Let's Make A Deal

Convicted felons Mike and Pat Graham are at it again, trading allegations for favors

Hofheinz, who was mayor from 1974 through 1977, is awaiting trial for allegedly paying Edwards $2 million for the governor's support of several Louisiana projects, including the youth correctional facility. Collins is awaiting his day in court, too. The former TDCJ director, who retired in January 1996, was indicted two years ago for taking kickbacks from VitaPro Foods Inc. in exchange for a $33 million no-bid contract with the prison system.

Allegations that Pat and Mike bilked Fred Rizk couldn't have come at a worse time for prosecutors, who have already acknowledged the occupational hazards of working with the Graham brothers. In September 1996 Steve Irwin, the assistant U.S. attorney then in charge of the Edwards investigation in Louisiana, appeared before a federal judge in Houston. Irwin's purpose was to delay the testimony of Mike Graham in his wife's bankruptcy proceeding on the grounds that the FBI investigation of Edwards would lose the element of surprise.

At the time, Irwin had been working with Pat and Mike for only a few months. But the prosecutor already had a feeling about the brothers, and it wasn't especially warm.

Mike (left) and Pat Graham were videotaped while giving their depositions.
Mike (left) and Pat Graham were videotaped while giving their depositions.
Fred Hofheinz has to regret ever meeting the Grahams.
AP/Wide World Photo
Fred Hofheinz has to regret ever meeting the Grahams.

"I'm not defending the Grahams as good people," he told bankruptcy Judge Karen Brown. "They're not -- they're as bad they come."

Nonetheless, Irwin testified, the FBI had been able to verify at least some of the damning information the Grahams had supplied, "and the things we were not able to independently corroborate, we believe are lies," he said. "And that's the way it has to be when you deal with the Grahams."

Before the hearing ended, Irwin uttered a comment that suggested prosecutors had heard a great many lies from the Grahams. "They are," Irwin told the judge, "the most manipulative con men probably on the face of the world."

It's too early to tell whether Irwin's nearly four-year-old assessment of the Graham brothers will come back to haunt prosecutors in the Hofheinz and Collins cases. But attorneys for the nearly dozen people who were indicted as a result of the two-state investigation have long argued that the prosecutors, like so many before them, have been conned by Mike and Pat.

"If you had to make a determination of whether someone had done anything wrong, and you had to, in any way, base it on the Grahams' testimony, I just don't see how you could do that with a straight face and in good faith," says Austin attorney William A. White, who represents Andy Collins.

In the meantime, Pat and Mike have reaped the benefit of being government snitches. In 1998, when both were waiting to be sentenced for failing to pay a combined $1.5 million in taxes, Pat and Mike instead saw their felony charges reduced to misdemeanors by Houston prosecutors. Pat, who was looking at a one-year sentence before the deal, got three months in a federal prison camp. Mike, a repeat offender, faced the prospect of ten years in jail, but received only a nine-month sentence, which ended October 28, 1999.

Moreover, three years after he pleaded guilty to the jailbreak scheme, Pat has yet to be sentenced on the felony theft charge. He could get up to ten years. But at the request of government lawyers in New Orleans, U.S. District Judge William Harmon has agreed to delay sentencing until prosecutors can offer testimony on Graham's cooperation in the Louisiana and Texas investigations.

But defense attorneys suspect that represents only a portion of the overall protection Mike and Pat have enjoyed. Collins's trial was, in fact, set to begin in January. But U.S. District Judge Lynn Hughes postponed it when he discovered that prosecutors had not put into writing what the Grahams were promised in exchange for their cooperation, other than that they would not be prosecuted for crimes they brought to the government's attention.

This deviation from standard government procedure on immunity agreements prompted the judge to order rare open-court depositions of the Graham brothers and Louisiana prosecutors. Mike and Pat began their testimony in late February and are expected to undergo additional questioning in the coming weeks. Hughes has given defense attorneys a wide berth to explore not just the immunity issue, but the Grahams' personal finances and their business dealings since becoming government witnesses four years ago.

Defense attorneys have taken advantage of that judicial generosity to zero in on the allegations by Fred Rizk. Armed with subpoenaed bank records, the attorneys were able to show how the Grahams spent almost the entire $250,000 from Rizk in less than three months. None of the money was used for "start-up costs," as Rizk claims he was told. Instead, the Grahams and their families used the loan to make their house payments, buy jewelry and gifts, pay legal fees and otherwise cover the expense of living day to day.

So far, the brothers haven't been very forthcoming on the Rizk matter, for the most part choosing to express their Fifth Amendment right against self-incrimination. Pat and Mike did admit, however, that none of the Rizk money went to pay down some $3 million in back taxes they owe between them. Pat acknowledged that he owns his $400,000 house in Kingwood free and clear, but the government has yet to file a lien against the property. Likewise, Mike Graham testified that other than a few letters, the Internal Revenue Service has made no real effort to collect his unpaid taxes.

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