Copyright 1994 Newsday, Inc.  
Newsday (New York)December 1, 1994, Thursday, ALL EDITIONS
SECTION: BUSINESS; Pg. A49

LENGTH: 757 words

HEADLINE: NY Mason Fund Mob Piggy Bank;
Real estate 'flip' netted $ 16.5M

BYLINE: By Kenneth C. Crowe. STAFF WRITER

BODY:
The deal to drain $ 7.5 million out of the New York Mason Tenders District Council pension fund was such a blatant rip-off that the union's usual real estate lawyer refused to do it.

So, Frank Lupo, then president of the district council, went shopping for another lawyer, and found one: Gerard W. Cunningham, a Manhattan-based lawyer and then a member of the North Hempstead, L.I., Town Council.

The story is laid out in filings made in U.S. District Court by the U.S. Attorney's Office as part of a civil racketeering suit it filed seeking to take over the district council and its multimillion-dollar fringe benefit funds. Confronted by overwhelming evidence of mob control and pervasive corruption, the Mason Tenders' parent union, the Laborers International Union of North America, recently put the district council in a trusteeship and installed former federal prosecutor David W. Elbaor to run the union.

In the court documents, Assistant U.S. Attorney Allan Taffet recounts how in December, 1989, Ronald Miceli, a small-time entrepreneur from Oceanside with mob ties, told his lawyer he planned to buy an 84-year-old, 12-story loft building at 32 W. 18th St. in Manhattan and immediately sell it to the pension fund for $ 15 million to $ 18 million - a classic real estate "flip."

Miceli's lawyer contacted Wilfred Davis, the pension fund's co-counsel, to tell him to prepare the legal papers. But Davis balked. Taffet, in his filing, said: "The original idea for this real estate scheme - flipping the building to the pension fund at almost twice what Miceli had paid for it - was too conspicuous a fraud even for Wilfred Davis." Davis did not return Newsday's calls requesting comment.

Lupo, currently in a federal prison for his part in the real estate scheme, testified that since Genovese crime family capo James Messera, Miceli's hidden partner, was pushing for the sale, "I was in a very bad spot." He turned to Cunningham, who was attorney for pension fund trustee Joseph Fater, then managing director of the New York Building Contractors Association.

Lupo testified that Cunningham "put together this whole package, from beginning to end." But the deal was altered somewhat: On Feb. 1, 1990, Miceli purchased the building for $ 7.5 million. That same day, the pension fund gave him a loan for $ 15.85 million - slightly more than twice the price he paid. Miceli waited almost 10 months, until Nov. 29, 1990, to sell the building to the pension fund for $ 24 million - more than three times the price he paid.

Miceli and his hidden partners realized a profit of $ 16.5 million on the deal. Cunningham was paid $ 21,475 by the pension fund for his services, according to documents filed with the U.S. Labor Department.

When the real estate deal was exposed in a Newsday investigation in 1991, Cunningham declined to comment. Recently, he again did not respond to several requests for comment.

Last year, Miceli, Messera, Lupo and four others were sentenced to prison on labor racketeering charges stemming from the West 18th Street transaction. Cunningham, running on a Republican ticket, was ousted as a North Hemsptead Town Council member last year. He had been a member of the town board for 22 years. Cunningham currently is a vice chairman of North Hempstead's Republican Committee.

Michael S. Gordon, a Washington, D.C.-based lawyer and one of the nation's foremost experts on federal laws covering fringe benefits, said a lawyer would have an ethical but not a legal obligation to steer pension fund trustees away from deals such as the West 18th Street transaction - and, if they refused to do so, to report the scam to the U.S. Labor Department or the Justice Department.

"There is no attorney-client privilege with respect to ERISA plans," Gordon said, referring to the Employee Retirement Income Security Act of 1974, which he helped write.

Sources said Fater became so alarmed over the West 18th Street deal that he resigned as a pension plan trustee in May, 1991. His successor as trustee, Paul J. O'Brien, who also is managing director of the Building Contractors Association, continues to employ Cunningham as his attorney for the Mason Tenders pension fund. The pension fund has two union and two employer trustees.

And the pension fund lost the chance to collect on a $ 10 million insurance policy when Cunningham and the trustees either ignored or missed a provision in the policy requiring approval of a "qualified professional asset manager" before investing in any real estate deal.