He either had a proffer session or he flipped. Could have been either. Remember, in the show Larry was indicted with Junior in 1999. As of 2007, we see him get popped for violating house arrest. That's 8 years, a long time.

Its feasible that after all that time he gave cooperation serious consideration, and finally decided to do it. Remember, in one episode in season 5, he laments to Bobby about Tony's unwillingness to "leave his own family out of the fucking frying pan" while allowing others to rot.

If I had to guess, after 8 years of seeing Tony having immense financial success while he sat awaiting trial, he said f it and signed on with the feds.

Sure, he may not have given up Tony on the Willie Overall thing, but that doesn't mean he would not have or hadn't already given up Tony on other crimes.