Pubdate: Thu, 28 Aug 1997
Source: Houston Press, page 19
(http://www.houstonpress.com/1997/current/feature11.html)
Contact: Feature Story
Snitch vs. Snitch
In the drug world, you can't trust anybody especially a
federal informant
By STEVE McVICKER
Jorge Arroyo's head appeared to be on a swivel. From his vantage
point in the burgundy leatherette booth, he constantly monitored
the other patrons of Houston's: Was anyone in the Kirby Drive
restaurant watching him? He'd spent much of the past two decades
as a paid informant for the U.S. Drug Enforcement Administration.
In the snitching business, you watch your back.
When he wasn't looking over his shoulder, the wiry Bolivian spoke
elliptically to the two attorneys who'd joined him that July
evening four weeks ago. Kent Schaffer, a dark, dangerouslooking
man with a beard, had made a career of defending suspected drug
dealers and was considered one of the best at his craft.
Likewise, lanky Dan Cogdell had carved a reputation as one of the
top criminaldefense attorneys in Houston. Cogdell had a
corporate air befitting his usual whitecollar clientele; for
him, meeting with a twitchy snitch was slumming.
The two lawyers had recently joined forces on a case that
required both their areas of expertise. In October 1986, a
federal grand jury indicted Woodlands businessman Daniel Steven
De La Garza on four counts of money laundering. Along with his
two brothers, De La Garza had built an estimated $10 million
fortune in real estate and managed care. According to both state
and federal authorities, he also controlled shadier dealings on
the side. And like Arroyo, he'd worked as a federal informant.
In fact, that was how he met Arroyo. In the 12 years since, their
history has been one of lies and doublecrosses. Each has tried
to set the other up, and each has used the feds to do it.
Now, in late July, their paths were about to cross yet again. De
La Garza's moneylaundering trial was set to begin the first week
of August, and Arroyo was scheduled to be the prosecution's star
witness.
Earlier that day, the attorneys say, they were in Schaffer's
office conferring about the De La Garza case when Schaffer
received a call from Arroyo. Schaffer had represented Arroyo in
1985, when he'd been charged with smuggling cocaine from
Colombia; even so, Schaffer thought it somewhat unusual that
Arroyo would get in touch with him, since prosecution witnesses
rarely offer to make themselves available to the defense. But on
the phone, Schaffer says, Arroyo said he needed to talk with him
about the De La Garza case and arranged to meet the two lawyers.
In the Houston's booth, Schaffer sipped an ice tea; Cogdell, an
O'Doul's. After a few minutes of small talk, Cogdell asked Arroyo
to explain why he was testifying against De La Garza, why he
would help a government that had previously prosecuted him.
Arroyo again checked to be sure he wasn't being watched. Then, on
a cocktail napkin, he wrote a dollar sign. He complained that the
federal authorities were mistreating him, that they had reneged
on an agreement to pay him for his testimony and planned to
humiliate him by bringing up his criminal past during De La
Garza's trial.
Cogdell asked Arroyo how much the feds had paid him over the
years to be an informant. Arroyo suggested that Cogdell guess.
The attorney took the cocktail napkin on which Arroyo had written
the dollar sign, and beside it, wrote "50,000." Arroyo took the
napkin, tore off the writing, put the scrap in his mouth and
swallowed it. He gave a thumbsup sign, and began describing his
car and how money could be placed in the back of it.
Cogdell was dumbstruck, then furious; nothing like this had ever
happened in his whitecollar practice. "If you think that I
offered you $50,000 not to show up next week, you're fucking
crazy," he told Arroyo.
Schaffer was cooler. He quickly said that the meeting needed to
end, and told Arroyo that they would get back in touch.
Leaving the restaurant, the two lawyers worried that they were
being set up by Arroyo, and possibly by the feds. Both Arroyo and
their client operated in the shady world of stings, informants
and doubledealing. The lawyers wondered whether they, too, were
being sucked through the looking glass, entering a realm where
facts are hard to come by and nobody can be trusted.
A "sleazy saga of illusory illegality" is how the Fifth Circuit
Court of Appeals characterized the first chapter of Dan De La
Garza's relationship with Jorge Arroyo. In the court's ruling on
the 1985 drug charges against Arroyo, no one emerges as a hero
not Arroyo, not De La Garza and certainly not the feds.
Arroyo had connections to the rich and shady in Bolivia; he was
married to the daughter of Hugo Banzer Suarez. In 1971, Banzer
seized control of Bolivia during a military coup, allegedly with
help from Klaus Barbie, a fugitive Nazi often called "the butcher
of Lyon." Reportedly, the coup was financed by Bolivian drug
lords.
Banzer's first reign as president lasted roughly seven years.
During that time, according to the Los Angeles Times, members of
Banzer's family were involved in the sale of drugs. In May 1989,
the newspaper reported that one of his daughters had openly
peddled cocaine on the campus of the American Cooperative School
in La Paz, and that his physician soninlaw had been arrested
carrying a suitcase full of cocaine in Canada.
Trouble eventually found Arroyo as well. In 1982, he left Bolivia
to study English in Houston. In July of that year, he was
convicted of possessing less than half a gram of cocaine and
placed on eight years' probation. With financial help from his
fatherinlaw, he went into business selling empanadas wholesale.
When the business failed, he filed for bankruptcy.
De La Garza, on the other hand, had no highandmighty family
connections. He grew up in Corpus Christi, the eldest of six
children, and started his adult life as a military police
officer. His enormous size then, as now, he weighed
approximately 300 pounds made him a force to be reckoned with.
When he left the service in 1978, he started a company called
International Bodyguards.
As a bodyguard, De La Garza traveled with entertainment figures
and foreign nationals visiting the U.S. In 1982, he was twice
indicted on two counts of theft over $10,000; each time, the
charges were dropped. According to an investigator involved in
the probe, some of De La Garza's clients used the aircraft
fueling services of a company called Universal Weather and
Aviation. De La Garza, the investigator says, somehow managed to
divert the payments his clients wired into his own bank account.
The court records have been sealed, and De La Garza denies the
allegations. But the investigator believes that the criminal
suits, as well as a civil suit by Universal, were dropped because
De La Garza agreed to make restitution.
Arroyo would later claim that De La Garza used the bodyguard
business as a front for dealing drugs. De La Garza denies that
allegation as well, saying that he never used drugs, and
purchased them only in his role as a DEA informant.
De La Garza says that he developed an informal relationship with
the agency through a friend who worked for the Houston Police
Department. The Fifth Circuit ruling suggests another connection
as well. Harvey Davis, an old friend of De La Garza's from
Beaumont, is described by the court as a "drug addict and double
dealing informant." After Davis was busted for coke in Phoenix,
he arranged to have the charges dropped; in exchange, he moved
back to Houston and began informing for the DEA. Somehow, De La
Garza was included in the deal, and both he and Davis were
assigned to DEA Special Agent Roger Norman.
In the summer of 1984, Davis and De La Garza were told to gather
information about Arroyo, who claimed to be able to obtain large
quantities of cocaine through his family connections. Norman, De
La Garza and Davis obtained an introduction from two alleged drug
dealers, Guillermo Nino and Jackie Higgins. Then, for several
months, the trio met with Arroyo to discuss purchasing as much as
100 kilos of powder. They proposed various schemes for smuggling
the contraband into the country, ranging from highconcept
(hiding the dope in the flange plates of jets flown here for
repair) to downright ordinary (De La Garza and Arroyo would meet
a Bolivian "mule" in Mexico, then simply drive the coke across
the border).
During this time, Nino and Higgins, the pair who'd introduced
Davis and De La Garza to Arroyo, disappeared. Dealers are not the
most reliable of people, but nonetheless, De La Garza was
alarmed. He and Davis filed a complaint with the DEA accusing
Agent Norman their own contact of robbing, then murdering,
Nino and Higgins. (The Fifth Circuit does not probe the truth of
this claim, but notes dryly that neither Nino nor Higgins was
later available to testify.)
Nonetheless, De La Garza continued to work for the DEA. And in
September 1984, he and Arroyo planned to go to Bolivia themselves
and bring back cocaine chemically bonded to cardboard inserts
inside a briefcase. Before leaving for South America, De La Garza
arranged for Arroyo to be busted upon their return to the States.
Things didn't go entirely as De La Garza planned. As he and
Arroyo traveled back to the States, Colombian authorities in
Bogot detained De La Garza; he says he wasn't told why. Although
De La Garza was never charged or tried, he remained incarcerated
for the next two years. According to his attorneys, he is
convinced that his arrest was an act of revenge engineered by
Agent Norman. (Norman, now based in Sacramento, did not return
calls from the Press.)
After De La Garza was arrested, Arroyo was allowed to return to
the U.S. As De La Garza had arranged, Arroyo was arrested and
indicted on nine counts of drug smuggling. Represented at the
time by Schaffer, Arroyo was acquitted of four counts and
convicted of five; he appealed all five convictions. After a
district court granted him a new trial, and the Fifth Circuit
upheld that decision, the Department of Justice dropped its case
against him.
Despite his legal victory, Arroyo ended up spending two years in
jail the same amount of time De La Garza spent in a Colombian
prison. When both were again free men, it was payback time.
As Dan De La Garza sits in his attorney's plush office, the
cellular phone that he wears in a holster rarely stops ringing.
The massive, balding businessman seems mildly annoyed by the
interruptions as he tells what it was like to spend almost two
years of hell in a Colombian prison. Between calls, he recounts
various forms of torture: hanging upside down for hours at a
time, being sprayed with icecold water from a highpressure
hose, and beatings that left him with seven broken ribs.
It is an understatement to say that De La Garza has come a long
way in the 11 years since his release. "Can you say 'rebirth'?"
he asks.
"You can do pretty much whatever you want to do when you have to
start your life over," he says. What he decided to do, with the
help of friends, was to buy foreclosed office buildings from the
Resolution Trust Corporation and sell them at a profit. From
there, he branched into the healthcare industry.
De La Garza and two of his brothers, Michael and Shawn, control
three companies: DLG Financial, Health Trust, and Synergies.
Through those companies, they own medical office buildings and
operate managedcare companies in Houston, Dallas, Shreveport and
Albuquerque. Last year, De La Garza told federal authorities that
he earned approximately $150,000 a year in addition to an annual
bonus between $50,000 and $100,000. His home in The Woodlands is
valued at $800,000. His net worth has been estimated at $10
million, though he says it's lower now. His attorneys say all of
that money is legitimate.
In fact, in many ways, De La Garza and his family now seem
downright respectable. In 1992, his brother Mike ran for state
representative in the Democratic primary, taking 43 percent of
the vote against incumbent Kevin Bailey. In September 1995, De La
Garza himself was quoted in a USA Today story noting that
Hispanic CEOs were fighting to preserve federal affirmative
action policies.
That's not to say that De La Garza remained squeakyclean; in
fact, a case can be made that he's merely moved up in the world
of shady deals, into the more lucrative realm of whitecollar
crime. In January 1995, a federal court in Houston fined DLG
Financial $600,000 after finding that the company had violated
the U.S. Bank Control Act in 1990, when it failed to get prior
approval from the Federal Reserve for the purchase of $1 million
in promissory notes from NCNBTexas through International
Bancorporation.
The Federal Reserve board of directors held that DLG's offense
was not merely a technical violation, but part of the business's
regular heavyhanded practices. "De La Garza, continuing a
pattern that started in December 1990, sought to control the
bank's management by forcing it to engage in questionable
mortgage pool transactions with related interests," wrote
Assistant Attorney General Frank W. Hunger. "He threatened the
management with foreclosure of the stock [of International
Bancorporation], implicitly threatening their jobs if they did
not accept his offer."
De La Garza does not seem fazed by the sanction. He dismisses the
fine as a mere slap on the wrist, noting that his company still
made $1.4 million on the deal. He considers the penalty little
more than the price of doing business.
But another questionable business deal still dogs him. In 1993,
De La Garza and another man were indicted in Travis County for
misapplying $9 million in insurance company assets. De La Garza's
codefendant turned state's evidence, and De La Garza was
convicted and sentenced to five years in prison. He is now
appealing that conviction.
Around the same time as De La Garza was indicted in that case,
federal investigators were luring him into an unrelated trap
one constructed with the help of his old nemesis Arroyo.
Unlike De La Garza, Arroyo didn't prosper after his release from
jail. On October 6, 1989, less than two years after he'd been set
free, Houston police arrested him for delivery of less than 28
grams of cocaine. Three months later, he was turned loose after
Harris County assistant district attorney Ira Jones filed a
motion to dismiss. On the dismissal form, to indicate the reason
for dropping the charge, Jones checked a box marked "Other."
Arroyo had cut a deal to become an informant for the DEA.
Since then, according to federal records, the U.S. government has
paid him almost $37,000 to gain the confidence of suspected drug
dealers and help ensnare the targets of DEA sting operations. No
doubt to Arroyo's great satisfaction, one of his first targets
was De La Garza.
Arroyo approached De La Garza about laundering drug money cash
that was actually to have been provided by the DEA. According to
De La Garza's attorneys, the businessman saw in this offer a
delightful opportunity to put Arroyo behind bars. Playing along,
De La Garza told Arroyo that he did, in fact, know a banker who
could fill his needs and then, says attorney Schaffer, De La
Garza alerted the FBI, which was interested in running a sting
operation.
The spyversusspy machinations came down to this: De La Garza
didn't know Arroyo was working for the DEA, and Arroyo didn't
know De La Garza was working for the FBI.
For some reason, though, Arroyo didn't produce the money to be
laundered, and both plots fizzled. Still, Arroyo maintained
contact with De La Garza, occasionally even borrowing money from
the businessman to pay his rent. However much the two loathed
each other, they stayed in touch.
In 1993, Arroyo once again approached De La Garza about finding a
banker to clean some money. Arroyo was still working for the DEA,
and this time around, his contact was Special Agent Norman De
La Garza's former contact and archenemy.
According to De La Garza's attorneys, De La Garza contacted FBI
agent Jan Lindsey, proposing that Lindsey snare Arroyo by posing
as a dirty banker. But that scheme hit a snag: The FBI had lost
interest. (Cogdell says he plans to call Lindsey as a defense
witness at De La Garza's trial, but the Press was unable to
contact the agent for confirmation.)
The attorneys argue that De La Garza still hoped to set up Arroyo
someday, and so went along with Arroyo's scheme, planning to keep
him on a string. In May 1993, Arroyo gave De La Garza
approximately $100,000 in cash, and De La Garza in return gave
him $93,000 in cashier's checks. Schaffer says De La Garza kept
the 7 percent commission as part of his charade.
In February 1994, the pair repeated the exercise, this time with
more money: Arroyo gave De La Garza approximately $275,000 in
cash; two weeks later, De La Garza wiretransferred Arroyo
approximately $261,000 from two different banks.
De La Garza's attorneys contend that he agreed to go along with
Arroyo's (and the government's) scheme only because he wanted to
bring Arroyo to justice. That argument was to be the essence of
De La Garza's defense at least, it was until Schaffer and
Cogdell met Arroyo in Houston's.
As the two lawyers drove away from the restaurant, they tried to
figure out what had happened, and what their next move should be.
"I was concerned that this silly motherfucker was going to say
that we offered him money," says Cogdell. "At the same time, it's
clear to me that he's trying to get us in a bidding contest with
the DEA."
They decided they needed to report the incident to someone; the
question was, to whom?
The feds were out. For all Cogdell and Schaffer knew, the DEA
might have orchestrated their meeting with Arroyo, hoping to
compromise the lawyers. Or, Schaffer noted, even if Arroyo was
working on his own, he might claim they'd originated the offer of
a bribe, and the feds would be inclined to believe him. Even if
authorities didn't believe Arroyo, the lawyers figured, the FBI
or the DEA would whitewash the whole affair.
Schaffer and Cogdell also didn't trust U.S. Attorney Gaynelle
Griffin Jones. Both attorneys had had problems with Jones, and
Cogdell's dealings with her had been particularly contentious. A
year and a half before, while Cogdell was defending a client
against federal bankfraud charges, he says he tried to warn
Jones that the prosecutors in her office weren't shooting
straight with the defense team. According to Cogdell, Jones not
only ignored his warning but encouraged the prosecutors to stay
their course. (Jones did not respond to a request for an
interview.)
The charges against Cogdell's client and nine other defendants
were thrown out after a judge cited the two prosecutors for
misconduct. In his ruling, U.S. District Judge Kenneth Hoyt wrote
that "only a person blinded by ambition or ignorance of the law
and ethics would have proceeded down this dangerous path."
Cogdell filed a complaint against Jones with the Department of
Justice. "I don't trust her to be objective or reasonable," he
says. "I think Gaynelle has a history of covering Gaynelle's back
and little else."
"We had to go to somebody we could trust and who had no interest
in the case at all," adds Schaffer.
That person, they decided, was Harris County District Attorney
Johnny Holmes. To say the least, it's rare that a criminal
defense attorney thinks of the hardnosed D.A. as an ally, but
few question his integrity.
Early the next morning, Cogdell and Schaffer were in Holmes's
office, and the D.A. was amused by their predicament. "They were
pretty drove up," recalls Holmes. "And I remember thinking to
myself that they should have just told the guy, 'Hell, no,' but
after thinking about it overnight, they apparently decided to
play undercover cop."
Nevertheless, Holmes agreed to help. The attorneys had arranged
to meet Arroyo back at Houston's at 3 p.m. Holmes said he'd have
them wired for sound, and would have his office supply them with
$50,000 in "flash" money. The D.A. warned Schaffer that if he
lost that cash, he'd face a long payroll deduction.
The attorneys returned to their offices and Arroyo called to
change the game plan. Instead of Houston's at 3 p.m., he wanted
to meet at Schaffer's office an hour later. Holmes' investigators
hurriedly wired the law office.
When Arroyo arrived, Cogdell continued to seem offended by
Arroyo's plan. He told the informant he still thought that the
plan was a bad idea. With the tape rolling, Cogdell was careful
to make it clear that all parties believed the $50,000 guaranteed
that Arroyo wouldn't testify against their client, and that the
deal had been Arroyo's idea. That said, he got up, brought the
money into the room, and gave it to Schaffer. He then left the
room.
Schaffer handed Arroyo the cash, and Arroyo headed out. In the
hallway, detectives cuffed him and read him his rights, then
hauled him to jail.
Fresh from the showers of Harris County's San Jacinto Street
jail, but wearing a day's growth of stubble, Jorge Arroyo enters
a small, glasspartitioned interview room with his hands cuffed
behind his back a sign that, as an informant, he's being kept
in administrative segregation, away from other prisoners, for his
own good. Dressed in an orange jail uniform, he eyes his visitor
cautiously, examining through the glass the business card that
identifies the man as a reporter.
"I am in a very delicate situation," says Arroyo. He adds that he
is not allowed to say anything to anyone about De La Garza
without permission from Robert Stabe, the assistant U.S. attorney
who is the lead prosecutor in De La Garza's case.
But asked about Schaffer, Cogdell and the $50,000, Arroyo's
inhibitions quickly fade. He didn't suggest the bribe, he says.
As he speaks, he pulls his cuffed hands from behind his back and
makes a circular motion with his forefinger: It was the other way
around. The deal, he says, was the lawyers' idea.
Since De La Garza's indictment, Arroyo has been working for a
mining company in Brazil, where he lives with his wife and
children. He says that last month, after he returned to Houston
to testify against De La Garza, he learned that Schaffer had been
trying to reach him by phone at his Brazilian number. So he
returned Schaffer's call and did it at the local DEA
headquarters, taping the conversation with a DEA recorder. That
tape, Arroyo insists, proves that the bribe was Schaffer and
Cogdell's idea.
So why is Arroyo in jail?
Arroyo shrugs. His face reads, "You figure it out."
Apparently Arroyo is telling the truth about recording his
conversation with Schaffer. But according to Harris County first
assistant district attorney Don Stricklin, nothing on the tape
suggests wrongdoing by either of the lawyers. Stricklin also says
Arroyo may have made a second tape possibly of the meeting in
the restaurant but the prosecutor has neither seen nor heard
it. Schaffer and Cogdell say they hope there is a tape of the
meeting at the restaurant, that it would completely clear them of
trying to pay Arroyo to disappear.
Such a tape might also clear them of an even more devious plot:
setting up Arroyo to appear to solicit the money, thus ruining
his credibility as a witness in the case against their client.
Clearly, that's been the outcome of the affair. On the stand, if
Arroyo says he didn't extort money from the lawyers, they have a
tape to prove him a liar. And if he says he did extort the money,
then he's obviously a crook. Either way, a jury isn't likely to
believe his testimony against De La Garza.
Schaffer dismisses the notion that he and Cogdell engineered the
sting for their client's sake. "I couldn't give myself that much
credit," he says. Still, he admits, such a scheme would have been
ingenious.
The cases against Daniel De La Garza and Jorge Arroyo are both
pending.
The De La Garza trial has been reset for October. With Arroyo's
credibility severely damaged, the federal prosecutor says he's
rethinking his strategy. Schaffer and Cogdell believe the case
against De La Garza has been mortally wounded; the government has
no case with Arroyo, and no case without him.
A state court has charged Arroyo with witness tampering, but so
far, the U.S. Attorney's Office has yet to file charges against
him for planning to literally go south on them. District Attorney
Holmes finds it hard to believe that his counterparts haven't
taken the action. "The feds ought to be outraged," he says.
Arroyo remains in jail without bond. In the jail interview room,
he talks about wanting to return home to his family in Brazil.
Then, shifting emotional gears, he puts his right forefinger and
thumb close together, signaling that this case is small potatoes
to him.
Just then, a guard bangs the door. Arroyo gets up from his chair
and begins to walk away, his occupational paranoia taking hold.
He seems suddenly struck by the thought that perhaps he has said
too much to this stranger.
"Hey," he asks the reporter, "who do you really work for?"