Coffee with Betti and the FBI

Lightning strikes the ReBates Hotel; death toll unknown

But that $2,000 did not appear on the campaign finance reports Fraga was required to file between February 1 and his March 12 primary contest with Green. Nor did it appear on his post-election report.

Yarbrough, Castillo and Peavy have all declined comment since news of the sting broke last week.

DeGuerin says Montero and Correa continued to employ Maldonado after Council approved the Duddlesten project, claiming they wanted to ensure their clauses would be written into the final package the developer would negotiate with the city. That was the purpose of the meetings Maldonado arranged with Fraga, Peavy and Castillo at the Hyatt coffee shop on April 30 and May 1.

After the FBI sting was revealed to her, Maldonado went looking for Reyes, who had been sharing office space with the Cayman Group. But according to DeGuerin, Maldonado found that Reyes had already moved out of the Bering Drive condo, and when she finally tracked him down, the former councilman advised her that Montero and Correa were "no good" and he wanted nothing further to do with them.

In the meantime, the FBI ordered Maldonado to make another run at Peavy, and this time equipped her with a hidden microphone when she met the councilman for a late lunch on Friday, May 3, at the Wyndham Warwick. Once again, Maldonado tried to give a cash-filled envelope to the councilman. And once again, DeGuerin says, Peavy refused the gift.

Over the weekend, Maldonado had second thoughts about cooperating. On Monday, May 6, she contacted defense lawyer Ron Woods -- the former U.S. attorney here -- and DeGuerin, who had won a hung-jury verdict on behalf of the lone Lightning Strike defendant who stood trial. DeGuerin says he was immediately struck by the similarities between Lightning Strike and the operation that ensnared Maldonado. His new client, he adds, had never heard of Lightning Strike.

Woods and DeGuerin placed a conference call that day to the Justice Department's Attanasio, advising him that Maldonado would continue to cooperate only if she were not charged with any crime and received complete immunity. Attanasio refused.

DeGuerin theorizes that after the call, the FBI realized its cover was about to be blown. Duddlesten says he was first contacted by the FBI on Wednesday, May 8 -- while he was meeting with Hilton executives who had flown in from Los Angeles -- and notified of the investigation and told he was not a target.

The following morning, FBI agents fanned out across the city, knocking on the doors of all 14 councilmembers before eight o'clock. All were asked whether they had accepted money to influence their vote on the hotel project. Some of the agents' other questions suggested that the FBI's interest in City Hall was wider in scope than the hotel contract.

It is unclear whether the hotel sting was an outgrowth of the FBI's earlier investigation into a ticket-collection contract the city awarded to Municipal Collections, a company owned by a former Lanier associate Peary Perry. According to one person who the FBI questioned repeatedly in connection with the ticket-collection contract, investigators seemed especially interested in an unusual clause that guaranteed 19 percent of Municipal Collections' proceeds to minority subcontractor Bayou City Enterprises. But that source believes the feds almost immediately broadened their probe from the Municipal Collections deal to the city's contracting practices as a whole. The agents, he said, specifically mentioned Maldonado and other City Hall regulars with influence.

The Justice Department has steadfastly refused to comment on any facet of the sting, apparently conceding the early public relations battle to DeGuerin.

"I wish we could talk," lamented one assistant U.S. attorney, "because DeGuerin is beating our brains out in the media.

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