Embarrassing Little Secrets of Hotel Six

Last month, FBI informant Julio Molineiro learned the hard lesson that when you take the stand as a major witness in a six-ring federal bribery-conspiracy circus, cross-examination is likely to bring out all your best-buried little secrets. In Julio's case, they just happened to be tax evasion, drug use, prior theft convictions and conduct unbecoming even a snitch.

Now, as the remaining defendants in the marathon trial testify one by one in their own defense, the spotlight on their private lives is proving equally revealing. In the case of former councilman Ben Reyes, it involved an admission that he had long falsely claimed to be a veteran wounded in action. More on that later.

Councilman John Castillo's tax returns revealed he had tripled his income since taking over the District 1 seat in 1995 and had failed to report as taxable income payments from his mentor Ben Reyes's congressional campaign and cash he admitted Reyes had slipped him at the Montrose eatery Ruggles. Then there was the little matter of spending $400 he had known was an illegal contribution to win a political dance crown as Rey Feo [King Ugly].

But compared to what followed when his Council colleague and codefendant Michael Yarbrough testified, Castillo came off looking like Mr. Solid Citizen. The portrait that emerged from Yarbrough's interrogation was of a public official making $42,800 a year who has no bank account, pays his bills with money orders purchased at a post office and tends to simply collect cash handouts from business people and groups like so much string to be stuffed in his pockets. Yarbrough admitted he withdrew $12,000 for his campaign account prior to the 1995 elections and spent it without keeping any receipts to document the lucky recipients.

Under such circumstances, who wouldn't be tempted to keep a little of that loose green stuff for personal use? Not me, declared Yarbrough, who claimed he had actually spent part of a $1,500 videotaped cash payment from undercover agents to buy baskets for senior citizens. Without keeping receipts in that case, either.

Yarbrough had been present at Carrabba's restaurant when Reyes, in a profanity-laced conversation, described how he had forced a contractor to give him a payoff in exchange for help in getting a city contract approved. Yarbrough is accused of accompanying Reyes into the restaurant bathroom and accepting a packet of cash.

To explain his taped admission to agents that he received $1,500 from Reyes, Yarbrough reported an exchange of money never mentioned before. According to Yarbrough, when he confirmed the payment on-camera, he had really meant money Reyes legally collected at a fundraiser two months previously. According to Yarbrough, Reyes had initially given him a packet of checks, and then passed him an envelope of cash at a wrecker industry meeting that also contained contributions from that earlier fundraiser. It was that legal cash that Yarbrough said he was confirming when taped by the FBI.

When Yarbrough was interviewed by federal agents at his home on May 9, 1996, as the sting investigation went public, he flatly denied receiving cash from Reyes and never mentioned the alleged cash transfer at the wrecker meeting.

After grilling Yarbrough on his failure to file campaign reports for the period of late 1995 and early 1996 encompassed by the FBI sting, prosecutor Mike Attanasio snapped a trap on the apparently unsuspecting councilman. After getting Yarbrough to testify that he was not above the laws that his constituents had to follow, Attanasio asked, "Did you file income-tax returns for 1994, the year you began serving on City Council?" Before Yarbrough's attorney, Mike DeGeurin, could object, Yarbrough admitted he had not filed returns for that year or the next two.

The tax admissions provoked a few gasps around the courtroom. During a break in the proceedings, DeGeurin provided a visual commentary on the testimony by dragging hard on a cigarette, sticking his fingers in his ears and then blowing the cancer stick several feet through the air. DeGeurin later moved for a mistrial on the grounds the government had not disclosed the tax information on Yarbrough as part of routine pretrial discovery.

"What's really happened here is that Mr. DeGeurin didn't know it," replied Attanasio smoothly. "But that's not the government's concern." Judge Hittner agreed, and denied the mistrial motion.

Later, the councilman tried to recover by declaring that since tax deductions were withheld from his paychecks by the city, the government actually owed him money.

The slam dunk on Mike DeGeurin angered his brother, Dick DeGuerin, Betti Maldonado's attorney. "My brother's too nice to object," fumed Dick DeGuerin in open court during another exchange between prosecution and defense. "I'm not going to let [Attanasio] do that to me."

Not content to leave it at that, Dick DeGuerin then vented to a Channel 26 reporter, Sue Speck, when she asked whether he would put Maldonado on the stand after the carnage inflicted on Castillo and Yarbrough. "I hate to turn her over to those bastards," snapped the lawyer, "but I might have to."

When prosecutors protested the following day, Judge Hittner upbraided Dick DeGuerin out of the jury's presence for an "outrageous" comment, and said he would penalize the lawyer in the future in a way that would not affect the trial. Dick DeGuerin in turn issued a tepid apology in which he denied intending to insult anyone's parentage.

"The rodeo's started," cracked silver-haired, bulldog attorney Mike Ramsey shortly after his client Ben Reyes finally began his testimony last Thursday. The former councilman is the heart and dark soul of the Hotel Six case, and after the melancholy demolition of Castillo and the near comic pummeling of Yarbrough by the prosecution, he brought a presence and charisma to the stand that had been absent most of the trial.

Stripped of his Council seat by term limits and with much of his dignity damaged by a string of FBI audio- and videotapes filled with his own obscenities, Reyes came across as a lion in winter, with no outward acknowledgment that his power had diminished. When Attanasio objected that Ramsey was putting words in Reyes's mouth, Reyes coolly replied, "I can speak for myself."

Ramsey chose to begin Reyes's defense with one of his strongest pieces of evidence, a fragmented FBI videotape taken at a west Florida resort in September of 1995 in which Reyes repeatedly states he didn't plan to profit from the downtown hotel project. Reyes and his son, Peter, and brother, Tony, flew to Florida in September of 1995 for a meeting with other members of the Cayman Group, which was ostensibly seeking a role in the Duddlesten downtown hotel project, backed by Ben Reyes.

The prosecution had claimed that the tape of the Florida meeting was unintelligible, but defense experts had reconstructed much of the dialogue.

In banter with an FBI agent going by the alias Len Davis, Reyes talked about his two stints of duty in Vietnam as a U.S. Marine. "I got shot," the then-councilman told a group that included Molineiro and agent Bob Dogium, who was playing the role of Cayman Group president Marcos Correa. Son, Peter, added: "Got his lung shot out."

In his political career in Houston, Reyes has never been shy about playing up the war injury. During one speech before the downtown Kiwanis club in the '70s, Reyes emoted so sincerely about it that a retired Marine general rose from the audience and came forward to embrace him.

Upon Reyes's retirement from City Council, state Senator Rodney Ellis issued a congratulatory proclamation in 1995, citing Reyes's "two Purple Hearts."

In his campaign literature for the 1994 congressional race and runoff against eventual winner Gene Green, Reyes also claimed that he was awarded numerous combat decorations, "including those that would mark the end of his military career -- two Purple Hearts for wounds suffered in the loss of a lung."

In a Press interview for that race, Reyes had this account of the shooting that led to the removal of a lung: "Every time after that, I felt I was on borrowed time and somebody let me live an extra few years to do something."

Pressed for details about his wounding, Reyes declined. "Too many people died in that war needlessly, without any kind of fanfare, and their bodies came home and they were buried and nobody gave a damn. We ain't going to play war hero."

It turns out there were more reasons than simple humility for Reyes not going into the details, and Ramsey was quick to draw it out of his client in court last week. With the example of Yarbrough's humiliation over the disclosure of his failure to file tax returns still fresh, and knowing that prosecutors had access to Reyes's war record, Ramsey decided to defuse an inevitable revelation and minimize the damage to Reyes's credibility.

"In fact, did you get shot in Vietnam?" Ramsey asked Reyes, who answered "No, sir." In fact, Reyes testified, he had suffered an infection known as black lung disease, and the lung was removed at a stateside military hospital after an attempt to do the surgery on a Navy ship was canceled because of bad weather. As it turns out, Purple Hearts are awarded for injuries in combat, and Reyes's Marine records don't include mention of the prestigious military honor, a source told the Press.

Another one of those ugly little Hotel Six horned toads had just hopped out of the bag.

As Reyes continued to testify, the shape of Ramsey's defense strategy came into focus. Early on, the defense had hammered at informant Molineiro's credibility and ability to selectively tape the targets of the investigation. In his examination, Ramsey now led Reyes through a series of recordings that document the defendant repeatedly refusing offers of money from Dogium and disclaiming any intent to profit from the hotel deal.

The prosecution countered that Reyes was very selective about whom he revealed his true intent to, and excluded Dogium from that circle of confidence.

On the other hand, Molineiro clearly had the councilman's complete trust. Asked by Ramsey to compare Molineiro to other con men he had met, Reyes paused. "Few like Julio. He was the best."

Ramsey's explanation for Reyes's filmed acceptance of a bag containing $50,000 in December of 1995 at a westside apartment is that it was a legal loan set up by the agents to trick Reyes into incriminating himself. Reyes contends the government repeatedly tried to get him to take cash, but he refused. By this account, Molineiro then set out to entrap Reyes by luring him into an alleged joint venture to purchase distressed city properties at a county auction.

Reyes testified that as a councilman he had lobbied in Austin to secure state legislation to allow properties seized for nonpayment of back taxes to be sold off without requiring the purchaser to pay off those accumulated liens. He hoped to exploit the new law by buying up properties before the rest of the real estate community realized they were available at bargain prices.

There are a few problems with that defense line, the first being that Dogium told Reyes on tape that the Cayman Group did not want to invest in the real estate venture. On tape, when Molineiro hands Reyes the bag of cash, he explains that it is a present for helping the Cayman Group win a role in the hotel contract. When Reyes actually purchased the parcels of land, he did so in his own name and that of his son and girlfriend, rather than the name of a joint venture.

In his testimony, Reyes claimed Molineiro had actually met him at several previously undisclosed meetings at an eastside restaurant, Los Molcajetes, where the alleged details of their joint venture were hammered out. No tapes exist of those meetings, and Reyes was hazy enough about the dates to prevent the government from proving that Molineiro could not have been present.

Ramsey then highlighted a telephone conversation in November of 1995 between Reyes and Molineiro, where the informant, apparently searching for the right phrase, says: "Everything is arranged ... the ... all the loans ... all the tickets that ... all the loans are taken care of." According to Ramsey, the exchange proves that in untaped conversations, Molineiro enticed Reyes into believing the $50,000 was a venture capital loan to purchase the properties.

The taped evidence that has been introduced in trial is ambiguous as to whether Molineiro and Reyes had any business connection on the real estate front. Reyes does repeatedly talk to Molineiro about his purchases at the auctions, but each time the agent seems somewhat confused, and time and again asks for explanations of the activity.

The government contends that Reyes accepted the $50,000 as a clear-cut gift, and no matter how he chose to spend the money, it constituted a bribe to help the Cayman Group win the hotel project.

In testimony, Reyes came up with a novel explanation for why he had claimed on tape to Dogium that he had bribed nine Houston city councilmen with gifts of $5,000 each. The Cayman Group operatives, explained Reyes, were Latin American cowboys who would have tried to bribe city officials on their own if he had not convinced them that he was already doing so.

"It was going to be a real tough deal to keep them from screwing up," explained Reyes of Dogium and Molineiro. "It was a way for me to take the opportunity away from [Dogium] to give money to councilmembers ... a way to cool him off."

Testimony ended last week on that note, with explanations still to come from Reyes on a batch of FBI tape recordings of Reyes and Molineiro preparing alleged bribes for Councilman Castillo, Yarbrough and then-councilman Peavy. Stay tuned to find out if they prove more convincing than the account of Reyes's war wounds.


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