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If you fly into Miami International Airport and drive east toward the city and north on Interstate 95, you bypass South Beach and midtown and in about thirty minutes reach the 163rd Street exit. Heading east toward the ocean leads you past several miles of strip malls filled with convenience stores, pawn shops, bodegas, gas stations, chain restaurants, nail salons and an occasional yoga center. Then rising unexpectedly in the distance is a row of condominium skyscrapers so baroque and unattractive that they conjure up the name of only one man: Donald Trump. Ad Policy

You have arrived in the city of Sunny Isles Beach, or “Florida’s Riviera,” as its political and business leaders have dubbed it. Massive skyscrapers along beachfront Collins Avenue include three Trump Towers and three other Trump-branded properties, including the Trump International Beach Resort, where I stayed—very comfortably, I confess—for eleven days in June.

Other luxury properties on the stretch include the gaudy Acqualina Resort & Spa, where the penthouse recently went on sale for $55 million, and the Jade Ocean, which offers “beach amenities thoughtfully conceived to continue attentive service and lavish appointments all the way to the water’s edge” and a Children’s Room featuring Philippe Starck furnishings and a baby grand piano. Meanwhile, ground was recently broken on the Porsche Design Tower, which its developers describe as “the world’s first condominium complex with elevators that will take residents directly to their units while they are sitting in their cars.”

Until the late 1990s, this Miami neighborhood was populated by retirees and tourists and was dotted with dozens of theme motels, many of them named after Las Vegas properties: the Dunes, the Sands, the Desert Inn and the Aztec. Between the 1920s and ’50s, Sunny Isles catered to visitors like Jack Dempsey, Babe Ruth, Grace Kelly, Burt Lancaster and Guy Lombardo, but later became a destination for tourists of modest means.

Everything changed in 1997, when real estate developers and other business groups succeeded in passing a referendum to incorporate Sunny Isles as a town. From that point on, building, planning and zoning decisions were stripped from the Miami-Dade County Commission and put in the hands of the industry-dominated Sunny Isles City Commission, whose current members consist of a real estate executive, a property lawyer and a former advertising executive. What happened next was the most spectacular neighborhood transformation seen in Miami since cocaine money rebuilt the city’s downtown area beginning in the late 1970s.

The first mayor was David Samson, a parking garage magnate from Chicago who retired to Sunny Isles and helped “remake a sleepy area of low-rise motels built along Collins Avenue in the 1950s into a sparking city of condominium towers,” according to his 2003 obituary. Norman Edelcup, a former banker and real estate executive, succeeded Samson upon the latter’s death, and the city has been a property developer’s wet dream ever since.

For all of its wealth, Sunny Isles, which spans just one square mile and has a population of 20,832, is as bland and boring as its political leadership. “Residents are as pampered as hotel guests,” says the glossy official guidebook, which features photos of the beach, shopping boutiques and, mostly, luxury condos. “World- class spas, unparalleled concierge service, beachside wait staff ready to serve, free city transportation, and dozens of cultural opportunities is why Sunny Isles Beach stands out amongst the rest.”

I interviewed a Siberian-born realtor in the lobby of Beach Club, a luxury condominium on South Ocean Drive in Hallandale, just north of Sunny Isles. “Miami is a brand,” she told me as we sat on a sofa in the building’s huge foyer. “People from all over the world want property here.” Developers were only putting up luxury properties because they “know that the crisis has not affected people with money,” she added. By way of example she pointed to the Regalia, a new Sunny Isles condo with only thirty-nine units, one per floor, with prices starting at $6 million.

Most of her clients are Russian—there are now three direct flights per week between Moscow and Miami—and increasing numbers are moving to Florida after spending a few years in London first. “It’s a money center, and it’s a lot easier to get your money there than directly to the US, because of laws and tax issues,” she said. “But after your money has been in London for a while, you can move it to other places more easily.”

* * *

Florida was at the epicenter of the housing bubble that collapsed the country’s economy, and the state’s overall foreclosure rate remained the highest in the country through the first half of 2013. But the luxury real estate market in Miami is flourishing. A March story in Property Week said the “dark age” of the 2009 crash was over: “Fewer than ten percent of downtown Miami units are left and they’re going fast. Meanwhile, super-luxury penthouses at the exclusive southern tip of South Beach…are selling for $25 million.”

This remarkable boom in high-end real estate has been driven by foreign money, with “buyers coming from all over the world but with the highest concentration from Venezuela, Argentina, Brazil and Russia,” according to the website for Miami Condo Investments, which offers high-end properties for sale. Twenty-six percent of real estate sales to foreigners in the United States occur in Florida, more than anywhere else in the country and twice as high as second-place California, according to the National Association of Realtors. Seventy-six percent of condo buyers in Miami don’t take out mortgages but pay cash, versus a national average of 32 percent for cash sales for all properties.

Jorge Pérez, a developer known as the “Condo King,” told a local real estate conference earlier this year that all these foreign buyers make Miami the only city in America where the cash model works. “It’s a very local market,” he said. “It’s for people who are used to paying cash for most of their second homes.”

Born in Argentina to Cuban parents, Pérez faced financial ruin during the last housing bubble. By 2010, his Related Group had lost four of its seven Florida developments to foreclosure and was desperately trying to reschedule $1.5 billion in debt. Now he is hawking a new slate of luxury projects, including One Ocean at the tip of South Beach and the SLS Hotel, a brand whose flagship property is in Beverly Hills.

Enticing foreign buyers may have saved the financial skins of Miami real estate investors like Pérez, but all that offshore money entails risks as well. Obviously not all of the money flowing into Miami from abroad is illegitimate. Yet there are abundant signs—beyond the city’s traditional role as a repository for dirty cash and the fact that much of the inflow is from countries particularly rife with corruption—that significant numbers of foreign condo buyers are political figures and businesspeople seeking to illegally export capital abroad, launder profits or evade taxes.

Corruption and bribery cost developing countries up to $1 trillion per year—lost revenues they are increasingly serious about attempting to recapture. Some of the money ends up in traditional offshore havens like Nevis, Bermuda and the British Virgin Islands, and huge amounts also flow to Western financial centers like Geneva, London and New York. But Miami, and its real estate market in particular, is an especially popular haven for ill-gotten cash. “South Florida has always been a favorite destination for international visitors and political figures, whether it is for vacation or to purchase property along its sandy and sunny beaches,” said a May 2011 Treasury Department report. “As such, Miami finds itself in the distinct position of being a reoccurring hot spot for funds pilfered by politically exposed persons (PEPs) and other criminal proceeds.”

* * *

The combination of tax haven accessibility and weak banking secrecy and corporate registry rules—as in Wilmington, Delaware, where nearly 300,000 businesses are registered at a single address—has created a huge global problem. For the past year, the International Consortium of Investigative Journalists has been making public a vast trove of leaked offshore records that have revealed tax evasion by billionaires, oligarchs, emirs, princes and multinational corporations around the globe. A recent report by the Tax Justice Network described tax havens as “the economic equivalent of an astrophysical black hole” and estimated that they collectively held as much as $32 trillion—roughly double the annual GDP of the United States.

In February, a member of Russia’s ruling party, Vladimir Pekhtin, was forced to resign from the Duma when a blogger published documents showing that he owned three Miami properties worth more than a combined $2 million. Pekhtin’s holdings were especially embarrassing because he had not disclosed his overseas properties in his annual financial disclosure filing, as is legally required under a bill he had written as chairman of the Duma’s ethics committee. In Russia, which saw illegal capital outflows of more than $200 billion from 1994 to 2011, charges of corruption and lavish spending overseas have become major political issues.

In September of 2012, The New York Times reported that wealthy Argentines had been pouring money into Miami real estate “by expensive and sometimes illegal means.” Hugo Chávez’s presidency prompted massive illegal capital flight by wealthy Venezuelans, with vast sums pouring into Miami. His re-election in October 2012, five months before his death, prompted some local realtors to joke that Chávez should have been named condo “Salesman of the Year.” Alvaro Lopez Tardon, the alleged leader of a Spanish drug gang, is currently facing trial in Miami on charges that he bought fourteen condos and a fleet of luxury vehicles to launder $26.4 million in cocaine profits.

It’s difficult to discover who specifically has been snapping up high-end properties, because many buyers are not individuals but Florida limited liability companies (LLCs). In August 2012, a 30,000-square-foot house on Indian Creek Island with thirteen bedrooms and fourteen bathrooms sold for $47 million, the most expensive home sale in Miami’s history. Media accounts identified the anonymous buyer as a Russian but the listed owner is AVK Land Holding, a Florida LLC, whose business address is a pay-by-the-day business center in midtown Manhattan and which was registered a few months before the sale by a Tallahassee company called Incorporating Services Ltd. AVK’s annual report is signed by Andrey M. Kaydin, an attorney based in Coney Island who has also served as a beard for buyers of luxury properties in New York City.

Buying property through business entities set up in Delaware or offshore havens is also common. Condo owners at properties in Sunny Isles include companies that were established or have legal representatives in a multitude of locations, including Argentina, Belize, the Bahamas, the British Virgin Islands, Chile, Guatemala and Trinidad.

Trump’s partner in Sunny Isles is Dezer Development, which began buying up property in 1995 and now owns twenty-seven acres of oceanfront. According to company president Gil Dezer, his firm handles the due diligence on condo buyers. “We do make sure we know our customer by asking for personal information at the time of signing the contract,” Dezer wrote in an e-mail. “We also make sure that anyone buying with an LLC proves to us that they are the rightful owner of that LLC and we check again at closing to make sure that we are still dealing with the same person at the time of delivering title.”

Offshore entities are an especially bright red flag, but domestic LLCs offer a simple means of obscuring property ownership from tax and law enforcement agencies or an aggrieved business partner or spouse. Peter Zalewski, a consultant to real estate developers, told me that Pekhtin “was either naïve or cheap. If he’d just hired a local attorney, he could have structured things in a way that he never would have been caught.”

Democratic Senator Carl Levin of Michigan has long tried to address rampant money laundering by passing a bill that would require companies registered in the United States to reveal their true owners, but it has been blocked by the US Chamber of Commerce, the American Bar Association, and lobbyists for states including Delaware and, notably, Florida. Meanwhile, Florida’s political leaders have been spearheading the fight against a new Treasury Department rule mandating that foreign banks tell the IRS about accounts held by US taxpayers—and which would, reciprocally, require US banks to share the same information with foreign governments. Not surprisingly, Florida banks and realtors don’t like the idea of more sunlight on their lucrative dealings with foreigners. “There is a huge amount of dirty money flowing into Miami that’s disguised as investment,” said Jack Blum, a former congressional investigator and Washington attorney specializing in money-laundering cases. “The local business community sees any threat to that as a threat to the city’s lifeblood.”

I uncovered more than a score of notable foreign property holders in Miami, from a former senior Angolan official to various oligarchs, political cronies and controversial figures from Eastern Europe and Latin America (for summaries of their backgrounds and Miami holdings, see sidebars). That small window came after more than six months of research; dozens of interviews with money-laundering, banking and real estate experts; a visit to the city; and countless hours poring over Florida real estate and corporate records by myself and several research assistants.

I was especially interested in the growing presence of Russians and other Eastern Europeans, who began purchasing properties in Miami soon after the collapse of communism. Early arrivals included various Russian pop stars, among them Igor Nikolaev and Alla Pugacheva, but more than a few bad apples as well. Miami soon became a boomtown for former government officials and post-perestroika businessmen who looted the state during privatization and for mobsters who trafficked cocaine, bought strip clubs and set up offshore banks around the Caribbean. In his book Red Mafiya, Robert Friedman wrote that “Versace-clad” Russian gang leaders found Miami to be an ideal base for money laundering, “where each new day brought the potential for a multimillion- dollar score.” By 1996, according to a Miami Herald story that year, some 300 former Soviet citizens had bought properties in South Florida.

Isaac Feldman, who came to Miami after first emigrating to Israel, founded a real estate agency and became rich selling condos, mostly to Russians. Feldman didn’t seem overly concerned about the source of his clients’ money. “That some people [in the former Eastern bloc] operate by not paying taxes and duties and paying some bribes, yes, that could be,” he was quoted as saying in the Herald story.

Mayor Edelcup later appointed Feldman as a community adviser, and in 2010 he received 26 percent of the vote in a run for the Sunny Isles City Commission. Feldman vowed to mount another campaign, but his political career was cut short when he and two other Russians were indicted last December for conspiracy, wire fraud and money laundering. The trio had employed young Eastern European women to lure rich tourists to bars that bilked them—to the tune of $43,000 in the case of one customer—for overpriced caviar, vodka and champagne.

Thanks to its heavy Russian presence, Sunny Isles has acquired the nickname “Little Moscow.” Shops at a mall across the street from the Trump International Resort include a delicatessen offering blintzes and beef stroganoff, a furniture store with white leather sofas in the display window and restaurants serving an Eastern European clientele.

One night I had dinner at Lula Kebab House, where I felt like I’d been transported into a Russian version of Goodfellas. A Russian singer performed on a small stage with disco lights while customers ordered skewered sturgeon, eggplant salad and pierogis, and clinked forks on glasses to announce toasts before downing shots of vodka. At the table behind me, a man who looked to be almost 70 spoke in Russian to his wife, who appeared to be at least 40 years younger. At a table out front, a man of about the same age was seated with a young woman dressed in blue jean shorts, a halter top and cowboy boots.

Sunny Isles also has numerous real estate agencies owned by Russians that cater heavily to Eastern European clients, among them Exclusively Baranoff Realty, which operates from an office in the lobby of the Trump International Beach Resort and, according to an advertisement hanging near the elevator bank, represents “the most exclusive residences in Sunny Isles Beach, from $250,000 to more than $20 million.” A purple-and-gold advertising flier on a table out front of the agency that listed numerous properties for sale was in English on one side and Russian on the other.

I approached several realtors as a potential buyer. One agent I met with, a beautiful dark-haired Eastern European woman, told me that luxury properties in Sunny Isles were selling fast, mostly to foreigners and New York hedge funds. There were about 300 units in each of the Trump properties in Sunny Isles, but only ten were available in the $2-million-and-up range (which I had said I was looking for). If I was serious about buying, I’d have to move quickly and pay cash.

She took me to see a three-bedroom, three-bathroom unit on the thirty-eighth floor of Trump Palace, which looked out on the turquoise waters of the Atlantic and was on the market for $2.3 million. Building amenities included a bar, business center, cabanas, exercise room, indoor and outdoor pools, a spa and sauna, and tennis courts. “Living in a Trump property is like living in a hotel,” she told me, echoing the sales pitch in Sunny Isles’ official guidebook, as we stood on a balcony and gazed out on the ocean. The unit was attractively priced, she said cheerfully, and all the more so as the owner, a Russian looking to buy a bigger condo elsewhere in the area, had spent at least $350,000 on improvements.

Later that day, I obtained the property records for the condo. The legal owner is a company registered in Belize, an offshore haven where, according to a government website, there “is no requirement to file annual returns or public disclosure of directors, shareholders, charges, loans or agreements.”

In other words, the true owner of the Trump Palace unit is untraceable. He may be a perfectly respectable businessman, but the arrangement was a typically murky Miami affair.

Money Laundering, a Miami Tradition



Miami is a relatively new city, having been incorporated in 1896, and its entire history is inextricably intertwined with the real estate industry and its regular cycle of booms and busts. Miamians chatter incessantly about real estate, in the same way that a certain subset of New Yorkers talks about the stock market, Washingtonians politics and Los Angelenos the movie industry.

One afternoon at a restaurant called Boteco, I sat next to a table of four Brazilians who were cooking up a property deal. When drinking a cup of coffee in front of a strip mall café, I overheard a woman on the phone saying, “I know, I know, but the question is, are you willing to go higher?” At Tatiana—a restaurant and nightclub just north of Sunny Isles that is a favorite of Russians and that, on the weekends, features a show with cabaret dancers, circus performers and an occasional tiger—I overheard half of another phone conversation in which a middle-aged American man talking excitedly about one deal said, “I’m not normally a pyramid-scheme type of guy, but this one I like.”

Tens of thousands of people moved to Miami during the city’s original property rush of the 1920s. Many never intended to settle there but instead hoped to get rich speculating, and the enormous real estate bubble that ensued exploded in 1926. That was the same year as the Great Miami Hurricane, the most destructive ever to hit the United States at that time. It killed nearly 400 people and caused billions in property damage (in today’s dollars), blowing away thousands of unfinished houses that had been abandoned when the real estate market crashed. Next came a post–World War II rush fueled by people who came to stay. “That boom was more legitimate than the first one, and in a sense it has never ended,” says Paul George, a professor of history at Miami Dade College, adding that Dade County’s population has grown from 250,000 in 1940 to about 2.6 million today. “But ever since, we’ve had spikes of excessive speculation that ended badly.”

The wildest ride began in the 1970s, when Latin American drug lords turned Miami into a key hub of their operations and poured billions of dollars into the local economy, with much of it laundered into real estate. It also led to a crime wave—memorialized in Miami Vice and Brian De Palma’s Scarface—that gave Miami the nation’s highest murder rate. Drug money tainted everything from law enforcement to real estate to banking. “Miami’s Federal Reserve branch has a currency surplus of $5 billion, mostly in drug-generated $50 and $100 bills, or more than the nation’s twelve Federal Reserve banks combined,” Time magazine reported.

The city’s last real estate boom resulted from reckless lending by banks during the early 2000s. During the run-up, Miami’s once sleepy downtown and city center were completely transformed by the frantic construction of high-rise residential buildings and office towers. Residents poured in, turning downtown into one of the fastest-growing areas in the entire state. Moscow-based Mirax Group, headed by Sergei Polonsky—who once ate part of his tie on live TV to settle a bet, and whom Forbes has rated one of Russia’s nine most bizarre oligarchs—announced a development project on a private island that the company marketed to Russian buyers, saying it would change “the expectations of elegant and sophisticated living on Miami Beach.” Pérez, the Condo King, announced plans for the Icon Brickell, a $1 billion project that included three towers with 1,640 units, a swimming pool the size of a football field and five restaurants. Marc Anthony told People magazine that he and Jennifer Lopez had bought a unit at the Icon Brickell, “and when we are through decorating the condo, it will be the sexiest place in town!”

Then, inevitably, came the crash. Miami real estate prices fell by 35.8 percent between late 2005 and the same period in 2009. Tens of thousands of downtown condos were unoccupied that year and, as a Property Week story recounted, at night dogs roamed deserted streets in once hot central neighborhoods. Mirax went bust and Polonsky has fled Russia, where he is wanted for real estate fraud. He is reportedly in Cambodia, where he spent jail time earlier this year for allegedly attacking six boatmen with a knife. In May 2010, HSBC Bank seized control of 1,276 condos at the Icon Brickell, and it turned out that Anthony and J. Lo had never purchased a unit there. Instead, they had, in a PR move engineered by developers, leased a condo cheaply.

Things were even grimmer elsewhere in the state. Trash piled up at vacant lots in abandoned ghost subdivisions. Construction came to a screeching halt on giant shopping malls and office buildings that went into foreclosure. In 2010, a real estate expert told NPR that there were enough housing lots in Charlotte County, in the southwestern part of the state, to last for more than a century.

Rampant Corruption, Lax Regulation



Through boom and bust, one constant in Miami has been the political and business establishment’s embrace of offshore cash. Predictably, this has led to an assortment of foreign rogues regularly washing up in the city.

In 2003, US Immigration and Customs Enforcement (ICE) set up what became known as the Foreign Corruption Investigations Group in Miami to track down assets held by foreign officials and business executives in the United States. Within months, the group—which was based in Miami due to the large number of requests for assistance that the local office received from foreign governments—seized a $3.5 million Key Biscayne condo owned by Byron Jerez, former head of Nicaragua’s tax office. The following year, the United States returned to Nicaragua $2.7 million worth of assets that had been stolen by former President Arnoldo Alemán, who was sentenced in his home country to twenty years under house detention for embezzling $100 million from the state treasury. The assets included various Miami bank accounts, a cabana at the Key Biscayne Ocean Club, and a $150,000 deposit for the purchase of another Key Biscayne condominium.

In 2008, after Uruguayan authorities alerted ICE, the feds agreed to extradite Juan Peirano Basso, an international fugitive wanted for embezzling more than $800 million from financial institutions in Uruguay, Paraguay and Argentina, and who had been living comfortably in Miami. Basso’s actions “are believed to have caused the collapse of the Uruguayan economy and to have caused the South American financial crisis of 2002,” said an ICE press release announcing his extradition. Since its inception, the Foreign Corruption Investigations Group has made eighty criminal arrests, secured 148 indictments and seized more than $131 million in assets, according to ICE.

Drug lords and other criminals and swindlers have no doubt been drawn to Miami for some of the same reasons that tourists and retirees flock there—the ocean, sun and natural beauty—but Florida’s reputation for corruption and sleaze has surely been a lure as well. This is, after all, a city that is notorious for bizarre political and business scandals. Earlier this year, Miami-Dade Assistant State Attorney Ari Pregen was fired after he flashed his work badge to gain free admission to a strip club and pulled out his credentials again when the bill came, to avoid paying a 15 percent credit card surcharge.

Overall, Florida led the United States in federal convictions of public officials—781—between 2000 and 2010. Just this summer, three suburban Miami mayors were arrested on corruption charges within a month. “This is a place where it’s easy to lose your moral compass,” says Zalewski, the real estate consultant. “Everyone who moves to Miami wants to live in South Beach, which is fun, but the rule should always be to not renew your lease after the first year. If you do, it’s pretty much guaranteed that you’ll end up in rehab.”

Adding to the area’s decadent appeal is that banks and real estate developers have frequently played fast and loose with the rules as well. Allen Stanford, now serving a 110-year prison sentence for running a massive Ponzi scheme, set up his bank in Florida in 1998 after the state’s banking director authorized it to move huge amounts of money offshore without informing regulators.

Florida’s rate of mortgage fraud was higher than anywhere else in the country between 2000 and 2008. In the latter year, Don Saxon, Florida’s top mortgage industry regulator, was forced to resign after a Miami Herald investigation found that 10,000 criminals—including burglars, cocaine traffickers and identity thieves—had been approved to broker home loans in Florida and had committed at least $85 million in mortgage fraud.

Some flagrant abuses have been addressed, partly due to tighter rules imposed under the Patriot Act following the 9/11 attacks, but Florida banks still have a lot of room for improvement. In 2011, Miami-based Ocean Bank forfeited $11 million to the federal government for willfully failing to establish an anti–money laundering program for seven years. During that time, Ocean Bank took in large sums of cash from Colombia’s Bernal-Palacios drug trafficking organization. Among the group’s leaders was Ricardo Mauricio Bernal Palacios, whom the DEA once described as “one of the most wanted money laundering fugitives in the world.”

The real estate industry is more lightly regulated than financial institutions. Banks are required to file a Suspicious Activities Report (SAR) with the Treasury Department if they suspect a client is depositing or transferring corrupt money. Real estate agents and title insurers are exempt from that requirement—as are businesses that primarily sell luxury goods such as jewelry, yachts and private planes—which makes property an especially attractive vehicle to money launderers. Furthermore, bank tellers don’t receive a commission on the deposits they accept, so they are more likely to ask questions of a dubious customer than a real estate agent, who stands to make a huge commission on a multimillion-dollar luxury condo deal. “SARs are hugely important and often lead to exposure of major cases,” Stefan Cassella, an assistant US attorney based in Baltimore and the former deputy chief of the Justice Department’s Asset Forfeiture and Money Laundering Section, told me. “Requiring a broader range of players to file them would be a big help to law enforcement in terms of keeping corrupt money out of the United States.”

A Law to “Smoke Out” Owners



In 2007, Bradley Birkenfeld, an American director of UBS’s wealth management division in Geneva, approached the Justice Department and revealed disturbing information about his employer’s business practices. In addition to disclosing that he had smuggled diamonds (in a toothpaste tube) across borders for a client, he told US authorities that UBS was helping thousands of rich Americans hide their assets offshore to avoid paying taxes.

The US government went after UBS, and in 2009 the bank settled the case and avoided criminal prosecution by paying a $780 million fine. More important, UBS turned over to the US government the names of more than 4,500 American account holders, and the case “put the first big cracks in Switzerland’s vaunted bank secrecy,” in the words of The Economist. At home, the IRS introduced amnesty programs that allowed Americans to pay a small penalty to repatriate undeclared offshore accounts, a move that has brought the Treasury an estimated $5 billion in back taxes and penalties.

Another result of the UBS affair was that in 2010 Congress enacted the Foreign Account Tax Compliance Act (FATCA), which requires foreign banks to notify the IRS about accounts held by US taxpayers or face stiff penalties.

One section of FATCA that has elicited particularly intense hostility is its provisions for reciprocity, meaning that American banks would have to provide foreign governments with the same information about their nationals who hold US accounts. FATCA was opposed by investment banks like JPMorgan and Bank of America and foreign financial institutions like the Zurich Insurance Group and the Hong Kong Securities Association. But no one fought harder against the rule than Florida bankers, real estate developers, politicians and regulators, who feared it would slow the flow of foreign money into the state’s economy, especially in Miami.

The Florida Bankers Association sued to block the measure for allegedly failing to comply with federal rule-making procedures. The lawsuit said that the measure would impose too high a regulatory burden on banks and that the federal tax code already had sufficient provisions in place to prevent tax evasion. Leading FATCA opponents also included the Florida International Bankers Association, a trade group representing foreign banks from eighteen countries, and the Florida Office of Financial Regulation, which said it would require the “blanket collection” of information on foreign account holders and that the IRS should instead negotiate with foreign governments for “the reciprocal exchange of information” as required in individual cases.

Florida Republican Congressman Bill Posey, a member of the House Financial Services Committee, wrote a letter to President Obama saying that FATCA would “result in the flight of hundreds of billions of dollars from US financial institutions” and the leaking of personal information that might lead to “kidnappings or other terrorist actions” against foreign account holders in their home countries. In reply, Treasury Department official Michael Mundaca said that the IRS does not share information with foreign governments “unless and until several conditions are met, including a review of the protections against the misuse of information.” He also denied the new rules would cause massive capital flight from American banks, and noted that US banks had made similar arguments in the mid-1990s when new regulations required the reporting of bank-deposit interest paid to Canadian account holders. In fact, the amount of money held by Canadians in American banks rose from $1.9 billion in March 1996, just before the final regulations were issued, to $4 billion one year later.

The anti-FATCA lobby was able to delay enactment of the rule and water down some of its provisions, but as of midyear the United States had signed reciprocal agreements under FATCA with nine countries and was negotiating with eighteen more. Charles Intriago, president of the Association of Certified Financial Crime Specialists in Miami, predicted that FATCA would “smoke out” the true owners of a lot of front companies for criminals, including politicians. “The IRS is going to get the names of their girlfriends and aunts and uncles who are serving as directors of companies set up offshore,” he said.

That remains to be seen, as opponents are already campaigning to repeal the rule and the IRS recently announced that it is giving foreign financial institutions an additional six months, until July of next year, to comply. Senator Rand Paul, the Kentucky Republican, has introduced a bill to repeal FATCA, saying it is a “violation of sovereign nations’ laws and privacy matters.” Congressman Posey is leading the repeal effort in the House. On July 1, he wrote a letter to Treasury Secretary Jack Lew saying that FATCA measures “themselves would not bring one penny into the US treasury, they would discourage investment in the United States.”

A number of conservative activists are also involved in the FATCA repeal campaign, including Grover Norquist of Americans for Tax Reform and Andrew Quinlan of the Center for Freedom and Prosperity (CF&P). A Washington Post story in April said that the latter group’s “fundraising pleas have been circulated to offshore entities that make millions by providing anonymity for wealthy clients,” and that the director of a Hong Kong company that creates offshore trusts had sent a CF&P solicitation “to contacts in the Cook Islands, pointing out that CF&P was trying to raise $250,000 for a lobbying campaign to ‘stop the bleeding, build allies and go on the offensive’ against efforts in Washington to regulate the industry.”

No matter what happens with FATCA, cleaning up Florida financial institutions will not be easy, says Brian Kindle, who works for Intriago’s association. “I read a lot of court records about financial crimes, and whether it’s a Midwestern Ponzi scheme or a Caribbean bank fraud, at some point I always come across the phrase, ‘The money moved through a bank in South Florida.’ We have a big banking community, but New York and California are even bigger, and the money doesn’t always move through their banks. Our banking and real estate industries grew up during the cocaine era, and the attitude here has always been to make a quick deal and don’t ask any questions. That’s the whole culture, and it’s pretty antithetical to a rules-and-regulation-based compliance system. Changing that is going to be hard.”

During my last few days in Miami, I visited a few more properties for sale in Sunny Isles and waded through real estate listings. There were dozens of oceanfront properties with all the trimmings: marble floors, custom white Italian doors, built-in bars, multimedia systems, ceiling windows with electric shades, his-and-hers baths and walk-in closets, Jacuzzis, swimming pools and beachfront cabanas. At Ocean Three, a condominium toward the northern end of Sunny Isles, an in-house restaurant, Bistro, delivers to the units, the pool and the beach and offers a seven-course tasting menu that includes options such as foie gras, oysters Rockefeller, lobster, black winter truffles and baby rack of lamb.

And so it goes in Miami, where the welcome mat for the globe’s most pampered people is always out. Today, even as much of Florida has yet to pull out of the last real estate quagmire, at least 170 new condo towers are planned for Miami, many by the same developers behind projects that went bust during the last bubble. The Real Deal, a South Florida real estate publication, recently reported that a new influx of money from the Far East was further buoying the market and that the Ritz-Carlton Residences Palm Beach had already completed several deals with Chinese buyers.

Earlier this year, Flagstone Development announced it would build a mega-yacht resort called Island Garden that will feature high-rise towers, a hotel, shopping and a marina. The project was originally planned five years ago but fell apart when the real estate bubble brought down the global economy. Flagstone promises it will be open for business in 2019.

Jack Blum, the money-laundering investigator, recounted to me a work trip to Miami two years ago, when he was stunned to see condominiums going up in the poor Liberty City neighborhood. “I was in a cab and asked the driver what was going on,” he said. “He didn’t miss a beat—he said, ‘That’s from money laundering.’ When it’s that obvious to cabdrivers, you know the situation is bad. But that’s what the city’s economy is built on, and it is a monumental challenge to fix it.”