The FBI authorized Teamsters union President Jackie Presser to make payments to "ghost employes" on the union payroll and did not fully inform the Justice Department of the arrangement, thereby dooming the department's 32-month investigation of Presser, according to federal law-enforcement sources.
Until late in the investigation, the sources said, top Justice Department officials and FBI Director William H. Webster were not told that the FBI was not only using Presser as an informant, but was also allowing him to engage in criminal activity as part of an elaborate investigation of Teamster ties to organized crime.
It remains unclear why federal prosecutors in Cleveland who were investigating the ghost-employe scheme were not told that the FBI had approved it.
Attorney General Edwin Meese III confirmed yesterday that the FBI's handling of its relationship with Presser "is being looked at at the present time internally." Sources confirmed that the FBI's office of professional responsibility is conducting a full-scale criminal investigation into the matter, as reported by the Los Angeles Times.
Meese, in an interview, defended the department's agreement to allow Presser's uncle, Alan Friedman, to be released from a Texas prison next week rather than disclose details of Presser's relationship with the federal government. Friedman has served 11 months of a three-year embezzlement sentence for collecting $165,000 in union payments, approved by Presser, as one of the ghost employes in the scheme that sources now say was authorized by the FBI. A "ghost employe" is one who neither reports to nor does any work for an organization but is paid anyway -- a no-show.
"Nobody's tried to cover this up," Meese said. "If anything, the prosecution has shown that they have faced up to their responsibilities to the accused and the court . . . .
"I think it just shows that the department has honored its obligation to the court and its obligation to fairness to the defendant, and has not tried to cover it up. The easiest thing to do would have been to be quiet."
Meese said he could not comment further on the probe of Presser -- the only major labor leader who supported President Reagan's reelection -- because he had disqualified himself from the case to avoid the appearance of political influence. Meese said other department officials could say little about the investigation, which was dropped last month, because much of it involves confidential grand jury testimony.
There is some dispute about how much FBI agents told their superiors and the Justice Department about their relationship with Presser. While the FBI told the Justice Department about two years ago that Presser was serving as an FBI informant, some federal sources say, the bureau did not reveal that its agents had authorized criminal activity by Presser as part of an investigation of Teamster links to organized crime.
Other federal sources, however, say the FBI may have described its approval of the ghost-employe scheme to at least some officials at the Justice Department, who apparently failed to pass on the information to senior department officials or to the organized-crime strike force in Cleveland.
FBI spokesman Bill Baker said yesterday he could not comment on the handling of the Presser case, other than to confirm that an internal inquiry is under way.
Federal sources said the ghost-employe scheme approved by the FBI was in line with Justice Department guidelines in force since the 1970s. Under the guidelines, FBI agents may approve some illegal activity by their informants, who often have criminal backgrounds, in order to lead investigators to more important criminals.
The guidelines do not allow informants to engage in violent crime, however, and confer immunity from prosecution only for activities approved by the FBI.
A federal judge is expected to decide Monday whether Presser's uncle, Friedman, should be granted a new trial because the government failed to turn over information that might have vindicated him when he was convicted two years ago. The Justice Department has said it will allow Friedman to go free rather than seek a new trial because it does not want to turn over sensitive documents about Presser that Friedman's lawyer has demanded.
The lawyer, Dennis Levin of Cleveland, charged the government with entrapment and said the FBI should have revealed before the trial that it had authorized the $165,000 in payments that Friedman was convicted of accepting. He accused the FBI of "hiding" the information.
"I think it's atrocious when the government is in the business of creating crime," Levin said. "In our wildest imagination, we never thought that Jackie Presser was working for the U.S. government, that the government had authorized a ghost employe scheme . . . . Alan was a fish that got caught in the net."
Levin said the FBI appeared to be after "secondary organized-crime figures" in an independent union that Friedman once headed. He acknowledged that Presser, while visiting his ailing uncle in the hospital, offered Friedman $1,000 a week for life in exchange for merging the smaller union with Presser's Teamsters local in Cleveland.
The merger later occurred and Friedman was put on the Teamsters payroll.