Take the Cash and Talk That Trash
Welcome to the smoky rooms and overheated corridors of Hotel Six, where the closed-circuit television picks up excellent deception, the air crackles with currents of duplicity and the concierge thoughtfully leaves the bugs on all night to record guests' every utterance.
It's not the sort of place you'd want to linger, but for a handful of politically prominent Houstonians locked in its hallways, the visit seems to have stretched over a lifetime. They can't wait to check out, but only a jury has the power to release them -- or to throw away the keys.
You see, Hotel Six (or "Operation Parallax," as the FBI curiously christened it) isn't a hotel at all, but rather, a trap built of illusions cemented by collusion and baited with cash to tempt city of Houston politicians. Inaugurated in the summer of 1995 with two Hispanic undercover agents posing as investors of the nonexistent Cayman Group, the operation is only now unfolding in public view.
And what a view federal court provides for lucky spectators able to cram into Judge David Hittner's tiny eighth-floor courtroom downtown. The trial has all the elements of a smash TV miniseries, mixing the gadgetry of high-tech law enforcement with the intrigue and seedy glamour of undercover agents offering bribes in parking lots and the bathrooms of swanky restaurants.
A screenwriter couldn't have concocted a more riveting script, its dialogue chock full of unintentional dark humor and the X-rated language of street politics. At its best moments, a state-of-the art CD-ROM system called TrialDirector delivers graphic audio and video on which elected officials take the cash and talk the trash through courtroom monitors and speakers.
Topping the marquee is former councilman Ben Reyes and his hit political-science lecture "Buy Yourselves Some Leaders." Almost as hot, according to our sneak-preview reviewer, is Councilman Michael Yarbrough's tour de force performance as the brokenhearted official who only received $1,500 from the feds when he was promised $3,000. But don't reach for the hankies just yet. This video has a happy ending, as Yarbrough is finally handed the missing money he was promised. Of course, only the reviewers in the jury box will have the last word on whether those cash payments were felony bribes or innocuous campaign contributions.
At the center of Hotel Six, sitting seemingly unruffled and serene in the dock, is Reyes himself, the old gray fox of Houston City Council, a maestro in his day at manipulating the levers of city government and a legislative sculptor who makes the new generation of term-limited councilmembers seem like very slow school kids. Reyes is accused of directing a conspiracy to bribe councilmembers John Castillo, John Peavy and Yarbrough to support the downtown convention center hotel plan with cash supplied by the undercover agents. (Peavy later resigned from Council because of an unrelated ethics matter.)
Former Port commissioner Betti Maldonado and lobbyist and former Reyes aide Ross Allyn stand accused of working with Ben to carry out the bribery scheme.
Reyes -- described by his attorney Mike Ramsey as controversial "and as radioactive as he can be" -- in his lengthy political career has displayed two public faces. One is that of the man who literally invented grassroots Hispanic politics in the city and led his constituents to the limited empowerment they enjoy today. But he also bears an uglier visage: that of a power broker often accused of using public office to exploit business opportunities for himself, his family and his associates.
The FBI sting team targeted Reyes from the beginning and then followed his directions to ensnare other city officials with offers of cash. The theme of the federal case, and perhaps the most sensational visual display to be unveiled at the trial, is the January 8, 1996, videotape of the lecture Reyes delivered to his Cayman partners, as well as co-defendant Ross Allyn, at a West Houston apartment complex on Bering Drive.
The sting team included FBI informant Julio Molineiro, a.k.a. Carlos Montero. Montero asked Reyes how much money he needed to budget in the future to guarantee the votes of Houston City Council members for developer Wayne Duddlesten's downtown hotel proposal.
As Reyes began speaking, an assistant dutifully scribbled down names and numbers on an erasable board. Included on the list were John Peavy for $5,000, with $2,500 before the vote and $2,500 after the vote if Duddlesten won; and $3,000 each for Michael Yarbrough and John E. Castillo, a former associate of Reyes and his successor on Council.
After Reyes finished, he told Montero it was time to get to work. "Now we have to go out and purchase us some leaders," he said, unaware that his little chat would someday be played back in a courtroom.
"Those words at the heart of this case came out of the mouth of this man," declared prosecutor Mike Attanasio in his opening statement last week, pointing to Reyes.
Perhaps so -- but Hotel Six has many hearts.
A wisecracking Judge Hittner regaled prospective jurors last week like a cable-TV salesman pitching a new channel. Trying to cheer up a crowd facing the depressing prospect of losing two months of their working lives to a marathon trial, the judge promised a "very interesting case" and the rare chance to witness some of the finest trial lawyers and prosecutors in the country. Hittner, known to relish high-profile cases, could hardly contain his enthusiasm for the spectacle.
He certainly wasn't exaggerating about the legal talent. The cream of the Houston criminal defense corps is matched toe-to-toe with an elite Justice Department sting team, and there are almost as many lines of attack and defense as there are hours of tape (at last count, around 400). The spectacle of the brothers Dick DeGuerin and Mike DeGeurin, Mike Ramsey, Dan Cogdell, Bob Bennett, Max Secrest and Paul Nugent all crammed around the defense table brought to mind the superstar-laden Houston Rockets. Could so many egos, saddled with all the differing interests of their clients, play together in the same courtroom?
At least three of the lawyers have the advantage of having worked together and successfully beaten another federal sting offense. This past November, U.S. District Judge Kenneth Hoyt threw out indictments against three robotics manufacturing executives after concluding that the government had failed to prove its case. The trio was represented by Dick DeGuerin, Ramsey and Cogdell. Their clients had been charged with contract fraud in an investigation that was part of the fallout from Operation Lightning Strike, another controversial FBI sting that targeted members of the Houston aerospace industry. And in the only other Lightning Strike-related case to actually go to trial, Dick DeGuerin represented bribery defendant Dale Brown. After a hung jury, the government dropped its case against Brown.
Still, Hotel Six poses daunting problems for the superstar defense attorneys. "In a case like this, where you've got six people -- where you really have six different cases -- sometimes you're stepping on each other's toes," admits a member of the defense team.
During the course of the trial, at times one defendant or another is bound to look a little more guilty than some of the others. And when one defendant begins to stink, a defense attorney can be tempted to improve his client's position at the expense of the smelly co-defendant.
The opening statements illustrated that problem, as Dick DeGuerin declared his client Maldonado knew nothing of payments that Mike DeGeurin's client Yarbrough had received. And attorney Nugent told jurors Ross Allyn didn't realize that wrongdoing was going on because whenever Molineiro "wanted to talk dirty, he talked in Spanish to Ben [Reyes]." Allyn, noted Nugent, doesn't speak Spanish.
"The government loves for that to happen," says a defense source. "That's why they indict people together, to try and benefit from that crossfire. To avoid that, you have to understand what everybody else's case is about and try to do as little harm as possible. We don't need to have more than one prosecutor in the courtroom."
Actually, there are two already: Mike Attanasio and John Scott. But the feds' main man is Attanasio, the son of a major-league baseball agent. His powers of persuasion over a Texas jury can't be discounted: Five years ago, he convinced a panel in San Antonio that former congressman Albert Bustamante was guilty of racketeering and influence-peddling charges.
"You won't find many trial lawyers with the Justice Department any better than he is," says San Antonio lawyer A.L. Herndon, who should know. He represented Bustamante.
Also sitting at the government table is FBI special agent Ron Stern, the agent who conceived the sting and directed its team.
The Hotel Six sting began with the end of another high-profile case. In 1990, Stern led the team that burst in on the D.C. hotel room of a drug-using Mayor Marion Barry. Immediately after Barry was convicted of crack possession, Stern and his family left D.C. for Houston.
Because of his role in the Barry bust, Stern has come under attack as part of an FBI attempt to target minority leaders across the country. His wife, Julie, a Justice Department lawyer who tried civil-rights cases in D.C., says the common denominator in his investigations is corrupt officials, not minorities.
"Ron has investigated public corruption in every city we've been in," says Julie Stern. "In Washington, the power structure happened to be black. In Houston, the allegations involved Ben Reyes, who happened to be Hispanic. I've prosecuted cross-burners and racists, and the idea of racism is repugnant to me and Ron."
Once settled in Houston, Stern began surveying the turf for his stock in trade, political corruption. It wasn't long before Councilman Ben Reyes came to his attention. Reyes had been prosecuted before by the Harris County District Attorney for taking illegal corporate contributions, and his celebrated personal appropriation of a magnolia tree from a vacant home he had helped bulldoze as part of a neighborhood revitalization campaign. The investigation sputtered and Reyes pled out on misdemeanor campaign violations and kept his seat on City Council.
In April '95, Hispanic activist Berta Flores contacted Stern and relayed a rumor that Reyes had been paid cash by former state representative Roman Martinez in exchange for his assistance in getting Martinez city cab and airport food concessions. Those concessions had been awarded in the mid-'80s; by 1995, Martinez had sold his interests in both operations and had joined the city payroll as a council aide to Reyes.
In his testimony Friday, Stern did not mention Flores by name, but recounted that the confidential informant who contacted him in April 1995 told him that it was known in Houston's Hispanic community that, if you wanted to do business with the city, you had to pay a cash kickback to Reyes for his assistance.
It was at that point, testified Stern, that he decided to initiate an undercover investigation of the councilman. To that end, Stern enlisted the services of Molineiro.
Flores is a wild card in the investigation. Although she has described herself as a foe of Reyes and worked for his opponent Gene Green in several contests, other City Hall insiders recall that she was friendly with the councilman during his last several years on Council. Reyes's attorney Ramsey described Flores as "the viper" who introduced FBI informant Molineiro, alias Carlos Montero, to the councilman. Ramsey says Flores had been avoiding a subpoena to testify in the current legal proceedings.
Eventually, the subpoena was served, and Friday morning, Flores appeared at the federal courthouse briefly to be sworn in as a future witness in Judge Hittner's chambers.
"She seemed hot as hell about having to be here," said one of the defense attorneys.
Flores's departure from the federal building played like something out of a Keystone Kops episode. First, she avoided reporters and photographers waiting for her outside by lingering in the courthouse coffeeshop, and then tried to slip out a different exit. Reporters found her anyway, and she walked away without comment.
Flores, though, is not the biggest wild card in the investigation. That distinction belongs to Molineiro, the informant who pretended to be Carlos Montero. Molineiro is a native of Chile, where there are 26 outstanding warrants for his arrest. Defense attorneys in the bribery trial want to know how it was that the Federal Bureau of Investigation chose him for the undercover role of a South American businessman looking to do business in Houston -- and paid him $107,000 for his assistance.
Before Molineiro was an FBI informant, he'd worked for the Drug Enforcement Agency. But according to attorney Mike Ramsey, that entry on his resume should have tipped the FBI that something was amiss: Molineiro was allegedly blackballed by the DEA for lying, stealing agency funds and endangering DEA agents.
The defense seized on Molineiro's DEA history, hoping to discredit the informant or, better still, to get a mistrial in the case. On the stand, FBI agent Stern claimed he knew nothing of those allegations, a position that led Ramsey to accuse Stern of incompetence. "What he didn't do was, he didn't do his job," said Ramsey of Stern. "He took into the political bloodstream a worm fired by the government for cheating and stealing."
Whatever Molineiro's history, Reyes at first found him credible as the shady Carlos Montero. During Molineiro's first meeting with Reyes at his district office on August 1, 1995, the informer told the councilman he was interested in obtaining city contracts and needed help finding minority subcontractors to perform those contracts. Because Molineiro specified he was only interested in minority contracts, defense attorneys have charged that the investigation was designed to snare only Hispanics and blacks.
Initially, Reyes directed Molineiro and an undercover FBI agent, Bob Dogium, to his brother Tony Reyes, who has a long history of working with Ben on city-related contracts.
Back in 1989, the councilman came under fire for voting on city contracts that provided $3.9 million in subcontracting work for Royal Supply. The company was headed by Tony, who had been accused of winning contracts under the city's minority business program and then brokering them to nonminority firms for a percentage of the deal. The district attorney probed the relationship, but no criminal charges resulted.
Once the Cayman Group came calling in 1995, Tony took the lead in searching for possible places to invest the FBI cash. According to an affidavit by Stern, Tony and Ben met with Montero/Molineiro at a Carrabba's restaurant a little more than two weeks after the informer's initial session with the councilman. According to the affidavit, Ben Reyes first broached the subject of the convention center hotel, telling Montero there was money in the deal for everyone and that he should be ready to move fast if Reyes could put a deal together.
In early September 1995, according to the Stern affidavit, Tony Reyes told Montero that Ben had gotten assurances from Wayne Duddlesten that they could have the subcontract for the downtown hotel garage, and Tony proposed that it be owned by Cayman Group and himself. A new term-limits law meant that Ben would have to leave office in January 1996, but Tony explained that Ben could continue to control the dispersal of city contracts even then.
"He can do it now, but he has to be careful," explained Tony Reyes, according to dialogue chronicled in the affidavit. "He has one hand tied right now. But he can still hit hard. Just imagine when he has both hands free, and he's outside."
Later that month, Tony accompanied Ben Reyes and one of the councilmember's sons on a trip to Captiva, Florida, to meet with more FBI operatives disguised as Cayman Group investors. It was at this meeting that Reyes announced he had gotten a better deal with Duddlesten, and that they could actually buy in for a share of the total contract.
According to the feds, Tony Reyes apparently sensed the operation was crossing the line into legally questionable behavior and bowed out, citing concerns about his family. Reyes then recruited attorney Isaias Torres to handle the negotiations between the Cayman Group and Duddlesten.
At a meeting with the agents in October, Torres waved a copy of the Houston Chronicle containing a front-page article on a reported FBI investigation of the Lanier administration for irregularities in the awarding of a delinquent parking ticket collection contract. Ben Reyes must be protected from this type of thing, Torres warned the undercover agents.
Torres is in no position to do any protecting now. He's listed as a cooperating witness for the government -- and thus, against Ben Reyes.
The bribery phase of the sting played out in two phases. In the first, Reyes allegedly took the lead in trying to bribe the councilmembers. Then, in spring 1996, came the second phase: After Reyes became suspicious of the federal agents and began trying to distance himself, Betti Maldonado became the contact person with councilmembers.
That first phase kicked into gear on December 1, 1995, when Molineiro gave Reyes a leather satchel containing $50,000 in $50 bills. Reyes admits taking the cash, but attorney Ramsey claims it was not a bribe but the seed capital for a joint venture between the councilman and the Cayman Group. (Even by that reasoning, Reyes's acceptance of the money would be ethically questionable, since it would go to purchase distressed city properties being sold under a program Reyes had helped craft as a councilman.) The feds will counter that defense with a tape of Reyes acknowledging later to Bob Dogium, the FBI agent using the alias Raul Correa, that the $50,000 was to buy his support for the hotel proposal rather than city property.
Shortly after Reyes gave his "buy some leaders" talk on January 8, 1996, the first round of alleged bribes of Council officials took place. Just two days later, the feds claim Reyes met with his successor on Council, Castillo, and Molineiro at an unspecified restaurant. According to the affidavit, the operative witnessed Reyes handing Castillo an envelope wrapped in a magazine. "Ben Reyes later told [Montero] that the envelope contained $3,000 for Castillo."
The following day, Montero and Reyes dined with Councilman Michael Yarbrough at Carrabba's on Kirby, where Reyes allegedly passed $1,500 in cash to Yarbrough in the men's bathroom.
Three days after that, Reyes allegedly repeated the maneuver with John Peavy, delivering an envelope with $2,500 to the councilman in the urinal of the restaurant inside the Wyndham Warwick Hotel. "FBI Special Agent Jim Trimbach followed Peavy and Ben Reyes into the bathroom," states the document. "Peavy and Ben Reyes remained in the bathroom until they were alone." Reyes later told the agents he had given Peavy $2,500.
According to Reyes attorney Ramsey, the bribery scenario outlined above never happened. Ramsey told jurors in his opening statement that Reyes had in fact never given the councilmen the money, but rather had kept it for himself. Since Reyes was no longer a city councilman, his action was not a crime, but rather a simple rip-off of the Cayman Group operatives.
"It's poetic justice," declared Ramsey. "The scammers got scammed."
But there's a potential problem with that defense: Federal agents claim that, in taped conversations, councilmembers themselves independently confirmed that they'd received cash from Reyes. Whether those tapes are convincing will be left for the jury to decide.
The second phase of the sting began late in April '96, after Reyes had become suspicious of the Cayman Group agents and relocated from the FBI-rented offices at the Phoenician complex back to his own home in east Houston. He'd wised up to the operation when the agents began pressing him to revisit Peavy, Yarbrough and Castillo and get them to agree to inserting new language in the downtown hotel proposal. He apparently alerted Peavy and Castillo that the agents were bogus.
Anxious to get more incriminating evidence before the sting became public, the operatives began pressing Betti Maldonado to take over the role of delivering cash to the officials. Maldonado made several such presentations, but quickly became alarmed by the agents' blunt demands. When she balked, the agents revealed their identities and pressured her to cooperate. For a week, Maldonado did so -- then she sought advice from Port Commission Chairman Ned Holmes and Mayor Bob Lanier. She soon retained Dick DeGuerin to represent her, and on the afternoon of May 9 held a news conference to denounce the FBI for a racially motivated operation.
Anticipating Maldonado's move, FBI agents had already fanned across the city the same day to interview City Council members, collecting one last round of statements in an attempt to incriminate the officials who had accepted cash from the Cayman Group. The sting was over, but the legal maneuvering was just getting started.
As with every operation where cops tempt citizens to do wrong, there is the question whether agents snared a netful of civic sinners, or led astray a flock of civic saints. Dick DeGuerin claims Betti Maldonado is the quintessential example of an innocent forced to commit crimes.
"This case is about treachery," Dick DeGuerin told the jury -- the treachery of a few government agents who intimidated and blackmailed Maldonado into actions she would never have considered on her own.
Because five of the six defendants are minorities, the defense has claimed that the sting operation is a racially motivated attack that singled out black and brown politicos from the beginning. The selection of a 14-member jury panel with three blacks and two Hispanics makes it more likely that defense lawyers will try to hammer the theme of a racially motivated prosecution.
But at least one member of the team isn't certain the defense will play the race card. "It's a fact of this case that the government targeted minorities," says the attorney. "How much we're going to emphasize that or let the facts speak for themselves, we're just going to have to wait and see. Some jurors don't like playing the race card. And while I'm not saying that is what bringing out the targeting of minorities is, it still has be done very, very delicately."
Instead, the defense will try to put the government on trial by hammering hard at the FBI's conduct.
"They want to corrupt people," says Dick DeGuerin of the FBI. "They want to create crime."
Upon that premise likely turns the fate of the Hotel Six. If the jury can be convinced that the six people in the dock would never have taken the cash and violated the law without prompting from the government, their stay in Hotel Six will likely come to a swift conclusion. But if those tapes and videos convince the panel that Ben Reyes and his friends have been caught in broad daylight doing what they usually do behind closed doors, there may be no exit.