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Laborers' union local faces U.S. probe on graft charges
Federal prosecutors have launched a probe of Local 734 of the Laborers' International Union of North America after charges by some trustees of widespread corruption.
The U.S. Attorney's Office in Newark subpoenaed records from the New Jersey local after an independent hearing officer for the Washington, D.C.-based union concluded that the organization was riddled with no-show jobs and ill- defined, overpaid positions.
Many of those jobs were filled by relatives and business associates of former executive board member August "Auggie" Vergalito, who left the local after he pleaded guilty in 1997 to concealing payments he made from the union's pension and welfare funds.
Among those on the payroll of the union local or its funds were his wife, a daughter, three sons-in-law, a former son-in-law and two business associates.
The hearing officer, Peter F. Vaira -- the former U.S. attorney for the Eastern District of Pennsylvania -- also determined that some of those involved with the local and its benefit funds had ties to organized crime.
Local 734, based in Rochelle Park, has 3,500 members in New Jersey and Pennsylvania. Its members include construction, health care, food service and custodial workers.
The federal grand jury probe was disclosed in several court filings earlier this week in connection with a separate civil lawsuit brought by trustees for the union.
Department of Justice officials would neither confirm nor deny that there was a criminal investigation under way.
However, an attorney for Louis Calastro, chairman of the pension and welfare funds of Local 734, confirmed they had received subpoenas for records and documents.
"Vaira's report triggered the subpoenas," said the attorney, Angelo R. Bisceglie Jr. of Newark. "But we still maintain there is a lot of smoke and noise, but no substance to the allegations."
The trustees, who were put in place as part of a voluntary supervision, want to remove the leadership of the local, which has seen its membership decline sharply. Seeking an injunction, they filed briefs last week charging a "gorging" of plan assets.
In papers filed before U.S. District Judge Dennis Cavanaugh in Newark, the trustees cited more than $1 million in salaries for essentially no-show jobs.
The trustees also questioned the hiring of Peter Rizzo -- whose pay quickly rose from $116,948 to $150,800 -- as a funds administrator.
They noted that while he was drawing a paycheck as a pension investigator for Local 734, Rizzo simultaneously worked for Carmelo "Joe" Sita, who was executive manager of benefit funds, business manager and secretary-treasurer of the Hudson County Laborers' District Council. Sita pleaded guilty earlier this month to conspiring to embezzle more than $1 million from the Laborers' District Council.
In a countering affidavit, Rizzo said his efforts on behalf of the fund's medical coverage helped save more than $9 million in hospitalization costs. Rizzo also said he made the decision to terminate the jobs of several benefit fund employees with ties to Vergalito.
Bisceglie, while acknowledging there were some employment abuses, said the funds did not suffer any major losses and were financially healthy.
Hearings on a request for a preliminary injunction are scheduled for later this month.