Labor Secretary-designate Raymond J. Donovan said yesterday he had no knowledge until a week ago of charges that his New Jersey construction company bought labor peace with the Teamsters three years ago by putting a "ghost employe" on its payroll.
The ghost was identified at Donovan's confirmation hearings as the chauffeur of New York Teamster official Harry Gross, now under investigation by the Justice Department.
In testimony before the Senate Labor and Human Resources Committee, Donovan also said he found, upon investigation last week, that his firm had had no choice but to hire the phantom Teamster, who was foisted off on it as a "walkaround foreman." He said such foremen are required by an area contract between construction companies and the union.
As part of its inquiry into his fitness, the committee is investigating some transactions involving his company, Schiavone Construction Co. of Secaucus, N.J. Another transaction involves a payment to an alleged middleman in an elaborate construction kickback scheme in Newark in the 1960s.
Ronald Reagan's Secretary of Energy-designate James B. Edwards also was on Capitol Hill yesterday, and told his confirmation committee he no longer favors abolsihing the Energy Department, as Reagan promised to do in the campaign [Details, Page A2].
Elsewhere in Donovan's long day at the witness table, he told the senators that he favors right-to-work legislation, thinks many federal occupational health and safety regulations have been "oppressive," believe the federal equal employment opportunity officials have sometimes been too confrontational in their dealings with business, and maintains an open mind on a sub-minimum wage for teen-agers.
Most of the questions as to the Schiavone company transactions came from committee Democrats headed by Edward M. Kennedy (D-Mass.). One, Donald W. Riegle Jr. of Michigan, said he found it hard to believe Donovan was unaware until last wek of the ghost employe incident. But the general view as the hearing ended was that the Democrats had not damaged the nominee, and that he would be confirmed.
Committee Chairman Orrin G. Hatch (R-Utah), who had originally favored another candidate for the Labor Department job, made a point of saying as the hearing opened that Reagan had found "a capable and hard-working nominee who can meet the challenges of that demanding office."
The supposed peace pact cost Schiavone about $13,000 in wage payments from November 1977 through June 1978, according to the committee's information, which staff aides said was derived from an "ongoing" Justice Department investigation.
According to the Justice Department, three top Schiavone officials appeared before a grand jury in December 1978, and one acknowledged that the company hired "ghost employe" Joseph Murray at the behest of a Teamster official identified as Harry Gross.
"Gross demanded that Mr. Murray be placed on the payroll on the 11 p.m. to 7 a.m. shift" on a Manhattan subway construction project "as a
"The [Justice] Department reports that Mr. Murray was Mr. Gross' chauffeur. The department further reports that Mr. Gross had ghost employes on the payrolls of other companies," the committee report said.
Donovan said he had not heard of the allegation until last week, when he was told about it by committee staff members. Since then he said he has had the opportunity to check with key employes, particularly with Schiavone senior vice president Josph DiCarolis, the most senior of those who appeared before the grand jury in connection with the matter.
DiCarolis said Murray was a "walkaround foreman" who had to be hired under the provision of local construction industry contract with the Teamsters, Donovan said.
"He never showed up for work," Donovan said of Murray. "But under the collective bargaining agreement, we had to pay him."
Red-faced, Donovan added in his comments to the committee: "If you call that extortion, you would be very incorrect."
"What do you call putting a chauffeur on the payroll, who doesn't even come to work?," shot back Kennedy, ranking minority member of the committee.
"You ask me what I think of that. I don't like it one damned bit. It is not our policy," Donovan said. However, he conceded that such practices "are typical" in the construction industry.
Though Riegle called it surprising that Donovan could not know of the grand jury appearances, Hatch, pointing out that Schiavone has 1,500 employes and $150 million in current orders, said such a lapse was understandable.
"I don't find it preposterous at all, or even suspect, that people who are beneath him, who are very competent, don't come to him with every problem," said Hatch, who went on to praise Donovan for his ability to delegate authority.
The second business dealing under study yesterday was a much-reported $13,000 check sent by Schiavone to the Irving Kantor Supply Co., a Newark payoff front operated on behalf of mobsters and wayward politicians, on Aug. 30, 1967.
Donovan argued that the payment was part of a legitimate business deal in which the company received the right to dump waste materials on land then believed to be owned by the late Irving Kantor.
Donovan said he now believes the land probably was owned by the city of Newark, but that the affair had been investigated by the Justice Department and the Internal Revenue Service between 1970 and 1973, and that both agencies gave his company a clean record.
"They went through 1 million [Schiavone] checks . . . eight years of records. . . . It was the most trying period of my life," Donovan said.