Assailing his chief accuser as "murdering slime," Labor Secretary-designate Raymond J. Donovan yesterday bitterly denied fresh allegations that he and his New Jersey construction company have had ties with organized crime.
Donovan blamed the dispute holding up his appointment to the Reagan Cabinet on an unfair presumption of guilt that he labeled the "New Jersey syndrome." He insisted that the accusations clouding his nomination were all "unfounded, scurrilous [and] groundless."
Just before he testified, FBI officials told the Senate Labor Committee that they have collected allegations of questionable or illegal activity by Donovan or his company from about half-a-dozen informants. But an FBI man added that they have not been able to corrobroate a single one of the accusations despite an intensive investigation over the last two weeks.
Several Democratic senators on the committee indicated they still had reservations about Donovan in light of the volume of the allegations, all from sources the FBI has found "reliable" in the past, but Donovan said they were all just "hoodlums" as far as he was concerned.
Sen. Edward M. Kennedy (D-Mass.) said he was perplexed about why so many individuals would come up with damaging talk about Donovan or his firm, the Schiavone Construction Co. of Secaucus, N.J.
"I'll tell you why, senator," Donovan responded hotly after seething in a front-row seat throughout the morning while the FBI witnesses made their report. "It's the New Jersey syndrome.
"I'm from a great state, New Jersey. But if you're in the construction business in this country, you're suspect. If you're from New Jersey, you're indictable. And if you're Italian, you're convicted."
Outlining more than a dozen heretofore unpublished allegations, FBI Executive Assistant Director Francis M. Mullen Jr. said that three separate FBI sources in New York had supplied information indicating that Donovan, through his position as the Schiavone company's executive vice president, "had social and business ties with organized crime figures."
According to a more detailed 19-page FBI report, the New York office of the bureau said its sources had stated that the Schiavone company was "mobbed up."
One of these sources, the report added, "indicated the upper management of SCC [Schiavone Construction Co.] is closely aligned with organized crime elements though its contacts with Jopel Construction," a company headed by William Masselli.
The report identified Masselli as an "alleged self-admitted 'soldier' in an organized crime group" and said the FBI source in this matter "alleges Mr. Donovan is acquainted with organized crime figures through Masselli on a business and social basis."
Mullen emphasized, however, that none of the New York sources could provide "any information at all to show any specific criminal misconduct on the part of Mr. Donovan."
For his part, Donovan expressed surprise to hear Masselli had been alleged to have organized crime connections.
"Do you know of any organized crime figures with whom you have had business or social ties?" Senate Labor Committee Chairman Orrin Hatch (R-Utah) asked.
"I do not," Donovan replied. "At least not to my knowledge." He said he could not have met Masselli more than three times, "totally on a business basis."
Jopel Construction was first hired by Schiavone as a minority business subcontractor in New York on a 63rd Street subway project after an earlier subcontractor went bankrupt. The FBI reported that Jopel is "the focus" of an ongoing investigation.
"They [Jopel] are an established and approved MBE [Minority Business Enterprise] contractor," Donovan protested. "They're few and far between, unfortunately. We must sub out 10 percent of our subcontracts to minority business contractors."
The Senate committee will meet Thursday in executive session for a vote on Donovan's nomination. A decision on the 50-year-old Republican's appointment was held up two weeks ago when the FBI alerted the senators to claims that were conveyed to the bureau by Ralph Picardo, a long-time informant with ties to organized crime.
Picardo said that in the late '60s he had picked up periodic payments for "labor peace" at the Schiavone headquarters in Secaucus from a man whom he knew only as "Ray" but whom he identified this month from newspaper photographs as Donovan.
Once convicted of murder, Picardo has been a government witness for major criminal trials in recent years, all of which resulted in convictions. Hatch noted that the 1975 murder conviciton resulted in a 15-to-20-year prison term for Picardo before it was overturned in April 1977 by the appellate division of the New Jersey Supreme Court.
Hatch said he heard Picardo "suddenly became a born-again informant" when gasoline was thrown in his prison cell and ignited.
"That's correct," the FBI agent-in-charge of the Donovan investigation, Anthony Adamski Jr., replied. He acknowledged that Picardo, an FBI "protected witness" was, by his own admission, "an unsavory character." But, he said, the FBI still regards him as a credible witness whose information on other topics has, by and large, proved accurate.
Donovan had another view, asking the senators at one point whether they had ever had groundless charges made against them by "murdering slime."
"I know he's lying," Donovan protested. "In fact, I believe he's a pathological liar.In past cases, my attorney informs me, witnessses have called him 'whacko,' 'off-the-wall,' 'full of s---,' -- Okay? -- and 'pathological liar.'"
Mullen said the FBI examined more than 90,000 canceled checks, another 90,000 invoices and 20 cash disbursement journals covering the 1965-70 period for Schiavone Construction and two subsidiaries, but could find nothing to support Picardo's charges.
Picardo, the committee was told, refused three times to take a polygraph (lie detector) test. FBI officials said he felt it would be demeaning and would imply disbelief in what he had to say.
Sens. Thomas Eagleton (D-Mo.) and Clairborne Pell (D-R.I.) wondered whether Donovan -- who said he never even met Picardo -- would be willing to take a polygraph test himself in an effort to resolve any senatorial doubts and help them make up their minds.
Donovan refused with a show of indignation, declaring that for him to take such a test would be "insulting and outrageous" when "a self-admitted murder refuses to take one."
The hearing was adjourned after a final declaration from Donovan who vowed, if he is confirmed as labor secretary, "to do all in my power to stamp out the sort of activities which have been wrongly attributed to me or my company."
Hatch said he planned to vote for him, then added, "I have to tell you if any of these allegations prove to be true, it'll be one miserable experience for all of us."