The Insider

"Look, Daddy, Here's a Present"
Ben Reyes gestured to an assistant standing beside an erasable display board that had been set up in the small Galleria-area office of a man Reyes knew as Carlos Montero. A paid FBI informant playing the role of a Latin-American businessman for the non-existent Cayman Group, Montero had just asked Reyes how much money he needed to budget to guarantee the votes of Houston City Council members for developer Wayne Duddlesten's bid to build a taxpayer-subsidized downtown hotel. It was January 8, 1996, and Reyes was barely a week into his new role as a private citizen after nearly two decades as a city councilman.

As Reyes began speaking, the assistant took a marker and dutifully scribbled down names and numbers on the board. While the list in no way establishes who eventually accepted money for supporting Duddlesten's bid, it may offer some indication of the value Reyes put on the political skins of his former colleagues.

According to an affidavit authored by FBI special agent Ron Stern, on the board beside the names of Jew Don Boney, Martha Wong, Judson Robinson III, Helen Huey, Felix Fraga and Ray Driscoll was written the figure $1,000. Next to the name of Betti Maldonado, who at the time was a city representative on the Port Commission, was $1,500. Michael Yarbrough and John Castillo, a longtime associate of Reyes's who succeeded him on Council, were each earmarked for $3,000. Next to John Peavy's name was the amount of $5,000, to be paid, as Reyes allegedly explained it, in two $2,500 installments: one before the Council vote on the hotel and the second if the Duddlesten project was selected.

After Reyes finished running down his plan to ensure the upcoming Council vote went in Duddlesten's favor, he allegedly told Montero it was time for the Cayman Group to get busy.

"Now we have to go out and purchase us some leaders," Reyes purportedly said, unaware that FBI video cameras and tape recorders were capturing his real-world political science lecture for posterity.

The scene at Montero's office is among many vignettes and new details of the 26-month investigation of corruption at Houston's City Hall outlined in Stern's affidavit, which was unsealed after the Hotel Six indictment was returned in late July. The 22-page statement provided the justification for a federal court order authorizing "non-consensual" wiretaps and videotaping of suspects in the probe. Filed with a judge on January 19, 1996, Stern's affidavit raises previously undisclosed allegations about several people who were not named in the indictment that was issued 19 months later. It also answers the question that neither the FBInor the U.S. Justice Department has been willing to publicly address since the existence of the investigation was first revealed in May 1996:Why was Reyes targeted for a sting?

Of the nine councilmembers whose names were written on the board at Montero's office, only Peavy, Castillo and Yarbrough now stand accused of accepting Reyes's poisonous presents. Maldonado was indicted for her alleged role in soliciting councilmembers for Reyes's scheme who were not particularly close to the ex-councilman. Reyes himself and his longtime Council aide, Ross Allyn, who was working for developer Duddlesten at the time of the meeting in Montero's office, also were indicted. All have pleaded innocent to charges of conspiracy and bribery, and U.S. District Judge David Hittner has warned the parties in the case not to speak with the media.

But back on that January day at Montero's office, Reyes was extremely talkative, at least according to Stern's affidavit. After spelling out the cash he said he needed to influence his former colleagues, Reyes extended his wish list a bit further.

"What we need is ... a private office where we can ... we won't have any problems saying that, this, this and that," Stern quoted Reyes as telling Montero, who proved only too happy to comply. Shortly thereafter the FBI provided Reyes with his requested nest, a two-story townhouse at the Phoenician complex on Bering Drive, where the palm trees, fountains and security gates conjure the image of a secure tropic hideaway only slightly less bogus than the Cayman Group itself.

Unknown to Reyes, however, it wasn't really the sort of place where a circumspect individual would want to say "that, this, this and that," because the audience went far beyond the walls of apartment No. 712 at the Phoenician. Thanks to the federal court order requested by Stern, the government had bugged the phone number, (713) 953-7354, miked the rooms and secreted mini-video cameras to record the action from a plethora of angles. Stern claimed in his affidavit that the electronic spying was necessary because standard investigatory tools such as informers, search warrants and physical surveillance had failed or would be unlikely to succeed in trapping Reyes and his associates.

"This is in large part due to the pattern that has developed," explained Stern, "whereby Ben Reyes is the only point of contact between the undercover agent or confidential witness and each member of Houston City Council who is taking money in exchange for votes."

Continued Stern: "The interception of oral and wire communications and visual, non-verbal conduct and activities between Ben Reyes and other recipients of illegal payments is the only way to determine the nature and extent of their illegal activity."

The wiretaps and cameras would eventually record boxes and boxes of tapes and resulting transcripts. But prior to the creation of the electronic fishbowl on Bering Drive, the feds already had bagged one choice item that they covertly slipped out of Montero's office and stored away for the future. That erasable display board, containing the names and Ben Reyes's estimated cost of buying ten public officials, now sits in a federal evidence storeroom. It awaits a future day under the bright lights of Hittner's courtroom, where Reyes and his five co-defendants are slated to stand trial next year.

By the time Montero received his budget estimate from Reyes, the two had become veritable cronies who had worked and traveled together for some six months. They and other federal agents and Reyes's associates had been brought together in an operation designed by Stern and activated on June 6, 1995. Montero and an FBI agent with the assumed name Marcos Correa would be the primary contacts with Reyes.

"This investigation was initiated based on information from a reliable informant," Stern reported in his affidavit, crediting the source with previously providing reliable information to him regarding public corruption. According to Stern, the informant alerted him that Reyes "had received cash payments in 1993 or 1994 from former state legislator Roman Martinez in exchange for Martinez's receipt of concession stand contracts at metropolitan Houston airports, and the award of the Fiesta Cab contract to Martinez."

Actually, Martinez had received those concessions years earlier, and by 1995 had sold his interests in both operations. But rumors had abounded at City Hall that Reyes was instrumental in bringing his longtime protege those deals and had expected something in return. By 1994, Martinez, down on his luck and in the midst of a divorce after losing two races for a state Senate seat, had joined the city payroll as a Council aide to Reyes.

Martinez is now reportedly working as a consultant for Yellow Cab, which owns Fiesta but maintains it as a division of its Houston operation. He did not return a phone inquiry for comment on his purported role as the inspiration for the City Hall sting.

The Stern affidavit also delineates the actions of two other men whose names do not appear in the indictment. One is Tony Reyes, Ben Reyes's older brother; the other is lawyer Isaias Torres, a former member of the Texas Ethics Commission whom Reyes helped cut in for a share of the contract to collect delinquent taxes for the city.

During an initial meeting between Montero and Ben Reyes at his district office on August 1, 1995, the informant told the councilman he was interested in obtaining city contracts and needed help finding minority subcontractors for that purpose.

The request must have seemed almost too good to be true to Reyes, who had a long history of mixing family business with his job as a councilman. Back in 1989, Reyes had been investigated by the district attorney's office for voting on city contracts which provided $3.9 million in subcontracting work for Royal Supply, a company headed by Tony Reyes. A ubiquitous pilot fish who swam parallel to Ben throughout his Council career, Tony Reyes had been accused of snaring supply contracts under the city's minority business program and then brokering them to non-minority firms while picking up a percentage of the deal. No criminal charges resulted from the D.A.'s probe.

Once the Cayman Group came calling, it didn't take Tony Reyes long to become involved in the negotiations to find appropriate outlets for the agents' cash. Tony and Ben met with Montero at Carrabba's restaurant on Kirby Drive a little more than two weeks after Montero's initial session with the councilman. According to Stern's affidavit, Ben Reyes introduced the subject of the proposed hotel near the George R. Brown Convention Cen-ter, telling Montero there was money in the deal for everyone and he should be ready to move fast if Reyes could put a deal together.

The affidavit states that in early September 1995, Tony Reyes told Montero that Ben had gotten assurances from Wayne Duddlesten that they could have the subcontract for the parking garage at the downtown hotel, and Tony proposed that it be owned by the Cayman Group and himself. Stern then quotes Tony Reyes explaining that Ben could continue to control the dispersal of city contracts even after he left office: "He can do it now, but he has to be careful. 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. He can move a lot of things."

One way Ben could move things, Tony explained, was by promising his ex-colleagues that he could raise "20 or 30 thousand dollars" for their election campaigns.

"Don't you think he's going to be able to do that?" Tony Reyes rhetorically asked Mon-tero. "He can do that legally."

About two weeks after that conversation, Tony accompanied Ben Reyes and one of the councilman's sons on a trip to Captiva, Florida to meet with FBI operatives disguised as Cayman Group investors. It was at this meeting, Stern reported, that Reyes announced he had gotten a better deal with Duddlesten and that the Cayman Group could actually buy in for a share of the total contract.

"Ben Reyes further explained that the vote on the City Council would be very close and that his vote would be critical. Ben Reyes told [one of the undercover agents] that they would be partners and Ben Reyes wanted a share," according to the affidavit.

Reyes was term-limited from seeking re-election, and as his departure date from Council neared, he apparently began taking more control of the Cayman Group operation and seems to have pushed his brother out of the picture. Later, the feds forcibly granted Tony Reyes immunity after deciding his role in the scheme did not rise to the level of an indictment.

It was at about the same time in the fall of 1995 that Reyes recruited attorney Torres to handle the negotiations between the Cayman Group and Duddlesten. On October 4, according to the affidavit, Torres told Montero and Correa that Duddlesten needed the Hispanic vote on Council to win the contract, and that they had to demonstrate to Duddlesten that those votes could be delivered.

In a comment that now reads in a darkly humorous vein, Torres displayed a copy of the Chronicle with 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 had to be protected from this type of thing, Torres warned the undercover agents, who must have struggled to keep from cracking smiles.

Just like that ostensibly secure nest at the Phoenician where participants could safely discuss "that, this, this and that," the operation then proceeded to incriminate Reyes in ways Torres never anticipated. And Torres himself was to become a cooperating witness against the man he once seemed so anxious to protect.

In order to charge a target of the sting with an offense, the feds had to meet an exacting standard: If an agent didn't participate in the handing over of cash directly to an official produced by Reyes or surrogates Maldonado and Allyn, then there was insufficient evidence to seek indictment. Thus, Stern's affidavit raises some allegations that appear to be based on claims by Reyes and which were not repeated in the July 30 indictment.

But at least three acts that are cited in the bribery charges in the indictment are detailed in the affidavit, and they seem to be directly linked by both chronology and dollar amounts to the shopping list Reyes prepared for Montero.

According to Stern's affidavit, two days after the office meeting, Reyes met with John Castillo and Montero at an unspecified restaurant, where Montero witnessed Reyes handing Castillo an envelope wrapped in a magazine. "Ben Reyes later told [Montero] that the envelope contained $3,000 for Castillo," Stern reported. On that same day, Reyes and Montero moved into their spacious new digs at the Phoenician.

Two days later, Montero and Reyes dined with Michael Yarbrough at Carrabba's, where Reyes allegedly passed $1,500 in cash to the councilman in the men's restroom.

Four 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," stated Stern in his affidavit. "Peavy and Ben Reyes remained in the bathroom until they were alone," and Reyes later told the agents he had given Peavy $2,500.

The way Stern outlined it, Reyes had meticulously stuck to the budget he outlined on the board in Montero's office -- at least with Peavy, Castillo and Yarbrough. On January 31, 1996, those three joined the 13-to-2 Council majority in favor of the Duddlesten proposal. (In the indictment, Castillo is accused of bribery for allegedly taking a second $3,000 payment from Maldonado on April 29, 1996, while Peavy is accused of accepting bribes from Reyes and Allyn totaling $5,000 on January 16 and February 20, 1996. Yarbrough is charged with taking a total of $3,000 on January 12 and January 24, 1996, five days after Stern's affidavit was submitted to a federal judge.)

Perhaps not coincidentally, Peavy, Castillo and Yarbrough were the only ones for whom Reyes was prepared to lay out serious cash on January 8, 1996. They were also the three that Reyes had no hesitation about bringing to his Cayman Group partners -- the ones he seemingly felt most comfortable presenting to outsiders, as if it had all been done before.

Others, like Gracie Saenz, no pal of Reyes's, were kept at arm's length, and Maldonado was assigned to woo them to the fold. Since Saenz headed the Council's Ethics Committee, Reyes may have been especially uncomfortable about having her over to the Phoenician. Although Saenz did eventually visit the townhouse, she took no money from the undercover agents.

Stern suggests Reyes had no such reservations about some other councilmembers and claims he had casually informed Montero at a restaurant only two days prior to the Galleria office meeting that he knew Peavy "very well."

"What I think Peavy is looking for," Reyes is quoted as saying in Stern's affidavit, "is to get hit. I think if we give him five thousand dollars, he'll be okay ... I'm going to tell him, look, daddy, here's a present, what do you think? Can you be with us?"

Back in November 1995, Reyes had claimed to agents that he had personally given $5,000 in cash to each of nine councilmembers, out of his own pocket, and "indicated that you have to know which ones you are able to do this with," according to Stern's affidavit. Reyes then used his supposed outlay of $45,000 as an excuse for claiming reimbursement from the Cayman Group for $50,000 -- a cash payment the July 30 indictment accuses Reyes of taking in a satchel on December 1, 1995, while he was still on Council.

Even before he had allegedly made the cash payments to Peavy, Castillo and Yarbrough, Reyes was convinced he had the Council under control on the hotel project. The affidavit cites a meeting Reyes had with agent Marcos Correa the day after the 1995 city elections, when the lame-duck councilman reported that all the members lined up for Duddlesten had won re-election. When Correa asked what the Cayman Group's role in the contract would be, Reyes allegedly responded, "Your part is going to be the same as Duddlesten. You will be an owner for the percentage you put in."

"Someone may ask you how come you got 40 percent," Reyes went on, apparently pulling a figure out of the air and then supplying his own answer to the hypothetical questioner: "Because I bought the project and I fixed the votes."

One allegation in the Stern affidavit is angrily disputed by an unindicted member of Council. On December 8, 1995, according to the document, Montero and Reyes met then-council candidate Jew Don Boney at a fundraiser for Boney at Reyes's home in Denver Harbor. Boney was in the midst of what was expected to be a tight runoff against Saundria Chase Gray, and Reyes had taken a strong interest in the contest on Boney's behalf.

Stern's affidavit claims that on December 21, 1995, "at a breakfast meeting between [Montero], Reyes and Jew Don Boney, Reyes gave Boney an envelope with cash in it. Reyes called the envelope his business card."

When read that allegation over the phone last week, Boney heatedly asserted that the passing of cash "never happened," although he acknowledged that he had met with Reyes and the Cayman Group investors and had "some discussions" with them.

Boney was clearly agitated at being questioned about the Stern affidavit. "I've made a real effort of my own not to be drug into that bullshit," he said. "I didn't get any money from Ben, I didn't get any money from the agents. I didn't ask for any, I didn't take any. Clearly, there's some people that did. That's where the story is."

Boney, who is not a cooperating witness in the probe, also rejected any suggestion that he had gotten off light in his dealings with the feds.

"They didn't give me any mercy, I can tell you that," he said with a touch of sarcasm. "If there was anything to prove that I took any money from anybody, I certainly would have been indicted."

Boney isn't the only unindicted figure who appears in the affidavit in a questionable light. The document repeatedly refers to Torres's and Tony Reyes's claims that developer Duddlesten promised first a hotel parking garage contract and then a big share of the hotel deal if Hispanic votes could be delivered.

Duddlesten's degree of knowledge of the Cayman Group operation's efforts on his behalf has never been fully established. The government has charged Reyes with mail fraud for causing a "Duddle-sten letter" to be sent to the Cayman Group. The contents of that letter have not been made public, and Duddlesten has refused to discuss the letter with The Insider on an on-the-record basis. In May 1996, after Maldonado went public with her role in the sting, Duddlesten initially claimed to the Press that he barely remembered the Cayman Group operatives, but he subsequently ac-knowledged that he had met with them twice at his home.

One knowledgeable source describes the developer as "a slick son of a gun" who relied on Allyn to line up the votes he needed. "He tells 'em what he needs -- 'You get it done' -- [and] sometimes he doesn't want to know about it and puts the blinders on."

Likewise, there is nothing to prove that any of the unindicted councilmembers whose names wound up on Reyes's list that January day in Montero's office did anything wrong, and the accusations against those indicted will be tested in court. But if the man who knew Council as well as anyone alive actually placed his former colleagues' reputations on his auction block, his deep familiarity with City Hall had obviously bred total contempt for its ethical standards.

The Insider can be reached at (713) 624-1483 or (713) 624-1496 (fax), or by e-mail at


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