March 7, 2010
Deal to Save Everglades May Help Sugar Firm
By DON VAN NATTA Jr. and DAMIEN CAVE
Standing amid the marshes at the Loxahatchee National Wildlife Refuge in June 2008, Mr. Crist said, “I can envision no better gift to the Everglades, the people of Florida and the people of America — as well as our planet — than to place in public ownership this missing link that represents the key to true restoration.”
Nearly two years later, the governor’s ambitious plan to reclaim the river of grass, as the famed wetlands are known, is instead on track to rescue the fortunes of
The proposal was downsized only five months after it was announced. By April 2009, amid the deepening recession, the state said it could afford to purchase only 72,800 acres of
United States Sugar dictated many of the terms of the deal as state officials repeatedly made decisions against the immediate needs of the Everglades and the interests of taxpayers, an examination of thousands of state e-mail messages and records and more than 60 interviews showed.
Efforts to restore the
But documents and interviews suggest that the price tag and terms of the deal could set back
When a “fairness opinion” commissioned by the state found that those appraisals had overvalued the land by $400 million,
When it came time to decide which land to buy, state officials acknowledged that
State officials acknowledged that some of that land, which has been ravaged by canker, a plant disease, is useless for restoration.
The officials defended the negotiations as appropriate, saying that
Mr. Crist said in an interview that officials had “negotiated to try to get the very best deal we could.” He added, “We have a duty and a responsibility as good stewards to understand that we may never have this opportunity again, ever, ever.”
Supporters of the plan said the land would enable the state and federal government to build reservoirs and water treatment systems. But doing so would require deep financial reserves from the South Florida Water Management District, which oversees restoration and is financed by taxpayers in 16 counties. Internal district documents put the price tag at up to $12 billion and projected that the district would have nowhere near that amount.
In the meantime, more than a dozen projects under way as part of a 10-year-old federal and district restoration effort have been suspended or canceled in anticipation of the cost of the
Former Gov. Jeb Bush, who initiated most of that work, said in an interview that he was “deeply disappointed” with the decision by Mr. Crist, his successor and a fellow Republican, calling the move to halt the projects a setback for restoration.
“To replace projects that were under way for a possibility of a project decades from now is not a good trade,” Mr. Bush said. “On a net basis, this appears to me there has been a replacement of science-based environmental policy for photo-op environmental policy.”
In its current form, the deal’s only clear, immediate beneficiaries would be United States Sugar, a privately held company based in Clewiston, Fla., and its law firm, Gunster, which is expected to collect tens of millions of dollars in fees for its work on the sale, according to current and former United States Sugar executives.
The sale, scheduled to close March 31, amounts to a lifeline for the company, which entered negotiations at a time of profound weakness; it was facing a costly shareholder lawsuit, sinking profit margins and increased foreign competition. The deal would enable it to wipe nearly all the debt from its books.
United States Sugar had an unusually powerful advocate in Gunster, a
He and Mr. Crist are confidants, and the governor referred to Mr. LeMieux as the “maestro” of his 2006 election victory. When a United States Senate seat was vacated in 2009, Mr. Crist appointed Mr. LeMieux to fill it. The governor is now campaigning for that post and has often described the
Mr. LeMieux said in an interview that he had recused himself from the United States Sugar negotiations while he was chief of staff, to avoid a conflict of interest. He said he had never discussed the deal with Mr. Crist, which was “awkward as heck,” given how close they are.
Back at the law firm, Mr. LeMieux sent an e-mail message on Dec. 18, 2008, to its compensation committee, saying “I should not be compensated” for the firm’s
Rick J. Burgess, a Gunster partner, said he spoke to Mr. LeMieux on occasion about the deal, using him “as a sounding board.”
Mr. LeMieux played a similar role for Kirk Fordham, who runs the powerful Everglades Foundation. Mr. Fordham said he spoke two or three times with Mr. LeMieux when he was at the law firm for updates about the negotiations.
“I won’t lie to you — it’s a damn good price for that land,” said the executive, who spoke on the condition of anonymity because he had signed a nondisclosure agreement. “But it’s not as good a deal for the
A Governor’s Overture
On Route 27 heading out of
The reservoir was a vital piece of the $7.8 billion restoration project put together by President Bill Clinton in 2000. Under the plan, reservoirs, marshes and hundreds of wells would collect, clean and deliver rainwater to the
Environmentalists had long sought to restore the historic flow way, or waterway, from Lake Okeechobee south through the glades and into
The system of wells and reservoirs was a way to circumvent that need. Like many previous restoration efforts, though, the
Even so, in 2004, Governor Bush was able to accelerate eight projects; some $282 million alone was spent on the giant reservoir.
But by 2007, with a sagging sugar business looking to prop up its balance sheet and a new governor looking to burnish his environmental and national credentials, the fate of the Everglades was about to take another abrupt turn.
On Nov. 15, 2007, two
The lobbyists, J. M. Stipanovich and Brian Ballard, had supported Mr. Crist’s campaign for governor, and Mr. Ballard was one of its major fund-raisers.
“It was a visit to open his eyes, to open his ears to the idea that a lot of these decisions were affecting their livelihood,” Malcolm S. Wade Jr., a senior vice president at United States Sugar, said in an interview.
At the meeting, the governor announced that the state might be interested in buying
“There was a sense, or some indirect communication, that they might be a willing seller,” the governor said.
Mr. Wade said that the company had been taken by surprise. “It caught everyone out of the blue,” he said.
For its board members, Mr. Crist’s overture was appealing in part because they figured a government purchase would be far more lucrative than a private deal.
“It wasn’t another company coming in and bottom-fishing you,” Mr. Wade said. “They knew it would be for fair-market appraisals.”
A Setback Seems Averted
When the state began negotiating its ambitious plan to save the
Missing from the table, according to interviews and e-mail messages, were Miccosukee Indian tribe members, some of whom live in the Everglades; the Florida Crystals Corporation, the other major landowner in the area; and the federal agencies that partner with the state on restoration efforts.
Lawyers for the Miccosukees and
Likely supporters of the deal had been told months earlier, including Paul Tudor Jones II, a billionaire hedge-fund manager and philanthropist who co-founded the
As the negotiations proceeded, it became clear that financing was problematic. The cost of the land deal had initially been estimated at nearly $2 billion. But the water district was already committed to spending about $800 million for the giant reservoir outside
Responding to an e-mail message from a fellow environmentalist saying that the governor needed to understand the threat the reservoir posed to the United States Sugar land purchase, Mr. Jones replied, “He knows that and is doing the best he can.”
Yet stopping construction of the reservoir presented a potential political disaster.
So on May 15, 2008, with the
The litigation referred to a lawsuit environmental groups had filed over water usage from the reservoir. The announcement stunned the groups, which had made it clear that they did not want the project stopped.
“We were a convenient pretext,” said Bradford H. Sewell, a lawyer for one of the groups.
There were enormous financial consequences. The district had to pay the reservoir’s contractor a $2 million-a-month penalty for suspending the work. It eventually paid $25 million in penalties and fines for canceling the contract, on top of the $282 million it had already spent on the construction.
Fallout from the suspension was mounting when Shannon A. Estenoz, a member of the district’s advisory board who had been on the board of the
On June 24, 2008, with
Politically, the timing was perfect. Mr. Crist was on the short list of potential running mates for Senator John McCain, the presumptive Republican nominee for president.
Ellen Simms, a former United States Sugar comptroller who views the deal skeptically, said that despite the high cost to taxpayers, it was difficult in those early days to question it. “Who can be against it?” she said. “This was going to save the
A few did speak out. The Miccosukee Tribe quickly filed a lawsuit, saying that the purchase would delay the restoration. “This is a death warrant for the
Interviews and previously undisclosed records showed that
“For some reason, they weren’t willing to negotiate in a way that would bring us to an accord,” Mr. Crist said in an interview. “
Twists and Disappointments
The growing financial crisis in the summer of 2008 was rapidly changing the scope of the deal. On Nov. 11, 2008, Mr. Crist announced a smaller, $1.34 billion purchase of just over 180,000 acres of
At a press conference, Mr. Crist called the new deal “miraculous.”
“He got scammed,” Mr. Guest said. “Everyone gasped in disbelief when he came back with what he did.”
Mr. Sole said in an interview that he got the best deal he could.
But internal district documents revealed that the land had been overvalued by the two firms that performed the independent appraisals. Both relied on figures from 2004 to 2008, when a speculative real estate market had prices soaring.
If the current prices had been used, the state would be paying far less. For example, while the water district agreed to pay
The two outside appraisal firms used by the district — Anderson & Carr, of West Palm Beach, Fla., and Sewell, Valentich, Tillis & Associates, of Sarasota — came up with almost identical figures of around $1.3 billion, a rarity that raised some eyebrows.
“When I had heard that number, I couldn’t swallow it — it was an unbelievable number,” said Woody Hanson, a land appraiser in
Neither appraisal firm used by the district would comment.
Eric Buermann, chairman of the district’s advisory board, defended the appraisals but acknowledged that they had used outdated values. “At the time we had to make the decision,” he said, “those were the latest, best numbers available.”
Yet when the appraisals were updated in 2009, they still relied on sale prices from 2004 to 2006, documents showed. District officials said the appraisers assured them that prices had held steady.
In an interview, Mr. Crist said critics of the appraisals were underestimating the land’s environmental value.
But the appraisers for the
The firm, Duff & Phelps, based in
When the firm’s opinion arrived at the district, officials there consulted with Mr. Sole, the Environmental Protection secretary, about the best way to respond. The timing was critical because the district’s board was scheduled to vote less than one month later, in mid-December, on the $1.34 billion purchase.
Officials who had commissioned the Duff & Phelps report, at a cost of $1.5 million, were now scrambling to minimize its impact. Internal e-mail messages showed that the district’s scripted response for reporters was sent to Mr. Eikenberg, Mr. Crist’s deputy chief of staff, as well as several prominent environmentalists.
“It is not an appraisal and does not provide a conclusion about the value of the acquisition relative to its public purpose,” the district’s statement said.
The deputy executive director for government and public affairs at the water district wrote talking points. “Note: There are differing views about the merit of fairness opinions within the business and academic communities,” the public affairs official wrote, according to the e-mail.
Robert E. Coker, a United States Sugar vice president, was more blunt, characterizing Duff & Phelps publicly as “Huey, Dewey and Louie.” He argued that
Paying for the land was only the beginning. A slide show prepared by the district on restoration projects and construction detailed one estimate that put the effort at $8.6 billion and another at $12.3 billion, according to records obtained by The New York Times.
Even at the lower estimate and with the federal government paying its share, the district would struggle to bear the costs. The details of the deal were now raising concerns among some district board members and environmentalists.
An unlikely cheerleader emerged. George LeMieux, despite having insisted that he had nothing to do with the deal, appeared at a legal conference in
In a keynote address that went uncovered by the local media, Mr. LeMieux described the
“We really stand at the intersection of opportunity and possibility,” he said. “We have a historic opportunity to change the face of the Everglades and our environment with this acquisition of the
‘In the Driver’s Seat’
Thomas Van Lent, a hydrologist for the Everglades Foundation, said he had “no idea” why the state had agreed to purchase it as part of the deal.
Mr. Wade, the United States Sugar senior vice president, does. “Buy it all,” he said he told the state. “I don’t want to be left with just a piece of the groves.”
An environmental assessment presented to the district revealed that 49,000 acres of the
Mr. Buermann, the water district advisory board chairman, said the state had little choice but to let
“You have to understand that once the deal shrunk and we were not buying the sugar mill, the assets,
Like other supporters, Mr. Buermann compared the deal to William Seward’s purchase of
“The issue for us is can we use that land, and the answer is yes,” he said. “If we had a choice with all the land, it might not be our first choice of the inventory, but that doesn’t mean it isn’t valuable.”
In April 2009, Governor Crist announced a second downsizing of the deal, necessitated again, he said, by the state’s shrinking economy. The district would now buy 72,800 acres for $536 million. Critics said that as the deal got smaller, it got better for
Under the terms of the new deal,
“What you have is just another step in the category of kicking the ball down the road and chasing it,” said Alan Farago, the conservation chairman of Friends of the Everglades.
Criticism from other environmentalists, though, has been muted. Some have acknowledged concerns, but do not want to say anything that might help kill what would be the largest land purchase ever for the
“The whole concept that we are able to get additional land out of the E.A.A. — that has always been very difficult to do in the past,” said John H. Hankinson Jr., chairman of the board of directors at Audubon of Florida, referring to the Everglades Agricultural Area. “And that I think is ingrained in a lot of the consciousness of the people involved in this.”
Even if the deal goes through, it could be another generation before the
Mr. Buermann said the water district was still analyzing whether it could afford to pay the $536 million and would discuss it at a two-day board meeting beginning Wednesday. Mr. Crist recently appointed two new members to the water board, both of whom support the purchase.
In an interview on Feb. 26, by phone as he traveled through the
“But what are they doing to try and preserve the
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"The master class has always declared the wars; the subject class has always fought the battles. The master class has had all to gain and nothing to lose, while the subject class has had nothing to gain and everything to lose--especially their lives." Eugene Victor Debs