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Miami's image blown away by cash scandals

It was Miami Vice come true. But the bad guys were not Colombian drug dealers. They were the the men running the Florida city. Now, it might become known as Miami Bust.

This may be the pearl of the American South-east and the unofficial capital of Latin America, home to such stars as Madonna and Stallone, but the city is on the verge of bankruptcy after years of corruption. There is even a serious and growing move to wipe it from the map. And all of this in its centennial year.

The governor of Florida, Lawton Chiles, last week declared "a state of financial emergency" in the city because of a $68m (pounds 41m) budget shortfall, and said the state of Florida would supervise the city's finances. Experts say that by next March there will be no money left in the kitty to pay city employees. "The city of Miami is facing a crisis of monumental proportions," said Mayor Joe Carollo.

On the orders of Governor Chiles, a five-member financial emergency board from the state of Florida will today begin trying to sort out the mess, largely the result of a string of corrupt city governments.

The crisis was uncovered in September after an FBI "sting" led to charges against three senior officials, including the city manager Cesar Odio, a leading member of the Cuban-American community, for extorting seven- figure kick-backs. An emergency audit then showed that successive city governments had been cooking the books.

The emergency stunned Miami residents, still reeling from a series of crises. First there was Hurricane Andrew, in 1992,then came the tourist murders by gangs who preyed on foreigners who got lost coming out of the airport in rented cars.

Earlier this month, the city even lost many of its beaches when a freak storm eroded the sand. "With the latest emergency we're going to get a lot of negative publicity, and what's going to come out is that Miami is a banana republic, a city that can't govern itself," said Milan Dluhy of Florida International University. "The image is that no one is in charge and that they're corrupt."

Only this summer, the authorities were describing Miami as the city of the future, billing it as "the new Hollywood" after a spate of films was shot here. The place was booming, they said. So what went wrong?

Well, trouble had been brewing for years. Revenue projections were exaggerated. Bond issues meant for pension and insurance schemes were actually used for daily operating expenses. Politicians avoided raising service fees so as not to lose votes. Every year, the city played a "shell game" with its budget, moving money from one fund to another to disguise the deficit. Money would be borrowed after the end of a fiscal year to balance the books from the year before.

It was on 30 August this year that the lid came off. The city's finance director, Manohar Surana, abruptly resigned, sparking rumours of a scandal in the city's finances. In September, an FBI sting, codename Operation Greenpalm and using a body-wired informant, led to indictments against Mr Odio and one of the city's five commissioners, Miller Dawkins.

They were accused of extorting $1m (pounds 609,000) from the Unisys computer company in return for a lucrative contract for new computers in city offices. FBI agents believe the kickbacks practice had been going on for years.

Mr Dawkins pleaded guilty and faces 15 years in jail. Mr Odio faces trial. His alleged involvement sent shock waves through the Cuban exile community, which controls much of south Florida's politics and is a forceful lobby in national politics.

The fact that the city commission has long been dominated by Hispanics - four of the present five members are Hispanic - and that two Hispanics were allegedly involved in massive corruption could also raise racial tensions here. While the Cuban exiles live in relative comfort in and around an area known as Little Havana, most blacks live in ghettoes such as Liberty City and Overtown and still have trouble getting other than menial jobs.

If Miami falls apart, the rich-poor divide would undoubtedly widen. Even before last week's emergency, a group of residents had organised a petition to abolish Miami as an entity, describing it as unviable.

They hope to force a referendum next year. The idea would be to incorporate the city into the surrounding Dade County.

The likely outcome? Wealthier districts such as Coral Gables and Coconut Grove would break off on their own - Miami Beach, with its bustling art deco district and glitzy condominiums, is already a separate municipality - leaving the poor areas, like Little Haiti, Liberty City and Overtown, to deteriorate into crime-ridden Third World-style slums with no means of support.