The Insider

Since the FBI investigation of alleged bribes to members of City Council went public in May, critics of the operation have accused the agency of targeting only Hispanic and black councilmembers and lobbyists.
But now it appears the G-men have diversified their probe by scrutinizing the mostly Anglo, Republican-oriented lobbying team representing PSG, the U.S. subsidiary of a French corporation that spent the spring months seeking the Council's support for a contract to manage the city's wastewater system. No such pact has yet been awarded, but it certainly hasn't been for lack of effort by PSG.

The FBI's specific area of inquiry is whether PSG officials routed contributions to Councilmen Joe Roach and John Kelley through a group of supporters, in effect creating a network of "nominee contributors" to influence the city officials to support PSG. A common technique in routing campaign gifts involves the real contributor's paying or giving the nominee the amount of the contribution plus the income tax liability accrued in the process. The nominee then donates directly to the official's campaign, getting around election laws limiting the size of campaign donations. In this case, while the councilmembers themselves may have committed no illegalities, the individuals who orchestrated contributions could be on the hot spot.

As a member of the Council's competitive services committee, Roach championed the idea of having one company manage a privatized wastewater system. The councilman even issued a memo on the subject with attached letters from several companies. In one of them, PSG president Mike Stump dangled an offer to provide a free estimate of savings his company could provide by running wastewater operations, then write a cashier's check to the city for that amount if PSG got the contract. Stump never had to write that check, but he did give a $1,000 donation to Kelley's campaign last November.

FBI agents have quizzed PSG lobbyist Karen Post of the Peppar & Post public relations firm on the subject of the contributions. In the last year, Post has become a fixture on the City Hall scene, operating with what one source describes as an unlimited PSG budget. Post's company was paid nearly $1,800 during the last election cycle by Roach for campaign design and graphics services. According to associates, she has also had a business relationship with PSG for some time. One observer of municipal politics claims Post "wants to be the new Joe B. Allen," a reference to the Vinson & Elkins kingmaker and leader of the giant law firm's PAC. Post did not return several phone inquiries from The Insider.

Other members of the PSG team included state senator-in-waiting Jon Lindsay, waste disposal company executive Willard Jackson, the husband of tennis star Zina Garrison Jackson, and consultant Denis Calabrese, who worked for Roach in the last election. Port Commissioner Betti Maldonado, who became a central figure in the FBI sting after helping undercover agents offer cash contributions to several councilmembers, was briefly a member of the PSG team. Maldonado dropped off the roster after finding she didn't fit into the Post-Calabrese-Lindsay mix.

Calabrese, who says he has not been contacted by the FBI, jumps to Roach's defense. The councilman, says Calabrese, "was not all that aggressive" in helping PSG, and he points out that during the time PSG was pressing for a contract to manage the entire system, it actually lost a pact to manage the Southeast Water Purification Plant. Calabrese also notes that his job with PSG did not involve campaign contributions.

Roach refused to confirm or deny that the FBI is examining contributions to his campaign. "If you want to provide me the name of someone who wants to go on-the-record with these kind of accusations," replies the councilman, "then I'll be happy to respond. But I don't have any interest in fueling speculation about rumors and innuendo." Roach did say he didn't know whether there was an effort by PSG operatives to route money into his campaign.

Other sources tell The Insider that PSG operatives made direct overtures to consultants with links to key councilmembers in the privatization arena, offering generous contracts in exchange for help in gaining the ear of those officials. "I was just very uncomfortable with how aggressive they were," says one of those folks approached by the PSG group. "I can't tell you how relieved I am we didn't get involved." This person apparently has no hankering for long summer chats with the FBI.

Meanwhile, for those of you wondering why the feds have taken such an abiding interest in Councilmen Michael Yarbrough and Jew Don Boney even though they have no listed contributions from the FBI-created Cayman Group, look for the government to try to prove that both campaigns received Cayman cash that is not listed on their finance reports. As to whether the FBI has tapes to prove it, only the grand jury knows for sure. One source tells us the panel was prepared to return at least one indictment two weeks ago, and had to be cooled down by prosecutors who hope to have a package of indictments at the end of the grand jury sessions. Guess they'll return no indictments before their time.  

Reno Writes
A front-page article in early June by Deborah Tedford, the Chronicle's federal courthouse reporter, ruffled local U.S. Attorney Gaynelle Griffin Jones and raised concerns by Mayor Bob Lanier. The piece featured claims that the former chief agent-in-charge of the Houston FBI office, Mike Wilson, had to pull strings in Washington to get Justice Department officials to continue his agency's City Hall investigation after Jones refused to do so. In response, Jones issued a statement claiming the article was inaccurate and that she had never declined possible charges, but rather had recused herself because of a former relationship with a target of the sting. The reported dissension between the FBI and the U.S. Attorney's Office provoked Lanier to write Attorney General Janet Reno, asking her to get her subordinates to stop squabbling and share some of the probe information with city officials.

Reno has now answered Lanier with a letter that takes several swipes at the credibility of the Chronicle report. "Unfortunately, the Houston Chronicle article enclosed with your letter was incorrect in several material respects," Reno wrote. She repeats Jones' assertion that the investigation was referred to the Justice Department's public integrity section by Jones, and not the FBI. Further, Reno backed Jones' claims that her office had never declined possible charges arising from the investigation. Reno also labeled as false the allegations by some blacks and Hispanics that the FBI had targeted officials based on race or ethnicity.

Tedford is standing by her story, saying, "I am aware through sources in the U.S. Attorney's Office that the office did decline to prosecute. But I'm not going to get into semantic games with Gaynelle." Tedford says that while Jones did not issue an official opinion declining to pursue the FBI's cases, her assistants verbally indicated to the FBI that they didn't feel the investigation had turned up much. Tedford still contends that former agent Wilson felt it was much more important than that, and took the matter to the Justice Department in Washington.

Reno also appeared to brush aside Lanier's request that the feds share information on the probe. "It is the general policy of this department not to reveal specific facts about ongoing investigations," she declared. But at the end of her missive, the attorney general effectively confirmed what Lanier told the Press two weeks ago: that the FBI is indeed sharing information on a limited basis with Rusty Hardin, the lawyer retained by the city to advise the mayor on the probe. "I understand they have been able to address some previous questions expressed by you and the city attorney," wrote Reno, "and I assure you they will continue to give any requests from you and your staff every consideration." With that, The Insider nominates Reno for our Bureaucratic Doublespeaker of the Year.

Sour Farewell
Channel 13 president and general manager Jim Masucci's surprise resignation and immediate departure last week after a meeting with Disney news executive Larry Pollack provoked few tears around the station. Masucci's earlier decision not to come back from his Maine vacation to attend the funeral of veteran 13 reporter Steve Gauvain last month had shocked the bereaved staff and eroded Masucci's already dwindling base of support at KTRK. The 64-year-old Masucci also didn't bother with so much as a call to Dwight Payne, the photographer who was at the wheel when Gauvain's news vehicle blew a tire, flinging the reporter to his death. Less than an hour earlier, the 51-year-old Gauvain had been on the air doing a live shot.

"You really needed someone at that point to pull the staff together and say, 'It's going to be okay,' " says one 13 staffer. "[Masucci] just wasn't there. There were a lot of people who felt that really said a whole lot about how much each one of us are worth [to him]."

As to whether Masucci's sudden departure was in fact a firing prompted by his perceived insensitivity to Gauvain's death, the staffer says, "We all hoped it might play some role, because at least it would imply that even in a humongous corporation like Disney, people still matter."

Masucci was unavailable to the media after his resignation. He left a brief note indicating his departure was voluntary and based on a decision to slow down and enjoy his considerable wealth. But the note displayed a stunning bit of insensitivity to the bad feelings churned up by his decision to ignore the funeral. "I just spent two weeks on the coast of Maine, where I realized there is life after television," he wrote blithely. Back in Houston, Steve Gauvain's friends were realizing that sometimes there isn't.  

The Insider is available by phone at 624-1483 or 624-1496 (fax) or by e-mail at

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