A new witness has surfaced in the investigation of Secretary of Labor Raymond J. Donovan and, according to informed sources, has told authorities that he had "long conversations" with Donovan about bid-rigging on New Jersey Turnpike Authority projects.
The witness, a New Jersey businessman named James J. Donelan, is expected to be called today before the federal grand jury in Brooklyn that has been investigating Donovan's activities as a New Jersey construction company executive before he joined President Reagan's Cabinet.
Donelan was interviewed by the FBI last year before Donovan's confirmation proceedings, but the Senate Labor Committee was never informed of what he said until Donelan approached the committee through his lawyer last week.
It was not clear just how much Donelan told the FBI last year, but sources said the result was a rather bland report. It was sent to special prosecutor Leon Silverman, reportedly from an FBI field office where it had been kept, but Silverman evidently saw nothing in it to arouse his interest.
After a Senate Labor Committee staff interview of Donelan last week, however, committee Chairman Orrin G. Hatch (R-Utah) immediately called FBI Director William H. Webster to a meeting, attended by ranking minority committee member Edward M. Kennedy (D-Mass.), to determine what had happened.
A government source said, "It was discovered basically that Hatch's committee had talked to the same person the FBI had," but was given much more detail.
"It was obviously more than" the FBI had been told, this source said. "It had greater potency" than the bureau's information.
Silverman was informed of the committee's account by express letter last Friday, and this time took notice. His investigators interviewed Donelan over the weekend, sources said.
Donelan, sources said, was a business associate of Donovan until about 10 years ago, and ran a company called Flashers Inc., which supplied highway barricades with flashing warning lights that he designed.
Now in a different line of work, Donelan confirmed to a reporter yesterday that he had "long conversations" with Donovan in years past, but declined to discuss their substance.
He acknowledged, however, that his relations with Donovan and Donovan's former company, Schiavone Construction Co., had deteriorated, and that at one point within the last 10 years he engaged a lawyer and was on the verge of filing a lawsuit against Schiavone.
"I don't even know if the suit was actually filed," he said. One night, he said, after putting his records pertaining to Schiavone Construction in his car, "I was mugged getting into the car and the car was stolen. It was found in Newark the next day."
When it was found, Donelan said, "The only thing that was missing were the records. I don't know who did it. It could have been some guy who just liked those kinds of papers."
According to sources, Donelan has said that he and Donovan had lengthy conversations, at least some in Donovan's offices at Schiavone Construction in Secaucus, N.J.
Donelan has alleged, sources said, that Donovan from time to time discussed how Schiavone Construction, of which he was executive vice president, was able to get inside information on upcoming Turnpike Authority projects, make the low bid and, after winning the contract, renegotiate the cost of certain items.
Donovan and his company have been dogged with allegations of bid-rigging in the past, most recently in connection with unresolved charges linking Donovan to a now dead New Jersey mobster, Salvatore Briguglio.
"It is, in general, the same type of allegations that have been made before," Hatch said yesterday of Donelan's report. "The significance is that he Donelan doesn't seem to have a criminal background. . . . He doesn't appear to have come from the underworld."
Donovan's official spokesman was not immediately available for comment, but in the past Donovan has steadfastly denied that he was guilty of any wrongdoing and has denounced his accusers as hoodlums unworthy of belief.
In response to a question, Donelan said that he had no criminal record.
Hatch would not discuss Donelan's story, saying that it was "in the hands of the special prosecutor" now.
One government source familiar with Donelan's account said that "it dealt with a number of areas" in addition to New Jersey Turnpike Authority projects and covered "maybe half a dozen points" altogether.
"He is very specific and he sounds very, very impressive," another source said.
Yesterday, meanwhile, the special grand jury working under Silverman's guidance in Brooklyn heard testimony from William V. Musto, who lost his New Jersey state senate seat last week because of a federal racketeering conviction.
Musto, who was reelected mayor of Union City, N.J., this month, the day after he drew a seven-year federal prison sentence, arrived and left, saying little except that he had never met Donovan.
Silverman and the grand jury have been investigating a variety of allegations that Donovan and his company have been involved in union corruption or had ties to organized crime figures.
Musto had served for 16 years in the New Jersey state senate. He has also been ordered to relinquish his seventh term as mayor of Union City under a New Jersey ruling that prohibits him from holding office because of the rackets sentence. He was convicted of sharing in hundreds of thousands of dollars in kickbacks from a Hudson County contractor.
Musto told reporters yesterday that he had never met Donovan and had nothing to say "about him that would affect his status."
Last year at the Senate hearings on Donovan's nomination there was mention of an allegation that Musto might have helped Donovan and his company "get work in municipality contracts." Donovan said that Schiavone did not undertake municipal projects and that the allegation was not substantiated.