Hotel Whitewash

What do the FBI and developer Wayne Duddlesten have in common?

You don't normally think of millionaire property manager/developer Wayne Duddlesten as a civil-rights leader, but he sure sounded like one back in October 1995, as he pitched City Council members on why his plan to build the $150 million downtown convention center hotel was superior to that of rival JMB Development.

Duddlesten, whose more accustomed public role is that of longtime crony to former mayor Bob Lanier, seemed to be taking a few pages out of the Reverend Jesse Jackson's book as he proclaimed his vision that minority investment groups would share in the profits of the hotel.

"I can't tell you how the light bulb went off in my mind," the developer melodramatically declared of his personal epiphany when he grasped the idea of letting minorities buy into a third of the hotel deal. "How totally excited I was!" he rhapsodized, seemingly on the verge of breaking into a stanza of "We Shall Overcome."

The tall, thin Duddlesten played to the councilmembers like a veteran street preacher, slapping his palm on the lectern as he spoke, slowly turning his head from side to side to fix each official with what seemed like a beam of emotional sincerity.

"They want to become part-owners of this hotel. Now, I hope this says to you [thump] what it says to me [thump], that this is an unprecedented opportunity.... Why not be the first city in the country to say ... their dollars mixed with ours and they became owners, not just workers, they became owners with us!?"

Duddlesten used that promise of a 30 percent minority ownership in the hotel and the involvement of the Hilton Hotel interests to successfully woo councilmembers, who voted 132 for his proposal on January 31, 1996.

Yet somehow, that glowing vision of multihued hotel brotherhood never came to pass. The structure of Duddlesten's deal has since gone through a financial mix-master, and the one ingredient that did not survive in the blend was minority ownership.

The short 1998 answer to Duddlesten's plaintive "why not?" is that the developer proved far more passionate about using minority investment as an issue to win his contract than he was about actually implementing it.

Although no one realized it at the time, it seems that Duddlesten and the FBI undercover agents who posed as Latin American businessmen to lure City Council members into accepting illegal cash had more than a little in common. Both used the promise of minority investment to carry out their schemes. The G-men nailed six targets, including four current or former councilmembers, with bribery-conspiracy indictments, while Duddlesten walked away with the contract.

In their rush to enlist in the Duddlesten rainbow coalition, minority councilmembers seemed to forget they were dealing with a man who lives in virtually all-white River Oaks and had never shown much previous passion for involving minorities in his ventures.

Even that master of political self-immolation, recently defeated city controller Lloyd Kelley, instantly saw through Duddlesten's shuck and jive in 1995, characterizing it as a shallow attempt to punch some members' emotional buttons.

"By pledging 30 percent, Duddlesten is being very slick," opined Kelley at the time. "That's one of these ploys to get votes, knowing he doesn't have to meet it because there's no penalty."

Former Lanier chief of staff Dave Walden believes Duddlesten would have accepted minority investors had they shown up at his door with cash, but at the same time, figures the main thrust of the minority ownership pledge was "somewhere between smoke and bait" to get Council votes.

"I think he was sincere in trying to seek it and plug it into his deal, and it was good politics to say that," says Walden. "But the facts are, it was such a poor deal from a financial standpoint, I don't know that they could have found any minorities or majorities interested in risking that kind of money on such a speculative venture."

Like that bogus FBI front company, the Cayman Group, which turned out to be a total fiction, Duddlesten's promised ownership for minorities in the hotel proved to be a mirage that vanished once the developer won the contract and the project took some unexpected detours on its way toward implementation.

All that Duddlesten excitement about the union of white, black and brown greenbacks was nowhere in evidence as the pokerfaced developer stepped into the witness box in Judge David Hittner's federal courtroom last week. He had the air of a visiting head of state. Before he took the stand, the six defendants, one by one, came by to deferentially pay their respects.

Three of his former hotel team members, Betti Maldonado, Ross Allyn and Ben Reyes, sat at the defense table to his right, charged with bribery and conspiracy. While Duddlesten held out the bait of minority ownership to councilmembers for their votes, his teammates are accused of using a far less altruistic lure: cold, green cash. (The trial is in recess this week, and will begin again next Monday as the defense resumes its case. The trial is expected to run through mid-May.)

Judging by Duddlesten's terse, dismissive testimony, the subject of minority ownership in the hotel doesn't hold nearly the allure to him now that it did back when the hotel contract hung in the balance. At that juncture, Duddlesten and opponent Joe B. Allen, the Vinson & Elkins attorney representing hotel rival JMB, were fighting vote by Council vote to win the right to build the hotel. As Duddlesten testified, his promise of minority ownership was good political strategy and helped him win the contract.

But that was then, and this is now, Duddlesten regretfully informed the court. "Today, there is no minority equity." Duddlesten testified that his new partners in the hotel, Crescent Real Estate Equities of Fort Worth, have 80 percent control of the deal and are calling the shots.

When he was seeking the contract, Duddlesten paid extensive lip service to three minority investment groups that he introduced to Council as his future co-owners. But, as the developer testified, all that touted minority presence amounted to a few letters of intent, with no hard cash on the table.

"Sir, I would not characterize [minority investment] as being relied upon," Duddlesten told Maldonado defense attorney Dick DeGuerin. "I would characterize it more as making [ownership] available to [minorities]." Since no minority money materialized, Duddlesten seemed to be saying, his commitment to include minority owners was no longer operative.

Under questioning, Duddlesten also minimized the impact of his minority ownership pledges on his winning the hotel project, and suggested that Allyn and Maldonado had played minor roles in the campaign to win Council support. Those assertions don't correspond to the recollections of Marc Campos, a member of the rival JMB team.

"Ben, Betti and Ross were essential in influencing councilmembers and winning that deal," claims Campos, who recalls that every time JMB would visit a councilmember, Allyn was waiting outside the door to counter the effort. In Campos's view, Duddlesten's pitch for minority ownership turned the Council in his direction.

Allyn's attorney Paul Nugent took several sarcastic swipes at Duddlesten's seemingly faulty memory about who had helped him win the hotel contract and what he had promised in return. Under Nugent's cross-examination, Duddlesten initially couldn't even remember paying Allyn for his services until the lawyer produced a canceled $5,100 check signed by Duddlesten.

Just as the developer couldn't recall whose services helped him win the hotel contract, he is now disavowing responsibility for the minority ownership pledges that he so emotionally made to councilmembers. "I don't make those decisions now," he testified.

City Director of Convention and Entertainment Facilities Jordy Tollett isn't quite so willing to let Duddlesten off the hook. "I didn't hear his testimony," says Tollett, who is responsible for monitoring minority participation in the hotel project. "But I'm shocked that he would say that if he made some arrangement with Crescent, that he's saying he's not involved. I don't know that we made that deal."

According to Tollett, Duddlesten made the original minority ownership commitments in excess of what the city required under its Minority, Women, and Disadvantaged Business Enterprise program, and should be held to those commitments no matter what changes have occurred to the financing of the hotel.

"He's the one that took it further and said he wanted to go further," says Tollett of Duddlesten. "I would hope he passed that on in his arrangement.

"I'm not going to say 'well, that's too bad now,' They're the ones who made the statements, and I hope they live up to them no matter who he sold it off to."

Duddlesten is hoping to break ground on the hotel this summer, but it isn't up to him to set a date. Unable to make his financial commitments after the Hilton Hotel chain pulled out of the deal, Duddlesten peddled 80 percent of the hotel package to Crescent, which is controlled by Richard Rainwater, who got his start with the billionaire Bass brothers in Fort Worth. Mayor Bob Lanier announced the new arrangement late last year in a City Hall news conference.

Crescent has bought more than a billion dollars' worth of property in the Houston area, including the so-called Texas Eastern parcel originally owned by the rival hotel-proposal owner, JMB Development. The hotel will be built on that site rather than a nearby parcel of land originally earmarked by Duddlesten.

Crescent is now represented by Bill Miller, the same Austin-based political-relations consultant who helped Duddlesten win the contract battle. Miller insists that the hotel battle was decided when Hilton joined the Duddlesten team, and not because of the developer's promises to include minority owners. Asked whether Duddlesten's commitment to 30 percent minority ownership should be honored by Crescent, Miller indicated the issue isn't on his radar screen.

"These guys are traded on the New York stock exchange," comments Miller. "They just do business deals. They do their charity work, or whatever, but does that mean getting minority investors for the hotel deal in Houston?"

Miller paused. "I don't think that factors in. They think a little more globally than that."

The next time the hotel deal comes up before City Council, perhaps the minority members should try to think globally as well, and hold Crescent to the commitments made to Council by the man who won the contract.

E-mail Tim Fleck at tim_fleck@houstonpress.com.

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