Former UPI Partner Indicted p.

By: Debra Gersh

Ex-minority owner Joseph Russo charged with taking part in loan conspiracy to fund his 5% share in the wire service
FORMER UNITED PRESS International minority share owner Joseph E. Russo has been indicted for allegedly taking part in a loan conspiracy that funded his acquisition of 5% of the wire service.
According to the 10-count indictment, Russo, in 1986, conspired with bankers Ronald A. Piperi and his son Ronald D. Piperi to arrange a $1.5 million loan to Russo from First Savings, the bank controlled by the Piperis.
In return, the indictment alleges, Russo arranged for his Ameriway Savings and Ameriway Bank to lend the Piperis a total of $750,000.
E&P attempted to contact Russo for comment, but Houston directory assistance reported no listing for the Russo Companies and an unlisted number for a Joe E. Russo.
The indictment charges that on June 2, 1986, Ronald D. Piperi made an application for a $450,000 loan from Ameriway Savings and offered "a deceptive financial statement in the name of Ronald A. Piperi."
On that same day, according to the indictment, Russo made a $1.5 million loan application to First Savings, which was accompanied by "a deceptive financial statement in the name of the Russo Companies."
A week later, June 9, 1986, Russo allegedly arranged the $450,000 loan to Ronald D. Piperi for the benefit of Ronald A. Piperi. That day, Ronald A. Piperi transferred $450,000 to a broker to purchase 60,000 shares of Dallas-based Flexible Computer Corp., a company that sold and manufactured computers.
On June 10, 1986, Russo allegedly received his $1.5 million from the Piperi bank, and then arranged the balance of the loan to Ronald D. Piperi, $300,000, to be funded by Ameriway Bank.
The same day, as Ronald A. Piperi transferred $300,000 to his broker for an additional 40,000 shares of the computer company, Russo transferred $1.5 million to New UPI Inc., according to the indictment.
"It was part of the conspiracy that the defendant, Joseph E. Russo, sought to obtain a source of financing for the purchase of a 5% interest in New UPI Inc.," the indictment charges.
New UPI Inc. was the company formed by Mexican media owner Mario V?squez Ra?a, who purchased the wire service for $41 million after it had filed for Chapter 11 bankruptcy protection in 1985.
When V?squez made his first down payment on UPI, $29 million in June 1986, Russo was identified as a 10% partner in the wire service. In fact, in a May 1986 joint disclosure statement filed with the U.S. bankruptcy court in Washington, D.C., Russo is identified as a holder of 10% of New UPI common stock.
It soon was learned, however, that Russo actually held only 5% of the company.
Assistant U.S. Attorney Doug Durham explained that the indictment alleges the $1.5 million was transferred to New UPI by Russo for a 5% share in the company.
After speaking with a number of former UPI executives, the consensus seemed to be that Russo simply did not have the money for more than 5%.
As time passed, Russo's share in UPI eventually was diminished even further due to his inability to subsidize operating losses (E&P, Dec. 5, 1987, P. 17).
Russo and V?squez, who reportedly had not met before 1985, became partners during the bidding process, when each had petitioned the bankruptcy court for ownership of UPI.
Russo had no media experience, and there was a great deal of speculation that he had been brought in on the deal with V?squez to "Americanize" UPI's new ownership.
Those contacted for this article indicated that, despite his attempts otherwise, Russo played a very minor role in the operation of UPI and often was shut out of its operations by V?squez.
If business correspondence can be any indication of this, in 1987, E&P obtained a copy of a confidential memo to V?squez from then-UPI executive vice president Claude Hippeau detailing a proposal for restructuring UPI. The memo included the names of four top executives to be carbon-copied.
Russo's name was not among those listed.
Russo was identified in court documents and news accounts as founder and president of the Russo Companies, "a diversified financial services organization headquartered in Houston, with assets in excess of $1 billion."
Yet, on November 24, 1987, Russo and the Russo Companies, faced with real estate foreclosures and lawsuits for back taxes, filed for Chapter 11 bankruptcy protection, claiming liabilities of $127 million.
Durham explained it is possible that at one point the Russo Companies held real estate interests that may have been appraised at $1 billion, but that probably was far more than Russo's actual net worth.
Further, Durham explained, it is a matter of public record that a few months before Russo filed for bankruptcy a number of his properties were behind on their taxes.
In February 1988, V?squez turned management of UPI over to Earl Brian and other Financial News Network executives, who formed World NewsWire (WNW) Group Inc. to run the wire service.
Brian's Infotechnology eventually acquired control of WNW and thus of UPI, but by August 1991 UPI again filed for Chapter 11 bankruptcy protection. The wire service was sold again in June 1992 to the Middle East Broadcasting Centre (MBC) for $3.95 million.
The indictment, handed up to the U.S. District Court for the Southern District of Texas, Houston Division, names Russo and both Piperis and includes charges of conspiracy, bank fraud, bribery and misapplication.
According to the 20-page indictment, neither Russo nor the Piperis informed their banks' boards of the reciprocal, unsecured loans, which were made without the proper credit checks.
Since the financial institution did not secure the loan, there is no identifiable property to seize, so there can be no lien against New UPI stock. Figuring out whether the current company operating UPI would have any liability is, thus, irrelevant.
Had the loan been secured and had New UPI survived, there could have been a civil forfeiture action, completely independent of the criminal process, but first it would have to be proved that the money was used to buy a percentage of New UPI.
There is also a way in bank fraud cases to seize property once a guilty verdict has been reached, similar to asset forfeitures following drug convictions. The guilty party, however, must have some assets, and in this case ? again, because the loan was unsecured ? there is no identifiable property.
All three financial institutions named in the indictment have failed, explained Durham, assistant U.S. attorney in the U.S. Attorney's Office in Houston, who is investigating the charges along with FBI special agent Dennis Williams and others.
Durham noted that when a financial institution fails and liquidators are appointed, information often is uncovered that leads to criminal referrals to the Federal Bureau of Investigation.
This is the second indictment to name Russo, Durham added.
The other, filed in October, involves similar allegations, although not involving UPI or the Piperis.
Russo and the Piperis have been released on bail, and their trial is scheduled to begin June 28.