When then-Secretary of Labor Raymond J. Donovan was indicted in New York last year, his lawyers complained that the only evidence cited by Bronx District Attorney Mario Merola and his prosecutors was a $200,000 check Donovan had cosigned as a construction company executive in 1979.
Prosecutors contended the check was part of a scheme to defraud the New York City Transit Authority of some $7.4 million on a Manhattan subway tunnel that Donovan's company was building. Donovan said he did not remember signing it until years later.
Now, according to sources, transit authorities have obtained evidence that Donovan signed 26 other checks made out to an allegedly phony minority business company, Jopel Construction, that was run by reputed Mafia soldier William P. Masselli.
The checks were obtained in recent weeks by the inspector general's office of the Metropolitan Transit Authority, the NYCTA's parent agency, which has been conducting a separate inquiry into various aspects of the 63rd Street tunnel project, including bidding and contracting procedures. In the process, sources say, the MTA inspectors obtained a mass of documents, including the checks to Jopel that Donovan cosigned. With the trial still months away, Merola's prosecutors had not yet subpoenaed them.
Asked for comment, Donovan lawyer William O. Bittman said Sunday that the existence of the checks was no news to him and saw nothing surprising about them.
"Why would it be surprising that he signed checks?" Bittman said. "They [Jopel] had a trucking subcontract. They had to get paid."
Bronx prosecutors have charged that Donovan's company conspired with Masselli to inflate the value of the work Jopel was doing as a subcontractor on the subway job and thus siphon off some $7.4 million that the transit authority thought was being paid to Jopel in satisfaction of minority business requirements.
The checks that Donovan signed, according to informed sources, total $1.79 million and were drawn on a Chemical Bank of New York account maintained by Donovan's firm, Schiavone Construction Co., and two corporate partners on the $186 million subway job. Because it was a joint venture, the signatures of two SCC officers were required on each check.
The first check with Donovan's signature was for $200,000 on March 13, 1979, the date of what Merola has called an "extraordinary" interest-free loan from Schiavone Construction to Masselli for what were called start-up costs and expenses. The last of the 27 that Donovan signed was for $75,000 on Dec. 23, 1980, a week after President Reagan had nominated the New Jersey man as a member of his Cabinet.
Bronx Supreme Court Judge John P. Collins last March held the case against Donovan strong enough to be tried on merits. The decision prompted Donovan's resignation as labor secretary. At the time, however, the $200,000 check was the only one Donovan was publicly known to have signed. It was the only one cited by Special Prosecutor Leon Silverman during his 1982 investigations into alleged ties between Donovan and members of organized crime.
Silverman evidently made details of the $200,000 loan check public because Masselli had charged that he paid a $20,000 cash kickback at the instructions of another Schiavone executive, Joseph DiCarolis, in return for the money. But Silverman said he could not corroborate the allegation and concluded his inquiry saying that there was insufficient credible evidence to warrant Donovan's indictment for any federal crime.
Bittman said Sunday he felt sure a federal grand jury that investigated Masselli's dealings in 1980 and l981 as well as Silverman had had access to the checks, even if Silverman made no mention of them. "There's never been any secret about the checks," Bittman said. "Silverman had every . . . check there was."
Bittman and Paul J. Curran, another Donovan lawyer, stressed the one-check theme repeatedly in pretrial pleadings last fall and winter. At hearings last December during an unsuccessful attempt to move Donovan's case into federal court, Donovan said he cosigned the check routinely at DiCarolis's request. He said he had no recollection of why it was issued except for an attached memo saying it was an "advance as per subcontract."
"I think I signed somewhere between 90 and 110 checks that day," Donovan testified. "I have no specific memory of signing that check."
Bittman emphasized the point in final arguments at the federal court hearings and again a few weeks later in Bronx Supreme Court, deriding the $200,000 check as "the single act" the prosecution could cite against Donovan, "the keystone of their . . . noncase."
Lawyers for Donovan and Schiavone Construction contend that the company's arrangement with Jopel in handling the excavation work was proper.