Flagship Operator Pleads Not Guilty

By Laura Elder
The Daily News  

Published March 9, 2006

GALVESTON — An attorney for Daniel Yeh, operator of the Flagship Hotel in Galveston accused of defrauding federal hurricane lodging programs, entered a not guilty plea for his client Wednesday and said Yeh should undergo an examination to determine whether he’s mentally competent to stand trial.

Federal Magistrate John Froeschner is expected later this month to decide whether Yeh should be examined to determine whether brain tumors have rendered the hotel operator unable to understand proceedings against him.

Yeh, who has had three brain surgeries to remove tumors — most recently Feb. 21 — attended his arraignment in a Galveston courtroom Wednesday with a partially shaven head revealing a thick, dark scar curving from above his left brow to just above his left ear lobe.

Meanwhile, Froeschner, who said Yeh’s health and ties in Galveston and Houston made him an unlikely flight risk, released Yeh on an unsecured $75,000 bond.

Assistant U.S. Attorney Gregg Costa had argued that Yeh, who had strong ties to Taiwan, was a flight risk. Born in Taiwan, Yeh is a U.S. citizen.

A Houston grand jury last week returned a 39-count indictment charging Yeh with defrauding the Federal Emergency Management Agency’s hurricane-lodging programs of at least $232,000.

After Hurricane Katrina devastated Louisiana and Mississippi on Aug. 29, leaving thousands homeless, the federal government funded a program allowing some evacuees to stay in hotels free while FEMA grant programs reimbursed the hotels.

The Flagship, 2501 Seawall Blvd., enrolled in the FEMA programs after Hurricane Katrina and continued to participate after Hurricane Rita in September, according to the indictment.

Yeh is accused, among other things, of filing fraudulent reimbursement claims for rooms in the names of supposed hurricane evacuees on dates when those rooms weren’t occupied.

Costa said Wednesday the federal government was skeptical of defense claims that Yeh was mentally impaired and said Yeh was able to participate in complicated business dealings last year and, up until December, to teach computer science courses at the University of Houston.

Costa said Yeh understood what he was doing and was active in a scheme to defraud hurricane-lodging programs.

“We think the defendant engaged in an active, deliberate and blatant scheme to defraud taxpayers of hundreds of thousands of dollars,” Costa said after Wednesday’s hearing.

Robert S. Bennett, who along with island attorney Michael Fieglein is representing Yeh, said the federal government sought the indictment despite being aware Yeh lacked mental competency and that his client responded immediately to FEMA upon inquiries about billing practices.

Bennett has said Yeh relied on the guidance of a hotel employee, who no longer works at the island property, for FEMA billing and Yeh repaid the government $232,000 upon learning of inquiries of over billing.

But Costa on Wednesday said Yeh might have defrauded FEMA programs of more than $232,000 and that a federal investigation into billing at the Flagship Hotel continues.