By Chris Lane
By Jeff Balke
By Aaron Reiss
By Angelica Leicht
By Dianna Wray
By Aaron Reiss
By Camilo Smith
By Craig Malisow
By Thursday, May 2, Betti Maldonado had grown very nervous over her association with the Cayman Group, two investors seeking a piece of developer Wayne Duddlesten's contract to build a city-subsidized hotel near the George R. Brown Convention Center. The men, supposedly wealthy South Americans named Carlos Montero and Marcos Correa, had hired Maldonado back in December to lobby members of the Houston City Council.
On the previous two days, Maldonado's work for the Cayman Group had included pushing cash-filled envelopes on three councilmembers -- one of whom accepted, according to a version of events outlined last week by Maldonado's newly retained lawyer, Dick DeGuerin. Although Maldonado believed her actions were legal, and that she was only distributing campaign contributions on her client's behalf, she had developed a nagging uneasiness about the way she was being asked to conduct business, DeGuerin says.
So Maldonado informed Montero and Correa that she wanted to end her relationship with the Cayman Group. But the pair had one last order of business for Maldonado that Thursday, asking her to follow them to an office building at Ella Boulevard and the North Loop.
Two days earlier, Maldonado had swung by City Hall in her Ford Explorer, picked up Councilman John Castillo, and driven him to the Hyatt Regency a few blocks away. In the hotel coffee shop, they were joined by the man Maldonado knew as Carlos Montero, who excused himself after Castillo and Maldonado ordered coffee and water. Then Maldonado got down to business, presenting Castillo with a single piece of stationery on which was typed two short paragraphs. "Here are the clauses we want in the contract," Maldonado told the councilman, following a script that Montero had laid out for her during an earlier meeting.
The document read: "The Cayman Group shall receive a share, as defined and set forth, of any and all revenues accruing or arising in any way from the Duddlesten hotel projects. Said revenues shall include but not be limited to development fees. The Cayman Group's share of the revenues will be in proportion to the Cayman Group's equity participation in the Duddlesten hotel projects. The Cayman Group shall invest not less than $5 million and not more than $10 million."
According to DeGuerin, as Castillo was inspecting the note, Maldonado reached into her purse, pulled out an unmarked envelope containing $3,000 and pushed it toward the councilman. "And here's an envelope to put that in," she said. Castillo took the envelope without looking inside. When Montero returned, the coffee break concluded. Nothing was said about the envelope as Maldonado drove Castillo back to City Hall.
Later that afternoon, Maldonado returned to the Hyatt coffee shop with Councilman Felix Fraga in tow. This time, Maldonado handed Fraga the typewritten clauses the Cayman Group wanted written into Duddlesten's contract before Montero could leave the table. She also gave Fraga an envelope, which, she explained, contained a campaign contribution.
Fraga pushed the envelope back across the table. "I don't need this," he said. But Montero, insisting that Fraga accept the money, pushed it back. Fraga again demurred. Finally, Maldonado offered to hold onto the money, and the meeting adjourned. As the trio left the coffee shop, Maldonado confided to Montero that she would give Fraga the money when she drove him back to City Hall.
Instead, according to DeGuerin, she said nothing more about it, dropping the councilman off and returning to her office, where she placed the envelope in the top drawer of her desk. (Fraga at first told the Press he had no memory of having an unmarked envelope pushed on him but later confirmed the incident. He did, however, admit to taking $2,000 in cash from Montero and Correa on an earlier occasion.)
On Wednesday morning, May 1, Maldonado was back at the Hyatt, this time with Councilman John Peavy. She managed to stay on-script with Peavy, DeGuerin says, but the result was no better than her encounter with Fraga. Peavy pulled the envelope down below table level, opened it, then handed it back to her without removing the contents.
On Thursday, after telling Montero and Correa she wanted out, Maldonado followed the twosome to the building at Ella and the North Loop, unaware that she had been directed to the Houston headquarters of the FBI.
Once inside, the Cayman Group investors revealed themselves to be undercover agents. In a scene familiar to defendants caught in the FBI's Operation Lightning Strike sting at the Johnson Space Center, Maldonado found herself surrounded by enlarged photos of herself -- photos surreptitiously taken by surveillance cameras. On one wall was a poster with a list of people Maldonado had contacted on behalf of the Cayman Group. DeGuerin says she was also shown videotape of her coffee-shop meetings with Castillo, Peavy and Fraga. Then FBI agent Ron Stern, who before being transferred to Houston helped supervise the agency's 1990 sting of Washington, D.C. Mayor Marion Barry, went to work on Maldonado.
"[Stern] tells her, 'We've got you cold, but we'll make a deal with you: you can plead guilty and we'll try to get you probation, but we need you to continue to help us,' " says DeGuerin.