Fred Rizk has known his share of blowhards over the course of his career as a real estate developer, but he couldn't help but be impressed when he first met Michael and Patrick Graham.
Mike (left) and Pat Graham were videotaped while giving their depositions.
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Mike was a large garrulous man with enormous energy and a seemingly endless store of ideas. Understated and precise, Pat shared his brother's love of the deal, but expressed it with a more measured enthusiasm. As business partners, Mike and Pat had clearly enjoyed some success. They drove expensive automobiles, lived in big houses and wore the finest clothes.
Later Rizk would recall that Mike Graham came to his office early last November with a plan to develop some land in Williamson County. The 258-acre property had apparently been in the family for years and was a source of many fond memories for the Grahams, of hunting expeditions and first kisses. Nonetheless, the family had decided that now was the time to develop a portion of the property for an apartment complex.
Always willing to entertain a good business proposition, Rizk took a look at the property and liked what he saw. The land -- a largely untouched landscape of gentle hills and flatland around a small lake in Georgetown, just north of Round Top -- was perfect for development.
In mid-November Rizk tentatively agreed to partner up with the Grahams to develop 25 acres. At the Grahams' request, Rizk also agreed to cover the project's start-up costs by lending $250,000 to the partnership.
Then a shadow fell across the favorable presumptions Rizk had made about his new business associates. On November 29, 1999, former Houston mayor Fred Hofheinz was indicted in Louisiana on bribery and conspiracy charges. According to news reports, the chief witnesses against Hofheinz were none other than Mike and Pat Graham, who had been moonlighting as FBI informants.
In addition to helping federal prosecutors in the Hofheinz case, Mike and, in particular, Pat were instrumental in securing an indictment in Houston against James "Andy" Collins, former executive director of the Texas Department of Criminal Justice. Collins was charged with accepting bribes from a prison contractor.
Rizk -- who, at 74, is semiretired and spends most of his time in Austin -- also learned a number of other unsettling things about the Graham brothers. Mike and Pat owed millions of dollars in unpaid debts and loans, dating as far back as the 1970s. In 1994 a civil jury found them guilty of defrauding investors in a private-prison venture and ordered the Grahams to pay $33 million in damages. In 1997 Pat pleaded guilty to felony theft after getting busted for a bizarre scheme to help a man escape from prison.
Mike and Pat also had a habit of not paying their taxes, a crime for which they each had served time in jail. In fact, when he first met Fred Rizk, Mike Graham had been a free man only a few days, following the completion of a nine-month sentence in federal prison.
Rizk immediately demanded that the Grahams return his $250,000. Apparently he was too late. In a complaint filed in March with the Harris County district attorney's office, Rizk said that Mike and Pat admitted they split the money and that most of it was gone. Rizk also learned that the Grahams may not even own the land they proposed to develop, which is tied up in a title dispute in Williamson County.
As for its sentimental value, the hill and dale so precious to the Grahams had been in the "family trust" since only July 1998, when a Graham partner put up $1.7 million to buy it from a neighbor of Mike's.
</1>I<1>f not for their roles as "cooperating witnesses" for the federal government, Mike and Pat Graham would surely have been behind bars in November 1999, instead of pitching a real estate project to Fred Rizk.
Four years ago the Graham brothers were up to their well-fed necks in trouble. Pat faced an indictment for reportedly stealing $150,000 from a woman on the promise he would arrange a jailbreak for her boyfriend, who had murdered his wife. Pat was also weeks away from being charged with tax fraud, as was Mike, who was still on probation from an earlier conviction for tax evasion.
On April 30, 1996, faced with the likelihood that they'd be sent to prison, the Grahams arranged to meet with the FBI and government lawyers in New Orleans, where they offered the story that Fred Hofheinz had bribed four-term governor of Louisiana Edwin Edwards to gain political support for several projects, including a proposed youth correctional facility in Jena, Louisiana. FBI agents set up an electronic surveillance operation, which eventually led them to believe Edwards was extorting money from riverboat casino operators in exchange for state gaming licenses.
Edwards was indicted following a two-and-a-half-year investigation. Other than triggering the wiretaps, the Grahams apparently played no role in that investigation, nor did they testify at Edwards's trial, which ended last month with the former governor's conviction on 17 counts of racketeering.
On the other hand, the corruption cases pending against Fred Hofheinz and Andy Collins are based almost exclusively on the veracity of Pat and Mike. According to government records, including affidavits and transcripts of the brothers' debriefing sessions with prosecutors, the feds appear to have little corroborating evidence in either case.
