Labor Troubles

More questions for Donovan

The legal problems of Labor Secretary Raymond Donovan are deepening A special prosecutor will probably be appointed this week to investigate allegations that Donovan witnessed an illegal payoff by his New Jersey construction firm to a corrupt union official in 1977. In addition, TIME has learned that investigators are looking into the possibility of perjury in Donovan's testimony at his confirmation hearing, when he claimed he had never met New Jersey Gangster Salvatore (Sally Bugs) Briguglio.

Just before Donovan was confirmed in February, the FBI told the Senate Labor and Human Resources Committee that Mobster Ralph Picardo had claimed to have received regular payoffs from Donovan in the 1960s for labor peace. Picardo had testified for the Government to help convict several Teamsters Union officials of racketeering. According to the FBI Picardo contended that Briguglio, a victim of a mob execution in 1978, had shared these payoffs. When asked about this at his Senate hearings, Donovan denied giving any bribes, called Picardo "murdering slime" and testified three times that he had never even met Briguglio. Because the FBI reported that it could not verify Picardo's charges, the committee accepted Donovan's denials. But since the hearings, TIME has learned, other witnesses have told federal investigators that they had seen Donovan and Briguglio together. Donovan refused to comment on the investigation, but President Reagan declared at last week's press conference: "I have had assurances that there are no grounds to these charges."

The special prosecutor is also expected to look into dealings between Donovan's former company, Schiavone Construction Co., and William Masselli, a member of New York's Genovese Mafia family. Masselli heads an excavation firm that has made some $12 million under subcontracts with Schiavone. The FBI has evidence showing unusually close links between Schiavone officials, including Donovan, and Masselli. Masselli had a preferential (but not necessarily illegal) arrangement under which he was to be paid 7 1/2% of the cost of his company's work for Schiavone "off the top," as his firm's profit. He collected some $250,000 in such fees for subway work and is suing Schiavone for about $630,000 more. The Schiavone company also loaned Masselli $200,000 to start the subway job.

Over the past three years, Masselli was the target of FBI agents, wiretappers, stakeouts, prosecutors and federal grand juries. These investigations produced reports of an alleged $5,000 payoff to New York City Democratic Congressman Mario Biaggi. The money was said to have come from a paving contractor who was seeking dumping privileges at a city landfill. Biaggi denied any such deal, saying: "It didn't happen." Similarly, Masselli is alleged to have sought the help of Carmine De Sapio, 73, a former New York City Democratic leader, in leasing a dump site from the New York State Metropolitan Transportation Authority. A man claiming to be an intermediary told Masselli that the help of De Sapio would cost about $20,000. De Sapio refused to comment on the matter.

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