The Trial of Joe Russo

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

During the break, Russo seems energized. "It's been debilitating to sit there for eight weeks listening to this crucifixion," he says. "All these humiliating things being dredged up in front of your wife, your family, your friends." The irony, muses Russo in a tone that blends injury and outrage, is "that your own government, that you've tried to protect, would take these coincidentals...." He breaks off, shaking his head. But soon he's pantomiming a boxer's pose, ready for action. As he passes through the lobby metal detector, though, the mask of reflective optimism slips. "I know I'll screw up somewhere," Russo says.

He and Berg devote much of the day to a dramatic and excruciatingly detailed account of the UPI saga, which saw Russo make it to the final round of bidding for the bankrupt company, then work a deal with the victorious Vasquez Rana for a 10 percent share. The tale is interesting less for its intended effect -- which is to portray Russo as the workingman's friend and the universally hailed owner of a valid commitment letter -- than for image of frantic plate-spinning it conjures. From mid-1985 through much of 1986, as his companies slid deeper into the hole, Russo was flying around America in either pursuit or promotion of UPI: lunching with Walter Cronkite, whom he wanted for UPI's board, at New York's Plaza Hotel; visiting UPI subscribers to "spread the good news" (always a Russo specialty) about UPI's new ownership; conferring with the Washington Post's Ben Bradlee and USA Today's Al Neuharth.

"It was a very exciting period in my life," says Russo quietly. Listening to him, it's easy to imagine what a lifeline this bold new arena of corporate acquisitions must have seemed. It was more than a way to lease up the Lyric Center or help Houston diversify: it was a way to escape the worsening financial morass back home. Suddenly it's clearer why Russo threw himself into so many projects, from the Democratic convention campaign to contemplating a race for mayor, in the months before his 1987 bankruptcy. For Russo, the darker side of ferocious optimism -- a penchant for denial -- had struck again.

October 12: Russo Gets Mad
David Berg is marching Joe Russo through the eternal loan documents, hoping to explain the inconsistencies before the prosecution starts hammering at them again. Russo portrays the Piperi loan as "the kind of business that Ameriway was trying to do with people in the community," and depicts his own involvement in it as minimal. According to Russo, he simply "introduced" the Piperis to Ameriway officers after the loans had already been approved. He doesn't remember seeing the letter Ronald Drew addressed to him on June 2 in which Drew discussed both loans, asking for Russo's financials while promising the Piperis' own, and suggesting that "once the dust settles" they both offer collateral "to escape criticism from our respective examiners." According to Russo, he had turned over the UPI loan to his right-hand man, Harold Klinger, whom he also told to contact Ronald A. about a loan Piperi wanted to arrange.

Russo's basic message: other people were responsible for making the Piperi loan; and there was "absolutely not" any suggestion that for Russo to get the UPI money he had to put up on June 10, the Piperis had to get money from Russo's bank in return. Russo can understand why someone might question the transactions, he concedes under Berg's gentle questioning, sounding as if he really can't; but he insists that even though the loans were funded on the same day, they weren't linked. On the subject of the twin drop in interest rates, Russo sounds evasive. It's hard to explain away the tit-for-tat letter Ronald Drew addressed to Russo, alluding to "our conversation before the holidays" in which they discussed lowering the rates on both loans. Russo doesn't remember any such conversation, although he "might have" had it. Berg suggests once again that the rate modifications did no harm -- but that's hardly the point, since the more the two loans can be shown to have moved in tandem, the more they look to be linked.

Klinger's name pops up again and again in Russo's testimony, along with a dark hint at some unspecified malfeasance; it's becoming obvious whom the jury is supposed to blame for this mess.

Russo does admit to responsibility for one thing: his personal financial statement, even though it was prepared by his assistant; the Russo Companies statement, of course, was the province of Harold Klinger. He and Berg engage in a low, sad exchange about his mounting financial woes -- before l987, he never thought he would lose his companies, Russo maintains stoutly -- and soar to a lyrical finish. "I walked every construction site, every floor of every building," Russo declares with passion, "and it would probably take a developer to understand this. There was a great aroma out of a construction site that was very refreshing and exhilarating to me."

"Now the companies are gone," says Berg. "Do you ever drive around at night and look at your buildings?" "Yes," replies Russo in a very quiet voice. For all its calculation, it is one of the trial's genuinely painful moments.

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