The Trial of Joe Russo

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

Then the temperature in the courtroom seems to drop 20 degrees. It's cross-examination time; Mike Clark and Joe Russo cross swords immediately. What about that memo notation that nobody at Ameriway was to communicate with the Piperis regarding more collateral "per JER"? Did Russo give that instruction? "I did not," says Russo frostily.

In short order Clark has Russo sounding truculent and evasive. Clark prods him about various Piperi loan documents Russo says that he didn't read, or doesn't recall or -- in the case of one that says the purpose is to buy an S&L -- might very well have signed in blank. "How many other times did you sign a blank document?" inquires Clark, his skeptical voice having added a layer of permafrost. Replies Russo, "I don't recall."

They go on in this vein for more than two hours, calling each other "sir" as if the word were a small, deadly barb; Russo gibing "Did you ask me a question? I didn't hear a question," and "Would you ask me the question please, sir?" He is looking more unsympathetic by the minute.

Clark goads Russo on an obvious sore spot -- holding the UPI stock in his own name (it ended up in his daughters' trust) while leaving the debt with his bankrupt companies. But it is not until Clark suggests that Russo was exploring the possibility of bankruptcy with lawyers as early as January 1987 -- a direct contradiction of his earlier testimony -- that Russo completely loses his cool. "You ... are ... wrong," he says fiercely. When Clark says that things "were coming to a head for the Russo empire, you couldn't pay your bills," Russo snaps back bitterly, "You seem to take a certain joy in that." "No sir," retorts Clark witheringly. "I don't take joy in that. I take this very seriously." He pauses a few beats before adding, "This is a good place to break, your honor."

Gathering up his tote bag, Clark leans over the rail and says, "He's got a temper." He does not sound at all displeased.

October 25-26: A Refurbished Witness
A 12-day hiatus has passed. The courtroom feels like the first day of school: people bustle in sporting new haircuts, state Senator Rodney Ellis makes an appearance in the Russo pew and when Joe Russo takes the stand, it is obvious he has been cramming at Witness U. No longer is he the sarcastic combatant. Today, and for the rest of his testimony, he acts the quietly injured party, answering in a spookily uninflected voice. Judge Harmon allows the contents of a sealed envelope into evidence, over Berg's protests: it's the letter by which Russo engaged the services of bankruptcy specialists Sheinfeld, Maley & Kay. Clark shows it to Russo. Would he like to clarify earlier testimony that he had "zero" meetings regarding bankruptcy? "Well, I might... I might like to clarify my testimony," says Russo. So was the meeting about bankruptcy? "Well not ... not totally." The meetings were about bankruptcy issues, about avoiding bankruptcy, he explains mildly. But there's no getting around that Clark has caught him being less than truthful.

Clark has Russo come down from the stand to examine a wall of loan documents that are on display; Russo, arms clasped behind his back, offers less-than-convincing explanations about their anomalies. Yes, that's his signature on Ronald Drew's "once the dust settles letter," the one he disavows reading. It was sent over as a fill-it-in-yourself loan request? "Could be." On goes the chipping-away process. Russo is licking his lips a lot. He could have had a let's-drop-the-interest-rate conversation with Ronald Drew, Russo admits again. He could have seen Drew's "once the dust settles letter." He just doesn't remember. He concedes that transferring his UPI stock in his daughters' trust made it unavailable to the Russo Companies' creditors when he filed for bankruptcy; since he made the transfer about the same time he was talking to Sheinfeld Maley, it looks as if he stripped the asset and left the $1.5 million debt with his companies -- a key point if the government is to prove that the loan went to Russo's benefit. Russo has produced no diaries that might note who he was meeting with during the crucial loan period; now he concedes although he doesn't have any in his possession, he "may have kept them from time to time." (It is a strange answer coming from a man who, in a local news article, once made much of the detailed diaries he kept.)

All day and half the next Clark's probing continues, sinking occasionally into baffling murk. But Russo never regains the self-assurance that marked his first hours on the stand -- not even when he's back in the friendly hands of David Berg. Once more the name "Harold Klinger" tolls like a death knell: we hear about "Klinger documents" and "Klinger numbers" and "Klinger initials."

In the end, with an earnest flourish, Russo frames his story -- and the story of this trial -- as Houston's own. Did you just run out of time? asks Berg. "We did," answers Russo gravely. "This real-estate depression just lasted too long. There were a lot of people who got hurt by it. It wasn't just a Joe Russo problem ... a lot of people were laid off, lost their homes. We were caught up in it like everyone else."

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