By Craig Malisow
By Jeff Balke
By Angelica Leicht
By Jeff Balke
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
By Ben DuBose
A case that involved millions of dollars in fraud, undercover operatives and culprits-turned-snitches could expect testimony tinged with sometimes bitter recriminations.
And that was the situation in a sentencing hearing played out in an El Paso courtroom in 2000. El Paso attorney Victor Bieganowski had been convicted of massive medical and legal fraud.
That kind of acrimony underscored the unusual twists that ultimately produced the September racketeering indictments of United Transportation Union officials for allegedly shaking down lawyers for lucrative union-endorsed business. The formal case, only in its infancy, is already revealing a lengthy probe that wound its way through colorful personalities: an acupuncturist shrink, his opportunistic lawyer brother and a former train engineer-turned-supervisor of a Houston AIDS program. Along with those were the internal clashes among prosecutors themselves competing for -- and against -- deals for informants.
In 1998, the good karma finally ended for the brothers Bieganowski of El Paso.
Dr. Arthur Bieganowski told of his belief in chi, the magical energy that could be unleashed in the body through his acupuncture sessions. The neurologist and psychiatrist had parlayed his pin practice into huge profits over the past decade. Evidence from his billing office in nearby Juárez showed he'd charged about $43 million and collected $31 million, primarily from federal health programs and Texas workers' comp funds, as well as private insurers.
Brother Victor conveniently maintained a law office upstairs from Arthur's clinic, and was a part of keeping the operation successful -- or too successful, in the opinion of a legion of investigators.
To penetrate the long-running scheme, two FBI agents posed as auto accident "victims" who were solicited and processed for treatments despite claiming no injuries. Reviews of clinic records showed systematic overbilling of health agencies and private insurers. A jury convicted the doctor of fraud and money laundering after an eight-week trial in 2000. He was described as blowing kisses to his friends before being sentenced to 14 years in prison and ordered to pay $23 million in restitution.
Arthur had already served about two years in custody before his sentencing, although brother Victor fared considerably better, thanks to his considerable resourcefulness. Both were indicted in 1998, and Victor had quietly pleaded guilty to fraud more than a year before Arthur's conviction. But Victor would remain free for more than four years after his indictment -- even gaining the government's permission to travel to the Cayman Islands, where the Bieganowskis had stashed millions of dollars in offshore accounts.
Some of the insight into the special handling of Victor recently surfaced in a Houston federal perjury case, a quiet precursor to the high-profile indictments of the United Transportation Union officials.
Neal F. Babineaux had been out of the railroads and organized labor for about four years when he received his summons to appear before a federal grand jury in Houston in 2001.
The questioning began innocently enough, as he was asked to recount his background. The Katy-area man had gone to work for Southern Pacific in 1977, two years after graduating with a business degree from the University of Louisiana at Lafayette. He became a locomotive engineer making runs between Houston and Lafayette and gravitated into rail union activities by the early 1980s, when UTU's Local 83 elected him its chairman.
After rising through the labor ranks, he backed Charlie Little of Leander, just northeast of Austin, in his winning 1995 run for president of the international union. That took Babineaux to UTU's headquarters in the Cleveland area, but he was back home and out of the union after several months. He said the long hours and extensive travel, coupled with his wife's illness and a teenage daughter, led to the decision to quit the $66,000-a-year position as an executive staffer and return to Katy.
The nonprofit River Oaks Health Association, contractor for a HUD-funded program for homeless people with HIV, hired him as its executive director six years ago.
In the grand jury proceedings, prosecutors soon revealed their real interest: Did he know about union officials soliciting bribes from lawyers to get on their lucrative designated counsel list to represent injured workers?
"No," he replied. "And to this day I don't think it exists."
The questions became more precise: Wasn't he a go-between in funneling lawyers' payoffs to union president Little? Hadn't his wife, a title company employee, forwarded those bribe payments to him from Katy to Cleveland? No.
And didn't he once confide that he'd take his knowledge about such secret payments "to the grave"?
Babineaux's denials dug himself into only deeper problems. A sealed indictment accused him of obstructing justice by lying to grand jurors. He had been secretly recorded earlier making the disputed remarks and outlining the system of payoffs from lawyers.
And the man wearing the wire was none other than an El Paso lawyer named Victor Bieganowski.
The case against Babineaux seemed simple. A jury would only have to listen to the secret tape recordings, then to his testimony lying about ever saying such things.
But his aggressive defense attorney, Gus Saper of Houston, was soon uncovering critical information about the underlying case of payoffs by lawyers to make the union's coveted list of designated counsel.
Recordings by operative Bieganowski were extensive and detailed. In the attorney's sentencing hearing, testimony revealed that the FBI and prosecutors outfitted his Houston apartment with a camera and microphones. And his road trips as an informant took him and his wire to the union's national convention in Miami and meetings with union brass in Las Vegas, Austin and Marco Island in Florida. In fact, in his first meeting with investigators in 1999, he was so eager to cooperate that Bieganowski used his own money to buy a tape recorder -- the Miami convention was only seven days away, leaving the FBI without enough time to rig him with their sophisticated equipment.
However, Saper's defense work for Babineaux raised questions about the evidence. Transcripts of tapes did not always reflect what was said, and one of them suggested that Victor Bieganowski might have been selective about what he handed over to authorities. "Yeah, but I'm not going to give them that," he's heard to say. "Good thing I played this. Do you have another tape?"
More questions about Bieganowski's credibility -- as well as some embarrassing moments for prosecutors -- came when Saper gained access to transcripts of the informant's own sentencing session in El Paso, on his guilty plea to the charges related to the medical fraud investigation.
Debra Kanof, a blunt-spoken assistant U.S. attorney for the Western District of Texas, headed that El Paso case. She clearly didn't want Bieganowski to duck a hefty punishment just because Houston investigators from the Southern District had interceded to snap him up to help on their union payoff probe.
After all, she told the court at his sentencing, Bieganowski had hindered the fraud investigation to the point where they'd cut off any talk of a deal. "I've never had a cooperator that was so manipulative," she said. "It wasn't until the trial that we found out just how manipulative and how many lies Victor Bieganowski gave to us."
That animosity was compounded when she learned that Western District prosecutors had agreed to not oppose probation for their key operative -- even though it would come in a case that wasn't theirs. Her wrath focused on Assistant U.S. Attorney Ed Gallagher, who led the union investigation and made the offer to Bieganowski. Her defendant, Kanof contended, had manipulated Gallagher, who had "meddled" in her case to the point of violating Department of Justice regulations about such deals.
Kanof added that she told his supervisors about the situation only after word of the feds' turf war reached them. "I didn't rat on him."
Gallagher dismisses the fracas as a "nonissue as far as the government is concerned" and says it was merely her opinion. "The issues of internal disagreement between two U.S. attorney's offices really are just that: internal," he says. "I don't think it is newsworthy -- it is just trash."
He attributes it to "off-the-cuff comments" made by a frustrated prosecutor, and scoffs at any claims that Bieganowski manipulated investigators. There's no indication that Kanof's remarks triggered any internal investigation, and Gallagher's reputation appears to be solid.
However, as Babineaux lawyer Saper continued to uncover more evidence of governmental infighting, prosecutors seemed to warm to the prospects of a deal. In September, Babineaux pleaded guilty and agreed to cooperate in the union case in return for a $3,000 fine and two years of probation.
Saper says he believes there would have been problems with the government's case at trial, although he notes that he can't predict what the outcome would have been.
Only weeks after the plea, the U.S. Attorney's Office here announced racketeering and fraud indictments against UTU president Byron Boyd Jr. of Seattle, retired president Little and two other union staffers. They are accused of taking nearly $500,000 in bribes from lawyers. Boyd's attorney, veteran white-collar fraud specialist Bob Sussman of Houston, declined comment on his client, who remains in office while fighting the charges.
Saper's curiosity is more about those who were not charged or indicted: the scores of plaintiffs' attorneys who profited by making the payoffs to gain the union's clients.
Court documents in Babineaux's perjury case indicate that about 40 attorneys were called as grand jury witnesses, although it is unknown how many testified about being solicited for bribes or paying them.
Prosecutors in his case told U.S. District Judge Nancy Atlas about five named lawyers who were prepared to testify that Babineaux had solicited money from them or received payments. They were Robert Pierce and Lou Ramond of Pittsburgh, Joel Alexander of Birmingham, and Houston attorneys Rodney Steinburg and Tommy Ray Ledbetter.
In one filing of planned evidence for trial, prosecutors say that Babineaux asked for $25,000 from Ledbetter in 1995, as "campaign expenses" for then-president Little. "When Ledbetter refused, the defendant stated that one day Mr. Ledbetter might look around and see that he did not have as many union cases anymore," the court document states. Alexander was told to pay $15,000 and if Little was elected, he'd be on the designated counsel list.
However, Saper says it is "more than a little unusual" that attorneys called to the grand jury were all given immunity, even before investigators had inquired about their information. Those knowledgeable about the probe say the immunity grants were necessary to gain evidence against the union bosses, and such tactics are common in efforts to penetrate criminal conspiracies.
"It just seems strange to me that the people who stood to make the most money are the ones who aren't indicted," Saper says. Unlike the union officials who are threatened with prison, "the rich designated legal counsel are going home scot-free to make more millions."
Those are only some of the deals surrounding this investigation. Bieganowski testified that he invested about $200,000 of his own money and time to help the government make the union case.
Bieganowski walked away from his stormy sentencing hearing with a 30-month sentence, along with orders to pay restitution of about $375,000. In fact, he is now scheduled to be released from a prison unit by next week. Gallagher says the controversies surrounding Bieganowski are public record and fair game for cross-examination.
"I look forward to these issues being litigated," he says. "Mr. Bieganowski is a very small piece of a very large pie of evidence."