Should Paul Fielding go to jail?

He's violated the public trust and betrayed his own ethical standards. But is Dallas' perpetually annoying councilman guilty of fraud, perjury, and extortion?

Still, like most of Fielding's outrageous assertions, there may be a kernel of truth in there somewhere. Because Fielding's troubles did start like a bad spy novel, complete with a silly code name: "Operation Cobra Nest."

Cobra Nest was an elaborate sting operation that the FBI set up in early 1991 to root out suspected corruption in the local defense industry.

With apparently no hard evidence of any serious crimes to go on, the feds set up a dummy business in North Dallas and went fishing for felons. It was the goal of the company, according to the sting, to help small, minority-owned businesses obtain contracts with the big defense companies by helping the little guys obtain the financing and product lines to pull it off.

But the money behind the company, called Edwards & Associates, was federal money--and its employees were actually undercover FBI agents. The feds brought in some experienced help by "recruiting" two businessmen who had just been busted in a defense industry kickback scheme in Arizona. To avoid prison, the two electrical parts distributors agreed to set up shop in Dallas and go to work fulltime for the feds.

Three and a half years later, the local media dutifully hailed Cobra Nest as an enormous success when the feds, displaying tiny airplane parts at a Dallas press conference, finally issued a battery of indictments.

The reality, however, was much different. Cobra Nest could be more accurately described as a multimillion-dollar boondoggle--an expensive FBI fishing expedition that involved extensive phone tapping, surreptitious videotaping, and incessant offers of cash and lavish entertainment to suspects.

For all that effort, Cobra Nest resulted in the indictments or guilty pleas of only 13 industry bottom-feeders in Dallas and Oklahoma. (When the Observer asked the local FBI office for the exact taxpayer-funded price tag on Project Cobra Nest, spokeswoman Marjorie Poche scoffed. "I don't have that," she said. "Why would I? I don't have it, and I don't know that anyone has it." She promised to look into it, but never called back.)

The meager roundup of criminals was particularly disappointing given that the government's real target--top officials at three major defense companies, Loral Vought Systems, Bell Helicopter, and Vought Aircraft Co.--never took the bait, never committed any crimes, despite the FBI's best efforts. In the end, the feds couldn't even nail all of the 13 they'd indicted.

In perhaps the most embarrassing case of overzealous investigation and prosecution, the feds managed to indict a man who didn't commit any crimes--although you'd never know it from reading a copy of the incredibly damning, 14-page charge the feds crafted against him and proudly disseminated to the press.

Harmon Hardy, 65, was a successful Dallas entrepreneur and a passive investor in a small minority-owned company called C&A Electronics, Inc. C&A was owned and operated by a man named Walter Lee McGruder who appeared to spend most of his time on tapped phone lines yammering to undercover agents about his company's dire financial condition. The FBI guys at Edwards & Associates were promising to rectify McGruder's woes by making him the exclusive distributor of a certain popular brand of electrical connector. McGruder's success in this venture would depend on kickbacks to buyers at the defense companies, since McGruder had a lousy business reputation.

McGruder and Hardy ultimately were charged with paying kickbacks to a senior buyer at Bell Helicopter named Billy Joe Hodge. Hodge pleaded guilty and is serving three years' probation. McGruder was sentenced to one year in prison. Hardy's case was dismissed when his lawyer took the time to review the FBI evidence--or lack of it, actually--and convince the feds they had no case.

End of story, except that the Cobra Nest wire taps were peppered with references to Paul Fielding. That's because Fielding financed small, minority-owned businesses for a living through factoring--an increasingly common but, in the public's eye, little-known option of last resort for companies that cannot get working capital from conventional sources like banks.

Factors buy a company's receivables--the money owed to the company by its customers who have already received goods or services but haven't paid for them yet. Factoring can be a godsend--the difference between operating and shutting down--for many small companies that, with no access to loans or lines of credit from a bank, find themselves chronically strapped for cash while they wait the 45 or 60 days between the time they complete a job and the time they get paid.

This is how a factoring company works: It purchases the small company's receivables in the form of a job invoice. Then the factor goes out and collects the money owed. For its trouble, the factor pockets three to nine percent of the invoice's total value.

Factoring is not a genteel business, by any means; collecting bills is never pretty, especially when you're doing it on behalf of financially desperate people. Ideally, the factor's client is an honest, hard-working person who is struggling to get a new business off the ground or going through an unexpected and temporary financial setback. Unfortunately, that's often not the case, because desperate people who are desperately in need of money do desperate things--including, for example, creating fake invoices to sell to an unsuspecting factor.

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