mention that the restaurant had closed.

The trust also said 12 jobs were ''created or retained'' after it invested $270,000 in three new diaper stores in Overtown, Homestead and Little Havana in 2002. The trust failed to report that all three stores had closed -- with the Little Havana store closing three years ago, records show.

Waters said the trust should have disclosed to HUD that those businesses had closed. ''If the business has been closed for two years, then the plans for the past two years should reflect that,'' he said.

After investing $50,000 to help renovate Homestead's Pioneer Mall shopping center in 2001, the trust told HUD this year that 12 jobs were created.

But the trust has no records of any jobs. In fact, the trust rescinded another $24,650 for the mall after the renovation project stalled, according to a trust memo.

In its HUD reports, the trust has also laid claim to hundreds of other jobs by bundling several projects together and giving just one total figure. But a breakdown of a recent package deal shows that these figures, too, are misleading.

For example, the trust told HUD that it supported 111 total jobs with $505,000 in grants and loans to 11 corporations. However, the trust files provided to The Miami Herald contained no evidence of any jobs resulting from those investments.

Three of the companies cited by the trust were sold or shut down. One moved from Miami-Dade to Georgia. Another reported less than $200 in net income last year -- with no record of any jobs.

Five of the corporations on the list were not even private employers. They were nonprofit agencies paid under service contracts with the trust.

The last deal on the list wasn't supposed to spur jobs in the first place. The money was used to install an elevator in a shopping center, records show.

CHAMBER'S EXPENSES

The trust's internal records can be just as unreliable.

In an internal report from November 2005, trust compliance manager Maria Santos congratulated the Hialeah Chamber of Commerce for completing a ''customized'' job-training program for 100 residents with a $200,000 grant.

But the trust files contain no records of a training program. Instead, trust records show, the money paid for the chamber's cleaning service, its phone bills, rent, payroll and similar expenses. The trust reimbursed the chamber $1,502 for new carpeting, $267 for party invitations and $57 for a plaque the chamber bestowed on the chief of the U.S. Small Business Administration.

Chamber President Daniel Hernandez did not return phone calls seeking comment.

When the trust described the chamber deal in its HUD report, the results suddenly improved: The chamber did more than train 100 people, it also guided 25 of them into new jobs.

The trust's public image of successful businesses and new jobs is a stark contrast to the troubling realities of the empowerment zone neighborhoods.

In areas such as Overtown and Liberty City, the poverty rate has increased since 2000, according to census and demographic data.

Only last month, a U.S. Census Bureau report said the city of Miami -- home to more than 70 percent of the county's empowerment zone residents -- remains among the five poorest cities in the nation.

Meanwhile, the trust continues to inflate the numbers.

In one case, the trust has hyped the success of a job-training program that cost the agency $1.3 million.

The trust told HUD that 750 people found jobs after graduating from a training program managed by the nonprofit South Florida Workforce between 2000 and 2002. But memos in the trust files say only 581 people found jobs -- with just 352 staying in the jobs for longer than 90 days.

In 2004, the trust claimed that 200 people found jobs under a second South Florida Workforce contract. But reports from the job-training program cited only 89 people in jobs, records show. The trust later canceled its contract with South Florida Workforce -- taking back more than $590,000 set aside for the program.

CLAIMS ON WEBSITE

Beyond its reports to the federal government, the trust has also revived defunct projects in its most public forum -- its website.

The website continues to forecast 2,500 new jobs from a biopharmaceutical park deal, although county leaders quashed the project two months ago amid a criminal investigation that led to the developer's arrest last week.

The website also lists 15 jobs ''to be created/retained'' at Arrow Recycling, an aluminum company along the Miami River.

The company hasn't existed for four years.

The owners never had a chance to hire anyone before they had to sell the business, said Carol Hymson, who helped her husband, Louis, manage the firm. Then they repaid the $120,000 loan.

''We maybe would have been better off if we hadn't gotten it,'' Hymson said.

Miami Herald staff writer Rob Barry contributed to this report.