Bad Deal

John Ballis was a crook. But he expected the federal government to keep its end of a bargain.

John Ballis has a better tan than a prisoner has a right to. The tall, beefy real estate developer looks much healthier now than when he entered federal prison three years ago. Even so, he rails against his incarceration: He is used to having things his own way, and here, at the Federal Correctional Institute in Bastrop, that's not an option.

During the go-go '80s, Ballis, now 50, made money by putting together Houston real estate deals worth upward of $70 million. He lived at one of the city's best addresses, had a farm in west Harris County and a house in Acapulco. He hung with Houston's rich and famous. He still claims Hakeem Olajuwon as his best friend.

Some of Ballis's deals were aboveboard; others were not. And in the instances that his good-ol'-boy charm failed to achieve his whiskey-fueled greed, he was not above running roughshod over friends and the law to get what he wanted. One former associate describes him as "a man without morals."

In a small room adjacent to the prison's main visiting area, Ballis is clearly agitated. Although prison officials have granted his wish for a private space in which to talk to a reporter, he complains that the room is not large enough. As he attempts to display several hand-drawn flowcharts outlining chapters in the dark side of his career, Ballis berates the prison's staff attorney for not providing adhesive tape. Forty-five minutes later, after failing, or refusing, to get to the point, the fast-talking Ballis whines when a guard informs him that he needs to wrap up the conversation. But Ballis's irritation with his keepers pales in comparison to his feelings toward the federal prosecutors and judges who sent him to prison.

In January 1990, Ballis pleaded guilty to having paid a savings and loan president $371,000 in kickbacks in exchange for $6.7 million in loans. But the bald terms of his plea don't convey the bravura of his crime. Prosecutors say the loans he received actually totaled three times that amount. And $300,000 of the kickback was cash stuffed inside a duffel bag -- and delivered via helicopter.

In accordance with the plea-bargain arrangement, Ballis provided federal investigators with information about the bribe and was sentenced to two years of probation. The plea bargain also granted him immunity from any other prosecution related to investigation of the S&L.

Federal attorneys say that Ballis violated the deal by not telling prosecutors everything he knew about the kickbacks. He was subsequently sentenced to 12 and a half years in prison. According to a 1994 study funded by the National Institute of Justice, of the 580 people sentenced for thrift fraud, only four percent received sentences of ten years or more. Ballis, who has nine and a half years left to serve, had the book thrown at him.

Not surprisingly, he sees the soured deal differently from the federal attorneys: The feds, he says, wronged him. He claims authorities broke the law by tricking him into a plea arrangement designed to send him to jail. He insists that government prosecutors deliberately prevented him from telling the whole story, and that they bargained in bad faith.

Surprisingly, that opinion is shared by the federal judge who originally sentenced him and by one of the prosecutors who helped bring him to court. Ballis may richly deserve punishment, his supporters say; but the federal government should be held to its deals, even when the other party is a crook.

"There's no justification for some of the things I've done," says Ballis. "But what I've done is not why I'm in here."

John Ballis worked his way up to S&L fraud. Before he became a multimillion-dollar deal-cutter, he was a crooked dentist.

He grew up in Beaumont, the son of an engineer and a housewife. In 1971, he graduated from the University of Tennessee's College of Dentistry with an undistinguished 2.15 grade-point average. In June, he set up shop in both Houston and Liberty, a small town 45 miles to the northeast. According to a friend, Ballis smelled money in Liberty: The town had only a few dentists and a large number of minority children who might qualify for Medicaid.

Ballis's Medicaid billings led to his downfall as a dentist. During an investigation by the state attorney general's office, two patients testified that they'd gone to Ballis for root canals, for which he billed Medicaid $150 to $175. But examinations by other dentists revealed that no root canals had been performed on either patient.

Ballis claims he was performing a new procedure not easily detectable through x-rays. But on February 25, 1977, the Texas State Board of Dental Examiners voted unanimously to suspend Ballis's dental license. And in a Liberty County court, he pleaded no contest to two misdemeanor charges stemming from 15 allegations of tampering with a government document. He received ten years' deferred adjudication. Asked why, if he was innocent, he didn't fight the charges, Ballis replies, "It just wasn't worth it."

He already had his eye on bigger prizes; by the time his license was suspended, he'd decided to become a real estate developer. After splitting up with his first wife, Ballis met and married Lisa Elaine Reed, the daughter of Houston developer Chester Reed. One insider likens the elder Reed to the John Huston character in Chinatown -- the dealmaker behind the scenes. In Ballis, he found a willing and eager protege.

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