Roots of the Sting

Harry Terry was in Dallas one morning in May 1993 when Larry Miller, the chief clerk of Houston's Municipal Courts Department, caught up with him by phone.

Terry, a Houston businessman, was acting as the local agent for West Capital Financial Services, a California-based company awaiting City Council approval of a contract to collect delinquent fines for the city. On the phone, Miller told Terry the contract was "unraveling" and that he had to hustle back to Houston to meet with Sheila Jackson Lee, who at the time was a member of the Houston City Council.

The West Capital contract had already been tagged -- or delayed -- twice by Council, so Terry caught the next flight home and was seated in Lee's office by 3 p.m., the appointed hour. At six o'clock, the councilwoman finally appeared, and Terry could see that his client's contract was in trouble. He recalls that Lee, who has since been elected to Congress, "interrogated" him about his views on affirmative action and the importance of equal opportunity in city business.

She closed the meeting, Terry says, by stressing that Council approval of the West Capital deal was unlikely -- unless the firm had a written agreement with Zinetta Burney and Peggy Foreman, two African-American attorneys, guaranteeing them a piece of the action as minority subcontractors.

Terry was surprised, but not shocked. Then-city attorney Ben Hall had issued a similiar order to West Capital, Terry says. But Hall had wanted the company to hire Bayou City Enterprises, a venture formed by three attorneys who were associates of Hall's.

Terry says he received another phone call the day after Lee set him straight, this time from attorney Enrique Dovalina. He told Terry that someone had suggested he find out if West Capital had room for a few more lawyers in its deal with the city. Terry met with Dovalina and his partner, Arturo Eureste, and agreed to hire them as minority subcontractors. On June 5, 1993, the West Capital contract appeared on the Council agenda once again, and, this time, was approved.

Three years later, the city has cancelled that deal, as well as a second ticket-collection pact with Municipal Collections Inc. Meanwhile, the FBI, initially attracted by the reported irregularities in the awarding of the collections contracts, widened the scope of its investigation to encompass the city's general contracting practices under the administration of Mayor Bob Lanier. It's not yet known if at some point that probe morphed into the recent FBI sting, which apparently was designed to induce minority councilmembers to accept bribes in connection with developer Wayne Duddlesten's plans to build a city-subsidized downtown hotel.

The Justice Department has yet to respond to comments by Dick DeGuerin, the attorney for port commissioner and lobbyist Betti Maldonado. DeGuerin says FBI undercover operatives posing as investors of the Cayman Group duped Maldonado into passing cash-filled envelopes to minority councilmembers. According to DeGuerin, the Cayman Group wanted Council to ensure that a clause guaranteeing it proceeds and an equity share of Duddlesten's project be written into the final contract the developer would negotiate with the city.

Duddlesten's proposal, which promised substantial minority construction and professional services contracts, was already a heavy favorite of minority councilmembers, and may well have won the contract over competitor JMB/Urban Development on its merits. But there's little question that enthusiasm for his project by minority members of Council was enhanced after the developer said he had secured about $8 million in equity from black, Asian and Hispanic investors. At one point, that total included a proposed contribution from the Cayman Group.

Indeed, minority participation has been a critical consideration in the awarding of city contracts throughout the four and a half years of the Lanier administration. Minority and non-minority councilmembers alike have been known to delay votes on contracts over displeasure with the amount of work carved out for minority firms.

"Everybody down there is participating in someone's contract," Harry Terry says. "The administration has allowed certain people unspecified authority to influence minority contract awards."

Who gets city work has been a thorny issue for Lanier, and at times, the public debate has grown tense with protest marches and subtle charges of racism. Almost two years ago, Lanier began meeting with black leaders over their scant share of construction contracts. When word got out that the mayor was going to retool the city's affirmative action ordinance, women and Hispanics weighed in, and the administration found itself struggling for consensus.

In February 1995 -- about four months later than expected -- Lanier introduced the new ordinance, which bucked the national trend by raising the percentage of city work that goes to minority firms. Anglo contractors grumbled a bit, but for the most part, Lanier's new guidelines seemed to calm the waters.

Behind the scenes, however, the conflict has played out differently -- not through city ordinance, but in the angry shadows cast by Lanier's victory over state Representative Sylvester Turner in December 1991. African-American leaders excoriated the Lanier campaign with allegations that it sabotaged Turner's chances by leaking to Channel 13 a story that suggested Turner may have been involved in an insurance scam. When he took office, Lanier eased the burn by appointing Hall, then a Vinson & Elkins associate, as his city attorney. Within the administration, Hall quietly became a minister-without-portfolio for African-American business interests.

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