The FBI inquiry that eventually resulted in indictment of former labor secretary Raymond J. Donovan began with predictions of "sound prosecutable cases" involving a virtual Who's Who of organized crime, according to the FBI memorandum that started the investigation.
Only two indictments against journeymen mobsters were obtained, however, before the investigation was closed in late 1981.
Three years later, using much the same evidence, Bronx prosecutors secured an indictment against Donovan and nine other men on charges of defrauding the New York City Transit Authority of about $7.4 million.
The prime focus was a South Bronx warehouse run by reputed mobster William P. Masselli, a subcontractor for Donovan's company on several subway projects here. Masselli's office and telephones were subjected to electronic surveillance for six months in 1979.
The resulting FBI tapes, according to court disclosures today, contained 351 mentions of Donovan, his Schiavone Construction Co. or other Schiavone executives.
The complex history of the FBI investigation began unfolding in Bronx Supreme Court today at hearings prompted by defense motions to suppress the tapes, now principal evidence in the Donovan case.
Defense lawyers maintain that the surveillance was tainted by "blatantly lawless" tactics that became evident after indictment of Donovan last fall. Seeking to counter that charge, Bronx prosecutors called as their first witness Robert A. Levinson, the FBI agent instrumental in starting the $1 million probe.
Levinson testified that most of his initial information came from Michael Orlando, an ex-convict recruited by another FBI agent and referred to organized-crime expert Levinson.
By Sept. 15, 1978, Levinson said, he had enough data to send a 14-page memo to FBI headquarters outlining "excellent prosecutive potential" for cases of political corruption, fraud, labor racketeering, police corruption, shylocking and narcotics trafficking.
The only indictments that resulted, however, dealt with charges of truck hijacking and a plot to manufacture synthetic cocaine, for which Masselli and Orlando were held to account. Both avoided a trial by pleading guilty to reduced charges offered by the government. The tapes were put back under seal.
In his 1978 memo, Levinson described Masselli as a Mafia "moneymaker" and "front man" for convicted drug trafficker Louis Cirillo, whom Levinson said was "the largest single importer and distributor of heroin in the United States" before his imprisonment in 1972.
The FBI memo also mentioned Masselli's "partnership" with state Sen. Joseph Galiber (D-Bronx), a codefendant in the Donovan case.
The memo described Galiber as a close ally of Rep. Charles B. Rangel (D-N.Y.) and, like Rangel, one of the city's "most powerful . . . black politicians."
Citing unidentified FBI "sources," the memo also asserted that Galiber "is presently involved with Rangel in the sharing of substantial profits for legislative favors and their 'bag man' has been identified as former New York State Assemblyman George W. Miller (D-Manhattan), who is reportedly a law partner of Congressman Rangel."
Rangel, in a telephone interview, denounced the memo as "flawed on its face." He said Miller "has been a political opponent of mine as long as I can remember" and that Miller never was his law partner or even a social acquaintance.
Rangel said that he was "politically associated" with Galiber and that he "would certainly entertain a request Galiber might make of me, but never, ever has he asked."
The memo said that Galiber, acquitted in a government fraud case in 1977, was also "a principal" in Masselli's subcontracting business, Jopel Construction, and "was said to have utilized his influence" in obtaining a subway contract for Jopel.
Levinson testified that the investigation produced evidence of about 30 crimes worth pursuing under federal racketeering laws, including "a kickback or fraud case" involving Jopel. He said that only four or five of these cases involved Orlando.
Defense lawyers say the tapes are tainted because Orlando allegedly participated Nov. 30, 1978 in a hijacking used as a principal reason to start the court-ordered warehouse surveillance. Levinson denied that Orlando had done so.