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Snitch Vs. Snitch

Jorge Arroyo's head appeared to be on a swivel. From his vantage point in the burgundy leatherette booth, he constantly monitored the other patrons of Houston's: Was anyone in the Kirby Drive restaurant watching him? He'd spent much of the past two decades as a paid informant for the U.S. Drug Enforcement Administration. In the snitching business, you watch your back.

When he wasn't looking over his shoulder, the wiry Bolivian spoke elliptically to the two attorneys who'd joined him that July evening four weeks ago. Kent Schaffer, a dark, dangerous-looking man with a beard, had made a career of defending suspected drug dealers and was considered one of the best at his craft. Likewise, lanky Dan Cogdell had carved a reputation as one of the top criminal-defense attorneys in Houston. Cogdell had a corporate air befitting his usual white-collar clientele; for him, meeting with a twitchy snitch was slumming.

The two lawyers had recently joined forces on a case that required both their areas of expertise. In October 1986, a federal grand jury indicted Woodlands businessman Daniel Steven De La Garza on four counts of money laundering. Along with his two brothers, De La Garza had built an estimated $10 million fortune in real estate and managed care. According to both state and federal authorities, he also controlled shadier dealings on the side. And like Arroyo, he'd worked as a federal informant.

In fact, that was how he met Arroyo. In the 12 years since, their history has been one of lies and double-crosses. Each has tried to set the other up, and each has used the feds to do it.

Now, in late July, their paths were about to cross yet again. De La Garza's money-laundering trial was set to begin the first week of August, and Arroyo was scheduled to be the prosecution's star witness.

Earlier that day, the attorneys say, they were in Schaffer's office conferring about the De La Garza case when Schaffer received a call from Arroyo. Schaffer had represented Arroyo in 1985, when he'd been charged with smuggling cocaine from Colombia; even so, Schaffer thought it somewhat unusual that Arroyo would get in touch with him, since prosecution witnesses rarely offer to make themselves available to the defense. But on the phone, Schaffer says, Arroyo said he needed to talk with him about the De La Garza case and arranged to meet the two lawyers.

In the Houston's booth, Schaffer sipped an ice tea; Cogdell, an O'Doul's. After a few minutes of small talk, Cogdell asked Arroyo to explain why he was testifying against De La Garza, why he would help a government that had previously prosecuted him. Arroyo again checked to be sure he wasn't being watched. Then, on a cocktail napkin, he wrote a dollar sign. He complained that the federal authorities were mistreating him, that they had reneged on an agreement to pay him for his testimony and planned to humiliate him by bringing up his criminal past during De La Garza's trial.

Cogdell asked Arroyo how much the feds had paid him over the years to be an informant. Arroyo suggested that Cogdell guess. The attorney took the cocktail napkin on which Arroyo had written the dollar sign, and beside it, wrote "50,000." Arroyo took the napkin, tore off the writing, put the scrap in his mouth and swallowed it. He gave a thumbs-up sign, and began describing his car and how money could be placed in the back of it.

Cogdell was dumbstruck, then furious; nothing like this had ever happened in his white-collar practice. "If you think that I offered you $50,000 not to show up next week, you're fucking crazy," he told Arroyo.

Schaffer was cooler. He quickly said that the meeting needed to end, and told Arroyo that they would get back in touch.

Leaving the restaurant, the two lawyers worried that they were being set up by Arroyo, and possibly by the feds. Both Arroyo and their client operated in the shady world of stings, informants and double-dealing. The lawyers wondered whether they, too, were being sucked through the looking glass, entering a realm where facts are hard to come by and nobody can be trusted.

A "sleazy saga of illusory illegality" is how the Fifth Circuit Court of Appeals characterized the first chapter of Dan De La Garza's relationship with Jorge Arroyo. In the court's ruling on the 1985 drug charges against Arroyo, no one emerges as a hero -- not Arroyo, not De La Garza and certainly not the feds.

Arroyo had connections to the rich and shady in Bolivia; he was married to the daughter of Hugo Banzer Suarez. In 1971, Banzer seized control of Bolivia during a military coup, allegedly with help from Klaus Barbie, a fugitive Nazi often called "the butcher of Lyon." Reportedly, the coup was financed by Bolivian drug lords.

 

Banzer's first reign as president lasted roughly seven years. During that time, according to the Los Angeles Times, members of Banzer's family were involved in the sale of drugs. In May 1989, the newspaper reported that one of his daughters had openly peddled cocaine on the campus of the American Cooperative School in La Paz, and that his physician son-in-law had been arrested carrying a suitcase full of cocaine in Canada.

Trouble eventually found Arroyo as well. In 1982, he left Bolivia to study English in Houston. In July of that year, he was convicted of possessing less than half a gram of cocaine and placed on eight years' probation. With financial help from his father-in-law, he went into business selling empanadas wholesale. When the business failed, he filed for bankruptcy.

De La Garza, on the other hand, had no high-and-mighty family connections. He grew up in Corpus Christi, the eldest of six children, and started his adult life as a military police officer. His enormous size -- then, as now, he weighed approximately 300 pounds -- made him a force to be reckoned with. When he left the service in 1978, he started a company called International Bodyguards.

As a bodyguard, De La Garza traveled with entertainment figures and foreign nationals visiting the U.S. In 1982, he was twice indicted on two counts of theft over $10,000; each time, the charges were dropped. According to an investigator involved in the probe, some of De La Garza's clients used the aircraft-fueling services of a company called Universal Weather and Aviation. De La Garza, the investigator says, somehow managed to divert the payments his clients wired into his own bank account. The court records have been sealed, and De La Garza denies the allegations. But the investigator believes that the criminal suits, as well as a civil suit by Universal, were dropped because De La Garza agreed to make restitution.

Arroyo would later claim that De La Garza used the bodyguard business as a front for dealing drugs. De La Garza denies that allegation as well, saying that he never used drugs, and purchased them only in his role as a DEA informant.

De La Garza says that he developed an informal relationship with the agency through a friend who worked for the Houston Police Department. The Fifth Circuit ruling suggests another connection as well. Harvey Davis, an old friend of De La Garza's from Beaumont, is described by the court as a "drug addict and double-dealing informant." After Davis was busted for coke in Phoenix, he arranged to have the charges dropped; in exchange, he moved back to Houston and began informing for the DEA. Somehow, De La Garza was included in the deal, and both he and Davis were assigned to DEA Special Agent Roger Norman.

In the summer of 1984, Davis and De La Garza were told to gather information about Arroyo, who claimed to be able to obtain large quantities of cocaine through his family connections. Norman, De La Garza and Davis obtained an introduction from two alleged drug dealers, Guillermo Nino and Jackie Higgins. Then, for several months, the trio met with Arroyo to discuss purchasing as much as 100 kilos of powder. They proposed various schemes for smuggling the contraband into the country, ranging from high-concept (hiding the dope in the flange plates of jets flown here for repair) to downright ordinary (De La Garza and Arroyo would meet a Bolivian "mule" in Mexico, then simply drive the coke across the border).

During this time, Nino and Higgins, the pair who'd introduced Davis and De La Garza to Arroyo, disappeared. Dealers are not the most reliable of people, but none-theless, De La Garza was alarmed. He and Davis filed a complaint with the DEA accusing Agent Norman -- their own contact -- of robbing, then murdering, Nino and Higgins. (The Fifth Circuit does not probe the truth of this claim, but notes dryly that neither Nino nor Higgins was later available to testify.)

Nonetheless, De La Garza continued to work for the DEA. And in September 1984, he and Arroyo planned to go to Bolivia themselves and bring back cocaine chemically bonded to cardboard inserts inside a briefcase. Before leaving for South America, De La Garza arranged for Arroyo to be busted upon their return to the States.

Things didn't go entirely as De La Garza planned. As he and Arroyo traveled back to the States, Colombian authorities in Bogota detained De La Garza; he says he wasn't told why. Although De La Garza was never charged or tried, he remained incarcerated for the next two years. According to his attorneys, he is convinced that his arrest was an act of revenge engineered by Agent Norman. (Norman, now based in Sacramento, did not return calls from the Press.)

 

After De La Garza was arrested, Arroyo was allowed to return to the U.S. As De La Garza had arranged, Arroyo was arrested and indicted on nine counts of drug smuggling. Represented at the time by Schaffer, Arroyo was acquitted of four counts and convicted of five; he appealed all five convictions. After a district court granted him a new trial, and the Fifth Circuit upheld that decision, the Department of Justice dropped its case against him.

Despite his legal victory, Arroyo ended up spending two years in jail -- the same amount of time De La Garza spent in a Colombian prison. When both were again free men, it was payback time.

As Dan De La Garza sits in his attorney's plush office, the cellular phone that he wears in a holster rarely stops ringing. The massive, balding businessman seems mildly annoyed by the interruptions as he tells what it was like to spend almost two years of hell in a Colombian prison. Between calls, he recounts various forms of torture: hanging upside down for hours at a time, being sprayed with ice-cold water from a high-pressure hose, and beatings that left him with seven broken ribs.

It is an understatement to say that De La Garza has come a long way in the 11 years since his release. "Can you say 'rebirth'?" he asks.

"You can do pretty much whatever you want to do when you have to start your life over," he says. What he decided to do, with the help of friends, was to buy foreclosed office buildings from the Resolution Trust Corporation and sell them at a profit. From there, he branched into the health-care industry.

De La Garza and two of his brothers, Michael and Shawn, control three companies: DLG Financial, Health Trust, and Synergies. Through those companies, they own medical office buildings and operate managed-care companies in Houston, Dallas, Shreveport and Albuquerque. Last year, De La Garza told federal authorities that he earned approximately $150,000 a year in addition to an annual bonus between $50,000 and $100,000. His home in The Woodlands is valued at $800,000. His net worth has been estimated at $10 million, though he says it's lower now. His attorneys say all of that money is legitimate.

In fact, in many ways, De La Garza and his family now seem downright respectable. In 1992, his brother Mike ran for state representative in the Democratic primary, taking 43 percent of the vote against incumbent Kevin Bailey. In September 1995, De La Garza himself was quoted in a USA Today story noting that Hispanic CEOs were fighting to preserve federal affirmative-action policies.

That's not to say that De La Garza remained squeaky-clean; in fact, a case can be made that he's merely moved up in the world of shady deals, into the more lucrative realm of white-collar crime. In January 1995, a federal court in Houston fined DLG Financial $600,000 after finding that the company had violated the U.S. Bank Control Act in 1990, when it failed to get prior approval from the Federal Reserve for the purchase of $1 million in promissory notes from NCNB-Texas through International Bancorporation.

The Federal Reserve board of directors held that DLG's offense was not merely a technical violation, but part of the business's regular heavy-handed practices. "De La Garza, continuing a pattern that started in December 1990, sought to control the bank's management by forcing it to engage in questionable mortgage pool transactions with related interests," wrote Assistant Attorney General Frank W. Hunger. "He threatened the management with foreclosure of the stock [of International Bancorporation], implicitly threatening their jobs if they did not accept his offer."

De La Garza does not seem fazed by the sanction. He dismisses the fine as a mere slap on the wrist, noting that his company still made $1.4 million on the deal. He considers the penalty little more than the price of doing business.

But another questionable business deal still dogs him. In 1993, De La Garza and another man were indicted in Travis County for misapplying $9 million in insurance company assets. De La Garza's co-defendant turned state's evidence, and De La Garza was convicted and sentenced to five years in prison. He is now appealing that conviction.

Around the same time as De La Garza was indicted in that case, federal investigators were luring him into an unrelated trap -- one constructed with the help of his old nemesis Arroyo.

Unlike De La Garza, Arroyo didn't prosper after his release from jail. On October 6, 1989, less than two years after he'd been set free, Houston police arrested him for delivery of less than 28 grams of cocaine. Three months later, he was turned loose after Harris County assistant district attorney Ira Jones filed a motion to dismiss. On the dismissal form, to indicate the reason for dropping the charge, Jones checked a box marked "Other." Arroyo had cut a deal to become an informant for the DEA.

 

Since then, according to federal records, the U.S. government has paid him almost $37,000 to gain the confidence of suspected drug dealers and help ensnare the targets of DEA sting operations. No doubt to Arroyo's great satisfaction, one of his first targets was De La Garza.

Arroyo approached De La Garza about laundering drug money -- cash that was actually to have been provided by the DEA. According to De La Garza's attorneys, the businessman saw in this offer a delightful opportunity to put Arroyo behind bars. Playing along, De La Garza told Arroyo that he did, in fact, know a banker who could fill his needs -- and then, says attorney Schaffer, De La Garza alerted the FBI, which was interested in running a sting operation.

The spy-versus-spy machinations came down to this: De La Garza didn't know Arroyo was working for the DEA, and Arroyo didn't know De La Garza was working for the FBI.

For some reason, though, Arroyo didn't produce the money to be laundered, and both plots fizzled. Still, Arroyo maintained contact with De La Garza, occasionally even borrowing money from the businessman to pay his rent. However much the two loathed each other, they stayed in touch.

In 1993, Arroyo once again approached De La Garza about finding a banker to clean some money. Arroyo was still working for the DEA, and this time around, his contact was Special Agent Norman -- De La Garza's former contact and archenemy.

According to De La Garza's attorneys, De La Garza contacted FBI agent Jan Lindsey, proposing that Lindsey snare Arroyo by posing as a dirty banker. But that scheme hit a snag: The FBI had lost interest. (Cogdell says he plans to call Lindsey as a defense witness at De La Garza's trial, but the Press was unable to contact the agent for confirmation.)

The attorneys argue that De La Garza still hoped to set up Arroyo someday, and so went along with Arroyo's scheme, planning to keep him on a string. In May 1993, Arroyo gave De La Garza approximately $100,000 in cash, and De La Garza in return gave him $93,000 in cashier's checks. Schaffer says De La Garza kept the 7 percent commission as part of his charade.

In February 1994, the pair repeated the exercise, this time with more money: Arroyo gave De La Garza approximately $275,000 in cash; two weeks later, De La Garza wire-transferred Arroyo approximately $261,000 from two different banks.

De La Garza's attorneys contend that he agreed to go along with Arroyo's (and the government's) scheme only because he wanted to bring Arroyo to justice. That argument was to be the essence of De La Garza's defense -- at least, it was until Schaffer and Cogdell met Arroyo in Houston's.

As the two lawyers drove away from the restaurant, they tried to figure out what had happened, and what their next move should be. "I was concerned that this silly motherfucker was going to say that we offered him money," says Cogdell. "At the same time, it's clear to me that he's trying to get us in a bidding contest with the DEA."

They decided they needed to report the incident to someone; the question was, to whom?

The feds were out. For all Cogdell and Schaffer knew, the DEA might have orchestrated their meeting with Arroyo, hoping to compromise the lawyers. Or, Schaffer noted, even if Arroyo was working on his own, he might claim they'd originated the offer of a bribe, and the feds would be inclined to believe him. Even if authorities didn't believe Arroyo, the lawyers figured, the FBI or the DEA would whitewash the whole affair.

Schaffer and Cogdell also didn't trust U.S. Attorney Gaynelle Griffin Jones. Both attorneys had had problems with Jones, and Cogdell's dealings with her had been particularly contentious. A year and a half before, while Cogdell was defending a client against federal bank-fraud charges, he says he tried to warn Jones that the prosecutors in her office weren't shooting straight with the defense team. According to Cogdell, Jones not only ignored his warning but encouraged the prosecutors to stay their course. (Jones did not respond to a request for an interview.)

The charges against Cogdell's client and nine other defendants were thrown out after a judge cited the two prosecutors for misconduct. In his ruling, U.S. District Judge Kenneth Hoyt wrote that "only a person blinded by ambition or ignorance of the law and ethics would have proceeded down this dangerous path."

 

Cogdell filed a complaint against Jones with the Department of Justice. "I don't trust her to be objective or reasonable," he says. "I think Gaynelle has a history of covering Gaynelle's back and little else."

"We had to go to somebody we could trust and who had no interest in the case at all," adds Schaffer.

That person, they decided, was Harris County District Attorney Johnny Holmes. To say the least, it's rare that a criminal-defense attorney thinks of the hard-nosed D.A. as an ally, but few question his integrity.

Early the next morning, Cogdell and Schaffer were in Holmes's office, and the D.A. was amused by their predicament. "They were pretty drove up," recalls Holmes. "And I remember thinking to myself that they should have just told the guy, 'Hell, no,' but after thinking about it overnight, they apparently decided to play undercover cop."

Nevertheless, Holmes agreed to help. The attorneys had arranged to meet Arroyo back at Houston's at 3 p.m. Holmes said he'd have them wired for sound, and would have his office supply them with $50,000 in "flash" money. The D.A. warned Schaffer that if he lost that cash, he'd face a long payroll deduction.

The attorneys returned to their offices -- and Arroyo called to change the game plan. Instead of Houston's at 3 p.m., he wanted to meet at Schaffer's office an hour later. Holmes' investigators hurriedly wired the law office.

When Arroyo arrived, Cogdell continued to seem offended by Arroyo's plan. He told the informant he still thought that the plan was a bad idea. With the tape rolling, Cogdell was careful to make it clear that all parties believed the $50,000 guaranteed that Arroyo wouldn't testify against their client, and that the deal had been Arroyo's idea. That said, he got up, brought the money into the room, and gave it to Schaffer. He then left the room.

Schaffer handed Arroyo the cash, and Arroyo headed out. In the hallway, detectives cuffed him and read him his rights, then hauled him to jail.

Fresh from the showers of Harris County's San Jacinto Street jail, but wearing a day's growth of stubble, Jorge Arroyo enters a small, glass-partitioned interview room with his hands cuffed behind his back -- a sign that, as an informant, he's being kept in administrative segregation, away from other prisoners, for his own good. Dressed in an orange jail uniform, he eyes his visitor cautiously, examining through the glass the business card that identifies the man as a reporter.

"I am in a very delicate situation," says Arroyo. He adds that he is not allowed to say anything to anyone about De La Garza without permission from Robert Stabe, the assistant U.S. attorney who is the lead prosecutor in De La Garza's case.

But asked about Schaffer, Cogdell and the $50,000, Arroyo's inhibitions quickly fade. He didn't suggest the bribe, he says. As he speaks, he pulls his cuffed hands from behind his back and makes a circular motion with his forefinger: It was the other way around. The deal, he says, was the lawyers' idea.

Since De La Garza's indictment, Arroyo has been working for a mining company in Brazil, where he lives with his wife and children. He says that last month, after he returned to Houston to testify against De La Garza, he learned that Schaffer had been trying to reach him by phone at his Brazilian number. So he returned Schaffer's call -- and did it at the local DEA headquarters, taping the conversation with a DEA recorder. That tape, Arroyo insists, proves that the bribe was Schaffer and Cogdell's idea.

So why is Arroyo in jail?
Arroyo shrugs. His face reads, "You figure it out."
Apparently Arroyo is telling the truth about recording his conversation with Schaffer. But according to Harris County first assistant district attorney Don Stricklin, nothing on the tape suggests wrongdoing by either of the lawyers. Stricklin also says Arroyo may have made a second tape -- possibly of the meeting in the restaurant -- but the prosecutor has neither seen nor heard it. Schaffer and Cogdell say they hope there is a tape of the meeting at the restaurant, that it would completely clear them of trying to pay Arroyo to disappear.

Such a tape might also clear them of an even more devious plot: setting up Arroyo to appear to solicit the money, thus ruining his credibility as a witness in the case against their client. Clearly, that's been the outcome of the affair. On the stand, if Arroyo says he didn't extort money from the lawyers, they have a tape to prove him a liar. And if he says he did extort the money, then he's obviously a crook. Either way, a jury isn't likely to believe his testimony against De La Garza.

 

Schaffer dismisses the notion that he and Cogdell engineered the sting for their client's sake. "I couldn't give myself that much credit," he says. Still, he admits, such a scheme would have been ingenious.

The cases against Daniel De La Garza and Jorge Arroyo are both pending.
The De La Garza trial has been reset for October. With Arroyo's credibility severely damaged, the federal prosecutor says he's rethinking his strategy. Schaffer and Cogdell believe the case against De La Garza has been mortally wounded; the government has no case with Arroyo, and no case without him.

A state court has charged Arroyo with witness tampering, but so far, the U.S. Attorney's Office has yet to file charges against him for planning to literally go south on them. District Attorney Holmes finds it hard to believe that his counterparts haven't taken the action. "The feds ought to be outraged," he says.

Arroyo remains in jail without bond. In the jail interview room, he talks about wanting to return home to his family in Brazil. Then, shifting emotional gears, he puts his right forefinger and thumb close together, signaling that this case is small potatoes to him.

Just then, a guard bangs the door. Arroyo gets up from his chair and begins to walk away, his occupational paranoia taking hold. He seems suddenly struck by the thought that perhaps he has said too much to this stranger.

"Hey," he asks the reporter, "who do you really work for

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