MIAMI!

A post on a matter of local interest, from the Miami Herald.com:

Pharmed co-founders get 9 years for fraud
Once revered as charitable businessmen, brothers Carlos and Jorge de Céspedes will be going to prison for defrauding a South Florida hospital.

BY JOHN DORSCHNER
jdorschner@MiamiHerald.com
Saying she wanted to maintain community values in a time of rampant healthcare fraud, a federal judge Wednesday sentenced Carlos and Jorge de Céspedes, brothers who were once pillars of the community, to nine years in prison.
U.S. District Judge Patricia A. Seitz said the brothers had been ''two-faced for too long'' in bilking Kendall Regional Medical Center out of $5 million in a fraud that lasted 14 years.
Carlos de Céspedes, 58, and Jorge de Céspedes, 55, sat stone-faced as the judge said she was sentencing them to the top end of the recommended guideline of seven to nine years despite almost 200 South Florida leaders pleading for leniency because of the brothers' active participation in many South Florida charities.
Seitz said she had to be stern because she did not want Miami to crumble, as happened to the Roman Empire, because of a lack of ``civic virtue.''
The sentencing marked what may be the final chapter in the one of the greatest business success stories and most astounding financial collapses in Miami's history.
Arriving penniless as children from Cuba as part of the Pedro Pan exodus, the de Céspedes brothers spent five years in camps run by the Catholic Church before their parents arrived. In 1980, as young adults, they started Pharmed, a medical supply distributor, by installing an answering machine in a home storage room.
Twenty years later, Pharmed was the eighth-largest Hispanic-owned business in America, according to Hispanic magazine. In 2003, Pharmed had $48 million in profit on revenue of $584 million.
Carlos was a leader of the Cuban American National Foundation; Jorge was a volunteer basketball coach. Both participated in Roman Catholic charities. The basketball arena at Florida International University was named for Pharmed because of their contributions to the school.
BEHIND THE FACADE
The brothers loved displaying their wealth, driving Ferraris, Bentleys and ultra-rare Porsches. They owned Chispa restaurants in Coral Gables and Doral. They hired a county commissioner, Pepe Diaz, to work at one of their subsidiaries. ''I hired him so he won't steal from you and me,'' Carlos told The Miami Herald in 2006.
But there were signs of trouble. Three lawsuits by medical suppliers over two decades accused the brothers of deceptive practices in the complex pricing structure of wholesale medical supplies.
In August 2004, Roche Healthcare abruptly stopped using Pharmed, resulting in the company losing $300 million in annual revenue. Roche gave no explanation for its move, but in recent court testimony it was revealed that a Roche audit discovered the brothers had been engaging in a complex plot that used Roche supplies in violation of their contract.
About the same time, Pharmed's original supplier, Johnson & Johnson, also ended its relationship with the brothers, accusing them of ''unjust enrichment'' in collecting $22 million in rebates to which they were not entitled.
In 2007, the HCA hospital chain, one of Pharmed's major customers, stopped using the supply company after it discovered a conspiracy in which three employees at Kendall Regional, an HCA hospital, worked with Erika Urquiza, a Pharmed assistant vice president, in a scheme in which the hospital paid Pharmed for supplies that never were shipped.
When confronted by HCA, the brothers denied any knowledge of the fraud, blaming Urquiza and Fernando de Céspedes, a half-brother who had recently died. In fact, Jorge de Céspedes had recruited Urquiza into the fraud, and the dead brother had nothing to do with the plot.

There's more (click on link above).

After serial economic and investing busts of the epic nature of the dot.com crash and the current credit/housing bust, we have to suspect that the next shoes to drop could vastly exceed l'affaire Madoff: the corruption in the financial community, and perhaps its ties to Government (Friends of Angelo, anyone?).

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