Rudolph W. Giuliani : Crime Buster Finds Image Is on Trial

NEW YORK —  Outrage was the reaction on Wall Street last month when three top financial executives were handcuffed and led away--like hapless bank tellers in a garden-variety embezzlement--to be booked on insider-trading charges.

It seemed an unnecessary humiliation for executives of Goldman, Sachs & Co. and Kidder, Peabody & Co.--an affront, even, to the dignity of Wall Street. Many were quick to lay the blame on Rudolph W. Giuliani, the federal prosecutor for Manhattan and a man with a known taste for crime-fighting in the public eye.

“The stunt had Rudy Giuliani written all over it,” snorted a lawyer representing one insider-trading defendant.

‘Every Bust a Miniseries’

“When they rush in like ‘Miami Vice’ to handcuff respected members of the financial community, it just shakes confidence in the market,” said Phillip McBride Johnson, former chairman of the U.S. Commodities Futures Trading Commission. “These people can’t resist those cameras; they have to make every bust a miniseries.”

As it turned out, the decision to arrest and handcuff was made by postal inspectors investigating related mail-fraud charges. But the episode says much about the reputation of the man who has become the central figure in the investigation of Wall Street’s biggest scandal.

In four years as U.S. attorney for Manhattan, Giuliani has made a name as a scourge of mobsters and corrupt politicians, as a publicity-seeker and as a prosecutorial zealot who, some say, treads too often on the rights of defendants. Naturally, he would be thought responsible for the arrests--and, naturally, he would respond combatively.

Keeps a High Profile

“The rules apply to mob big shots like Fat Tony Salerno, and they apply to big shots at Goldman, Sachs, too,” said Giuliani, whose image before bristling microphones has become as regular a feature of the local evening news as the weather report.

These days, he is riding high. In the last four months, the former third-ranking official of the Justice Department has won two ground-breaking anti-Mafia trials and the major municipal-corruption case of Bronx Democratic boss Stanley M. Friedman.

This week, White House Chief of Staff Howard H. Baker Jr. and Atty. Gen. Edwin Meese III asked whether he would be interested in replacing John S. R. Shad as chairman of the Securities and Exchange Commission, sources said. He has also been mentioned as a possibility for FBI director, and political handicappers say that he may later have a good shot at becoming a U.S. senator or New York governor.

But first he must face what some believe is the most important test of his credibility--the insider-trading investigation, which, like some unkillable weed, wraps new tendrils week after week around the reputations of Wall Street executives and institutions. The SEC started this battle but it must be finished by Giuliani, his top lieutenants and his nine-lawyer securities-fraud staff.

It has been shaping up as a bitter battle. There has already been criticism of prosecutorial tactics and predictions that the government’s record of 45 convictions in 46 insider-trading cases will soon be spoiled.

Officials of Goldman, Sachs insist that there is no foundation to insider-trading charges brought last month against Robert M. Freeman, one of the three handcuffed executives and head of the top-rated investment bank’s takeover-stock trading operation.

Charges to Be Challenged

While most others accused in the 11-month-old investigation have settled charges, the Goldman, Sachs officials insist that they will fight charges against Freeman in court. Executives like Thomas Murphy, chairman of Capital Cities-ABC, have offered public testimonials to Freeman as the finest in his profession and as a family man of unimpeachable virtue.

The two other defendants charged last month, Richard B. Wigton of Kidder, Peabody, and Timothy Tabor, formerly of Kidder, say that they, too, will fight the charges.

“This is about the hundredth time I’ve been accused of going too far,” Giuliani responded. “I’m getting a little less sensitive.”

He believes insider-trading abuses are “systemic” on Wall Street and, as with street crime, takes a hard line on punishment. He wants penalties increased to a maximum of 20 years from the current five years and faults investment firms for their seeming reluctance to initiate internal investigations to uncover illegal trafficking in confidential information.

“We’ve got to bring a whole new ethic on Wall Street,” he says. “That’s what all this is about.”

It is Friday night, and Giuliani is late for an appearance before an organization of Italian-American young adults called Fieri, or “the Proud Ones.” Over the years, he has angered many in New York’s Italian-American community, who feel that he has harped on the ethnic roots of the American mob to build a political career.

But when he slips through the door, a rumpled suit and nest of cowlicks betraying his fatigue, he is introduced in a reverent whisper. The jostling crowd claps violently.

Many of Fieri’s members are from lower-middle-class ethnic neighborhoods of Brooklyn and Queens. They have been talking about the prejudice that they believe surrounds them.

“I wouldn’t spend more than a second thinking about that,” Giuliani tells them. “People can get preoccupied with that stuff. Don’t let it hold you back.”

Weighed Career as Priest

Giuliani, 42, was born in Brooklyn, the son of the owner of a bar and grill. After considering a career as a missionary priest, he went to Manhattan College and New York University Law School.

If he ever had a Brooklyn accent, he has managed to lose it. Now he lives on Manhattan’s Upper East Side with his wife, a news anchorwoman of a local television station, and their 18-month-old son.

To this audience, he symbolizes the accomplishments that have allowed much of New York’s Italian-American community to emigrate from the old neighborhoods to prosperous sections of Manhattan and the leafy preserves of the city’s outer suburbs.

“God didn’t appoint me,” he jokes a little later. “President Reagan gave me this job.”

Some in the crowd may have needed this clarification.

“He’s my idol,” breathed Victoria Cammarota, a young stockbroker’s assistant who was sitting in the third row.

“A great man,” said Luciano Rammarime, who was seated next to her.

Giuliani’s recent success derives partly from the power and prestige of the office of U.S. attorney for the Southern District of New York. The most prestigious of the 94 U.S. attorneys offices, it has historically attracted the most important cases, most resources, the brightest young lawyers and, partly because of its location in a national news center, the most publicity.

The job brought national recognition for Whitney North Seymour Jr., who is now special prosecutor in the current case of former presidential aide Michael K. Deaver, and was also a paragraph on the resumes of President Theodore Roosevelt, New York Gov. Thomas E. Dewey, Secretary of State Henry L. Stimson, and Supreme Court Justice Felix Frankfurter.

Yet even taking into account the strengths of the office, Giuliani’s record is impressive. Chief among his successes are organized crime cases in which he and his staff showed their mastery of the principal anti-mob tools available to federal prosecutors today--wiretaps, informants and the federal anti-racketeering statute.

‘Crime Commission’ Case

The so-called “crime commission” case, which last November resulted in the convictions of the alleged heads of New York’s Genovese, Lucchese and Columbo crime families, drew on the work of many investigative agencies, over many years. But it was Giuliani’s idea to prosecute the heads of the crime families as a collective criminal enterprise, thus exposing them to penalties for racketeering and enabling the government to seize property purchased with their ill-gotten profits.

Giuliani’s office also prosecuted the so-called “pizza connection” case, which led to the convictions this month of the former head of the Sicilian Mafia and 16 others for their roles in an international drug ring that was the largest ever exposed by federal authorities.

The two cases are among a series of anti-mob prosecutions, in New York and around the country, that some organized crime experts say have brought the twilight of the Italian-American Mafia.

“The best analogy is Wagner’s Ring of the Nibelung,” said Giuliani, an opera buff. “We’re now in the beginning of the last opera, ‘Twilight of the Gods.’ But it’s a five-hour opera, so we’ve got a long way to go.”

Praised for Staff Work

Giuliani has won praise for bringing these sprawling cases, which prosecutors have often avoided because of the difficulty of gathering evidence and then explaining it to juries. Other prosecutors praise Giuliani, too, for managing his staff so that it gathers enough evidence to convict, without becoming lost in the maze of often contradictory details.

Giuliani’s office has had the lead prosecutorial role in New York City’s municipal corruption scandal, which began with allegations of extortion in the city’s parking violations bureau and is already the largest such scandal in more than a half century.

So far, the scandal has led to the suicide of Donald Manes, former Queens borough president, the racketeering and mail-fraud convictions of Friedman, former Bronx Democratic boss, and the indictment or conviction of dozens of other businessmen and city, state and federal officials.

An incident in the Friedman case illustrated Giuliani’s emotional involvement in crime-fighting, which fellow prosecutors say is unusual even for someone in his job.

Apparently carried away in his impassioned summation, the prosecutor told jurors that all four defendants had destroyed evidence. Only one defendant had been so accused, and the statement set off a loud dispute with defense attorneys that ended with Giuliani and Friedman shouting profanities at each other.

‘Certain Kind of Passion’

In instructing the jury to ignore the slip, Judge Whitman Knapp cited Giuliani’s “certain kind of passion.”

Colleagues also found it revealing that he gave up plans to personally prosecute the “crime commission” case so he could lead the government’s charge in the corruption trial that was to be brought simultaneously. The Friedman case would be much tougher, since it hung on the testimony of a single corrupt former official--but it also promised more glory.

“Taking the bigger risk and going for more publicity are both perfectly part of his makeup,” said Paul Schachtman, a former senior assistant in the office.

Giuliani says it is his job to seek publicity--to deter other criminals and to keep the public informed. Those who criticize are “just jealous,” he said. “We’ve done things in the past four years that have never been done before.”

Giuliani has a knack for knowing what is newsworthy, associates say, and an unusual rapport with reporters. In fact, his public relations flair is such that some people are already wondering whether the SEC’s contribution in the insider-trading case will be overshadowed.

At a recent congressional hearing, Rep. Norman F. Lent (R-N.Y.) offered SEC Chairman Shad the unsolicited advice that he should take care the SEC is not forgotten, since “I know everybody in New York thinks Giuliani’s doing all of it.”

Sometimes, though, even admiring colleagues believe that he goes too far for publicity.

Donned Disguise

Last August, Giuliani and Sen. Alfonse M. D’Amato (R-N.Y.) disguised themselves in order to purchase a vial of the cocaine product “crack” from drug dealers in Manhattan’s tough Washington Heights neighborhood. To the delight of the New York newspaper industry, D’Amato slipped into Army fatigues as Giuliani donned shades and a swastika-festooned Hell’s Angels jacket over his pin-striped pants and black wing-tips.

Every paper in town carried their picture on the front page. They looked, the New York Daily News chortled, “like a paunchy, middle-aged version of Miami Vice’s Crockett and Tubbs.”

A week later, the police lab discovered that the officials had paid $20 for a vial that did not contain “crack,” but some substitute.

An assistant U.S. attorney in Giuliani’s office ripped out one paper’s big front-page photo of the two, taped a sheet of paper to the bottom and passed it around for other assistants to add needling captions. “It was a source of great hilarity in the office,” one who was present said.

Giuliani said that the episode helped win public support for a better anti-crack effort and only regrets that the stunt was perceived as having political overtones, since D’Amato was up for reelection three months later.

Clashes With Roy Cohn

Two years ago, making a whirlwind tour of television news shows to explain the “crime commission” indictments, Giuliani appeared on ABC’s Nightline with the late defense attorney Roy M. Cohn, who represented Anthony (Fat Tony) Salerno, reputed head of the Genovese family. A debate between the two soon deteriorated into a shouting match.

Giuliani attacked Cohn for taking big fees from the alleged mobsters, and called Cohn’s comments “sleazy” and “absurd.”

Was this beneath the dignity of a federal prosecutor? “I’m not a priest, I’m not a bishop,” Giuliani says. “I only wish that after we won the case I could have taken the indictment and really shoved it down his throat.”

Giuliani’s high profile, and the independence reflected in his public combativeness, may hurt him in the competition for the FBI director’s post, one top Justice Department official believes.

This high profile has also caused him to clash more often with the New York defense bar than his predecessors did. While prosecutors have always attracted publicity with their anti-mob prosecutions, the defense lawyers contend that Giuliani has increased such coverage with his frequent television appearances, discussion of defendants’ past criminal records and chronicles of the “war against the Mafia.”

His press appearances are among the reasons that several local bar committees have convened in recent years to study the limits of publicity in criminal cases. Gerald Stern, administrator of the New York Commission on Judicial Conduct, believes that Giuliani violated ethical canons two years ago when, just after the “crime commission” indictments, he declared that the government had taped conversations in which the defendants acknowledged their membership in the Mafia.

“These cases would not have been front-page news in every paper in town without these free-wheeling press conferences,” Stern said.

Cites Adherence to Rules

Giuliani said he has scrupulously observed the rules against unfair publicity and charges that the bar committees that have criticized prosecutors’ statements are dominated by defense lawyers pursuing their own interests.

Giuliani also aroused the defense bar by subpoenaing attorneys with alleged organized crime clients to find out if their fees were coming from illicit sources. Defense lawyers griped that such steps could violate the defendants’ right to legal representation, since attorneys would avoid such clients if they thought that their fees might be jeopardized.

At the Justice Department in 1981, Giuliani drew howls from civil liberties lawyers when he oversaw the detention of about 2,000 Haitians who had illegally entered Southern Florida. Most of the aliens were detained in a fenced compound in Miami for a year, as civil liberties attorneys and their allies in the clergy argued in court that the detentions were racist and illegal, harming the Haitians’ health and even causing several suicides.

Giuliani still strongly defends the government’s position that the Haitians were not entitled to automatic asylum since they were fleeing poverty, rather than political oppression. “Activist lawyers were getting them to characterize their reason for coming in as political,” he said.

In 1970, after law school, Giuliani went to work as an assistant U.S. attorney in the office he now heads. He worked in the Justice Department in the Gerald R. Ford Administration between 1975 and 1977 and then, after a period in private practice, returned as associate attorney general between 1981 and 1983.

When Giuliani became U.S. attorney, he was relinquishing a post in which he had directed all U.S. attorneys, as well as the Immigration and Naturalization Service, the Bureau of Prisons and other Justice Department offices.

‘People Shook Their Heads’

“A lot of people in Washington shook their heads at that move,” said Peter J. Romatowski, a former senior assistant in Giuliani’s office. “But he wanted to get back to the front lines.”

Giuliani has been unusually successful in getting the Justice Department to give him an enlarged staff and other resources, as well as to assign the office high-profile cases. Some prosecutors ascribe this success to his Washington connections.

Among the cases that might have been assigned to other districts for prosecution were the “pizza connection” case and the Columbo case, in which the government convicted members of the crime family for extorting money from restaurants and construction firms in New York.

Both cases had been claimed by the Organized Crime Strike Force of the Eastern District of New York, in Brooklyn, with which Giuliani has clashed several times. Giuliani asserts that the strike force “doesn’t have the lawyers we have, and they don’t have the leadership we have. They bite off more than they can chew, and things stall for ever and ever.”

Giuliani has clashed, too, with Robert M. Morganthau, the district attorney for Manhattan. The two have blamed each other for the failings of the local anti-drug effort and argued over the handling of the municipal corruption cases.

Giuliani is considered a shoo-in to be reappointed this spring for another four-year term as U.S. attorney, although he says he is not sure he will serve the entire period. Of his political plans, Giuliani will say only that he expects to return to public life in some role after he leaves his current office. D’Amato, who recently urged Reagan’s Chief of Staff Baker to make Giuliani director of the FBI, raves about Giuliani’s “extraordinary record” and says the prosecutor “can choose whatever he wants in political life.”

Seeks to Win Over Constituents

Giuliani seems to be trying to foster good relations with his constituents, including his sometime-allies in the Italian-American community. Giuliani led a delegation of Italian-Americans to persuade a touring British opera company to abandon plans to restage the opera “Rigoletto” in a New York setting, with the characters dressed as 1940s-era Mafiosi.

“That seemed a gratuitous swipe,” he said.

Last year, Giuliani was named man of the year by the largest of the Italian-American groups, the Coalition of Italo-American Organizations, despite strong opposition from some who “still think he’s trying to make us fall guys for his career,” said William Fugazy, the association’s president.

“When I got the award, I wondered whether they were going to clap or boo,” Giuliani said.

Staff writer Ronald J. Ostrow in Washington contributed to this story.