Longform

The Brothers Graham (Part I)

Page 2 of 6

Collins quit as TDCJ chief last fall, after Governor George W. Bush caught wind of his involvement in a private corrections facility on the drawing board in LaSalle Parish, Louisiana. The Louisiana project also involved Pat and Mike Graham, along with N-Group treasurer Jim Brunson and former Houston mayor Fred Hofheinz.

In the early stages of the LaSalle Parish project, Hofheinz had got to talking with then-governor of Louisiana Edwin Edwards, who mentioned that what he really wanted for his state was a professional basketball team. Hofheinz figured that was as close to the inside track as he would ever get, so he put the private jail on hold in late 1994, formed a group called Top Rank of Louisiana and, with Pat and Mike Graham handling the financial details, set out to buy the Minnesota Timberwolves.

Though the NBA would have loved a team in New Orleans, the league rejected the group's bid last June, saying the financing for the purchase was too speculative. Two New Orleans investors who say the Graham brothers told them the Timberwolves purchase was a fait accompli later sued Top Rank for breach of contract. In December of last year, a judge awarded them $500,000 -- a judgment that forced Top Rank of Louisiana into bankruptcy.

Meanwhile, shortly before that judgment was rendered in New Orleans, Hofheinz was named as a co-defendant with the Grahams in an Apex-related suit filed in Houston. The bond investors alleged that the former mayor helped the Grahams shield their assets from the Apex judgment by having his family's charitable foundation purchase Mike's antebellum-style manse in Kingwood and its furnishings for $385,000 -- a fraction of their value. According to the suit, Hofheinz also agreed to loan Pat Graham $650,000 from the Irene Cafcalas Hofheinz Foundation in exchange for the deed of trust to Graham's home, which sits on the other side of Deerwood Country Club from Mike's. Both Grahams and their families continue living in the houses.

Hofheinz, individually, was recently dropped from the suit. But the foundation named after his mother is still a defendant.

If you're getting the impression that Pat and Mike Graham are a magnet for trouble, and have a knack for dragging other people into it, you're on the right track. Testimony and evidence in the six-week Apex trial in 1994 offered up more unsavory possibilities involving former Texas governor Mark White and former state attorney general Jim Mattox -- though, as you might suspect, like Collins and Hofheinz, White and Mattox can only blame themselves for the implications.

White encouraged the Grahams' ill-fated private jail development when the concept was first proposed to him by Pat in 1987, shortly after White left office. Later, when the ex-governor joined Keck, Mahin and Cate as a partner, the Grahams chose the firm to act as counsel to bond underwriter Drexel Burnham Lambert. The jury in the Apex suit found that the Grahams and the Keck, Mahin law firm withheld crucial information from investors -- such as about $6 million in kickbacks to N-Group -- while misleading them into believing the state and other jurisdictions would pay to house prisoners in private jails.

Though White was not named as a defendant, and another attorney in the Keck, Mahin firm handled the official duties as underwriter counsel, the plaintiffs' attorneys, during their closing argument at the 1994 trial, accused the former governor of "initiating" the conspiracy to defraud the bond investors in exchange for $225,000 in contributions from a political action committee set up by the Grahams' firm, N-Group Securities. The funds were for White's failed comeback attempt in the 1990 Democratic gubernatorial primary.

Another N-Group PAC gave $55,000 to Mattox, the attorney general who approved the bond issue in September 1989, for his own unsuccessful run for governor in the 1990 Democratic primary. During the trial of the Apex lawsuit, an attorney for the investors asked Mattox point-blank if the PAC donation was a reward for that approval. Naturally, Mattox took offense at the insinuation. But according to evidence produced at trial, it was a legitimate question: a week before Mattox signed off on the bonds, the assistant attorney general in charge of reviewing the issue told Keck, Mahin and Cate that finding enough prisoners to fill the 3,000 private beds "may not be possible at all."

But as many have learned, Mike and Pat Graham have a way of making people believe anything is possible. Their powers of persuasion are well-established -- though aside from the material reality of 3,000 prison beds, not in any way that would suggest a history of good-faith efforts.

The brothers' chief accomplishment seems to be an unerring ability to walk away from their business associations somewhat richer, while leaving behind a trail of people who regret ever meeting them. The public record on the Grahams is littered from the 1970s on with accusations of increasingly brazen malfeasance: theft, breach of contract, bid-rigging, tax evasion, fraud and, now, against Pat Graham, money laundering.

KEEP THE HOUSTON PRESS FREE... Since we started the Houston Press, it has been defined as the free, independent voice of Houston, and we'd like to keep it that way. With local media under siege, it's more important than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" program, allowing us to keep offering readers access to our incisive coverage of local news, food and culture with no paywalls.
Brian Wallstin