When Neil J. Welch took command of the FBI's New York division in the summer of 1978, he had two big surprises waiting for him.
The first was the abysmal state of the FBI's intelligence on organized crime. An old friend about to retire, Paul Cummings, summed it up for him a few days after Welch's arrival that August.
"When I leave, Chief, you can turn out the lights," Cummings told him, "because I'm the last agent in New York with any member informants in La Cosa Nostra."
Welch's second shock was supplied by then-U.S. Attorney Robert B. Fiske, who assured him that he would not find the kind of political corruption that Welch had rooted out in other cities. As Welch recalled in his biography, "Inside Hoover's FBI," Fiske said corruption complaints were rarely made to his office.
That told Welch less about political corruption New York-style than it did about the Manhattan-based U.S. attorney's office, which, in the words of one critic, "had not conducted a major corruption prosecution in the last 10 years."
Those observations are coming home to roost in Bronx Supreme Court where former Labor secretary Raymond J. Donovan, nine business associates and their two corporations are facing trial on charges of defrauding the New York City Transit Authority of $7.4 million.
Pretrial hearings now under way and related documents obtained by The Washington Post are producing a rare glimpse of the FBI during a promising investigation that turned sour. The bureau, or "The B," as field agents call FBI headquarters, is not the all-knowing model of efficiency that J. Edgar Hoover liked to portray. And the New York office, the supposed FBI flagship in the field, had plenty of flaws, even during Welch's imaginative tenure. Officials there, as one high-ranking FBI man put it, seemed to operate on the "the Ivory Soap theory of management: if it floats, then leave it alone."
The shortcomings built up to a crisis during the organized crime investigation that led, years later, to Donovan's indictment in the Bronx. Code-named Operation Tumcon, it created bitter divisions within the bureau, pitting street agents against their supervisors, supervisors against their superiors, New York against Washington, and, at times, all or most of them against government prosecutors. Agents described one another as "captured" by the opposing faction, and the troublesome informant at the bottom of the turmoil was himself described as having "captured" the FBI.
By December 1980, "the entire case was messed up," according to a statement that Kenneth P. Walton, then deputy assistant director in charge of the New York office, gave to a team of internal investigators. He blamed this in part on what he called "rampant headquarters culpability."
Walton gave the interview on Dec. 11, 1980. FBI Director William A. Webster was in town that day, attending a meeting of the American Law Institute, but apparently Webster did not stop by the New York office and no one, a spokesman says, informed him of the in-house strife.
The next day, Dec. 12, back in Washington, Edwin Meese III, then head of President-elect Reagan's transition team, called Webster, who had by now returned to his desk.
Meese, Webster noted at the time, "wanted to be certain there was no ongoing investigation involving Donovan." Webster said that "I confirmed to him, based on what I had been previously advised, that this was the case . . . . I told him that I knew of nothing to hold up the nomination at this time."
Indeed, there was no ongoing investigation involving Donovan at that point. But there was one involving his company, Schiavone Construction. It was just one of the many facets of Operation Tumcon.
The long-secret history of that "messed up" investigation is now coming to light as a result of the Bronx hearings called to determine whether the FBI's "Tumcon tapes" -- now the principal evidence in the Donovan case -- must be suppressed. Defense lawyers have accused the bureau of illegal conduct in getting court authorization to make the tapes.
The government's sensitivity is underscored by the fact that two FBI lawyers and a prosecutor from the U.S. attorney's office are present in court each day to try to limit the disclosures.
Back in 1978, Welch, who had made a reputation with undercover investigations in other cities, soon turned his attention across the river to Brooklyn where the Justice Department had an active and aggressive Organized Crime Strike Force. Together, they nurtured "Operation Abscam," eventually securing the convictions of a U.S. senator, half a dozen congressmen and assorted local officials.
Tumcon, by contrast, was focused on the Bronx. It got its official start in September 1978, about the time Abscam turned its sights from property crimes to political corruption. But Tumcon was irrevocably tied to the Manattan-based U.S. Attorney's Office for the Southern District. It sank as fast as Abscam rose.
Tumcon was named for Angelo Tuminaro, a reputed elder in the Genovese crime family and allegedly a fugitive heroin kingpin who was trying to open a new "French Connection" into the United States. That report, and much more, came from Michael Orlando, a trusted courier between Mafia families who been recruited in 1977 as an FBI informant and who had come to be regarded, according to court papers, as "one of the FBI's most productive sources . . . ."
Tuminaro surfaced only once in the story, disguised as a little old lady who emerged from a church in Coral Springs, Fla., to confer in an expensive limousine with a number of confederates. Among them, allegedly, was William Pellegrino Masselli, a Bronx meat wholesaler and, according to FBI reports, then a candidate to become a "soldier" in the Genovese family.
An FBI squad formed at the behest of a hard-driving agent, Robert A. Levinson, began watching Masselli's plant in hopes of getting enough evidence on a hijacking ring to win a court order for electronic surveillance. Welch persuaded Fiske that bigger prosecutions could be expected.
The surveillance began Jan. 4, 1979. Levinson, one of only two agents who knew Orlando's identity, got "greedy," as he once put it. He and Lawrence T. Sweeney, the agent who had recruited Orlando, told him to stay close to Masselli and direct the conversation to certain topics. Before long, Orlando himself began turning up in the taped conversations, first discussing a plan to make synthetic cocaine and then talking about two March 1979 hijackings.
The two FBI men temporized at first, listing Orlando as "Mike LNU Last Name Unknown " on the logs used for periodic reports to the court. But finally, they say, they disclosed the problem to Welch and to U.S. Attorney Fiske at meetings in April 1979.
The two FBI agents argued that Orlando was not a "willful" participant in the conversations, but they recognized that he sounded like a criminal on the tapes. If Orlando were not prosecuted with the others, the secret would be out. Fiske, the FBI men say, promised to "research" the matter, but also said nothing would be done to expose the informant, even if it meant dropping the cocaine and hijacking cases altogether.
After Fiske left, Welch stunned Levinson and Sweeney by announcing disapproval of their plans to develop a narcotics-racketeering case. Welch reportedly complained that any such information would have to be shared with the Drug Enforcement Administration, which Welch regarded as corrupt.
As the months wore on, Sweeney and Levinson kept trying to keep Orlando's $500-a-week informant status from being exposed, but Orlando kept compounding the problem, taking active part in another hijacking in May, and then getting arrested over a house robbery in June.
Sweeney had no illusions about Orlando's "moral character," but still regarded him as invaluable. Orlando, Sweeney said, not only had named numerous "made guys" the FBI had never heard of, but he also had identified the killers in more than 20 gangland homicides and had provided tips that saved the lives of "at least eight potential murder victims."
Others in the New York FBI, meanwhile, became increasingly critical of Orlando's double-dealing and thought that he should be prosecuted along with Masselli and his confederates in the cocaine case and the hijackings, even at the risk of exposing him. At the U.S. attorney's office, prosecutor Michael Ross was even more outspoken, charging that Orlando thought he had Sweeney "on a string."
Sweeney and Levinson, in turn, were scornful of the proposed prosecutions, especially the cocaine plot. None of it was ever manufactured. "These guys can't even mix eggnog," Sweeney protested.
He and Levinson wanted to move ahead with political corruption and other cases that they felt could be based on the tapes and that Orlando had nothing to do with.
By March 1980, however, Welch said he had concluded that Orlando was "uncontrollable," but agreed to ask FBI supervisors in Washington to review the rift. A list drawn up by Tumcon squad supervisor Jim E. Moody showed 17 potentially prosecutable cases, including Masselli's takeover of a company that was a subcontractor for Schiavone Construction. Only four of the 17, it was said, would be likely to expose Orlando.
Welch retired before there was any response from Washington. Walton, now agent in charge of the New York office's criminal division, was convinced that "the informant was running the case and doing just as he pleased." Four days after Walton's promotion in September 1980 as the FBI's No. 2 man in New York, Orlando was dropped as an informant and preparations to prosecute the cases likely to expose him were begun.
Resistance from Levinson and Sweeney led the new head of the New York office, Lee Laster, to order the internal inquiry under way when Donovan was nominated. Earlier the Tumcon squad had protested the decision to prosecute only those cases involving Orlando but, according to Levinson, Walton warned them "you are going to step on your private parts ."
The agents destroyed the letter. As for the report of the internal inquiry, conducted by Donald J. McGorty, a senior FBI official in New York, Laster said he regarded it as something "conducted at my personal request" and tucked it away in his safe.
FBI officials in Washington, meanwhile, looked the other way. As Sweeney put it that November, "the bureau" was annoyed that New York had tried to pass the problem on and had decided that "if blood is on anyone's hands, it is not going to be the bureau."
Weeks later, on Jan. 20, 1981, Sweeney was re-interviewed by McGorty, while Donovan was awaiting his final Senate hearing. Sweeney explained that Orlando had called him Jan. 7 and "volunteered information concerning the Secretary of Labor-designate" but Sweeney was by then under directions not to ask Orlando any questions. Sweeney said he asked for permission, but was turned down.
That June, Sweeney wrote a letter to Webster, summing up the inquiry in unhappy terms.
"Our primary goal," he wrote, "was destroyed . . . when ADIC Neil J. Welch instructed us to gather no more narcotics information. Other political corruption cases were not successfully pursued. What remains after three years of dedicated labor by . . . street agents are three relatively minor TFIS theft from interstate shipment cases and a sorry attempt by several hoodlums to manufacture synthetic cocaine . . . . At the same time, the New York office's reluctance to work with the informant possibly has hampered the bureau's efforts to verify the alleged organized crime connections of a member of the president's Cabinet."