A former bookkeeper-secretary to Laborers Union Local 29 in New York said yesterday that Secretary of Labor Raymond J. Donovan's former construction company regularly made out paychecks to "ghost employes"--checks that union officials then cashed for themselves.
Joyce Cole, who has been used by the government as a witness in other cases involving Local 29, said one of the no-show employes was even in prison during part of the time that the Schiavone Construction Co. made out paychecks for him in the late 1970s.
One ghost employe's name was John Busso and, Cole said, she remembered Local 29 President Louis Sanzo telling her that "the guy never worked" for Schiavone.
"He Busso had a deodorizing company," Cole recalled. "He used to come into the Local 29 offices and put deodorizers in the bathroom. That's what he used to come to the office and do. He wasn't working. They had him down as a member of Local 29, but there were a lot of members of that union who were what you called 'book members.' "
Cole said she did not know whether any officials at Schiavone were aware of the use of ghost employes.
Before joining the Cabinet, Donovan was executive vice president of Schiavone and, according to his testimony at Senate confirmation hearings last winter, was in charge of "the business end of the business," which among other things gave him responsibility for labor relations.
Donovan is under a new FBI investigation as a result of allegations he was present at a 1977 meeting when another Schiavone official made a $2,000 payoff to Sanzo. He has declined all comment pending outcome of the inquiry; he testified earlier this year that Schiavone had never made a payoff to a union.
The payoff allegations were made by Mario Montuoro, former secretary-treasurer of Local 29, who has said he first reported the incident to federal authorities around 1978.
Sources say Montuoro also told authorities at that time of the no-show jobs and other favors provided Local 29 officials by Schiavone Construction in connection with a Long Island City subway job that launched the company into the New York subway building business.
Cole corroborated Montuoro's no-show job assertions, as well as several other allegations, in a telephone interview yesterday with The Washington Post.
Cole was Local 29's bookkeeper and served as secretary for Sanzo from 1976 to 1979. She has testified that Local 29 had links to organized crime through Samuel Cavalieri, identified in court records as a member of the Luchese family of the Mafia.
Cole has testified several times for the government in cases involving the local. In one instance she was called by federal prosecutors before a grand jury. The government relied on her testimony in securing Sanzo's conviction earlier this year on income tax evasion and conspiracy charges.
The federal investigation of Local 29 dates from the late 1970s, well before Donovan surfaced as a public figure. The FBI during Donovan's confirmation hearings investigated more than a dozen allegations tying Donovan and Schiavone Construction to union corruption and organized crime, but none involved Local 29.
According to both Cole and Montuoro, Local 29's no-show workers for Schiavone included Busso, a man named Al Buonanno who operated another company that did repair work on construction machinery and a man named Artie Martin who was said to own his business.
As for the paychecks, Cole said Local 29 president Sanzo and his cronies got them, not the "ghost employes."
Sanzo and other Local 29 officials, Cole said, would bring in the Schiavone payroll checks for ghost employes to the union's offices. Sometimes, she said, "Sanzo would sign the person's name on the back of the check for whom it was made out."
Cole said Sanzo also tried to get her to sign and cash checks for "other employes who were not working for Schiavone" but she refused.
"I said 'I'm not going to do that.' I said, 'If you want to cash it, cash it yourself,' " Cole recounted.
Montuoro, sources say, also told authorities Local 29 officers cashed paychecks for phantom employes and in addition cashed "vacation stamps" that contractors are required to provide for Local 29 workers. These can be redeemed for vacation pay.
The stamps earned by ghost employes were collected by a shop steward and brought to the union office to be cashed, Cole said. She said, "Sanzo approached me several times to cash vacation stamps."
Montuoro has also alleged that Schiavone Construction paid the salary of a Local 29 worker who helped put up a garage at Sanzo's home in Queens in 1977 with Schiavone-supplied lumber and paid for another two workers who helped install a fireplace and chimney at the Port Washington home of still another Local 29 official, Amadio Petito.
Montuoro, however, has apparently been questioned by FBI agents and Justice Department lawyers in recent weeks only about the alleged $2,000 payoff. This may be because Justice Department officials view it as the only "specific information" alleging that Donovan might have committed a federal crime.
During his confirmation hearings, Donovan was questioned about the alleged hiring of another "ghost employe" at the behest of a Teamsters Union official who has since been indicted on extortion charges. Donovan denied knowledge of the incident. Schaivone Senior Vice President Joseph DiCarolis had been questioned about it by a federal grand jury several years earlier. Donovan said DiCarolis, a friend for 20 years whose office was next door to Donovan's, never told him about it. He also said he did not regard it as extortion.
"We have never been extorted; we have never made a payoff," Donovan said of his company at one point last January. "No executive officer of Schiavone Construction Co., no employe of Schiavone Construction Co.," he added at a later session, "has ever bought labor peace."
Cole said she believes she saw Donovan at Local 29's offices in 1977 with another Schiavone official. "They went in the back and talked with Mr. Sanzo," she recalled.
Another Schiavone official, Jerry Liguori, who was project officer for the Long Island City subway project, was in Local 29 offices constantly, she said. "He was always calling; he and Sanzo were always going to lunch."
In any case, Cole said, "Anything that went on in the union, Mr. Cavalieri or Mr. Sanzo would have to okay it. I'm sure Liguori must have reported to his bosses."
Sanzo could not be reached for comment. The telephone at Local 29 went unanswered yesterday afternoon. At Schiavone headquarters in Secaucus, N.J., company president Ronald Schiavone, DiCarolis and Liguori were all said to be unavailable. A spokesman for Donovan has said the secretary will have no comment during the FBI inquiry, even on matters that do not appear to be under current investigation.