Joseph A. Vaughn's wife has a bad back. Richard S. Heinz was diagnosed with cancer. But the medical problems weren't their only setbacks.
Vaughn and Heinz worked for Michael Lee Cone.
Both workers have been saddled with more than $50,000 in unexpected medical bills. Cone Constructors Inc. deducted more than $3,000 in health insurance premiums from their paychecks for 10 months after the Tampa road construction company had effectively canceled their coverage without telling them. "I have been very sick over this, needless to say how my wife is doing," Vaughn wrote in January, more than a year after Joann Vaughn had back surgery. "She is mentally stressed and is under continuous worry about what is going to happen. She is in need of her physical therapy. They are now sending threatening letters requesting payment. So, out of embarrassment and not having the cash to pay, she has ceased going."
Cancer-stricken Cone worker Heinz confronted his old boss at a legal proceeding in January. "I had valid insurance and I went ahead with my chemotherapy on good faith," Heinz told Mike Cone. "They haven't received funds from Cone Constructors to pay the claims."
Cone employees stuck with about $150,000 in unpaid medical bills must get in line if they hope to squeeze anything out of Cone Constructors.
Mike Cone's company is bankrupt. In December, the Cone Constructors president converted an earlier petition for Chapter 11 reorganization into Chapter 7 liquidation. Cone threw in the towel in an apparent attempt to forestall questions from creditors, including the Florida Department of Transportation and the Internal Revenue Service. But Cone's gambit failed. The questions persist. And they have gotten more pointed, moving well beyond how a company reporting $7-million in assets can satisfy $25-million in creditor claims. "There's a good basis to believe that Mr. Cone may be subject to criminal investigations," bankruptcy trustee's attorney Allan C. Watkins told a federal judge in February. Spokesmen for the offices of the U.S. Attorney and the IRS in Tampa said they cannot confirm or deny that an investigation has been opened. The chaotic mismanagement of Cone Constructors, once among the 10 biggest road builders in Florida, has cost taxpayers millions of dollars, according to state officials. Yet the FDOT and the U.S. Attorney have found deeper problems. Government lawyers say discovery in the bankruptcy case so far has turned up evidence that, in addition to ripping off employees, convicted money launderer Cone may have:
Failed to disclose, hid or diverted corporate assets in order to frustrate creditors and the courts;
Forged documents to obtain bonds guar-anteeing completion of roadwork. These bonds were later called by the state when his company defaulted on contracts to build the new Suncoast Parkway and other projects;
Used former employees and his wife as fronts to get back into government highway construction, violating his plea agreement in a bribery scandal; and
Committed perjury while testifying about the demise of Cone Constructors.
Mike Cone blames his business and legal problems on the state agency that once plied his company with at least 80 percent of Cone Constructors' contracts. (The company reported 1999 revenue of $34-million, a figure that Cone subsequently indicated might have to be adjusted upward.)
"The Department of Transportation has already affected everybody in this room," Cone indignantly told a state lawyer who questioned him at a meeting of creditors last summer. "And for you to come here and fact-find for your own purpose, that's not what I'm here for."
His defiant obfuscation has further outraged creditors. They have demanded answers, along with their money.
His ailing employees and their dependents were left medically uninsured while his company pocketed their premiums, according to employee complaints and a state regulatory review. His subcontractors went uncompensated while he lied to the FDOT that he had paid them with state contract draws, a state criminal investigation found. He didn't bother sending employee paycheck withholdings to the IRS and now owes $3.5-million to the federal government, according to court records. And Cone Constructors has dodged $1.5-million in fines for fouling groundwater and wetlands near borrow pits in Pasco and Polk counties, the Southwest Florida Water Management District contends. Whether the authorities on Cone's case can force the renegade businessman to account for his misdeeds will tell the rest of us a lot about whether the law still applies to all citizens, even a wealthy and privileged one from an old-line Tampa family.
Meanwhile, Cone has decided that time is up for entertaining questions under oath about his business activities. (Cone didn't respond to a detailed list of questions from the Weekly Planet that he had promised to answer by a June 18 deadline.)
As lawyers quizzed Cone in January about the removal of records from company offices, he announced: "I'm going to go ahead and assert my Fifth Amendment rights." Addressing the bankruptcy trustee, Cone said of the lawyers for his company's creditors: "These guys aren't here to help me."
Three members of the Cone family have been shareholders of Cone Constructors at various times since its 1983 founding: Mike; his brother, Christopher D. Cone; and their father, J. L. Cone Jr., himself the son of a prominent early 20th century Tampa businessman. Both Mike Cone and his father live comfortably in million-dollar homes in south Tampa. The two men have belonged to one of Tampa's most exclusive networking organizations, Ye Mystic Krewe of Gasparilla, host of the city's annual pirate festival. Cone Constructors excelled at the lucrative and unsentimental job of winning government contracts to put down asphalt and pour concrete for highways.
In 1989, Cone Constructors and other white-owned Tampa Bay area road builders sued to stop Hillsborough County from giving too many public works contracts to companies headed by blacks, Latinos and women. The road builders lost at almost every level of the federal court system and, in 1995, they dropped the lawsuit without recovering a dime for the alleged reverse discrimination.
Government efforts to boost minority contracting have always displeased J. L. Cone Jr. The elder Cone, who became majority owner of Cone Constructors shortly before last year's Chapter 11 filing, threatened to sue over Tampa's minority-business program when Sandy Freedman was mayor. A Republican donor, J. L. Cone Jr. also has given $1,000 to the so-called Florida Civil Rights Initiative, an anti-affirmative action campaign.
The younger Cone was more interested in racecars than racial preferences. Mike Cone owned a road race-sanctioning organization for a while, although critics noted his stewardship coincided with a sharp decline in revenue at International Motor Sports Association Inc. From 1989 to 1997, he also held a major stake in a company that leases Sebring International Raceway.
After graduating from Tampa's Jesuit High School, Mike Cone earned a business degree from Mercer University in Georgia, he stated in a 1995 deposition. He started out with another family company, Cone Corp., before founding Cone Constructors.
Cone Constructors was doing so well by the middle of the 1990s that the company owners considered buying the Tampa Bay Lightning from the hockey team's original Japanese owner, according to Harold J. Kelley Jr., who managed the Sebring track for Mike Cone.
By 1999, Cone Constructors was paying Mike Cone $135,000 in salary as president.
The 1980s and 1990s were good years to be building highways and byways in the Sunshine State. Not only did the increasingly congested peninsula need more and wider roads; contractors came to view the state transportation agency as an easy mark.
Any design, engineering or other flaw in highway blueprints that could be remotely tied to the state prompted road builders to file for more money. Until recently, the FDOT routinely settled contract claims in favor of road builders, often without much proof of increased expenses.
The FDOT inspector general, the transportation agency's internal watchdog, reported last year that such settlement payments had tripled from $21-million in 1997 to $65-million in 1999. Studying a sample of the settlements, the Inspector General could find justification for only about 29 percent of the extra money paid to contractors.
According to Florida Trend, contractors deliberately bid low on highway jobs with the expectation of reaping bigger pay-outs later when they filed inevitable claims for cost overruns. In fact, the magazine named a Fort Lauderdale law firm, Vezina, Lawrence & Piscitelli, as the contract-claim litigator preferred by Florida road builders.
The fortunes of Cone Constructors took a turn for the worse in 1998. The inspector general started hearing that Mike Cone was shortchanging subcontractors.
Cone Constructors was a prime contractor on state highway projects. "Primes" are bonded and prequalified to bid for state work. They alone are responsible for passing along a portion of their contract payments to any subs hired for specialty work, like cutting curbs or posting signs.
In March 1998, after finding evidence that Cone had falsely certified to the FDOT that subs were paid, the inspector general called in the Florida Department of Law Enforcement. "The Statewide Prosecutor's Office was looking at all of the road contractors," Cone said. "We were the flavor of the month." FDLE agents took sworn statements from Cone Constructors office clerks who prepared subcontractor-reimbursement forms for Mike Cone's signature. Cone never seemed to sign the forms, the clerks said, even though he certified to the state that he had paid the subs. Traffic Control Products of Florida Inc. was among the victims after the Tampa company was hired by Cone to erect traffic signals and other markers on a Sarasota County road project. Many victims were small businesses with few other opportunities in their specialized trades, said Lynn Martin, an investigator for the inspector general who worked the Cone investigation. So, Martin said, some subs had to keep working for Cone and hope he eventually came around. The FDOT didn't catch on for years because Cone split the subcontractor reimbursements with a state engineer who helped him string along the subs on projects such as the Veterans Expressway and Suncoast Parkway.
Cone paid off FDOT engineer Robert Riley with cash and gifts that included a $140,000 waterfront home in Apollo Beach, Riley told FDLE agents in a 1999 taped confession. A Cone Constructors manager disguised the source of the home-purchase money by arranging the sale of another parcel acquired earlier for Riley to one of the manager's relatives.
On Cone's 43rd birthday, July 29, 1999, he entered a no-contest plea and was found guilty of felony money laundering and bribery along with the misdemeanor of making a false official statement.
Recalling his plea deal during a June 12 Planet interview, Cone said: "I took a hit personally to save the company."
Sentenced to a year of work release, Cone went home in five months. He was fined $203,500, placed on probation for five years and given until last October to wrap up his company's state projects. After that, he was barred from seeking new FDOT contracts until 2003.
A year after his sentencing, he sought his probation officer's indulgence so he could accompany his wife on a Disney cruise that Joanne Cone had booked to celebrate her husband's 44th birthday.
State transportation officials hastened Cone's court-ordered exit from government road construction in March of 2000 when his company was kicked off the Suncoast Parkway project. Cone Constructors defaulted on its $75-million piece of the $500-million toll road project by falling behind schedule, state officials said.
Cone, who claims the state still owes his company $40-million, loudly protested in the local press. Last July, when Cone Constructors sought bankruptcy court protection, Cone said the FDOT forced the move. Hillsborough environmental regulators ordered Cone Constructors to stop working on the parkway at night because Cheval Polo & Golf Club residents complained about noise, according to Cone. State officials refused to extend the company's deadlines for finishing its work, Cone said. Cone called the FDOT's default of his company "a ruse" designed to shield the agency from paying legitimate cost overruns on the project.
"We didn't go into Chapter 11 to stiff anybody," Cone said last week. "They just wanted to hurt us."
The FDOT and the IRS have a different take.
In a court brief filed last October, government lawyers said Cone Constructors began experiencing "significant financial difficulty" at least as early as the first quarter of 1999. Cone Constructors neglected to forward employee income-tax withholdings to the IRS from January through September 1999. Cone Constructors took insurance and retirement contributions out of employee paychecks but failed to remit the money to health and pension plan administrators, according to the government.
In December 1999, four months before the Suncoast Parkway default, Cone Constructors defaulted on an Orlando developer's contract in Carrollwood, the government lawyers said.
Still, the lawyers haven't completely bought into Cone's portrayal of his company as a government-induced financial basket case that limped into bankruptcy court.
FDOT lawyer John D. Emmanuel and Assistant U.S. Attorney Adelaide G. Few noted in their October court filing that, on Sept. 15, 1999, Cone Constructors "liquidated numerous certificates of deposit and refinanced and/or satisfied bank loans guaranteed by insiders."
Emmanuel, reviewing financial ledgers and questioning Mike Cone last August before the company president started pleading the Fifth, learned that $1.9-million redeemed from the CDs went to pay off Bank of Tampa loans that had been personally guaranteed by Cone family members.
Robert E. Morris, a lawyer representing two bond companies that had to help complete the Suncoast Parkway after the default, displayed a series of company balance sheets during the August questioning of Mike Cone.
As of March 31, 1998, Mike Cone and his wife owed Cone Constructors $1.33-million, Morris said. His brother and sister-in-law, Chris Cone and Madeleine Griffin-Cone, and his father owed $2.35-million, Morris said.
Mike Cone denied that his family had looted the company and he insisted that most of the debts were repaid before the bankruptcy filing.
"Where were those funds deposited?" Morris asked.
"I'll have to check our banking account information for that," Mike Cone replied last August.
In their October brief, Emmanuel and Few stated: "Mike Cone's testimony … pertaining to the supposed repayment of these loans appears to conflict with earlier financial statements." The lawyers doubted Mike Cone would pursue his father or his brother in court to repay the loans for the benefit of Cone Constructors' creditors.
J. L. Cone Jr. did manage to get to a courthouse before the July 7, 2000, bankruptcy filing to put in a $7-million claim against Cone Constructors. Filed in out-of-the-way Wauchula, days before Cone Constructors went Chapter 11, the elder Cone's lawsuit was against a company he ostensibly controlled. J. L. Cone Jr. bought out Chris Cone's stake in Cone Constructors on Jan. 5, 2000, and became majority owner.
A woman who answered the telephone at J. L. Cone Jr.'s home last month said she didn't think he wanted to talk to a newspaper reporter and hung up.
J. L. Cone Jr.'s 11th-hour lawsuit against his own company wasn't the only oddity.
After the defaults, Morris' two surety clients sued the Cone family patriarch, his sons and their wives to try to recover what was spent finishing up projects that Cone Constructors had defaulted on. In response, Chris and Madeleine Cone stated under oath that their signatures on 1998 Cone Constructors bond documents were forged.
Chris Cone, who operates a Lakeland aviation company, said he wasn't active with Cone Constructors at the time of his alleged signature on the bond documents. Madeleine Griffin-Cone said she hadn't visited Cone Constructors since an office Christmas party in the early 1990s.
The couple said they had no idea how Dortha A. Thompson, a longtime personal assistant to Mike Cone and his father, could have notarized their signatures. FDOT lawyer Emmanuel asked Thompson last December if she was ever asked to notarize an already signed document. "Not that I can remember," Thompson replied.
Cone Constructors paid Chris Cone a salary of $151,000 in the year leading up to the bankruptcy. In his sworn statement, Chris Cone said he rejoined Cone Constructors after a five-year absence in late 1999 when he learned the company hadn't been paying federal taxes. Chris Cone said he and his father imposed a requirement on Cone Constructors managers that he co-sign checks drawn on specific company accounts.
"I subsequently have discovered that my name was then forged on several Cone Constructors checks paid to vendors," Chris Cone said in his sworn statement. Chris Cone said the forged signatures on the checks resembled the forgeries on the bond documents.
Last month, Chris Cone told the Planet that he no longer has an interest in the company and would have no comment.
Patricia Rankin, personnel director at Cone Constructors, testified that the company "had a problem with forgery."
Emmanuel asked Rankin at a December deposition: "Did you ever hear of instances where maybe checks would come back in from the bank once they had cleared and somebody would say, "I didn't sign that check, even though it's my name on there?'"
"Yes," Rankin an-swered. "IRS showed me a check with my signature on it that was not mine."
In March, Suzanne L. Rossomondo, a white-collar crime prosecutor for the Hillsborough state attorney, subpoenaed Mike Cone for handwriting samples. Mike Cone has refused to answer questions about the alleged forgeries and fought the subpoena on the constitutional grounds that it would force him to provide potential evidence against himself.
Rossomondo said Mike Cone has been ordered to provide the writing samples, but she declined further comment.
Allan Watkins, the bankruptcy trustee's attorney, has argued in court that Cone forfeited his legal privilege against self-incrimination. "We think that Mr. Cone has given false testimony at the creditors' meetings he has attended and, by attending and answering, has waived his right to (the) Fifth Amendment," Watkins told a judge earlier this year.
Within two months of filing Chapter 11, Cone Constructors was seeking bankruptcy court approval to put Vezina, Lawrence & Piscitelli on retainer — before creditors got anything.
The Fort Lauderdale law firm, renowned advocate of road-builder claims against the state, was willing to represent Cone Constructors in a default-related lawsuit against the FDOT. Vezina, Lawrence & Piscitelli would bill at a reduced hourly rate in exchange for 15 percent of any gross recovery from the state. Mike Cone believes the lawsuit, filed in Orange County, will vindicate him someday. "We're not bad guys in this thing," said Cone. "We've never defaulted on a contract in our lives." The FDOT objected to the employment of Vezina, Lawrence & Piscitelli. The judge ordered Cone Constructors to disclose more information about the proposed retainer. The company then revealed that CVD Funding Inc. had offered to make a $200,000 "loan" to Cone Constructors to cover the retainer. CVD Funding's sole shareholder was Joanne Cone, Mike's wife.
FDOT lawyer Emmanuel had problems with that, too.
The Joanne Cone company wasn't lending her husband's company a thing, argued Emmanuel. CVD Funding essentially was buying 38 percent of any future state recovery by Cone Constructors, elbowing out creditors once again. The "loan" documents mentioned no finance charges and the debt would be forgiven if the state prevailed in court, Emmanuel said.
The issue became somewhat moot when Cone Constructors converted to Chapter 7. But lawyers for creditors and the company's bankruptcy trustee have kept an eye on Joanne Cone.
In February, after Mike and Joanne Cone both started taking the Fifth, the lawyers requested the judge to force the couple to answer the trustee's questions.
Emmanuel said the evidence suggested that Cone Constructors had diverted equipment and other assets to companies with ties to Mike Cone. Moreover, Emmanuel said, these companies were getting state and federal contracts despite Mike Cone's plea-agreement. The conduit for these questionable transactions was Joanne Cone, asserted Emmanuel. "So the creditors think that laundering money may be going from Mr. Cone to Mrs. Cone?" U.S. Bankruptcy Judge Paul M. Glenn asked the couple's lawyer, William M. Holland.
"That's what it sounds like, judge," Holland said. "And that money may be or has been piped from the corporation via Mrs. Cone to wherever. Judge, if I understand it correctly, I think they think that she is a participant in a fraud or what would be a fraud on the state with respect to construction."
Watkins, the trustee's attorney, confirmed that. "Judge, as far as our knowledge to date is, Mrs. Cone may be the recipient of some fraudulent conveyance," Watkins said. Mike Cone said his company was complying with his plea agreement and divesting itself of some equipment in preparation for going without state contracts for three or four years. Emmanuel accused Joanne Cone of setting up a company called Highway Industries SE Inc. to accept transfers of equipment from Cone Constructors, even after the Chapter 7 conversion. "It also appears that there were other improprieties regarding transfers of assets, employees possibly doing work for that company that were previously Cone employees and things of that nature," said Emmanuel.
The FDOT lawyer went on to disclose that Joanne Cone ended up a secured creditor on a financing statement for Cone Constructors heavy equipment that supposedly was transferred to another similarly named company called Highway Industries Inc., run by former Cone employees. Mike Cone's one-time Sebring track manager, Hal Kelley, formed Highway Industries Inc., according to state records.
"Again, that transaction appeared not to pass the smell test," Emmanuel said.
Mike Cone has accused state investigators of harassing his employees to get at him. He said investigators visit Cone workers at home in the evening and demand: "Give us something on Mike Cone."
In recent months, Cone said one of his companies in Dade City was raided by the state. For what reason, he said he doesn't know.
Cone figured the FDOT would have been satisfied with pushing Cone Constructors into bankruptcy liquidation. "They accomplished what the Statewide Prosecutor's Office couldn't do: put us out of business," he said.
FDOT attorney Emmanuel declined comment. Government lawyers have also been interested in an Eastern European equipment distributor that shipped 12 swivel loaders in 1997 to a Mike Cone company. Cone Constructors employees allegedly transferred the loaders to yet another Mike Cone company before the first company had come across with $361,920 that it had agreed to pay the distributor.
Court records show Mike Cone agreed to settle for $52,000, made a $10,000 down payment, then bounced two checks on an installment plan. Attempting a garnishment, the equipment distributor found a Cone account at SunTrust Bank with a $0 balance that was already overdrawn. The case was eventually settled.
Judge Glenn, who took under advisement the request to force the Cones to testify, nevertheless observed that the presentations by the creditors and trustee "support the reasonable belief of Mr. Cone and Mrs. Cone that they could be subject to criminal charges."
Mike Cone has expressed regret.
"I'm going to be candid with you," Cone told the Planet. "This was not a good situation. But the state came in and made a bad situation worse."
After Rick Heinz's cancer treatments went unpaid by the partly self-funded Cone Constructors medical plan, the St. Petersburg man came to a meeting of creditors in January to ask why.
"Rick, I'm glad you're here," Mike Cone told Heinz. "Out of this entire scenario … the thing that most disturbs me as president of the corporation is what is happening with this health insurance issue."
Cone claimed that his company stopped paying for employee medical insurance in early March of 2000 because the FDOT stopped paying the company on the Suncoast Parkway project.
Cone employees may not have realized that until their company's claims administrator formally notified all 145 of them that their insurance had been terminated in an April 10, 2000, letter. By then, Heinz had undergone chemotherapy for three months.
The day after the letter went out, state insurance regulators interviewed claims administrator Michael Bracken, who said the habitually tardy-paying Cone had stopped sending premium checks in December of 1999. Cone employees told court officials that Bracken's company informed them that Cone stopped paying in June of 1999 and their insurance was cancelled then.
Bracken said Cone promised for months to resume payment of the premiums but never did.
Cone told the state regulators that his company continued withdrawing the employee share of health premiums from paychecks through March 4, 2000. The workers quite likely won't see refunds. Many of them sank $2,000 or more into the Cone insurance fund without knowing it had collapsed. Moreover, they now must assume the extra burden of trying to pay overdue medical bills that they thought their employer had covered. Joann Vaughn, who has the back problems, isn't sure where her husband's paycheck deductions to the Cone medical plan went. Letting out a bitter laugh, she told the Planet: "I know it wasn't to the insurance company." Heinz's query may have been welcomed by Cone at the January meeting of creditors. Earlier, however, employee calls to the claims administrator were rebuffed. The administrator told the employees that they were being left in the dark on orders from Mike Cone.
Lacking Cone's cooperation, Chapter 7 Trustee Carolyn R. Chaney has hired a forensic certified public accountant to get to the bottom of the health plan problems and other company debacles. To assist her, Chaney chose John A. Magliano Jr., who testified at the 1999 racketeering trial of the Rev. Henry J. Lyons.
But what will Chaney and Magliano have to work with? Her counsel, Allan Watkins, told Judge Glenn at a February hearing that many Cone Constructors records have eluded Chaney. "Your honor, we found a mini-warehouse the other day," said Watkins. "I received a call that there was a mini-warehouse in another person's name that had records in it, and had Cone Constructors' records in it. I got there … and the records had been moved out the day before. We're playing a shell game trying to find records. I can't get Mr. Cone to tell me where $3- or $4-million worth of equipment is located. Every time we find — or creditors find — a piece and call and say there's a piece of equipment, it gets moved."
Contact Staff Writer Francis X. Gilpin at 813-248-8888, ext. 130, or frangilpin@weeklyplanet.com.
This article appears in Jun 21-27, 2001.