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The Insider

Welcome to Hotel Six
Don K. Clark, the senior agent-in-charge of the Houston FBI office, was noticeably uncomfortable in his role as a press release reader at last week's non-news conference following the indictment in the Hotel Six sting. The slight, unprepossessing Clark added nothing of detail to the Justice Department's bill of particulars charging bribery and conspiracy against Councilmen John Castillo and Michael Yarbrough, former councilmen John Peavy and Ben Reyes, Reyes's onetime aide Ross Allyn and former port commissioner Betti Maldonado.

In fact, Clark's underwhelming performance did little more than put a long, black face on an investigation under fire long before the indictments came down for targeting mostly minority politicians and operatives. Only Allyn is an Anglo, and after so many years in Reyes's orbit, jokes one observer, "he's an honorary Hispanic."

Peppered repeatedly by reporters as to the genesis of the sting, an exasperated Clark finally advised his tormentors to read the 25-page, 11-count indictment, seemingly unaware that it shed no light on that particular issue. Of course, had Clark wanted to be candid, he could have simply mouthed two words: Ron Stern.

Stern, as any student of sting would know, was the mustachioed agent in charge of the successful effort to net Washington, D.C. Mayor Marion Barry for indulging in a recreational crack habit. The day that Barry was convicted, Stern and his wife Julia, then a lawyer in the Justice Department's Civil Rights Division in D.C. and now on U.S. Attorney Gaynelle Griffin Jones's appeals staff here, moved their family to Houston. For the Hotel Six, it was a disastrous choice of destination.

It seems you can take the special agent out of the sting, but you can't take the sting out of the special agent. It was Stern who came up with the idea of weaving a custom-designed net to ensnare the old graying fox of Houston politics, Ben Reyes. The councilman had long been dogged by accusations from embittered former associates and political enemies that he used his Council seat to enrich himself and family members, but no one had been able to make the charges stick.

District Attorney Johnny Holmes tried to nail Reyes on felony charges in the late eighties, but had to settle for misdemeanor pleadings on illegal campaign contributions and the theft of a magnolia tree. The district attorney's staffers worked hard to link Reyes with Mexican figures reputed to be involved in the narcotics trade, but failed.

This time around, the effort would come from the opposite direction. Rather than trying to prove Reyes's associations with crime figures, the feds would lure him to break the law using a genuine Latin American informant, "Carlos Montero," and an FBI agent, Marcos Correa, both noms de guerres adopted for the operation.

Clark declined to comment when asked whether Montero had previously been a target of federal prosecution. Once the sting had begun to play out, Reyes would describe Montero and Correa to Betti Maldonado as "bad guys" -- possibly cops or drug dealers. He may have been right on both counts.

In order to link up with Reyes, the pair, operating as the Cayman Group, were introduced to the then-councilman by Berta Flores, a community activist previously considered hostile to Reyes and a supporter of Gene Green in his 1992 congressional runoff victory over Reyes. Flores was also considered something of a flake in Bob Lanier's campaign circles when she worked for Lanier in 1991 -- not a likely candidate to be entrusted with the delicate task of implanting the stingers into Reyes's inner circle.

"Berta's role is the big question, the missing piece in my mind," says Marc Campos, a consultant who knows the cast of characters well. "Everything I know about her says she's not the right person for the role." Flores's involvement suggests that anti-Reyes politicos may have assisted the FBI in setting up the sting.

Reyes certainly welcomed the cash provided by the Cayman operatives. A few months before Maldonado broke with the FBI and outed the investigation in May 1996, Reyes held court at a Montrose cafe and bragged that he had found some new business associates who were providing him with unlimited funding. The indictment claims Reyes received a satchel containing $50,000 in $50 bills provided by Montero during a meeting at Montero's apartment on December 1, 1995, while Reyes was still a member of Council. In another bar conversation after the sting became public, Reyes claimed he received more than $80,000 from the agents, an amount not documented in the indictment. Reyes's attorney Mike Ramsey has characterized his client's involvement as simply playing along with the agents to see what he could get.

The indictment alleges that Reyes spread some of the wealth in early January of last year in the form of $2,500 to Peavy and $1,500 to Yarbrough, passed to the councilmembers in the men's room of a Houston restaurant. Reyes also allegedly gave Castillo $3,000 at the restaurant several days earlier. That eatery is the trendy Carrabba's on Kirby, at one time a favorite hangout of Reyes's. (The indictment also accuses Castillo of accepting another $3,000 in cash from Maldonado at a restaurant, which Maldonado previously identified as the coffee shop of the downtown Hyatt; Peavy likewise is accused of taking a second $2,500 bribe from Correa in a restaurant parking lot, while Yarbrough is alleged to have taken another $1,500 in the Cayman Group's office.)  

During the FBI news conference, Clark fumbled with questions about whether the government had targeted only minority officeholders, and eventually cut off the queries by just declaring that he had heard the allegations and they were false.

A more sophisticated riposte from a source close to the investigation is that the operation was a Ben Reyes sting from the beginning, and that the former councilman selected each and every other target and participant. "Bennie was the captain of our ship," this source has said. The characterization jibes with a remark attributed to Reyes in the indictment: "I'm the only one who can work him," Reyes is alleged to have said of then-councilman Peavy.

Isaias Torres, identified in the indictment only as "the lawyer" chosen by Reyes to front the Cayman Group, is also an unlikely player, as he was a member of the state Ethics Commission under Governor Ann Richards. The Cayman Group was out to be included as an investor in developer Wayne Duddlesten's proposed downtown hotel project, and last week's indictment mentions a letter written by Ross Allyn and signed and hand-delivered by Torres to Duddlesten's office on or about October 5 of 1995. The letter, which was not quoted in the indictment, notified Duddlesten of the Latin American investors' intent "to invest eight million dollars in the proposed Convention Center Hotel with the Duddlesten companies if they are successful in being chosen [by the Council] as the qualified hotel developer."

Torres has been mum since his name first surfaced last year in connection with the FBI investigation. The fact that he is not one of the Hotel Six may indicate that he, as well as Councilman Felix Fraga, who took illegal campaign contributions from the operatives but escaped indictment, are cooperating with the feds.

In an intriguing twist, the last of the indictment's 11 counts alleges mail fraud against Reyes and cites the councilman's responsibility for mailing a "Duddlesten letter to a representative of the Cayman Group." The letter, which was signed by Duddlesten, confirmed details of the Cayman Group participation in the hotel deal. Reyes did not actually mail it himself, but in the legalese of the indictment, "caused it to be placed in a post office and an authorized depository for mail matter to be sent and delivered."

However the Hotel Six fare in court, the sting could damage the political fortunes of one state official, Attorney General Dan Morales. Reyes lobbied the attorney general by fax and by phone to try to get a favorable legal opinion for Duddlesten's hotel proposal, which included participation by the Cayman Group.

Morales's office has not set many land speed records for issuing opinions, but according to the indictment, on December 13, 1995, Reyes faxed a letter to Morales "encouraging the attorney general to issue an official opinion by the next day" so Reyes could vote on the hotel proposal. Reyes then followed up with a call to the attorney general to reiterate his support for Duddlesten, according to the indictment.

Morales certainly proved accommodating. His office issued the opinion favorable to Duddlesten on December 15, though the speedy action did not have the result desired by Reyes. When it was first placed on the Council's agenda, consideration of the hotel project was delayed by Councilman Robb Todd, and the Duddlesten proposal was not approved until after Reyes had been succeeded on Council by John Castillo.

The indictment says that after his "intervention" with Morales, Reyes bragged to Montero, "That's raw power, man."

Now it may be a stick of political dynamite sitting under Morales's re-election campaign.

The validity of the Council's vote on the downtown hotel has never been seriously questioned, although the indictment alleges that three of the Duddlesten supporters were bribed.

Castillo, after allegedly taking $3,000 from Reyes at a restaurant on January 10, 1996, later met with lobbyists for the rival JMB hotel proposal and denied he even knew who Duddlesten's minority investors were.

A supporter of the JMB bid claims that Bob Lanier himself had no strong favorite, and that the mayor cited the bloc of votes on Council for Duddlesten as a reason he supported that proposal. Other Council members may have been won over by the bogus minority participation by the Cayman Group in the Duddlesten bid. Given all those elements, without the alleged escapades of the Hotel Six, mightn't JMB be the rightful winner of the contract to build a downtown hotel?  

"Duddlesten ought to be given an opportunity to perform in accordance with what he said he would do," says Vinson & Elkins attorney and lobbyist Joe B. Allen, who spearheaded the JMB effort and opposes overturning the Council vote on the basis of the indictment allegations. "I've never believed that he could do the project as he represented, and 18 months later, I still don't believe it."

Events subsequent to the Council vote on the hotel, including the withdrawal of the much-touted participation of the Hilton interests in the venture, make Allen's prediction almost the current conventional wisdom.

If the Duddlesten downtown hotel is already headed for a slow and public death, from the standpoint of the project's future it really won't matter much whether the feds can find 12 jurors willing to send the Hotel Six to considerably more humble accommodations. Of course, a handful of personal, political and economic futures will be riding on that verdict.

(For the full text of the indictment against Reyes and company, check out The Insider's web presence at www.houstonpress.com.)

Make your reservations now by calling The Insider at 624-1483 or 624-1496 (fax), or through e-mail at Insider@houstonpress.com.


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