Secretary of Labor Raymond J. Donovan was called before a federal grand jury yesterday amid new allegations that he and his New Jersey construction company had ties to organized crime.
According to the cover story in the latest issue of Fortune magazine, the long-suppressed tape recordings of a New York Mafia member's telephone and office conversations include some about "washing" money through the accounts of Donovan's firm, Schiavone Construction Co. of Secaucus, N.J. The magazine said this was done by means of vouchers for sums ranging from $10,000 to $50,000.
In addition, the article said, the reputed mobster William P. Masselli provided entertainment during the 1979 Super Bowl weekend in Miami for visiting gangsters and various business associates, including officials of Schiavone. Donovan was executive vice president of the firm.
"According to a federal official," the article continued, Masselli also "found time in the course of the Super Bowl festivities to confer with Schiavone company officials, including Donovan."
At his Senate confirmation hearings last year, Donovan said he hardly knew Masselli, whose trucking firm was a Schiavone subcontractor on a series of New York City subway projects. Donovan testified that he had seen Masselli only three times, always on the job site, and had no knowledge of Masselli's ties to organized crime.
The labor secretary spent about 5 1/2 hours yesterday before the grand jury at the U.S. courthouse in Brooklyn, then stepped into a lobby jammed with reporters, microphones and television cameras for a few brief remarks. He smiled broadly and gave no sign that he had read the Fortune article or encountered anything else during the day to ruffle his composure.
"I testified before the grand jury today. I did it freely, fully and honestly," he said. "And let me tell you, it felt good. Thank you and goodbye."
Donovan, 51, was interviewed Monday for four to five hours by special prosecutor Leon Silverman at Silverman's Manhattan law offices. Donovan's lawyer, Dean Burch, said they had "a frank and thorough discussion." Silverman was appointed to investigate Donovan's role in an alleged $2,000 union payoff by his company. That investigation has since expanded.
The Fortune article was written by Roy Rowan, a member of the magazine's board of editors, and was described as the result of two months of reporting, including interviews with Donovan's former business associates, government officials, law enforcement authorities, union officers and some of the underworld informants Silverman has been subpoenaing before the grand jury.
It pointed out that the "biggest chunk of information still missing from the public record concerns Donovan's relationship with" Masselli, a reputed member of the Genovese family of the Mafia.
Masselli, 55, began serving a federal prison term in February for his involvement in a truck hijacking scheme and a conspiracy to manufacture $100 million worth of synthetic cocaine. His indictments stemmed from the FBI's eavesdropping and wiretapping at his South Bronx warehouse for seven months in 1979.
The Washington Post reported last week that the tapes contain repeated references to Donovan and, sources say, conversations with a number of other Schiavone officials. But the FBI failed to mention the 90 hours of cassettes at Donovan's confirmation hearings.
The bureau did report that one of its informants said Schiavone was "mobbed up" through its contacts with Masselli, but FBI executive assistant director Francis M. (Bud) Mullen testified that "there is no information available to the FBI which indicates that this is the case."
There was also an allegation at the time, evidently phoned in by a source, to the effect that Donovan "was associating with known mobsters at one of the NFL football games." But when Senate Labor Committee Chairman Orrin G. Hatch (R-Utah) asked about that, Mullen replied:
"We are well aware of the individuals with whom he was allegedly associated and have proven it to be incorrect."
Fortune, however, said it had learned that the Masselli tapes "contain references to events during the Super Bowl weekend in Miami where Masselli provided entertainment for business associates, including Schiavone officials, and for visiting mobsters."
The article said that with business prospering, the Genovese family decided some hospitality was in order during the Super Bowl weekend in 1979, and Masselli arranged the social details: "motel reservations, rental cars, tickets for the game. Two young women were summoned from Atlanta and a swinging cocktail party was thrown at Masselli's Hollywood, Fla., condo," the article said.
The magazine did not say when Masselli and Donovan were supposed to have gotten together, but it quoted an unidentified federal official as saying that they did confer.
The same official also was quoted as saying that Masselli and other members of the Genovese family held two conclaves at a Miami hotel that weekend "and divvied up construction jobs in New York and New Jersey, thereby avoiding unnecessary friction among the family members."
As a result of Silverman's prodding, the FBI recently unearthed other allegations that it didn't disclose at the time of Donovan's confirmation hearings. One dealt with an assertion that Donovan and a now-dead New Jersey mobster, Salvatore Briguglio, "took various pleasure trips together" with Briguglio's girlfriend, Joan Torino, and other women.
The FBI said it never reported this to the Senate committee considering Donovan's nomination "because the information proved to be unsubstantiated almost immediately," but the Fortune article suggested that the tip was discarded primarily because "Joan Torino told the FBI that she had never met Donovan."
The magazine article also stressed several points tending to shore up the credibility of Mario Montuoro, the ousted New York labor official whose allegations of Donovan's presence at a luncheon when a $2,000 union payoff reportedly was made in 1977 triggered Silverman's investigation.
Montuoro has said that the luncheon also dealt with Schiavone's hopes of getting his union, Laborers Local 29, to fight with the better-paid "sandhogs" Local 147 for jurisdiction over some subway tunnel work. William Finneran, the head of an industry group that is supposed to resolve such disputes, has said that Local 29 officials made such a pitch to him in late May, 1977.