Greed on Trial

Did Teresa Rodriguez and her well-heeled investors deserve one another?

The long-awaited trial of accused investment scamster Teresa Rodriguez debuted last week in Judge Sim Lake's federal courtroom amid dorky pastel pie charts, surreal tape recordings and a burnished parade of witnesses who left the distinct impression that the rich really are different from you and me.

For one thing, they could write $100,000 checks to Rodriguez with scarcely a blink, lured by the exceptionally juicy monthly returns she guaranteed on phantom government contracts -- fixed rates that mostly ran from 15 to 20 percent. From blond social X-ray Rose Mary Malone to a silver-haired gospel singer from Cincinnati, they wrote so many of those checks that when Rodriguez was busted by FBI agents in 1993, the onetime bookkeeper's accounting system was keeping track of more than $69 million in investor funds.

The woman who managed to divert a whopping $8 million of those funds to her personal use sat before the jury, demure and still, in suits as pointedly somber as widow's weeds. Her pouf of society Big Hair had melted into a fringed cap that tapered down her neck. The extravagant jewelry that was a Rodriguez signature in her early '90s heyday had melted away, too; now her earlobes shone naked in the courtroom's fluorescent glare. Even some of the abundant Rodriguez flesh seemed to have evaporated since her fall from grace. During intermissions, she clung to the defense table as if to a life raft, eschewing the schmoozy hall-walking some prominent defendants are prone to. When she did make an exit -- usually behind a hedge of lawyers -- it was in a scrunch-and-scuttle mode. Tiny, chunky, almost mousy save for her long, scarlet fingernails, she seemed an unlikely figure to have authored such financial chaos.

The Rodriguez investors who led off the government's case, on the other hand, hardly appeared to be hurting once you subtracted their general air of aggrievement. Socialites Malone, Betty Shindler and Virginia Ewing might have been dressed for a charity tea, so prosperous were their expensive suits and designer glasses and flashes of gold. Shindler, her posture as regal as any duchess, even sported one of the Chanel handbags Teresa once brandished as a way of bonding with her affluent marks.

The absence of hapless orphans and old folks in reduced circumstances put some helpful English on Rodriguez attorney Joel Androphy's opening volleys. His defense to mail fraud, wire fraud and money laundering charges was an audacious twist on a strategy common to murder cases -- the one that says the victim deserved to die. Rodriguez's investors, Androphy told the rumpled and shirt-sleeved jury, weren't investors at all: they were bad ol' fat cat loan sharks. At every opportunity, he tried to work the loaded words "River Oaks" into the record.

"Look," said Androphy during a break in the proceedings, "our argument is simple. Texas law says if you promise an unconditional rate of return, that is, a fixed rate, then that's interest, and that's a loan. An investment is not fixed. So by law these were loans." Moreover, Androphy contended, they were loans that paid an illegally high rate of interest, which would make the recipients guilty of the Shakespearean-sounding crime of usury.

He didn't deny that Rodriguez operated a Ponzi scheme, paying early investors off with funds culled from later investors further down the pyramid. He simply asserted that the investors had known what was going on and suggested that greed had prompted them to turn a blind eye. Ergo, no fraud. "You can't defraud someone by paying them the usurious interest rate you've promised them," declared Androphy, all muted intensity. (One courtroom wit, alluding to Androphy's more famous and excitable partner, likened his demeanor to "a David Berg who drank from the decaf pot.")

Denial, however, has yet to be made a federal felony, and denial -- or perhaps a willing suspension of disbelief -- was what seeped from the investors' testimony like sour milk. Malone, the former owner (and current landlord) of the upscale Rotisserie for Beef & Bird restaurant, testified in a scratchy voice suffused with traces of her native Germany that she had found it hard to believe Sophia Williams -- a neighbor at the posh St. James high-rise -- was really getting such large returns on her investments with Rodriguez. But after inspecting her friend's books and meeting with Rodriguez "for 20 or 30 minutes," Malone invested a total of $450,000 with very few questions asked, and lost it all. Why didn't she ask to see some of the government procurement contracts Rodriguez claimed to be getting under the 8(a) minority program? "I had faith she was doing all these things," maintained Malone, who was wowed by Teresa's "impressive jewelry," her "beautiful clothes," her social contacts and that notorious seat on the city's parks board conferred on her by Mayor Bob Lanier.

Why, Androphy wanted to know, was this the one investment of her life that the Wall Street Journal-reading, real-estate-dealing Malone hadn't bothered to thoroughly check out? Wasn't it because she was getting such an "astronomical" rate of return? Noting that (on paper, anyway) Malone had earned $60,400 in two months, Androphy accused, "You rolled that money over into a new contract because you wanted to make more money," managing to make America's pastime sound like some new form of obscenity.

And so it went, with each new witness detailing the outrageous lies Rodriguez spun about non-existent contracts, and Androphy painting them in turn as collusive greedheads. Occasionally, a piercing dose of Rodriguez's shrewdness would shoot through -- as when Malone described one of her political blandishments. Malone should keep her money in while she could, Teresa advised her, because the Republicans were leaving the White House and "Clinton is favoring black people to take this program over."

Other unwholesome qualities surfaced, too. Prosecutors may well have wanted to pop an Excedrin when Glenn Kearney, the Ohio gospel singer and investments buff, allowed as how he had "read where the government paid $500 for a toilet seat or $100 for a wrench," so he thought Teresa's wildly profitable pseudo-contracts "really sounded great." As if that bald expression of cynicism weren't enough, Androphy made Kearney admit he hung out at financial seminars in search of ways to avoid paying taxes on his investment profits. After that, it was hard to get too exercised about the $75,000 Kearney had lost; and spectators might have been forgiven for wondering why prosecutors chose to save the more humble investors for last.

It was not until tape recordings Kearney had made of Roeriguez-related phone calls were played that the surprisingly low-key trial acquired the bizarre quality that voyeurs had been hoping for. In one call, he and a Dallas independent oilman named Sidney Pinkston discuss the Teresa phenomenon, with prospective investor Kearney openly worrying that the exceptionally high profits suggest a Ponzi scheme. Pinkston, a satisfied Rodriguez customer, indicates he knows what Kearney means, but goes on to say -- with unnerving prescience -- that "she's either going to be the biggest con artist in the country and end up on 60 Minutes, or else she is for real, and I think the latter is the case." (You could almost see Androphy, who had wrested the tape from the prosecution in an acrimonious wrangle, licking his chops.)

Pinkston's rehearsal of the Legend of Teresa yields some wonderfully absurdist moments. "Now is her husband the mayor, or is that another gal?" inquires the hopeful Kearney. "Well, that's close. He's assistant chief of police," replies Pinkston, conferring a nice fat promotion on HPD Captain Dale Brown, the society cop who wed Teresa in 1991, a year after her scheme burst into full flower.

The true weirdness, though, lay in Kearney's tapes of conversations he had with Rodriguez herself. Distortion made her high, quick cadences sound like Minnie Mouse speaking Urdu; the headset-wearing jurors had to follow along with transcripts to make any sense of it. Teresa's snow job on Kearney and a friend he gets on the line reads and sounds like some hallucinatory infomercial: she lies about her contacts and 8(a) minority status with aplomb, reeling the men in by telling them she's working on a $5 million contract that will pay 18 percent a month and -- surprise! -- has to be finished by tomorrow. She name drops. She brags shamelessly. ("I have received every award there is to win.") She has an answer for everything. Why doesn't she finance her deals through ordinary bank routes? Because minorities on their boards or loan committees might get ideas and compete with her. Why wasn't she at a certain investment seminar? She was at her Mexia ranch "putting in a herd of cattle."

Within a few hours, Kearney and his friend had wired Rodriguez $75,000 and $100,000, respectively. When they call her back, their voices are giddy with anticipation; they bubble with laughter. Kearney's friend tells her about a trip he'd like to make and says, "I'm sure you're going to make some of these things come ... become possible." He almost says "come true," and in that instant, the extent of the self-delusion Rodriguez was able to inspire in people cuts straight through the tape's odd distortion. And it is impossible to escape the conclusion that, in the end, the investors' self-delusion was matched only by Teresa's own -- that fierce impulse that led her to scavenge for funds, spend pathologically and somehow believe that she could keep the inherently unstable Ponzi structure from collapsing on top of everybody.

The first week's proceedings left tantalizing hints of what may lie ahead. The FBI's financial analyst suggested in her testimony that Rodriguez may have been engaging in a rarefied barter system with some of her investors such as the Barber Brothers jewelers in New York. And names of prominent Houstonians whose checks passed through some of Teresa's 37 bank accounts -- including Hunan owner and fellow clotheshorse Gigi Huang -- cropped up momentarily and vanished without explanation.

Whatever the trial brings, it's not likely to drag on long with Judge Lake at the helm. Tiny and bespectacled, with a boyish shock of chestnut hair that drapes over his brow, Lake seems equally allergic to rabbit trails and redundancy. Watching him manage his courtroom -- "We're wasting the jury's time!" he admonished the lawyers at one point -- it was hard not to imagine him giving Judge Ito pointers. If Sim Lake were presiding at the O.J. Simpson trial, it would already be over, and the prospect of a quick end to the Rodriguez trial may be the single bright spot in the whole unpalatable and unflattering Teresa mess.

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