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Otto Obermaier Is No Rudy Giuliani


Legal Affairs

OTTO OBERMAIER IS NO RUDY GIULIANI

When Rudolph W. Giuliani was U.S. Attorney in the Southern District of New York, it seemed as if every week somebody was getting indicted. In packed press conferences, the politically ambitious prosecutor unveiled sweeping indictments of mob leaders, local politicians, and the pillars of Wall Street, including the jailed junk-bond whiz Michael Milken.

In May, Giuliani's mild-mannered successor, Otto G. Obermaier, held a rare press conference to announce the resolution of his biggest case to date: the probe of Salomon Inc. for admittedly manipulating the government securities market. But instead of announcing an indictment, Obermaier said the $290 million in civil fines was adequate. "There was no need to punish innocent employees and shareholders," he said.

LESS SWASHBUCKLING. Otto Obermaier is no Rudy Giuliani--but whether that's bad or good depends on whom you ask. Everyone praised Obermaier's decision on Salomon. And since taking over the country's most prestigious federal prosecutor's office nearly three years ago, he has impressed subordinates, judges, and former colleagues with his professional, reflective approach to law enforcement. That's a refreshing contrast, they say, to the swashbuckling Giuliani, who had some of his high-profile convictions reversed on appeal. "When assistant prosecutors come in, it's presumed that they're giving you the straight poop," says Kevin Duffy, a federal judge in Manhattan and Obermaier's former supervisor at the Securities & Exchange Commission. "I didn't have the same confidence I do now."

Yet Obermaier's restraint is triggering concern that the office has swung too far the other way. Not enough big cases are being made, say some law enforcement officials, defense lawyers, and Giuliani partisans, and those that are get little if any notice. The Manhattan office is being eclipsed by its Brooklyn rival, the U.S. Attorney's office for the Eastern District of New York, with its celebrated prosecution of mob boss John Gotti and increasing numbers of visible business and securities cases. One explanation: Obermaier may be less successful in nurturing crucial relations with such government agencies as the FBI. But Obermaier and some top aides say relations have never been better.

Is Obermaier aggressive enough? "I play the hands I'm dealt," says the prosecutor. His critics say that's the trouble. While Giuliani worked with federal agencies to develop cases, often initiating probes, Obermaier waits for the agencies to come to him. "They're the professionals," he says. "I merely run an organization that provides the legal backup for them." Obermaier says that he cares more about improving the administration of the nearly 200-lawyer shop than he does about making a prosecutorial splash. "It is not my intent to just do big cases," he says, noting that had Salomon gotten indicted, it would have generated endless stories around the world. "We try and do what's right."

LEGAL SNUB. For Obermaier, doing right means making "a safer New York." Obermaier has shifted the office away from glitzy Wall Street probes in favor of narcotics and weapons cases--a national law-enforcement priority. Drug cases now make up 41.5% of the mffice's docket, but they rarely draw significant press attention, he notes.

Obermaier may be oblivious to his public image, but he's conscious of how he appears as a lawyer. During the Salomon negotiations, he declined to sit at the same dinner table with the firm's lead defense lawyer, Ronald L. Olson, while at a legal conference. Olson believes Obermaier feared that someday somebody would raise questions.

The prosecutor is also aware of how his performance may play in Washington. "My suspicion is that this tenure will be reasonably favorably remembered," Obermaier says. Assuming the Democrats don't capture the White House, Obermaier would like to run "his own organization" when his term expires next year. His agency of choice? The Securities & Exchange Commission. "It's a reach," he quickly adds.The American-born son of German immigrants--his father worked in an ice cream factory, his mother was a seamstress--Obermaier graduated from Manhattan College in the Bronx. Armed with an electrical engineering degree, he worked as a patent examiner for the U.S. Patent & Trademark Office in Washington. There he attended Georgetown University's law school at night.

In the 1960s, Obermaier was an assistant in the office he now heads and served as chief trial counsel for the SEC's New York office. But he made his name as a defense attorney. He aggressively represented top brokerages fighting securities charges. Law wasn't his sole passion: While building his own firm, Obermaier managed to indulge his interests in tennis, Mozart, fine wine, and translating German, to name a few.

But not everyone has walked away satisfied. In 1988, arbitrageur John A. Mulheren fired Obermaier after he urged a plea bargain requiring Mulheren to admit guilt but letting him avoid jail. An appeals court later threw out Mulheren's securities-fraud conviction.

As U.S. Attorney, Obermaier got off to a slow start. It didn't help that he had publicly questioned using criminal laws to prosecute securities violations. Also, the office was in flux. Experienced prosecutors had left, and morale was "flat," says John K. Carroll, chief of the Securities & Commodities Fraud Task Force.

HIGHER PROFILE. Carroll says morale has been better lately. Obermaier's legal skills and wry wit have won over some staffers, and he has been known to bring a bottle of wine to meetings. The office has been busier: In 1991, criminal indictments jumped 9% over 1990 and are now about even with last year. Though he denies it, Obermaier even seems to be reaching out to the public. In past months, he has called six press conferences, compared with about that number over the prior two years. On July 8, Obermaier announced the indictment of five computer hackers nabbed in the first federal case using wiretaps to intercept computer transmissions.

Are financial markets under control? "As a result of the prosecutions of the '80s, I frankly think that Wall Street is in reasonably good shape," says Obermaier. Still, Wall Street isn't a place he can ignore. "We're probably going to have to strike out into other areas," he says, such as commodities and mutual-fund fraud, and insider trading in junk bonds. Those cases won't be as spectacular as Ivan F. Boesky's and Milken's. But if they pan out--and if the office keeps the heat up on other criminals--Obermaier may be remembered for what he has done and not for what he hasn't.THE ROAD TO U.S. ATTORNEY

1957-63 Otto Obermaier graduates from Manhattan College. Attends Georgetown

University's law school at night while working as a patent examiner in the U.S.

Patent & Trademark Office. Goes to work as a law clerk for a federal judge

1964-70 Works as a young prosecutor in the office of the U.S. Attorney for the

Southern District of New York in Manhattan. After a few years, becomes chief

trial counsel for the Securities & Exchange Commission's New York regional

office. Tries some early insider-trading cases

1970-89 Founds own law firm with a few partners. Specializes in defending

brokerage firms and corporations. In columns and interviews published in legal

newspapers, raises doubts about stretching the criminal law to attack

securities-law violations

1989 Succeeds the zealous Rudolph Giuliani as U.S. Attorney. Earns praise for

his cautious professionalism, but critics say he hasn't prosecuted enough big

cases

DATA: BW

Michele Galen in New York


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