Secretary of Labor Raymond J. Donovan yesterday angrily dismissed new allegations of union corruption surrounding him and his old construction company, and called for appointment of a special prosecutor to lay them to rest.
Breaking his silence at a hurriedly called appearance before reporters, Donovan said he is tired of being "besieged by false statements, leaks and innuendo," and denounced them as emanating from one man, Mario Montuoro, a former labor union official in New York.
"Mr. Mario Montuoro," Donovan charged, "is a damnable and contemptible liar."
Speaking in pugnacious tones at the Labor Department auditorium, Donovan began by reading aloud a letter he had just sent to Attorney General William French Smith denying the latest charges of illegal union payoffs and other favors, and asking that a special prosecutor be appointed immediately to settle the matter.
Government sources have been saying for more than a week that such an appointment is virtually certain anyway. There were signs that the Justice Department would ask the U.S. Court of Appeals here to name a special prosecutor this week, perhaps today.
Donovan put himself ahead of such a step with his statement yesterday.
"It was a smart move," said one government official close to the case. "He's got a good lawyer Dean Burch . Now the president can't fire him either."
Donovan would entertain no questions after his announcement, and said he would have "no further comment concerning this investigation other than to the special prosecutor." Donovan also affirmed associates' expectations that he has no intention of stepping aside. He said he is going home for Christmas vacation "to spend these holy days with my family" and will return to work "to devote all of my time and my energies to being secretary of labor."
The White House said President Reagan had been apprised ahead of time by the attorney general about Donovan's announcement. Reagan had no comment.
In his letter to Smith Donovan said that "for the past 11 days, stories have appeared in the print and electronic media concerning allegations by a Mr. Mario Montuoro charging me as well as officers and employes of Schiavone Construction Co. with bribery of a union official."
Montuoro has not used the word "bribery," but he has told reporters, as he said he told authorities several years ago, that Donovan was present at a 1977 luncheon when another Schiavone official handed an envelope containing $2,000 in cash to Louis Sanzo, president of Montuoro's union.
At the time, Donovan was executive vice president of Schiavone Construction. Montuoro was secretary-treasurer under Sanzo at Laborers International Local 29, then engaged in subway work for Schiavone Construction in Long Island City. The luncheon assertedly took place at Prudenti's restaurant in Long Island City.
Donovan said he was not there.
"Not only have I never had lunch at Prudenti's restaurant with Mr. Montuoro and Mr. Sanzo, I have never been in Prudenti's restaurant in my entire life," Donovan said in his letter.
"I honestly have no knowledge -- and I absolutely and unequivocally deny -- that any officer or employe of Schiavone Construction Co. has paid any sort of bribe to Mr. Sanzo or anyone else at any time or any place," Donovan added.
The sweeping disclaimer was reminiscent of Donovan's testimony at his Senate confirmation hearings last winter, when he rejected several allegations tying him and his company to organized crime and union corruption. Donovan denied that his company had ever made a labor union payoff or bought labor peace, and said, to the contrary, that Schiavone Construction was simply "not extortable."
In addition to charges that a $2,000 "token of appreciation" was given Sanzo, other allegations have come to light in the last two weeks. They range from assertions that Schiavone paychecks were made out to "no-show" employes and were cashed by Local 29 officials to claims that Schiavone provided free lumber, labor, vacation expenses and other favors to top officials of the local.
These charges came from two former Local 29 bookkeepers, Joyce Cole and Julietta Fernandez, and from Montuoro.
Donovan did not mention the bookkeepers yesterday. Instead, he mentioned in his letter to the attorney general "other charges attributed to Mr. Montuoro," and said they were "demonstrably false as well."
Since the preliminary inquiry the FBI undertakes in such cases is necessarily limited, Donovan said a special prosecutor "could on an expedited basis determine the truth once and for all." He asked that the prosecutor's authority cover "all the charges made by Mr. Montuoro against me and against Schiavone Construction . . . . "
"I'm glad he said that," Montuoro told a reporter later. He suggested that some of the other allegations might be easier to document, and added that he is sticking by his account of the restaurant episode.
"I got better sense in my mind than to make up a story about somebody important like that," Montuoro said of Donovan.
In brief remarks after his reading of the letter, Donovan denounced Montuoro as "a man who has convictions for the possession of heroin and of a deadly weapon." He also charged that Montuoro had been "accused previously of stabbing an officer while in the military."
Montuoro's lawyer, Arthur Schwartz, whose firm also represents Cole and Fernandez, said Montuoro "never heard of that stabbing allegation before."
Schwartz also said Montuoro's criminal record was "an old one, and Mr. Donovan's injection of such invective into the controversy now surrounding him has a false and hypocritical ring to it. Instead of dealing with the substance of the charges against him, he seeks to paint his accusers as low lifes and the very serious allegations as innuendo."
Schwartz also noted reports that veterans of the federal organized crime strike force in Brooklyn are prepared to investigate the allegations if a special prosecutor is not appointed.
"If I had a choice of being investigated by the Brooklyn Organized Crime Strike Force or a special prosecutor," Schwartz said, "I, too, would choose a special prosecutor."