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Thursday, July 9, 1998

Federal bankruptcy judge rejects testimony in Hofheinz case

HOUSTON (AP) - A federal judge has scrapped testimony that linked a local real estate transaction to alleged bribes paid by a former Houston mayor to politicians in Louisiana.

FBI agent Richard McHenry relied on an unreliable informant in testifying that former Houston Mayor Fred Hofheinz used $250,000 from a family charitable foundation to bribe Louisiana officials, U.S. Bankruptcy Judge Karen Brown decided Tuesday.

Brown ruled that McHenry had no firsthand information and relied solely on FBI informant Michael Graham, a convicted felon who helped spawn a probe into former Louisiana Gov. Edwin Edwards, Hofheinz and others.

Brown cited a series of incidents dating back to 1992 in which Graham has concealed information, forged legal documents and given conflicting testimony. Last month, Graham and a brother, Patrick Graham, pleaded guilty to tax evasion.

"Graham has again convinced this judge that he is not believable," Brown wrote.

Hofheinz defense attorney Michael Ramsey said the decision calls the entire investigation into question.

Hofheinz and Michael Graham had been disputing ownership of a $630,000 suburban Houston house since Graham filed for bankruptcy in 1996. Brown ruled that the Hofheinz family's foundation is the legal owner.

Hofheinz has testified that he seized the house as collateral when a $250,000 loan to Graham was not paid back. Graham went to the FBI with his allegations days after Hofheinz evicted Graham and his wife, Hofheinz said.

The Graham brothers told FBI agents they and Hofheinz paid off Louisiana officials to help them win contracts, including one to build a $35 million juvenile facility in Jena, La. That project was promoted by then-Gov. Edwards, Graham has said.

"Judge Brown's decision clearly repudiates Michael Graham and exposes his lies," Hofheinz said. "I am exonerated, but putting it behind me is another matter. I was wronged. There has been damage. There have been headlines."