Sunday September 24, 1995
Laborers fund sues state over Heritage
account
Union president Arthur Coia says he has no
connection to the secretive fund, which kept $420,000 in a no-interest account.
Journal-Bulletin Staff Writer
Five years ago, investigators combing through the rubble of the
looted Heritage Loan & Investment Co. found a mysterious passbook locked in the vault.
The passbook recorded the fact that a secretive customer, the
North American Laborers Defense League, had kept $420,000 in a savings account at Joseph
Mollicone's bank on Federal Hill in Providence.
This was no ordinary account. It paid no interest, a fact that
helped conceal the league's financial affairs from the government.
And the passbook contained a name that was well known in national
and local labor circles: "Arthur Coia."
Now the mystery surrounding the North American
Laborers' Defense League has taken a new turn.
Although the league got its $420,000 back last
year, it is now suing to collect back interest - even though the money was in a
non-interest-bearing account.
The defendant, as it happens, is the state of Rhode Island, which
took over Heritage following its collapse in 1990.
Meanwhile, Arthur A. Coia, who has risen to the
presidency of the 770,000-member Laborers' International Union of North America, declined
to be interviewed about the league.
Despite the presence of his name on the passbook, and evidence of
ties between Coia, the union and the league dating to 1981, the Laborers, in a statement,
said that Coia has no formal connection to the league or the account.
THE LEAGUE was formed in 1980 to defend union members against
criminal investigations and charges. Shortly after that, the league solicited donations to
assist union officials - including Coia and his father, Laborers
secretarytreasurer Arthur E. Coia - indicted for racketeering along with New England mob
boss Raymond L.S. Patriarca.
The league's recent lawsuit against the state
brings new attention to the secretive organization at a time when Coia and the Laborers
have come under federal scrutiny for alleged labor racketeering and misuse of union funds.
Earlier this year, Coia resolved a U.S. Justice Department
racketeering investigation of the Laborers by agreeing to oversee internal union reforms.
In July, the Journal-Bulletin reported that Coia personally
benefited last fall when another legal fund, also run by Laborers officers, bought an
office building that was partly owned by Coia.
Those associated with the league decline to discuss it.
James Merloni, the league's administrator and president of the
Massachusetts Laborers' District Council, could not be reached at his
office at the Laborers training facility in Hopkinton, Mass., at the Arthur E. Coia
Conference Center.
. IN THE SUMMER of 1980, while newspaper headlines trumpeted the
sweeping federal probe of nearly two dozen Laborers officials, including
the Coias, and mobsters, including Patriarca, the New England Laborers' Defense League, as
it was originally called, quietly set up shop.
The league was run by three trustees: Charles J. Rogers Jr., a
one-time lawyer for Patriarca; Monsignor Galliano Cavallaro, a Federal
Hill priest who had vouched for Patriarca at a parole hearing; and Dr. Albert C. Picozzi,
a North Providence dentist who helped found the Arthur E. Coia Educational Scholarship
Fund.
Its bylaws recognized that "working people and their
representatives do not possess or have available the degree of economic
resources" to defend themselves. The league submitted those bylaws and other records
to the state in support of its claim on the money on deposit at Heritage.
The bylaws said the league would solicit funds
to assist union members facing investigation or indictment. In a worst-case scenario, the
league would "assist such persons who may be incarcerated or unable to secure
employment as a result of such charges."
In an interview, Rogers said he was asked to be a trustee by one
of the Coias - he doesn't remember which one - and that the trustees would meet at the
Laborers offices on South Main Street in Providence.
The younger Coia, then a top Rhode Island union official and a
Providence lawyer whose law firm was in the same building, told a
reporter in 1981 that the league was started at his suggestion.
Coia said he bowed out of the league's operation once it was
established.
Asked if he would draw from the fund for his defense, Coia
replied: "If I have to."
Coia said, however, that the league was formed to help all union
members, not just himself and others targeted in the federal
racketeering case.
IN 1981, THE COIAS and Patriarca were indicted along with 18
others, including Laborers general president Angelo Fosco of Chicago. Prosecutors charged
that Coia and his father steered lucrative union insurance business to a company in return
for kickbacks, which they split with Patriarca.
Not long after the indictment, Monsignor
Cavallaro, pastor of Our Lady of Mt. Carmel Church, appealed to rank-and-file Laborers
throughout New England - the ditch diggers, the construction workers, the government
clerks - to reach into their pockets and donate money to help defend
their leaders.
Writing on the stationery of the New England Laborers' Defense
League, Cavallaro thundered that the Laborers leaders were "the targets of a
concerted and well-orchestrated campaign by the federal government to repress individual
rights."
Three years later, a federal judge dismissed the charges, saying
the government had not filed them in a timely manner.
How the Coias ultimately financed their defense is unclear. League
officials won't say how much they collected for the Coias' defense, or how it was spent.
In spite of the league's existence, the Coias drew on union funds
to pay at least some of their legal bills.
In 1986, the President's Commission on Organized Crime criticized
the Laborers "extraordinary expenditures," particularly for
criminal defense fees.
The commission singled out $200,000 the elder Coia had spent on
private investigators to track the federal investigation of the Laborers'.
The elder Coia also helped his son obtain $40,000 from the union
for legal expenses, the commission said; when the union's controller sent the bills to a
union lawyer for authorization, the elder Coia ordered them paid "without
question."
ANOTHER WINDOW into the early
operation of the defense league is provided by a government informant named Ronald Fino.
Fino, a former Laborers executive in Buffalo, N.Y., and onetime
confidante of the elder Coia, said in an FBI statement obtained by the Journal-Bulletin
that union officials outside New England were receiving money.
Fino, who has testified against several Laborers officials and
organized crime figures, told the FBI that he saw the elder Coia give a large amount of
cash to another defendant in the racketeering case at a hotel restaurant in Florida.
The money, "to take care of (his) personal and legal expenses
regarding the upcoming trial," came from the union's legal defense fund, Fino
recalled the elder Coia telling him.
Fino also remembered the elder Coia telling him about the defense
league.
"This particular fund is a 'pet' of Coia, Sr. and it was set
up and controlled by Coia, Sr. solely," Fino's FBI statement says.
Federal prosecutors have brought dozens of criminal cases against
Laborers' officials around the country since the defense league was formed. But who has
received money from the league is a mystery.
There is no way to know whether the money has gone exclusively to
union executives or whether any rank-and-file Laborers have gotten help.
"As far as I was concerned, the union had
some type of help for people who couldn't pay for lawyers," says
Rogers, the league's former chairman.
Rogers said the league officials would meet and review written
requests for assistance from members.
Rogers said he remembers meeting in the Laborers offices in
Providence, and that the walls were decorated with framed photographs of former New York
Yankees ballplayers: Babe Ruth, Lou Gehrig, Joe DiMaggio.
But Rogers said he can't recall any specific cases.
By 1988, Rogers had resigned. The league's new chairman was George
F. McDonald, a Cranston lawyer and former state representative who had had his own legal
troubles.
In 1975, McDonald pleaded guilty to soliciting a bribe as chairman
of the state Bicentennial Commission from a company that wanted to manufacture
bicentennial souvenirs. The company had planned to hire then-House Speaker Joseph A.
Bevilacqua as its lawyer.
McDonald declined to discuss the defense league.
IN 1982, THE LEAGUE changed its name to the North American
Laborers' Defense League. The reason it gave, according to league minutes: the
"strong, consistent and enthusiastic support of laborers, their officers and
representatives throughout the United States and Canada."
Through the 1980s, after the Florida case had
ended, the league continued to raise money.
At its Oct. 5, 1988, meeting, the league
reported a balance of $290,000, and bank accounts in Rhode Island and Massachusetts,
according to its minutes.
Rank-and-file Laborers were called on to give.
In a grimy union hall in Boston, home of
Laborers' Local 88 of the Compressed Air Tunnel Workers, Robert Schleiff said he learned
about the defense league in the late 1980s.
Schleiff, who operates a tunnel-boring machine,
said that members were told they would have to pitch in $100 in cash - $50 if they weren't
working. A bucket was placed in the union hall, he said, and members tossed their money in
as someone stood by, checking their names off a list.
"The guys complained, but they coughed up," said
Schleiff.
IN 1987, THE LEAGUE asked its lawyer for advice on the
desirability of moving its money to interest-bearing accounts. The no-interest accounts
had cost them significant interest income as the league's coffers swelled with cash.
The lawyer, Robert Bogucki of New York, responded with a letter
that laid out the implications of collecting interest: The league would have to pay taxes
and file income tax returns, exposing itself to the possibility of audits that would open
its books to the government.
"It should be recalled that the IRS, in many instances,
functions in cooperation with other government agencies (e.g. Department of
Justice)," Bogucki advised.
The lawyer could cite only one "significant
disadvantage" to keeping league funds in non-interest bearing accounts: "the
loss of income."
Bogucki said it was up to the league's committee to decide
"at what point does the loss of investment income outweigh the
implications of filing annual returns and paying applicable taxes."
The following year, the committee opened a $280,000 account at
Mollicone's Heritage Loan & Investment Co. - in a non-interest-bearing account.
The minutes of the league's Oct. 5, 1988 meeting
reflect that the trustees voted to open a "holding account" at Heritage for
"the prompt deposit of voluntary contributions."
But the passbook was locked in the vault at Heritage, and no
individuals ever contributed to the account directly.
In July 1990, the league deposited another $140,000, by wire
transfer from another bank, bringing the balance to $420,000.
EARLY THAT MONTH, banking examiners began digging into the records
at Heritage, eventually uncovering a multimillion dollar embezzlement.
That fall, Mollicone fled Rhode Island, leaving a statewide
financial disaster in his wake. The state took over the bankrupt Heritage and began paying
out most depositors.
But the state questioned the North American Laborers' Defense
League account. Heritage records indicated that Coia had withdrawn the money and used it
to buy stock in the bank.
Later, investigators would conclude that Coia's
signature had been forged to cover up Mollicone's theft of the money. Coia testified that
he had not authorized the withdrawal; in fact, he said, he had nothing to do with the
account.
The state also questioned the unorthodox practice of keeping
$420,000 in an account that paid no interest. The Superior Court special master who heard
the case agreed it was "unusual," but ruled last year that it was a valid
account and ordered the money repaid.
MOLLICONE'S EMBEZZLEMENT has obscured the
question of why the league put money at Heritage in the first place.
When Coia testified in the receivership case in 1993, the state's
lawyer, Laurel Bristow, asked him about his relationship with Mollicone and whether it had
anything to do with the account being opened.
Coia said he had known Mollicone since the late 1970s, and that he
did some personal banking at Heritage. In April 1990, Coia dealt with Mollicone directly
on a $50,000 loan from Heritage - a loan for which, Coia testified, he put
up no collateral.
Bristow asked if Coia had ever discussed the defense league's
account with Mollicone.
"I don't know," Coia answered. "I could have and
may not; I'm not sure."
Bristow asked if Mollicone had expressed a desire to Coia to have
the defense league put some of its funds in Heritage.
"I don't - I'm not sure if he did or not," Coia replied.
Coia also testified that he was not involved in the decision to
form the league.
The union leader said he wasn't even sure if he knew the league
had money at Heritage until after the bank closed, and he was shown the passbook with his
name on it when he went in to see about his own account.
THE MATTER of the mysterious $420,000 bank account at Heritage
didn't end with the state's repayment of the money last year.
This spring, the North American Laborers' Defense League sued the
state demanding back interest on the money for the four years the state held it.
Lawyers for the league argue that the state unreasonably delayed
paying the league's claim even after it agreed that Mollicone had stolen the money.
Consequently, the league was forced to hire lawyers to pursue its claim
"at significant cost."
One of the two law firms that has represented the league in the
Heritage case is Coia & Lepore. Coia is a partner in the firm.
As a result of the state's delay, the league contended, it
"has been unequally and unfairly treated."
The state counters that it was justified in
delaying repayment while it investigated this unusual account.
"Ordinarily, most depositors of a financial institution do
not put hundreds of thousands of dollars in an institution with no expectation interest
will be paid," the state's lawyers argued in court papers.
The league's demand for back interest "is especially
ironic," the state noted, "in that (the league) insisted throughout the course
of these proceedings that its $420,000 'deposit' was not interest
bearing."
MEANWHILE, THOSE most familiar with the league
remain silent. They won't discuss the league's affairs, including how much money has been
raised, how it is spent or whether Coia has received any, as a lawyer or a defendant.
Merloni, the league's administrator, was away recently at a union
conference in New Mexico. His secretary said he would have no comment.
Monsignor Cavallaro declined, through the
doorman at his downtown Providence residence at Park Row West, to meet with reporters.
McDonald, who was listed as league chairman as recently as 1990,
refused comment. A former Journal-Bulletin reporter, McDonald said he charges his standard
legal fee of $250 an hour for interviews.
Picozzi, the league's other original trustee, died in 1991.
Mollicone, who is serving a 30-year prison term at the Adult
Correctional Institutions, did not respond to a written request for an interview.
Coia told the Journal-Bulletin in 1993 that he has contributed to
the league but knows little of its affairs.
The Laborers, in the recent statement, said that Coia is
acquainted with the league's trustees, and that Monsignor Cavallaro is Coia's
"confessor."
The statement said, however, that Coia no longer has any
connection to the league.
"Ben Franklin discovered electricity, but
Thomas Edison developed the light bulb," the statement said. "The analogy holds
true for Arthur Coia and the North American Defense League: The idea was Mr. Coia's, but
he played no role in its creation and has no role in the organization now."
The statement said Coia does not recall
discussing the league with Mollicone; it also said Coia is not aware of any legal work
performed for the league by his firm, Coia & Lepore.
Coia referred all questions about the North
American Laborers' Defense League to Bogucki, its general counsel.
Said Bogucki, "It's simply an ironclad practice of mine not
to coment on clients' activities."
* * *
CAPTION: ON THE BLOCK: People wait outside the Heritage Loan &
Investment Co. on Atwells Avenue in Providence before an auction in 1991.
JOSEPH MOLLICONE is in prison for looting the Heritage Loan &
Investment Co. Arthur A. Coia is president of the Laborers' International Union of North
America. Charles J. Rogers Jr., left, was a trustee of the North
American Laborers' Defense League.
Contents copyright 1982 to 1995 by The Providence Journal Co