Facing the Music

There's no question that record producer Michael Morales—Dan's brother—tried to blackmail the Tony Sanchez campaign. But was he really acting alone?

March 2003By Comments

“HI, I’M MR. SMITH. WENDEL Smith calling again,” said the calm voice leaving a voice-mail message at the Austin campaign headquarters of Democratic gubernatorial candidate Tony Sanchez. It was early October 2002, and the man had been calling for several days, trying to reach campaign manager Glenn Smith, claiming he had important information about Sanchez, the Laredo businessman who was spending $60 million of his own money in an attempt to unseat Republican incumbent Rick Perry. “Imperative that I speak to you the next few days here,” the man said politely. “Thanks very much. Good day.”

Glenn Smith had never heard of Wendel Smith. In that last month of the already brutal, bare-knuckle campaign, the Sanchez operation was desperately trying to figure out how to win voters away from Perry, and Glenn didn’t exactly have time to return calls from strangers. But Wendel was not going away. After his calls went unreturned, he faxed Glenn a letter, which began, “In case you did not know, there will most likely be an eleventh hour leak to the media of a story.” He went on to write that a woman was preparing to go public with an allegation that Sanchez had assaulted her more than thirty years ago in San Antonio, when he was a law student at St. Mary’s University and she was an undergraduate at Incarnate Word College. “She (and the story) are said to be VERY credible,” Wendel declared in his fax. “The characters, places and dates all check out. . . . I believe it will put questions to your candidate that are unanswerable.”

Then he concluded: “I find myself in the position to keep the other side from obtaining the story and therefore the witness. I can have it delivered to you unseen, thereby averting disaster. As I am risking my professional career by squelching this story, I wish to be paid a consulting fee. . . . Very truly yours, Wendel Smith.”

What happened next can only be described as one of the strangest—oh, all right, squirrelliest—scandals in Texas political history, one that would lead to an FBI investigation, phone taps and traces, a sealed search warrant, and finally, the bewildering revelation in January that “Wendel Smith” was actually Michael Morales, the forty-year-old brother of Dan Morales, the former state attorney general who ran an acrimonious race against Sanchez in the Democratic gubernatorial primary last spring. The FBI’s case was so open-and-shut against Michael, a San Antonio music producer who won a Grammy in 2002 for his work on an album of tejano music, that before a federal grand jury had even gotten the chance to review the charges made against him, he agreed to plead guilty to communicating an extortion threat.

He should have also pleaded guilty to colossal stupidity. In the faxes and the transcripts of the taped telephone conversations between Michael Morales and Glenn Smith—which were made available exclusively to Texas Monthly—Morales seems to be making up his extortion scheme as he goes along. Over the course of three recorded phone conversations with Smith totaling fifty minutes, Morales is utterly unprepared for such basic questions as how the Sanchez campaign can be reassured that the woman will never go public if a deal is made or even how the extortion money will be paid. At one point, he begins making references to a mysterious man named “Stuart,” who he claims is the one who knows the woman making the allegations about Sanchez. It is really Stuart, Morales says, who wants the money to keep the woman’s story secret. When Smith asks for more details about the “consulting fee,” Morales responds, “That I don’t understand. Um, but, um, I guess first things first. We need to see if [Stuart] is gonna let go of this thing. Uh, but, uh, you know, I don’t have a plan there. Um, but I would imagine that um, um, depending on what he says, we’d have to put one together.” Eventually, he told Smith that he would need $280,000, a paltry sum considering that Sanchez is one of the state’s wealthiest men.

Although Michael’s pathetic attempt at blackmail played out like a lowbrow farce, the story immediately set off intense gossip in Austin political circles, especially when it was learned that Michael, under his odd pseudonym Wendel Smith, had approached the Perry campaign in April 2002, six months before he approached the Sanchez campaign, telling the same tale to Perry’s campaign manager, Deirdre Delisi. In that case, “Wendel Smith” asked for “a reasonable research fee” to put Delisi in contact with the woman who was making the allegations about Sanchez, which was not a crime because Michael was not directly asking for a bribe to keep the information secret. Still, inquiring minds wanted to know why Michael would suddenly decide to play hardball politics with major public figures. According to his friends and relatives, Michael wasn’t motivated by financial distress—Studio M, the recording studio that he ran with his other brother, Ron, was constantly busy. His attorney insists that Michael came up with the plan by himself, but would he really have done something so risky during a heated political season without first discussing it with Dan? And when exactly did the Perry campaign find out that “Wendel Smith” was Dan’s brother?

In other words, what did everyone know about Michael Morales’ crime—and when did they know it?

IN SAN ANTONIO, MICHAEL MORALES is regarded as a congenial, easygoing married father of two. People who know him sometimes have trouble believing that he is the brother of the proper, buttoned-down Harvard Law School graduate Dan Morales. Until recently, he wore his hair to his shoulders and an earring in one ear and had a predilection for black leather pants and silver shoes. “We are indeed very different,” Dan told me. “Left brain, right brain. He’s an artist. I’m a lawyer. We’re related by blood, but we’re two different guys. He is not really into politics.”From childhood, Michael dreamed about becoming a musician. Initially, he tried to make a name for himself as a performer, appearing on Ed McMahon’s Star Search. He started a dance-rock band, Michael Michael and the Max, and in 1989 he had two rock and roll hits, “Who Do You Give Your Love To” and “That’s What I Like About You,” that reached number 14 and number 28 respectively on the Billboard pop charts. Then, in 1990, he and Ron launched Studio M in San Antonio.

Although Michael produced (along with Ron) two campaign commercials for Dan during his gubernatorial run, he wasn’t a frequent visitor to Dan’s campaign headquarters. Nor was he part of Dan’s inner circle of strategists. Yet in January 2002 a letter arrived at the campaign headquarters from a woman alleging that Sanchez had assaulted her. A campaign official told me that she gave the letter to Michael because she didn’t want to “bother” Dan with the information.

It is still unclear why Michael took such an extraordinary interest in what the letter writer had to say. Michael is not talking about what happened. According to the same campaign official, Michael’s interest was piqued when he recognized the name of the woman’s therapist, who, she says, wrote a cover letter accompanying the woman’s letter, detailing the alleged crime. But when I discovered the therapist’s name and talked to her—she is a psychologist who has worked in San Antonio for over thirty years—she declared that she had never told the woman to send her story to the Morales campaign and that she had never told Michael or anyone in the Morales camp about her.

The woman who made the charges has not been publicly identified and, Sanchez supporters insist, might not even exist. If she does exist, they say, she is a liar. Through a spokesman, Sanchez himself emphatically denies any truth to any allegation that this woman supposedly was threatening to reveal. But Sam Millsap, a former Bexar County district attorney who was acting as a volunteer adviser for Dan, told me that the woman, whom he described as a middle-aged San Antonio resident, is “a real person.” Millsap said he met her after Michael came to him with her letter, asking him if the campaign should use her story. He did not have to be told that if the woman’s allegations could be verified, they would be political dynamite—exactly the kind of thing that could swing the primary race to Dan. But she had not gone to the police at the time of the alleged assault to file a report. Millsap contacted various people who the woman said would at least remember that she had told them about Sanchez’s alleged assault, yet none of them could remember her saying anything about it. The woman’s college roommate, whom a private investigator found in California, said that she herself was an alcoholic during her college years and that that period of her life had become a blur. Millsap and Dan, who also had learned about the woman’s charges, decided to let the matter drop.

According to Millsap, the decision left Michael frustrated and upset: “He kept articulating to me over and over that we needed to help this lady. He was haunted by the fact that this lady was out there by herself, and it’s possible he could have managed to put himself into a position thinking he was responsible for getting her help.”

If that really was the case, then Michael certainly came up with a bizarre plan to help the woman. He adopted the name Wendel Smith, made a copy of a typed narrative that the woman had written for her therapist and supposedly given him about the alleged crime, and in April, after his brother’s primary defeat, mailed parts of that narrative to Perry’s campaign manager, Delisi, along with his letter asking for a research fee. Delisi told me she had a telephone conversation with him—”Wendel was a persistent caller,” she said—but that she quickly filed the information away, unwilling even to have one of her researchers try to find out if what Wendel was saying was true. “What you have to understand is that during the course of the campaign, we had lots of people coming out of the woodwork claiming all sorts of things,” she said. “And there was already so much information about Sanchez on the public record that I knew we were going to pursue, so I made the decision that we were not going to spend time chasing down these other stories. And I wasn’t going to purchase unsolicited information.”

The rumor made its way around the Perry campaign headquarters; however, no campaign officials can recall whether Perry himself heard it. (Perry’s press spokesperson did not return my phone call.) Delisi did say that when she was having coffee with Dan in late May to discuss his desire to help the Perry campaign, he mentioned the anonymous woman’s allegation about Sanchez: “But he only mentioned it in passing. He didn’t say, ‘Hey, you should look at this, it’s really serious.’ And he never mentioned it again, at least not in my presence.”

And that seemed to be the end of the matter, until Wendel Smith began calling Glenn Smith in October. Glenn told me that as soon as he realized Wendel was attempting to extort money from the campaign, he called a lawyer, who called the U.S. attorney’s office, which brought in the FBI. The agents gave Glenn a recording device and told him to play along with Wendel to see what he would say. The transcripts are almost laughable.

“I’m very interested in finding a way to keep it [the woman’s story] out of the paper,” Glenn said during one of their first conversations. “Give me a ballpark on what you think it’s gonna take.”

Wendel finally said, “You know, I do not know. I do not know. But I can run down the hall and find out. I’d be glad to do that for you.” (Stuart, Wendel had explained, worked down the hall from him.)

When Glenn asked what guarantee he was going to get that the woman would never speak publicly about the matter, Wendel said, “I would imagine that maybe, um, I’d get you a copy of [the woman’s letter], um, um, maybe exchange a consulting fee, and then, um, when that is fulfilled, I guess give you the original or something like that? That’s somewhat of a, um, you know, it’s somewhat of a deal.”

Meanwhile, after putting a trace on Glenn’s phone, the FBI quickly learned that Wendel was calling and faxing his letters from the music studio of Michael Morales. The agents executed a search warrant on the studio just as Michael was preparing to re-fax a letter detailing his extortion demands. Apparently, Michael had thought that no one could figure out that he was Wendel Smith, because he was routing calls to the Sanchez headquarters through an Internet service that made the calls look as if they were coming from Colorado—a novice technique that failed to stump the FBI.

THERE ARE A FEW WELL-INFORMED political consultants who find it preposterous that Michael was not acting as a patsy for his older brother Dan, who had found Sanchez so distasteful that he eventually supported Perry in the general election. “Michael is a follower,” said a senior consultant to Sanchez’s campaign who knows the Morales brothers well. “He would never have done something so stupid unless Dan asked him to.

“But Dan told me, “I never had any idea that Michael approached the Perry and Sanchez campaigns.” Nor, he added, did he know anything about FBI agents searching Michael’s office in October—a search that happened to be conducted during the day in front of Studio M employees. The first time he heard about Michael’s duplicitous activities, Dan said, was in early January of this year, when reporter Pete Slover, of the Dallas Morning News, which broke the story about Michael, called him just two days before the newspaper published his article. He said he didn’t even know until January that Michael had initially retained Sam Millsap as his defense attorney, even though Millsap and Dan are close friends, and even though Millsap has represented Dan himself in the recent federal investigation of Dan’s handling of lawyer fees from the $17.3 billion settlement paid to the state by the tobacco industry while he was attorney general. Although skeptics find it hard to imagine that the two men didn’t talk about Michael’s problems, Millsap insisted that he doesn’t remember speaking to Dan about the extortion attempt until after the Dallas Morning News story appeared.

Dan’s denials have hardly slowed the rumor mill. One of the most perplexing questions still lingering about the whole matter is Michael’s decision to wait until October before approaching the Sanchez campaign. If he really did think his extortion plot was going to help this woman, then why didn’t he approach the Sanchez campaign last spring? Was it mere coincidence that he went after Sanchez only a few weeks after Dan had publicly endorsed Rick Perry? Had Dan encouraged him to resurrect his extortion plot so Dan could show Perry he was serious about supporting him? “Ridiculous,” Dan said with a laugh.

Glenn Smith, meanwhile, has his own theory. He told me that he thinks Dan was aware last fall about his brother’s illegal behavior. “I ran into Dan in Dallas on October twenty-fourth for one of the Perry-Sanchez debates, and I turned and said to him, ‘Tell your brother Michael that I said hello.’ The color of his face changed.” Dan disputes Smith’s account, saying the two didn’t speak about his brother at all that night.

But of all the theories now emerging, by far the wildest rumor is that some Perry people knew all along that Dan, who wanted to show his loyalty to Perry after endorsing him in the fall of 2002, had Michael revive his Wendel persona and approach the Sanchez camp to solicit a bribe—which would explain the puzzling six-month gap between Michael’s attempts to get money. If Sanchez had paid the bribe, the theory goes, then Dan or the Republicans would have leaked the news to the press that he was paying out hush money. In fact, there is no evidence whatsoever that Dan Morales or Rick Perry was ever aware of Michael’s activities, and both parties adamantly deny the allegation. What’s more, even the Democrats who floated this rumor are unwilling to identify themselves on the record.

Such rampant innuendo and conspiracy theories only prove how nasty the game of politics can still be in Texas. And in the end, Michael’s amateurish blunders suggest that, rather than being a pawn in a complex web of political deceit involving multiple high-ranking political figures, he has only himself to blame. If Dan, who had overseen many criminal investigations during his days as state attorney general, had been involved with Michael in the extortion scheme, wouldn’t he have made sure Michael placed his phone calls from someplace other than his office? Wouldn’t he also have made sure that Michael had his “Wendel Smith” story perfected so he wouldn’t bumble around during his conversations with the various campaign managers?

Perhaps the only way this bizarre scandal will be resolved is if Michael sits down with a reporter someday to explain why he suddenly, after a lifetime of law-abiding behavior, tried to turn himself into a shakedown artist. Did he really do it for this anonymous woman who still cannot produce one iota of evidence to prove her allegation? After a court hearing on January 30 in which Michael formally pleaded guilty, his only statement to the news media was “Sometimes your heart just gets over your head, and in this case I didn’t exercise extremely good judgment.” Such a statement, of course, did not draw much sympathy. “Blackmail is always wrong,” snapped U.S. attorney Johnny Sutton. “But it is particularly despicable when it has the potential to affect the election of the highest official in the state of Texas.”

Michael will be sentenced in April. It is expected he will spend two years in federal prison. When he gets out, his friends hope he will return to the music business. “He’s really got talent in music,” said Bobby Flores, one of the mainstay musicians at Michael’s Studio M. If only you could say the same about his talent in politics.

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