The Trial of Joe Russo

An intimate look at how -- and why -- Houston's high flyer of the '80s was taken apart in court

At day's end, Joe Russo exits the federal building with Sally at his side. He and Sally climb not into the jazzy Porsche that he once likened to his own high-performance business style; instead, they slip into traffic in an anonymous maroon Saturn.

August 22: The Gathering of the Tribes
Two days into the jury's crash course in banking, the government's expert witness, a self-possessed New York banking consultant named Margaret Keene, is still citing the many ways in which she feels the Piperi and Russo loans departed from sound lending practices. Among the things Keene finds awry: that Ronald Drew's $70,000 income could hardly service a $750,000 loan. That Ronald A.'s tax returns should have alerted Russo's Ameriway Savings and Ameriway Bank Woodway (which split the loan) to a $4.3 million debt load missing from Piperi's financial statements. That loan files showed confusion about the purpose of the Piperi loan and about the collateral. That a month after the fact, the Piperis put up shares of a volatile computer stock that later plummeted in value, leaving the loan seriously undercollateralized.

Keene sees flaws in Russo's UPI loan, too. For one thing, Russo didn't have to put up collateral or sign a personal guarantee. At the time, June 1986, the Houston real-estate market was reeling, but Orange didn't bother to verify whether Russo was on time with other bank loans until three months after he got his money; in fact, his companies were having major cash-flow problems. Yet the financial statements Russo sent over to Orange looked good, largely because his in-house accountants had switched to a method that conveniently removed his potential partnership debts from the bottom line.

There is much more, and coming from this earnest woman in the oversized eyeglasses and well-bred navy suit, it all sounds so reasonable. The elder Piperi, his wavy white hair and ruddy jowls suggesting a worldly Father Christmas, fidgets in his green leather chair. He chews gum. He removes his half-spectacles and dons them again, gazing around the large courtroom. With its vaulting skylight, blond wooden pews and handsomely veined brown marble, the room has the air of a modern church, and spectator seating has jelled along church wedding lines. The Russo women and friends gravitate to the far end of the left-hand section, behind their man; to their right, on the aisle, sit the Piperi women.

Scarcely a word crosses the gulf between Russo and Piperi turf; it's as if a stage director has told them to pretend they don't know each other. Looking out, a juror might distinguish two separate tribes. Sally Russo and her four daughters are all of a piece: slender, decorous, sleekly groomed and tailored, with the porcelain skin and crisp, high-cheekboned features of an old-fashioned cameo.

The Piperis are another breed: tousled, fleshy, expressive, quick to laugh. They seem far closer to Killeen than the Russos do to West Bell. Modie Piperi, a warm, buxom woman with a tightened jawline and a little upturned nose, sits shoulder to big padded shoulder with daughter-in-law Melanie, Ronald Drew's wife. Ronald A.'s frail, 84-year-old mother haltingly comes and goes with a changing guard of Piperi daughters and granddaughters. Big prints, bold earrings and flowy garments mark the tribal dress code, more Sam's Club than country club. It's hard to picture the Piperis as River Oaks swells -- but of course, the bust swept them away so fast, River Oaks didn't have time to take.

August 25: Berg Draws Blood
The jury is leaning forward, witnesses to one of Houston's hair-raising blood sports: a cross examination by David Berg. After five days on the stand, a hoarse and rasping Margaret Keene has lost some of her pale-blond, cream-silk cool. All brisk efficiency, his aluminum hair gleaming, Berg pecks sharply away at his target. The room rings with his urgent, bustling footsteps and staccato questions. "You're not gonna say that, are you?" "You made a mistake, didn't you?" The words practically tumble out of his mouth, impatient and accusatory. "I'm not trying to make you look ugly in front of everybody," he says -- but of course, he is.

The Keene who Berg now paints for the jury is nothing more than a money-grubbing government lackey. Besides, as an alien, Eastern, Wall Street Journal-reading member of the privileged class, she just doesn't get "our depression," as Berg keeps referring to the mid-'80s bust. Sowing doubt like bread crumbs, he gets her to admit she was wrong to say there was no evidence Russo told anyone on Ameriway's loan committees about the Piperi loan.

Berg's biggest score comes when he gets Keene to describe a short letter that Orange banker Steve Raab gave Russo in November of 1985 as a valid letter of commitment to fund the UPI loan. That's crucial to the Russo case: what one lawyer later describes as "Joe's theory" holds that if Russo had a binding commitment seven months before the two loans were funded, he would have no need to grant a reciprocal loan to the Piperis. When Berg extracts a concession from Keene that if there's a valid commitment letter, the loans are "unlinked," you can sense silent, there's-the-ball-game joy rising from the defense table.

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