White Collar in the Golden State: Spotlight on Joe Russoniello

[WSJ_law_blog]

Joe Russoniello might not be a household name in the white-collar world. But that might change if he has his way.

Russoniello is the U.S. attorney for the Northern District of California, based in San Francisco. According to a profile in the new San Francisco edition of the WSJ — which kicked off today, Bay Area readers! — he’s stepping up his office’s focus on white-collar investigations after seven years of dwindling resources and focus on other areas of enforcement. That said, some some defense lawyers and prosecutors remain skeptical that his efforts are effective.

White-collar prosecutions fell by half from 2002 to 2008, but the federal white-collar unit is now “up to speed,” Russoniello recently said to WSJ reporter Justin Scheck.

Current and former federal prosecutors support efforts to bring more white-collar cases in San Francisco, but question their effectiveness. Many recent local white-collar prosecutions, they point out, are one- or two-person crimes stemming from the recent financial crisis — what one current prosecutor called “low-hanging fruit” — rather than complex corporate investigations of public companies.

Russoniello, who served as U.S. attorney for the district from 1982 to 1990 before being reappointed to the job early last year, counters by pointing to big cases like the September indictment of two businessmen with a company called Cedar Funding on charges of stealing up to $100 million from investors and the guilty plea in September by San Jose financier William “Boots” Del Biaggio on a securities fraud charge as examples of his office’s recent work.

The year 2002 saw a dramatic decline in the amount of white-collar prosecutions in northern California. First, the federal government ordered a “dramatic reshuffling” of investigative resources away from white-collar cases and toward terrorism, said Kevin Ryan, the U.S. attorney here from 2002 to 2007.

A parade of experienced prosecutors exited the U.S. attorney’s office for private practice, and budget cuts kept Ryan from replacing them. At the same time, Ryan steered resources toward gang prosecutions. An emphasis on long-term, high-profile cases like the Barry Bonds steroids probe also reduced the volume of new white-collar indictments, Ryan said.

To revive the white-collar unit, Russoniello said he has tried to hire experienced prosecutors, though he says budget restrictions will make it difficult to expand the white-collar and securities-fraud units beyond 12 lawyers.

Russoniello, who spent 1990 to 2007 as a lawyer at Cooley Godward and as dean of the San Francisco Law School, also has attempted to speed white-collar probes with a new rule this year requiring white-collar prosecutors to meet with supervisors within 30 days of opening a case to determine plans to pursue it quickly. He also focused resources on areas like mortgage fraud.

Ryan and Russoniello agree it’s unlikely that the white-collar falloff since 2002 reflects vastly improved corporate behavior. “Are there still people out there breaking the rules, perhaps committing crimes? Yes. It hasn’t gone away,” Ryan said.

Photo: Jonathan Sprague for The Wall Street Journal