Special prosecutor Leon Silverman today began digging into charges that Secretary of Labor Raymond J. Donovan's construction company had "ghost employes" on its payroll for a New York City subway project.
A federal grand jury heard testimony about paychecks for "no-show" employes, ostensibly on the roster of Laborers Union Local 29, in a second day of testimony from Mario Montuoro, the local's former secretary-treasurer, sources said. Local 29 officials allegedly cashed the paychecks for themselves.
Today's line of questioning was the first solid indication that Silverman is willing to go beyond the allegation that triggered his appointment under the Ethics in Government Act--an allegation that Donovan was present when a $2,000 payoff was made to the president of Local 29 by an official of Donovan's former company. Sources emphasized, however, that there is still no sign that Silverman intends to follow through on other charges of illegal favors for Local 29 unless Donovan can be directly implicated in them.
Donovan, formerly executive vice president of Schiavone Construction Co. of Secaucus, N.J., disclaimed knowledge at his Senate confirmation hearings last year of any "ghost employes." He also insisted: "We have never been extorted. We have never made a payoff."
Montuoro, sources said, was asked today if Donovan knew of other benefits assertedly bestowed on Local 29's hierarchy by the Schiavone firm. Montuoro, it was understood, emphasized he had no way of knowing and said he met Donovan only once.
At the same time, sources said, Montuoro testified that at least four "no shows" were on Schiavone's payroll in 1977 and perhaps 1978 for the Vernon Boulevard subway extension project in Long Island City. He reportedly said he was certain Schiavone's project manager on the job knew of the practice.
Sources said that under questioning by Silverman, Montuoro declared that Frank Russo, one of the "ghost employes," was a real "ghost." "There ain't no such person," Montuoro reportedly said.
Two of the other men whom Montuoro named, Carmine Buonanno and Artie Martin, had their own businesses while Local 29 was doing blasting work on the subway. The fourth, John Busso, "used to put deodorizers in the bathroom" in Local 29's old office in Manhattan, according to former Local 29 bookkeeper Joyce Cole.
"I remember local President Louis Sanzo told me that that guy Busso never worked on the subway ," Cole has told The Washington Post.
Cole, who made those allegations in December, has not yet been scheduled for a grand jury appearance or interviewed by Silverman or any of his aides.
Today's questioning of Montuoro, sources said, extended into allegations of a Schiavone-financed trip for a Local 29 officer and free lumber and labor at Schiavone's expense to build a garage and greenhouse at Sanzo's home in Queens.
The prosecutors, sources said, cited reports that the lumber actually came from another company, but Montuoro told them, in effect, that they could not tell a "four-by-four," which went into a deck for Sanzo's pool, from a "three-by-ten," which went into the garage.