This article first appeared in WORTH magazine.
Teresa Rodriguez, the seventh of nine children, grew up on a farm near the hamlet of Danevang, Texas, some 70miles southwest of Houston. By her own account, which relatives deny, her father was abusive. "I had a very cruel childhood," she told reporter last year. "I tend to block it out now." She married in college and had two sons by the time she graduated. If Houston were another kind of place, she might never have found her way into the social circles where she did her best work. But Houston society rarely stoops to deny its rural and bourgeois origin; outside a tiny aristocracy, pedigrees are for stud horses and standing bulls. Rodriguez struggled hard to earn money and acceptance, and whence approached wealthy Houstonians with her investment proposal, she did so as a social equal. It didn't hurt that her second marriage, in 1991, was to a Houston police officer. He was Captain Dale Brown, latest in a long line of local society cops, the man to see about hiring off-duty officers to escort and guard important weddings, receptions, funerals, parties, and other occasions. She met him at a benefit ball.
Betty Shindler and husband, Jim, were particularly sympathetic to Rodriguez's struggle to find a place among Houston's upper crust. Jim Shindler worked hard for his money in 30 years as a real estate broker and developer; Betty grew up middle class in Crockett, in the piney woods of East Texas. In Houston, she devoted remarkable energy to volunteer work for the ballet, the Mental Health Association, the March of Dimes, and others.
In 1991, Betty became president of the Textiles and Costume Institute, a division of the Houston Museum of Fine Arts. Part of the job was fund-raising, and while soliciting major-gift prospects, Betty phoned Teresa Rodriguez, whom she knew by reputation as a successful businesswoman but had never met. Rodriguez responded immediately with a $2,500 check.
That fall, at a black-tie opening of a new Costume and Textile Institute exhibit, Betty sought out Rodriguez to thank her for the gift. Short, stocky, in her mid-40s, Rodriguez relied on her jewelry to exude a visual aura, and it worked. She was "swimming in jewelry," Shindler says approvingly. The two women hit it off. "She is so personable, very warm," Betty says. "Very funny, a little bawdy.... You just kind of disregard the four-letter words, or you laugh. She's one of the few women I thought could get away with it."
The Country Club Pitch
Shindler's and Rodriguez's paths crossed again in the spring of 1992. Shindler, chairwoman of the Women of Distinction Winter Ball sponsored by the Houston Post, sold her first $10,000table to Rodriguez. Later, she invited Rodriguez to lunch at the River Oaks Country Club, second only to the venerable Houston Country Club in local social standing. At lunch, Rodriguez made the pitch.
This is Rodriguez's story as Shindler tells it. (Through her lawyer, Rodriguez declined repeated interview requests from WORTH.) Because of its status as a minority-owned business, Rodriguez said, her employment-contracting firm was able to exploit Small Business Administration pork barrel. The SBA set aside money for contracts with minority-owned businesses. But qualified businesses often couldn't be found, and in other cases the businesses that landed the contracts couldn't handle the work. So, Rodriguez said, her company was able to step in, via an anonymous friend in Washington, and accept the jobs at tremendously inflated rates. She was landing these contracts as fast as she could expand her businesses to do the work, she said, and the contracts were so profitable that she could afford to pay investors 10 to 20 percent monthly to finance her business expansions.
Given the difficulties facing the real estate business since the latest Texas bust, Betty was receptive to fresh investment ideas. She brought Jim along to the next meeting with Rodriguez, a dinner at the club. Jim wondered why the lush program and Rodriguez's success in it had gone unnoticed by the press. Rodriguez said it had all been kept hush-hush since 1959 to avoid attracting unfavorable attention.
Rodriguez also dropped names, mentioning several well-known Houstonians who had invested and her friendships with Elyse Lanier, wife of Houston's well-connected mayor, and Charlie and Kittsie Thomas, then owners of the Houston Rockets basketball team. To the Shindlers, Rodriguez was clearly in the right loop. In December 1992, they claim in a civil suit, they gave her two checks for $100,000 each on a promise of a 15 percent monthly return, and in February 1993 a third $100,000 check. On the first $200,000 invested, Rodriguez paid the Shindlers $30,000 in January, February, and March of 1993. On their final $100,000 investment, the Shindlers got a payment of $15,000 in March. They did receive a check in April, but it bounced.
Still, Rodriguez was pulling in money elsewhere. She had made contact with Joanne King Herring Davis, a friend of the families of George Bush and of former Secretary of State James Baker III. The same month the Shindlers' checks bounced, Davis claims in her own suit, she gave Rodriguez $400,000.
The unusually attractive terms Rodriguez was offering made Davis uneasy. So did the fact that Rodriguez asked her not to indicate a payee on her check. But she went ahead. "I should have known that the Lord doesn't approve of things like this," Davis says. Yet it was the Lord's work that Davis was pursuing by investing with Rodriguez. Davis's family is assembling land for historic preservation projects on her ranch in Simonton, Texas, and Davis wanted to finance, among other things, the renovation and preservation of a 155-year-oldMethodist church that she had acquired and moved to the ranch.
The church is a plain wood structure. The ranch house is less understated. Confederate flags adorn the wall, and gilded mirrors reflect crystal chandeliers and old masters. Davis, an honorary consul general of Pakistan, has an interest in the Middle East; a rocket launcher, a land mine, and automatic weapons--souvenirs of the Afghanistan war--decorate the den. Novelty extends toa bathroom where a visitor, to expose the commode, must know enough to lift the padding on what appears to be a Spanish throne.
"This friend of mine had been telling me about Teresa," Davis says.” She said she made something like $20,000 a month--a month!" Davis never received an interest payment, and her money has vanished.
The Down-Home Pitch
Melba Held never moved in the same social circles as the Shindlers and Davis and didn't have the kind of money they did. But Held, a retired hairdresser in the blue-collar Houston suburb of Seabrook, did have friends, and together six of them raised $650,000to invest with Rodriguez.
Though lower on the social scale than Houston's richest neighborhoods, Seabrook shares some of the same attitudes toward enterprise, government, and taxes. That made it receptive to Rodriguez's pitch. Held met Rodriguez through a man who seemed to be an agent of hers, Alvin Bebar, the friend of a friend Held knew from the Seabrook New Age Christian community. Bebar represented himself as a specialist in tax avoidance and offshore banking. (Later, the IRS would identify him as a member of the Pilot Connection Society, an antitax protest group whose founder has asserted that the IRS is a for-profit corporation and predicted two years ago that in October 1992 an insane George Bush would stage a military coup to keep power in the hands of "the 12 families who control the world.") Bebar invited Held and her friends to meet Rodriguez and hear her pitch at lunch in a fancy Houston restaurant. Bebar arrived with his wife in a limo. Rodriguez arrived in a chauffeured Mercedes with a bodyguard. Held was impressed. "She's got on a million in jewelry!" Held recalls thinking.
Held claims in a civil suit that her own piece of the investment pool amounted to $61,000, which she raised by selling her second home, her jewelry, and her beauty salon. At Bebar's request, Held says, she sent the money to the Royal Trust Bank on the Isle of Man. She says Bebar told her she could reclaim her money any time she needed it. Soon enough she did need it--her doctor advised knee surgery, and her insurance had lapsed. So she told Bebar that she needed her capital. She never got it; to get the operation she had to wait two months until she was old enough to qualify for Medicare.
Teresa's Checkered Past
Perhaps it would have made difference to her investors to know that Teresa Rodriguez owed the Internal Revenue Service more than a million dollars.
Rodriguez got her start in business in the early 1980s as an executive secretary at a petroleum geology firm in Houston. Her boss there, a socially prominent man named William Law, helped Rodriguez start her own business, T.R.Financial Services U.S.A., which offered computerized accounting to small-business clients. Law directed some of Rodriguez's first clients to her.
In 1985, one of Rodriguez's clients offered her a partnership in Staff All, unemployment "leasing" company. Staff All hired away clients' employees, taking on the accounting and administrative burdens of employing them, and then leased their services back to the clients for a fixed fee. In the economic turmoil of Texas in the late 1980s, Staff All expanded rapidly and spun off companies involved in small-business computer systems, telemarketing, and temporary-employment services. Eventually, Rodriguez controlled some 60companies under the name of TR Network Cos. The organization eventually claimed650 clients and 52 employees of its own. In 1989, the local Hispanic Chamber of Commerce named Rodriguez Houston's Hispanic businesswoman of the year.
The next year, however, she landed in trouble with the IRS over nonpayment of payroll withholding taxes. The unpaid taxes alone totaled at least $1.2 million, and in early 1991 the IRS case officer recommended that some of the Fretwork companies be liquidated to raise the cash.
But then the IRS set the matter aside. In March of 1991, the agency closed thecae, stating in documents only that the money was "currently not collectable based on hardship," according to IRS documents. Teresa Rodriguez was still in business.
And she still was later that year, when Hispanic Business magazine, published in California, sent her a questionnaire about her company. Notwithstanding theIRS's recent finding about the financial status of TR Network Rodriguez claimed annual revenues of $46.28 million for her company. The magazine didn't look into the numbers, and ranked the business 43rd in its list of the top 500 Hispanic-owned businesses in the United States.
Her credibility was on the rise, and so, apparently, were her political connections. The magazine listing resulted in an invitation for Rodriguez to large White House luncheon and reception for Hispanic businesspeople in July1992. After the dinner, according to federal records, Rodriguez contributed$16,000 to George Bush's campaign, qualifying her for membership in the Eagle Club of major contributors.
Despite her business and political connections, a telephone call to the Small Business Administration in Washington would have revealed that no one named Teresa Rodriguez was registered as a minority contractor. No one named Teresa Rodriguez had ever received any SBA contracts. The man who finally made the call was Ed Pankau, a colorful, locally famous private investigator who specializes in financial wheeling and dealing. When Rodriguez’s check to the Shindlers bounced in April 1993, the Shindlers called on Pankau. Within 30 minutes, he says, a computer check of electronic databases turned up a number of red flags regarding Rodriguez: the IRS's tax liens, a bank’s claim that it had made her a loan that turned bad, and several lawsuits.
The clincher came when Pankau called the Small Business Administration in Washington. The SBA had never heard of Rodriguez; neither she nor any of her business names were registered as minority contractors, and she had never received any contracts from the SBA. Pankau reported all this to the Shindlers and to an FBI man he had worked with previously.
In short order, Pankau says, a senior FBI special agent appeared in his office to ask "the Leona Helmsley questions: Did she knowingly do it, and did she flaunt it--that's the bottom line." Pankau's response: "The woman made Leona Helmsley look like a piker."
On April 23, 1993, just two weeks after Joanne Davis's $400,000 expression of faith in Rodriguez, 13 IRS agents swarmed into Rodriguez's brand-new pseudo-French cum Federal-style townhouse. Rodriguez wasn't a hardship case anymore, according to what the IRS was hearing from Ed Pankau, and they were searching for auctionable assets. The agents found plenty to auction. The cataloging of it traces three generations of the French monarchy. The parlor suite was Louis XIV, other armchairs and sofas Louis XV and XVI. A 1920sSteinway grand dominated the grand salon, and an Aubusson lay on the floor.
Genteel shabby wasn't exactly the effect intended by faux-marble pilasters, moldings, baseboards, and door surrounds; Regency-style sconces; and an $11,000 crystal chandelier. Lest the point be missed, gold-leaf trim reiterated it. Items inside pantries and closets bore labels such as Waterford, Baccarat, Orrefors, Dom Perignon, Christofle, Wedgwood, Limoges, and Royal Albert. The spirit of Imelda Marcos presided in the wardrobes, with more than 100 pairs of shoes in felt-lined holders, 56 Judith Leiber handbags worth as much as $8,000apiece, the usual mink and cashmere. Hundreds of pieces of jewelry with a total value of $2 million were found in wall safes. A single necklace contained 596gems. Among the jewelry were Rodriguez's signature frogs. The IRS trucked all of it to a warehouse to await auction in early 1994.
Meanwhile, FBI agents raided Rodriguez's office, seizing her computers and 62boxes of files. The complaint later filed with a federal grand jury in Houston would accuse her of operating a scam often known as a Ponzi scheme, named for an early 20th-century American swindler who attracted investors by paying big, fast returns to some investors with money taken from others. The FBI agents told her to go home. She did, only to encounter the IRS agents stripping her town house. Rodriguez was wearing an $18,000 bracelet. The agents took it.
Between April and December of 1992, the federal complaint says, Rodriguez had deposited $30 million in Houston bank accounts. That money remains missing, so far as can be determined. Ed Pankau believes that the total she took from investors was much larger. Rodriguez's trustee in bankruptcy (she was placed in involuntary bankruptcy at the request of a number of her investors) declines to discuss the case. Pankau has offered to search for the money in return for 10percent of whatever he recovers.
Houston gossip columnists continue to spill ink by the tankerful on the case. The auction of the Toad Queen's personal property promises to be the biggest social-financial event since John Connally's bankruptcy. Some investors could even try to recoup a modicum of their losses by bidding on her bargains. Others might reflect along the lines suggested by Joanne Davis: "This was a nefarious scheme," she says, sitting in the living room of her ranch house, "and deep in my heart I knew it was. I knew it just wasn’t right."