NEWARK, MARCH 10 -- A former federal prosecutor who faked death threats to herself during proceedings against two suspected Sikh terrorists last year was found not guilty of obstruction of justice by reason of insanity today in U.S. District Court here. Judge Nicholas Politan delivered the verdict against Judy G. Russell, 38, after Justice Department lawyers presented psychiatric reports stating that she is severely disturbed and a possible schizophrenic with as many as four distinct personalities. The verdict capped a case that has stunned the legal community in northern New Jersey. Russell was among the state's most prominent young attorneys and had prosecuted some of New Jersey's most celebrated narcotics cases before being accused of the crime last March. "I remain shocked and saddened by {Russell's} bizarre actions," said U.S. Attorney Samuel A. Alito Jr., her former boss. He called the case a "true tragedy." Attorney William Kunstler, who is trying to block the Sikhs' extradition to India, called the ruling a "total whitewash" intended to "cover this whole episode and excuse Russell without affecting our case or the integrity of the Department of Justice." Politan ordered Russell to report for psychiatric evaluation at an outpatient clinic to be selected later. Now seeing a psychiatrist in New York City, according to court records, she faces final sentencing in April. The verdict marked the downfall of a woman once mentioned by New Jersey politicians as a candidate for public office. A former reporter for the Daily News in New York, Russell decided in the late 1970s to become a lawyer after fighting libel charges against her and worked her way through Rutgers Law School. As a private attorney, she successfully defended a former Hudson County prosecutor on bribery and conspiracy charges, which led former U.S. District Court Judge Herbert J. Stern to recommend her for a job with the U.S. attorney in 1983. In that post, she conducted some of the state's most important narcotics busts and prosecutions, including the 1985 wiretap of a drug ring operating in New Jersey and West Palm Beach, Fla., that led to at least 30 arrests and seizure of more than 800 pounds of cocaine. The strange case against Russell stems from controversial U.S. attempts to extradite Sukhminder Singh and Ranjit Singh Gill, arrested in May 1987 in Aberdeen, N.J. The two are wanted by India's government in connection with several political assassinations. In February 1988, Russell secretly told a federal magistrate overseeing the extradition hearings that she had received three death threats related to the case. According to documents submitted by the Justice Department today, FBI agents began to suspect that Russell had fabricated the threats when she said a fourth note warning "Federal Court Death for you" was slipped under her hotel door. U.S. marshals reported that nobody had approached her room. Agents matched the typewritten letters on her 1983 federal job application to lettering on envelopes in which the threats had been mailed. Agents searched her home and found three unmailed threats and glue, scissors and plastic gloves with ink smudges that matched ink on the threats. Russell insists that she does not remember mailing the threats or know how the other notes appeared in her home, claims that government psychiatrists said are consistent with her mental state, according to court records. Friends and colleagues describe Russell as an ingenious, driven attorney who, throughout her life, has had a knack for impressing the right people at the right time. The Sikhs remain in custody in Manhattan while their lawyers appeal the extradition order against them.