The Brother Graham (Part II)

Once upon a time in Humble, there lived two guys named Pat and Mike. They had a way of making people believe, and those people included some of Texas' highest public officials. While it turned out that their stories usually were just too good to be true

In a pattern that would become all too familiar to Mike and Pat Graham's creditors, the brothers refused to show up for depositions to answer questions about the operation of Bankers Capital Management. But evidence produced at the trial of James O'Brien's suit -- which the Grahams also chose to sit out -- showed that during 1987, while John Ford, O'Brien and others were losing money to Bankers Capital, Mike Graham had been issued corporate checks totaling more than $100,000. Nearly half of that was paid to Graham after O'Brien filed suit.

Moreover, Bankers Capital paid medical bills for Mike's wife, Rosalind; covered the rent and other expenses on an apartment at The Spires for Bankers Capital vice president Ray Santos and his family; and picked up the tab for an appraisal done on private land owned by Santos.

Santos, who has served on the state Parks and Wildlife board, testified in a deposition that he was paid $7,500 a month in consulting fees by the Grahams, though he admitted he was "never sure exactly" what type of consulting he did. He later filed his own lawsuit against the Grahams, alleging he was victimized to the tune of about $250,000 while backing Bankers Capital. Mike Graham has claimed that amount is closer to $85,000. Whatever Santos lost is inconsequential at this point; he filed for bankruptcy in April 1988.

More than a year after O'Brien sued Bankers Capital, a state district judge awarded him in excess of $500,000 in damages. That was in October 1988. Today, interest has nearly doubled the judgment to $1 million, and the meter is still ticking.

"We were all a little guilty," O'Brien acknowledges. "We were all greedy, saying 'Boy, we're going to make a lot of money with these people.' I mean, that's part of their game. All of these people put up money, front-end money, with the promise that they were going to raise funds and we were going to get very rich, very quick."

O'Brien and others who maintain hopes of retrieving the money they gave the Graham brothers would not have been encouraged had they seen Mike and Pat as they sat in U.S. District Judge Sim Lake's courtroom on January 16 of this year -- the same courtroom where 15 months earlier a jury had found that the brothers had defrauded investors in a $78 million project to build six 500-bed private jails.

Mike, the cocky clotheshorse with a taste for Norton Ditto threads, appeared clad in an unspectacular jacket-and-slacks ensemble of an indeterminate pastel-like shade. Pat, who less than two weeks before had been arrested while masquerading as a state prison official and allegedly carrying out a plot to spring a convicted murderer from prison, wore a somber gray pinstriped business suit.

They must have been in agony, these two men whose self-images turn on the constant display of material well-being.

The Grahams had returned to Lake's court because Kathy Patrick, who represented investors in the Apex trial, wants Mike and Pat to fork over their share of the judgment Lake awarded to her clients. The Grahams have successfully dodged any discussion of the amount and whereabouts of their assets, though their attorney, a chubby Dallas lawyer named Charlie Blau, says there isn't much to talk about.

"Your honor, I can assure you," Blau told the judge, "dealing with Michael and Patrick Graham is analogous to a junkyard dog chasing an empty armored car."

Perhaps. But it doesn't seem like that long ago that the Grahams built their six jails, and their company, N-Group Securities, was paid more than $8 million. At the time, it appeared that the Grahams' biggest score, and their most successful project, might have also been their least contaminated.

It didn't turn out that way, of course. The most likely reason is that even when they appear to be credible, the Grahams inevitably succumb to one of the most insidious of human instincts. And when that happens, nothing is as it once seemed.

"When they did those jail deals, they were really close to being legitimate," notes a former business associate. "If you cut through all the bullshit and ... kickbacks, they would have worked. But you throw that on, and it screws the whole thing up. The greed is always what's gotten them nailed."

Next week,part two of the Brothers Graham:from jail building with Mark White and Ray Hutchison to jailbreaking with Dana McIntosh.

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