HOW THE MAFIA LOOTS JFK AIRPORT
By Roy Rowan REPORTER ASSOCIATE Christopher Knowlton
June 22, 1987

More than $59 billion of freight and 27 million passengers a year are irresistible pickings for mobsters, who have made it a hotbed of stealing, smuggling, and extortion.

(FORTUNE Magazine) – THE SEAT BELT SIGNS flash on. Over the intercom comes the pilot's voice: ''We have started our descent into John F. Kennedy International Airport.'' Descent indeed. Few passengers landing here realize that America's gateway to the world is a hotbed of larceny, and prime turf for the Mafia. More bags checked by travelers and more goods shipped by businesses disappear at JFK than at any other airport in the world. The Kennedy catalogue of crimes starts with little stuff -- suitcases swiped from cargo holds, radios wrenched from cars in long-term parking lots -- and runs to hijacking, dope smuggling, and labor racketeering that embroils corporate executives in ugly confrontations with gangsters. Recently the good guys on the law enforcement side won some important convictions. But their sleuthing continues and more arrests must still be made. The airport's sheer size explains in part why it is such a bull's-eye for stealing, smuggling, and extortion. Kennedy is a 5,000-acre complex of runways, terminal buildings, hangars, warehouses, high-security storage vaults, container stations, and truck depots. Last year 27.2 million passengers arrived or departed, many easy prey for pickpockets, baggage thieves, or drug dealers seeking a stream of couriers. According to police, some 1,500 reported that their luggage had been stolen, representing a loss of about $3 million. The unreported losses could amount to as much again. Says William Ferrante, who heads the Port Authority police force at Kennedy: ''These are crimes of opportunity, and they are getting worse.'' Among JFK's 41,000 workers are many low-paid baggage handlers and freight jockeys who need little urging to toss a Gucci suitcase or a container of Japanese TV sets onto a passing truck heading off the field. ''The people assisting in thefts around here are often just squaring a $2,000 or $3,000 debt to a loan shark,'' says Arthur Stiffel, special agent in charge of U.S. Customs at the airport. Most enticing to the underworld bosses are the 1.1 million tons of air freight that pile up in the place every year. The total value last year: more than $59 billion, including such rich pickings as electronic equipment, gold, jewels, watches, furs, and currency. The Mafia first drew a bead on these goodies 25 years ago. As JFK became the foremost funnel in the U.S. for imported valuables, a rash of armed robberies occurred right on the airport premises, culminating in the celebrated $8-million heist at the Lufthansa freight terminal in 1978. SECURITY soon stiffened and cargo theft receded, or shifted to storage facilities on the Rockaway Boulevard perimeter outside the airport fence, where no comprehensive pilferage records are kept. But the organized crime leaders had already found a way of increasing their JFK profits, and with a lot less risk. Through control of two corrupt Teamster locals, they offered labor peace in return for a Mafia surtax on air freight companies and the brokers that earn high profits expediting shipments to and from the field. In 1983 the FBI overheard Frank Manzo, the Mafia overseer at JFK, boast to his cronies, ''We rule the airport. The field is mine.'' & By then the shakedowns of air freight companies had become so bad that big shippers like IBM began diverting cargo to other airports. That same year, the Brooklyn-based Federal Organized Crime Strike Force launched an investigation code-named Kenrac (Kennedy Racketeering). ''JFK had a worldwide reputation for being controlled by gangsters,'' said strike force chief Edward McDonald. Just this spring the prosecutors sent Manzo and two other mob leaders at JFK off to prison -- but not before the airport's share of all air freight entering the U.S. fell to 33% from the peak of 41% ten years ago. At least part of the decline is attributable to the Mafia-imposed costs. Although the extortion demands seem to be abating while the henchmen of the imprisoned bosses lie low, rival Mafiosi already show signs of moving in. Even after the convictions, says McDonald, ''air freight executives willing to disclose racketeering at JFK are few and far between.'' New York FBI chief Thomas Sheer agrees, adding, ''Some of them make so much money they don't care about racketeering.'' Meantime the other airport scams continue in full bloom. An airline executive reports that light-fingered baggage loaders use the security- screening X-ray machines intended to detect bombs in checked luggage to locate cameras, binoculars, and other pilferables. Security officers claim that suspects they pick up usually have pocketfuls of 50 or 60 keys for different types of suitcases, and that most thefts occur inside the belly of the plane while the baggage is being stowed. Says the frustrated executive: ''The poor passengers are 3,000 miles away by the time they discover their loss. Half of them never bother to file a complaint.'' To try to nail the culprits, detectives recently started implanting tiny transmitters in decoy suitcases that broadcast an alarm if someone tampers with them.

EVEN MAIL THEFT is worse at JFK then anywhere else in the U.S. postal system. Airmail packages landing at the airport often contain gold coins, cash, or precious stones (the Hope Diamond passed through the JFK post office). One airport employee arrested last year made off with $455,000 in cash and gold. As a result, 95 postal police officers stand guard over the 995 million pieces of mail processed each year. ''I thought I was coming to a penal colony when I was assigned here,'' says A. J. O'Neill, the chief postal inspector at Kennedy. Arthur Stiffel, the beleaguered special agent in charge of Customs, finds himself in a constant duel of wits with crooks. Stiffel carries a snub-nosed .38 concealed in an ankle holster and jokes that the job of his covert inspectors, who try to trace smugglers back to their suppliers, consists of ''seven months of boredom capped by 15 seconds of terror.'' And then? Says Stiffel: ''As soon as we get one guy locked up, another surfaces to take his place.'' Armed with electric drills and X-ray machines as well as pistols, Stiffel's special agents uncover all types of contraband: munitions or high-tech equipment not licensed for export, masquerading as helicopter spare parts; counterfeit Cabbage Patch dolls; phony Rolexes complete with bogus Swiss guarantees; fake Louis Vuitton handbags fine enough to fool a French fashion expert. The cascade of drugs flowing through the airport concerns Customs the most. Judging from a few recent intercepts, almost any type of container is now considered suspect. This spring cocaine was discovered secreted in a hollowed- out truck axle, hidden in bird feeders, and submerged among tropical fish in plastic bags. One shipment was found buried in a footlocker full of dog biscuits -- an apparent attempt to lull Customs agents into believing that their drug-detector dogs were barking up the wrong trunk. ''Most of our seizures come from cold hits, not from tips,'' says Edwin Hotchkiss, chief of the 66-person special Contraband Enforcement Team at JFK. In the past half year his agents seized 156 pounds of cocaine, 121 pounds of heroin, 15 pounds of hashish, and 4,429 pounds of marijuana. But the Federal Drug Enforcement Administration estimates that is only 5% to 10% of the incoming dope.

Stand in the gangway of Avianca Airlines flight 059 bound for Barranquilla and Bogota on any morning and you'll see some of the drug money streaming back to its Colombian suppliers. On orders of a covey of Customs inspectors, passengers pull wads of hundred-dollar bills from pockets, shoes, bras, money belts, purses, toilet kits, shopping bags, and even hatbands and dump them on the carpet to be counted. It's legal to carry out unlimited sums of U.S. currency, but amounts over $10,000 must be declared. Almost routinely, it seems, one or two passengers boarding this flight are found to have hidden $30,000 or $40,000 or far bigger undeclared sums. Then in full view of other waiting passengers, they are frisked, handcuffed, and hauled away. Recently the inspectors reported finding $41,900 stashed in a little boy's teddy bear, part of a $226,256 haul one Colombian family was allegedly trying to sneak out of the country. LATELY federal agents have been zeroing in on airline personnel. ''Usually we're after people who are trying to beat the system,'' says Robert Stutman, special agent in charge of the Drug Enforcement Administration in New York. ''But these people are the system, and they became corrupt.'' In March agents arrested 40 Pan American, Eastern, and Delta employees at JFK and charged them with conspiring to smuggle seven tons of cocaine worth $1.5 billion from Brazil since 1981. The workers allegedly circumvented Customs by shunting cocaine-filled suitcases through the sealed-off, so-called ''sterile'' corridors from arriving international flights, and placing the bags directly onto domestic carrousels. Feds say the ring included several airport ticket agents who erased the names of the couriers from the passenger lists. In other recent busts, agents report picking up a Nigeria Airways pilot with $2 million of heroin stuffed into his trench coat pockets and hand luggage, and breaking a currency-smuggling ring of 17 Avianca flight engineers and flight attendants who transported at least $10 million in cash back to Colombia. Cracking the Pan Am-Eastern-Delta case took more than a year of spadework. Charged with heading the ring was Art Vanwort, 39, a former Pan Am passenger service representative in New York, who had quit the airline in 1984 to return to his native Netherlands. A U.S. undercover agent and a police officer from JFK, posing as drug dealers, befriended Art's 38-year-old brother, Christianus Vanwort, in Brazil. During two weeks spent frolicking together at the beaches and bars of Rio, they say, Christianus bragged to them about how the smuggling system worked. The bust was carried out jointly by the airport police, Customs, and the DEA. ''This was the first time a JFK police officer teamed up with a federal agent on an overseas assignment,'' says Charles E. Rose, chief prosecutor in the case, who has been flying down to Rio collecting witnesses. Law enforcement staffs at JFK include the 255 uniformed police officers and 28 detectives of the Port Authority of New York and New Jersey, which runs JFK; 400 Customs officers; and squads from the federally administered DEA, the Immigration and Naturalization Service, the Secret Service, and the FBI. Finally, each airline has its own security staff. ''Up till now, interagency rivalries at JFK have taken precedent,'' says Rose. Another sign that the jurisdictional battles may be waning: In April Customs and the DEA inaugurated the JFK Narcotic Smuggling Unit, or JNSU, a combined force of a few dozen agents that is the first of its kind at an American airport. So far nothing has hit organized crime at Kennedy as hard as Kenrac, the Federal Organized Crime Strike Force's assault on extortion and labor racketeering. The tale of corruption, drawn from transcripts of bugged conversations and interviews with FBI agents, strike-force prosecutors, and one of the shakedown victims, reveals how vulnerable legitimate business is to the mob's embrace. Even after the investigation began in 1983, most of the 200 or so air cargo companies figured it was more prudent to pay off the Mafia bosses than to fight them. As one of the few air freight executives who helped the strike force told FORTUNE: ''For 25 years I feared for my life. I finally decided it was my patriotic duty to act.'' He showed investigators how to find the shakedown money buried in the bills of lading and persuaded a few other company heads to cooperate.

The airport Godfather for the past ten years has been Anthony ''Tony Ducks'' Corallo, 74, boss of the Lucchese crime family. Corallo's man at JFK was Frank Manzo, 62, a vile-tempered, 305-pound hulk. Manzo wasn't idly boasting when the FBI overheard him claim ''the field is mine.'' It was his by virtue of the Luccheses' 30-year hold on Teamster Local 295, which includes all the truck drivers hauling loads in and out of JFK, and Local 851, comprising the clerical employees. Muscleman Manzo couldn't cope with the technicalities of Teamster contracts. For those details he relied on Harry Davidoff, 69, a vice president of Local 851, whom a Senate committee called ''a ruthless thug who gravitated to the labor movement for no other reason than to steal from it.'' Davidoff's principal ally was Frank Calise, 47, a former truck driver who served as president of Local 295. The Manzo-Davidoff-Calise combine held the air freight firms at their mercy. The average weekly wages of workers represented by their two Teamster locals rose from $600 to $850 between 1979 and 1985, an expense that drove the small operators into the arms of the racketeers. Non-union truckers faced with the threat to organize their shops had two choices: Pay off to keep the Teamsters away or shut down, in which case the mobsters took over their businesses. THE SHAKEDOWNS extended to other so-called services, such as recruiting the customers of a competitor, granting immunity from cargo thefts, and providing protection against labor problems. A Mafia hotline number was offered in case of such emergencies as labor disputes or thievery. Strike Force prosecutors established that Manzo's men collected at least $1.25 million between 1979 and 1986. The amount was probably much greater because the extortion money rolled in too fast to tally. A lot of the money was funneled to Manzo and Calise by Heino Benthin, an entrepreneurial West German immigrant who had built a thriving pickup and delivery service. Benthin, it seemed, first got involved with the mob because he didn't consider a little bribery so bad as long as it was between friends. In 1980 when he discovered that Schenkers International Forwarders was seeking a new trucker, he looked up an old buddy there, slipped him $1,000, and got the business. A few days later, however, Frank Calise appeared, warned the German that he had ''stepped on somebody's feet,'' and summoned him to a Sunday meeting with Frank Manzo at the Sherwood Diner, a Mafia hangout near the airport. Benthin explained that he wanted to hire more non-union workers. ''You pay me and you got what you want,'' said Manzo, adding that he was now Benthin's ''friend'' -- though Benthin should never mention his name. The German agreed -- ''as long as nobody is going to get hurt,'' he said. Replied Manzo: ''Nobody's going to get hurt as long as everybody does the right thing.'' Benthin assumed that doing the right thing just meant keeping his mouth shut. He found out otherwise when Union Air Transport, a West German firm operating at JFK, was struck by Calise's Teamster Local 295 a few months later. The company offered Benthin a $4,000-a-week trucking contract if he could find a way to get rid of the pickets. He called Calise, who set up another meeting with Manzo at the Sherwood Diner. This time Benthin brought along a crony, Anthony DeSimone, who knew how business was conducted at Kennedy. An argument flared when DeSimone wanted to get in on the shakedown and pointed a finger at Manzo. Lunging across the table, Manzo impaled DeSimone's hand with a fork. ''Don't ever do that again,'' roared the Mafia boss. ''I'll kill you.'' After the incident a shaken Benthin told Calise, ''It doesn't look like nobody gets hurt. If this keeps up I want to get out.'' ''You're in for life,'' snapped Calise. ''If you get out, it's the end of your company.'' A few days later at the diner, Manzo set the price for labor peace at Union Air Transport: $50,000 for each year of the three-year contract, plus weekly payments of $500. The Union Air Transport manager flew to the company headquarters in Dusseldorf, collected $50,000 in cash, and brought it back to Benthin, who passed it to Manzo rolled in a newspaper at another meeting in the diner. Now a Mafia bagman, Benthin was getting in deeper and deeper. He delivered to Manzo a total of $250,000 from Union Air Transport, $132,000 from Schenkers International Forwarders, and up to $40,000 each from half a dozen other freight companies serving JFK. The payoffs were no secret. ''Everybody out here knew about them,'' says FBI agent William Cardin, who was assigned to the airport. ''But we didn't have what was important: the connection between the mob and the union.'' FINALLY THE FBI developed enough information to put bugs in Manzo's home, tap his phone, and photograph the comings and goings of his Mafia friends. The scope of the racketeering was quickly confirmed. Several discussions overheard revolved around the proposed 1983 merger of CF Air Freight, a subsidiary of Consolidated Freightways, and Air Express International, the biggest cargo forwarder at JFK. If the merger succeeded, the two Lucchese unions, Locals 295 and 851, would lose their contracts with Air Express International and be replaced by two unions representing the workers at CF Air Freight -- Local 707, linked by the FBI to the Colombo clan, and Local 814, controlled by the Bonannos. The stakes were high, since AEI was a company with 2,250 employees and revenues exceeding $250 million. But Lucchese henchman Manzo had a secret weapon. The Luccheses had an ''inside man'' at AEI, Vice President John Russo, who handled the company's labor relations at JFK. In recorded conversations Manzo instructed Calise, the local Teamster boss, to strike AEI. That, Manzo predicted, would force AEI to rely on Russo to settle the strike. ''I love it,'' Calise told Manzo. ''Then let John come in and be the hero.'' Calise also knew that AEI's executives were afraid of Russo, because they realized he had the hulking mobster, Manzo, behind him. ''You got them by the balls,'' crowed Calise. Soon after, Local 295 struck AEI on the grounds that its contract gave it veto power over any merger that failed to keep it as the bargaining agent. The mobsters then set in motion a scheme to force the two companies to pay them $500,000 for withdrawing the union's objections. Russo advised AEI's chairman, Joseph Mailman, that the merger could be attained only by working through Russo's ''contact.'' The scene in the distraught 82-year-old chairman's office, as Russo described it to Manzo in one conversation picked up by the FBI bugs, was reminiscent of Hamlet's soliloquy. Russo reported that Mailman was lying on a sofa when he walked in. ''I says five (($500,000)),'' explained Russo. ''That's when, oh, he got bent all out of shape. He started mumbling, 'Ah, I never did this type of thing before,' and blah, blah, blah. He's talking out loud, but he's really talking to himself. Then he said, 'How do I get the money, John?' 'Mr. Mailman,' I said, 'I don't know.' '' Russo further related to Manzo how the chairman continued to agonize, saying things like: '' 'I don't know how I got into this mess. This thing is so screwed up. I don't know what I'm going to do. I want to say no, but I don't want to say no.' '' A few days later Mailman made up his mind. He refused to pay the $500,000 and the merger collapsed. On Manzo's orders Local 295 immediately demanded that AEI hire more union workers. Then switching to the role of peacemaker, Manzo intervened. AEI paid him $50,000 to avoid taking on extra men. Armed with 500 reels of taped conversations, the FBI arrested Manzo, Calise, Russo, Davidoff, and Benthin in February 1985. Benthin had never considered himself one of these thugs and was appalled to find himself behind bars with them. He called for the FBI, spilled the story of the payoffs, and vanished into the federal witness protection program. Before the case went to trial last October, Russo pleaded guilty and testified for the government. Then Calise pleaded guilty and was sentenced to nine years. Benthin was on the witness stand for three days, after which Manzo also threw in the towel. He is due to start a 12-year sentence this month. Harry Davidoff, the only defendant to be tried and convicted, entered federal prison at Sandstone, Minnesota, in April to begin serving a 12-year term. But the Kenrac case is not closed. The strike force now suspects that the Gambino crime family may be taking over the turf vacated by the jailed Lucchese mobsters. In April Salvatore Reale, a reputed associate of self- proclaimed Gambino boss John Gotti, pleaded guilty to extorting $50,000 from . a freight forwarder at JFK named Air-Ride America. At the same time the FBI raided Local 295 headquarters. Hidden in the space above the ceiling in Calise's former office, agents found a loaded .22-caliber pistol and a black book with the word ''cash'' inscribed on the cover. It was a ledger in which Calise had faithfully recorded all the payoffs extorted from the air freight companies. The strike force is sifting through the hundreds of names and entries on its pages. ''We are making significant progress,'' is all that prosecutor Norman Bloch will say. But a lot more is likely to be heard about organized crime at John F. Kennedy Airport, judging by the words of Frank Manzo. Four years ago he was overheard warning Calise, ''God forbid somebody get the book.''

THE MAFIA'S BITE OF THE BIG APPLE
By Roy Rowan REPORTER ASSOCIATE Julia Lieblich
June 6, 1988

Byzantine building codes and horrendous logistics help the mob control New York City construction -- at a price that the big developers have been all too willing to pay.

(FORTUNE Magazine) – A CONCRETE-POURING job like Manhattan's new $486 million Jacob K. Javits Convention Center, completed two years ago, should have drawn a flock of bids. Not in New York City. Only two came in for the mammoth structure designed by I. M. Pei. The contract was awarded to S&A Concrete Co., a concern partly owned by Anthony Salerno, first among the nation's organized crime bosses, who is now serving a 100-year prison sentence for being part of the Mafia's ruling Commission. S&A thought the job could be done for a shade over $30 million. The only other bid was a suspiciously high $41 million. A Connecticut contractor spent three months working up a bid that would have been under S&A's, then dropped out at the last minute after a visit and a couple of phone calls from a Salerno lackey. Says Thomas Galvin, former chief executive of the convention center and now president of Xerox Realty Corp.: ''It was an open secret that concrete was Mafia-controlled.'' During the past decade, 17 federal, state, and city investigative agencies have been probing New York's crime-ridden construction industry. This scrutiny has resulted in scores of indictments and convictions. Just two weeks ago, Salerno and Vincent DiNapoli, another partner in S&A Concrete, were convicted of racketeering in federal district court in Manhattan, along with three other mobsters and four of their business associates. After a 13-month trial prosecuted by Assistant U.S. Attorneys Alan M. Cohen and Mark Hellerer, they were found guilty of rigging bids for building the concrete superstructures of 16 major projects in Manhattan, among them the Javits Center. The jury stripped Salerno and DiNapoli of their interests in S&A. Crime is so deep rooted that New York Governor Mario Cuomo this year ordered the formation of a special Construction Industry Strike Force, consisting of about 100 prosecutors, investigators, accountants, and analysts. It is the first law enforcement group in the country to concentrate exclusively on the building industry. Eventually Cuomo hopes to add a second agency to monitor and regulate the business. Says the governor: ''We must begin the enormous task of cleaning up a vital industry that has failed utterly to rid itself of corruption.'' The way the system works illustrates how criminal elements can take advantage of bureaucratic complexity, politics, and leave-well-enough-alon e businessmen to penetrate an industry vital to a great city's well-being. Manhattan developer William Zeckendorf Jr. describes how the costs flow from . mobster to builder to buyer to renter. ''There's too much money floating around,'' he says. ''So if you overpay by $5 or $10 a square foot, it gets passed on to the customer anyway.'' Construction costs in Manhattan may have been inflated over the years by as much as 20% because of the mob, according to a contractor who testified behind a screen at hearings held by the President's Organized Crime Commission in Washington. Whatever the surcharge, it affects the cost of doing business for any company in New York City. Ready-mix, the wet concrete that is delivered to building sites in lumbering 50-ton trucks with rotating drums, is the mob's main extortion weapon in Manhattan. But the Mafia has also infiltrated other building trades, including blasting, carpentry, and drywall. Several corrupt Teamster locals have pitched in by slowing or blocking delivery of building materials on command. While a few of the best-known Mafia bosses like Salerno are now in jail and some of their businesses dormant, law enforcement officials fear that mob penetration of New York City's $5-billion-a-year construction industry will worsen. A new state report titled Corruption and Racketeering in the New York City Construction Industry warns, ''Participants in the industry must be awakened from their complacency.'' Manhattan's megabuilders are not greeting that prospect with the enthusiasm you might expect. If anything, the industry seems alarmed that the governor just might succeed and end up hurting business. ''If people have a problem, they shouldn't build here,'' says Lewis Rudin, 61, chairman of Rudin Management Co. ''Arrest us if we're corrupt. If there's something wrong with what I'm doing, put me in jail.'' Rudin is also a member of the Citizens Crime Commission in New York City, a private watchdog group that has executives from six FORTUNE 500 companies on its board. He fears that the governor's plan will do to the construction industry what the gang-busting Waterfront Commission of New York Harbor did on the docks. ''Now,'' he says, ''we've got a clean shipping industry with no business.'' ONE OF THE FEW builders to endorse the need for a cleanup is Samuel LeFrak, who at 70 still rolls up his shirt-sleeves combatively and calls himself ''the Lone Ranger of my industry.'' The voluble chairman of the Lefrak Organization (the company uses a lower-case f) argues that featherbedding, bid rigging, and other corrupt labor practices raise the cost of building in New York astronomically, and he isn't afraid to say so. ''I'm not worried about any of these mob guys,'' he says. ''What are they going to do, put a bullet in me? Look, I'm a survivor. I'm here for the duration.'' Prompting Cuomo's call to clean up the construction industry is the scathing 130-page Corruption and Racketeering report, prepared by Ronald Goldstock, director of the New York State Organized Crime Task Force. It was to have been made public last July, but was withheld by the governor until there was a verdict at the construction racketeering trial just ended. The language Goldstock uses for his accusations is harsh. The document's most disturbing charge is that the construction industry is alarmingly comfortable with the Mafia. The report bluntly concludes that many developers, builders, and contractors ''believe that the monetary costs of corruption are more than offset by the money saved or earned through corruption.'' As a result, the report contends, the industry has ''become dependent upon'' the crime brotherhood. Mafia muscle, it states, assures ''contractors that they will only have to pay off once, that the amount will be reasonable, and that the services paid for will be delivered.'' Services include the strong- arm tactics needed to keep building materials flowing to job sites and to avoid labor disruptions. The developers' trade association responds to these charges with indignation. ''We resent being pictured as the enemy,'' says Joseph Newman, 63, chairman of the New York Building Congress and president of Tishman Research Corp. ''We're the victims.'' Newman's boss, John L. Tishman, 62, chairman of the 90-year-old Tishman Realty & Construction Co., which has built some 75 Manhattan skyscrapers, also denies knowledge of contractor complicity but concedes that ''there are some abuses in labor.'' Does Tishman mean the Teamsters, notorious for mob connections? Tishman, who is a student of psychic phenomena, glares at his questioner and snaps, ''Look, you said Teamsters. I didn't. I may believe in the afterlife, but I want to stay here awhile.'' The Goldstock report reveals that Harry Gross, a Teamster racketeer, and Philip Doran, a Teamster business agent convicted of attempted grand larceny and bribe-taking, were on Tishman's payroll up to 1985. The company says the two men were assigned to their jobs by the union. Tishman believes, as do others in his business, that the biggest impediment to building in New York is not corruption but the exasperating logistics. He has a point, but the problems also encourage the proliferation of fixers. Narrow city streets do not provide much storage space for building materials, so steel beams, concrete, brick, and glass must be trucked to the job on a precise schedule geared to when they will be used. Construction sites in New York are enclosed by wooden fences, and Teamster foremen are posted at the gates to check the union membership of all drivers delivering materials. These foremen can withhold labor and disrupt deliveries. That power gives mob-run unions a lot of leverage over an industry that employs 100,000 workers in New York City alone. EIGHT YEARS AGO, during the ground-breaking ceremony for the $250 million Gateway Plaza apartment complex at the southern tip of Manhattan, the builder, Sam LeFrak, told John Cody, then president of Teamster Local 282, that he was planning to use labor-saving precast concrete instead of ready-mix. Cody, who has since done a little time for labor racketeering and lost his Teamster post, made it clear that his boys who drove the ready-mix trucks wouldn't like LeFrak's idea. What he didn't mention was that Paul ''Big Paul'' Castellano, godfather of the Gambino crime family until he was gunned down on a midtown sidewalk in 1985, wouldn't like it either. Cody, the Goldstock report revealed, was a captive of the Gambinos and was paying Castellano $200,000 a year as his share of the labor shakedowns. Today LeFrak says that the precast suppliers reached some sort of compromise with Cody. Tom Galvin, who spent six years as chief operating officer of the Battery Park City Authority, the agency that oversaw Gateway Plaza, before becoming CEO of the Javits Center, disputes that: ''LeFrak didn't get around John Cody. Nobody did.'' And the New York Times reported that the Teamster boss's strong-arm tactics added $10 million to Gateway Plaza's costs. By deploying captive unions such as Teamster Local 282 as their enforcement arm, the Mafia chiefs have intimidated the developers and extracted immense plunder from them. Much of the booty comes from contractors and subcontractors who are hired by developers to do the work and who pass along the costs to the developers. Irving Fischer, president of HRH Construction Corp., prime contractor for the Javits Center, was one of the few builders who dared testify at Salerno and DiNapoli's trial. He described how ''a bunch of labor goons once stormed into our office and held the switchboard operator at knife point.'' Fischer says they demanded no-show jobs when he was building Trump Tower. But it is not the fear of violence that has kept the building industry from rooting out corruption. As Governor Cuomo told FORTUNE, ''It's the fear of upset, the fear of delay, the fear of impediment to construction, and then it's the ease with which the builders can put those added costs into the price of the job. If the industry had been eager to cleanse itself, builders would be walking into the D.A.'s office and saying, 'Hey, this guy's putting the arm on us.' ''

NEW YORK CITY'S maze of statutes and byzantine building codes makes the construction industry highly susceptible to Mafia infiltration. Tortuous permit requirements for demolition, excavation, hoisting, and other on-site operations, as well as the endless approvals needed from myriad municipal departments such as the Department of Buildings, City Planning Commission, Department of Environmental Protection, Department of Transportation, Fire Department, and Landmark Preservation Commission, plague the whole construction process with seemingly infinite bureaucratic obstacles. A racketeer with control over suppliers, union officials, and city inspectors can vastly improve the speed and efficiency with which buildings rise in Manhattan. Last November, New York Mayor Edward Koch summoned two dozen developers to a closed meeting at City Hall. He challenged them to hang tough and take a strike if necessary to curb the illegal labor practices. Later Koch complained that the group seemed defensive and ''conveyed the impression that there was no corruption. I must say, I saw a lot of slender reeds in that room.'' Lewis Rudin, one of the developers pressent, says, ''The mayor accused us of pussyfooting around about corruption. But to me, the need to get so many city approvals causes more of an increase in construction costs than all this nonsense about mob collusion.'' Rudin describes how the Department of Buildings ordered a four-day halt to the steel work on a 35-story office tower that he is cantilevering over the Broadway Theater, where Les Miserables is playing. ''It was an improper decision,'' Rudin says. ''But it cost me hundreds of thousands of dollars in lost time, and there was no gangster putting a gun to my head.'' The buildings commissioner says the stoppage was for safety reasons. Cuomo thinks Rudin may have a point. ''Sometimes I think the building codes were written to allow for chicanery,'' says the governor. He is now asking Thomas Reppetto, president of the Citizens Crime Commission, to gather all the industry's recommendations for streamlining work practices and abolishing outmoded regulations that invite extortion. For decades mobsters have proved skillful at seizing labor organizations by terror to loot their treasuries and pension funds. In the last dozen years or so, Mafia leaders like the bulging, 300-pound DiNapoli have demonstrated considerable flair for organizing corrupt union locals to shake down the developers. DiNapoli achieved underworld status as the protege of Salerno, 77, the head of the Genovese crime family. But the shabby storefront social clubs in East Harlem where ''Fat Tony'' and the other Mafia chiefs conducted their business were not to Vinnie's taste. He maintained a penthouse on Manhattan's East Side, from which to dabble in the usual loan sharking and gambling while devoting most of his energies to racketeering in the construction industry. Early on DiNapoli, 51, revealed a remarkable ability to roll with the reprisals of law enforcement. Convicted in a sports bribery case in 1978, he was sentenced to three years in federal prison. Serving time was not onerous. Locked up only on weekends, he was free to go about his business on working days, and after just three months of that convenient incarceration, Vinnie was released on probation. THE JUSTICE Department's Brooklyn-based Organized Crime Strike Force says that DiNapoli continued to dominate the city's drywall business while he was on probation. Drywall construction uses Sheetrock instead of plaster for interior walls and ceilings. DiNapoli reportedly owned two drywall companies and held sway over eight others in collusion with other gangsters, setting the price of a good part of this work in Manhattan. His contribution to the science of criminal control was to guarantee builders against delays. Astride both labor and management, DiNapoli exacted $1,000-a-week payments from drywall contractors he didn't own in return for labor peace. After arranging for a union slowdown, he would offer the hapless contractor an unconditional warranty against further interruptions -- but for a price. For additional sums, contractors were allowed to hire non-union workers or to operate so-called ''double-breasted'' shops, employing both < union and non-union laborers. He also ensured that contractors won whole jobs by getting the mob to rig the bids -- for a fee of up to 2% of the project. DiNapoli's big blackjack over the drywall industry was the 30,000-member New York City District Council of Carpenters. Its president, Theodore Maritas, was a puppet manipulated by Tony Salerno and other Genovese heavyweights. Maritas made sure that his union carpenters and the builders bidding for construction jobs played by the mob's rules. The tactics he used to discipline wayward contractors were recorded by FBI listening devices. He was overheard discussing how one contractor won a job worth more than $1 million without proper mob authorization. ''You know, my ears are ringing with this man,'' said Maritas. ''He don't get the message. I got to go in now with a f ----- hammer and break all his work down.'' In the end, Maritas apparently became a victim of the mobsters who controlled his unions. Indicted with DiNapoli and others on racketeering charges in 1981, he disobeyed mob orders and refused to plead guilty as Vinnie and the rest of the defendants did after their trial resulted in a hung jury. Before he could be retried, Maritas disappeared and is believed to have been murdered. DiNapoli went to jail for his drywall shakedowns (he got five years), leaving his wonderful money machine in the safekeeping of his mentor, Fat Tony. Salerno saw its vast profit potential and turned what had been a mere jalopy into a juggernaut to extort millions from the builders of Manhattan's shimmering towers. So great were the anticipated spoils that three other organized crime families -- the Gambinos, Colombos, and Luccheses -- horned in on Salerno. The result was a cartel secretly manipulated by the four Mafia families. Two Mafia-controlled firms producing ready-mix -- Transit-Mix Concrete Corp. and Certified Concrete Co. -- were part of it too, plus a half dozen participating contractors, who did not make but simply sold and poured the concrete. Enforcing the cartel's edicts were two corrupt labor groups: the District Council of Cement and Concrete Workers, and good old Teamster Local 282, representing the truck drivers who deliver all the ready-mix to the building sites. THE MAFIA got profits from the cartel in two ways. First, it exacted dues from its contractor members for the many benefits bestowed: protection from competition, the ability to charge inflated prices, assurances of supplies and a skilled labor force, and the right to ignore collective bargaining agreements. Second, it made money through the operation of its own companies. The cartel decided who could participate in the concrete, drywall, and other trades; it determined who would be awarded the contracts; and it decreed the prices to be charged. For example, the rigging of the Javits Convention Center bids followed a heated Mafia sitdown at a cafe in Manhattan called Paul & Jimmy's Place. After finally agreeing that Salerno's S&A Concrete Co. would submit the winning bid, the cartel then disposed of a presumptuous outsider who it had heard was also going to bid on the job. The Corbetta Construction Co. of Hamden, Connecticut, specialized in office buildings and airport work. It had just completed the $65 million concrete superstructure of the Union Carbide headquarters in Danbury. Dazzled by I.M. Pei & Partners' plans for the convention center with its 15-story atrium entryway, Louis J. Corbetta, the firm's president, planned to submit a bid of $29 million to pour the concrete. Says Corbetta: ''We had the perfect team to go in and build that job, we thought.'' Confident of winning, he even began negotiating with the Transit-Mix Corp. to supply the concrete. WHAT CORBETTA didn't know about was Transit-Mix's participation in the cartel. The day before the bidding deadline, Alvin Chattin, a vice president of the concrete supplier, showed up at Corbetta's office. Chattin, as Corbetta told a federal prosecutor last year, ''informed me that he was there to get us to consider doing something other than bidding the job as we planned, such as a complimentary price ((an intentionally high bid)).'' Corbetta said, ''I was floored. I had worked three months on this deal, personally. This job was perfect for us, and I would be goddamned if I was going to drop out.'' It took a while before he stopped steaming. He then told Chattin that ''under no circumstances'' would he ''bid the job other than straight.'' Despite his bravado, Corbetta knew he was swimming in scary waters. ''I was frightened,'' he remembers poignantly seven years later. The next morning Chattin telephoned. Corbetta told the prosecutor that Chattin said, ''this was a play that was not in Chattin's control,'' but that there was ''muscle behind the whole deal. It was not just a simple little thing of two contractors getting together.'' Finally, Corbetta asked him to call back a little later. When Chattin telephoned, Corbetta recalled, ''I told him I had decided to drop out. I was not going to bid the job. I was going to walk away.'' Chattin was among those convicted with Salerno and DiNapoli. The cartel's practices were part of the evidence cited by prosecutors in the Commission trial, in which Salerno and three other members of the Mafia's ruling council were convicted early last year of being part of a racketeering enterprise. With these gangsters now in jail, some of the cartel's operations have been suspended or have gone deeper underground. Stone walls do not a prison make, however, as long as there is a telephone through which Mafia leaders like Salerno can pass their instructions. One of the primary missions of Cuomo's new Construction Industry Strike Force will be to uncover the cartel's remnants. THE GOLDSTOCK report shows that contractors pouring concrete in the city benefited from Mafia control because they could get guaranteed market shares. Developers and builders had nothing to do with the selection process other than to fork over the rigged price. In return the contractors kicked back to the mob according to a sliding scale based on the price of the job. On concrete contracts under $2 million, a 1% tax was paid to the Colombo family, which because of its lower standing in the Mafia caste system was conceded all the small payoffs. Contracts of between $2 million and $15 million were taxed 2% by the ruling Mafia Commission, headed by Tony Salerno. Jobs exceeding $15 million were the exclusive province of S&A Concrete Co., owned by Salerno and DiNapoli. Exactly how all this worked in practice was carefully explained by Ralph Scopo, president of the District Council of Cement and Concrete Workers, in a conversation recorded by the FBI. Another cement contractor, ''Sally'' D'Ambrosia, contended that the spirit of free enterprise entitled him to bid on a job that exceeded $2 million at JFK Airport. Scopo insisted that contracts of this size were reserved for members of the Mafia Commission. ''Why can't I do the concrete?'' asked D'Ambrosia naively. ''Over $2 million, you can't do it,'' Scopo explained. ''It's under $2 million, hey, me, I tell you go ahead and do it.'' But D'Ambrosia persisted. ''Who I gotta go see?'' he asked. ''You gotta see every family,'' said Scopo. ''And they're gonna tell you, no. So don't even bother.'' Scopo was convicted of extortion and racketeering in 1987, and is currently serving a 100-year sentence. Rigged bids resulted in many other lucrative jobs for Salerno and DiNapoli. Listed among the racketeering acts for which they were just convicted is a $7.8 million concrete subcontract awarded to S&A in the construction of the Trump Plaza luxury apartments on East 61st Street built by HRH. Their indictment cited another rigged contract, for $5.5 million, of concrete supplied to an Upper East Side condominium built by Tishman Construction Corp. Describing his concrete suppliers, John Tishman says, ''They're a small, protected group, and they're all interconnected.'' He doesn't use the word ''Mafia.'' SALERNO and DiNapoli had yet another way of wringing money from stones -- through their secret interest in the concrete makers, Transit-Mix and Certified. Their front man in this enterprise was Edward ''Biff'' Halloran, former owner of the midtown hotel Halloran House. Halloran ostensibly owned both ready-mix companies and was Al Chattin's boss. The two firms are currently in receivership, having declared bankruptcy in 1987 after Halloran was convicted of a $9.2 billion check-kiting scam. He was convicted again of racketeering two weeks ago along with Salerno and DiNapoli. Salerno's close connection with Transit-Mix and Certified did not stop him from taxing Halloran on his concrete. He was able to exact a $2-per-cubic-yard levy on just about all ready-mix sold in Manhattan, but on Halloran's concrete Salerno upped the ante to $3 per cubic yard. Joe Culek, Halloran's butler, valet, chauffeur, and messenger, delivered the tax to Salerno's bagman. Culek described to a federal prosecutor how he and Halloran House controller John Horl once wadded $20,000 into an envelope. Then, said Culek, he ''ran on foot'' to mob lawyer Roy Cohn's office and handed the boodle to Cohn to give to Salerno. Cohn, who died of AIDS two years ago, had been Salerno's lawyer. Tracking down the racketeers is slow, frustrating work. Manhattan District Attorney Robert Morgenthau, who will share direction of the Construction Industry Strike Force with Ronald Goldstock, claims the biggest problem is getting victims to cooperate. ''Their fear of physical harm is too great,'' Morgenthau says. He also mentions a tactical problem impeding his prosecutors: ''Most of these crimes involve extortion. There is no overt act. So it takes ten to 15 investigators just to follow the paper trail on each case.'' But the biggest problem of all is the construction industry's reluctance to resist. It remains to be seen whether the new Construction Industry Strike Force can replace the power held by Fat Tony Salerno in keeping supplies flowing to job sites and assuring labor peace.

When the Mob Delivered the Goods
By RALPH BLUMENTHAL;
Published: July 26, 1992

ON A COOL MORNING IN JUNE, AS TRUCKS CHURNED through the parked-up side streets of New York City's garment district, a taxicab pulled to a stop on West 35th Street, across from Macy's. Stepping out into a maelstrom of rolling racks of dresses and hampers piled with cutwork and piece goods, the three passengers made their way across the busy sidewalk and into the maw of a trucking warehouse.

One of the visitors -- tall, gaunt and impeccably tailored -- was Robert J. McGuire, a former Federal prosecutor and New York City Police Commissioner. President of Kroll Associates, one of the nation's most sought-after private investigative firms, he was accompanied by Alice T. McGillion, a former First Deputy Police Commissioner who was Kroll's director of communications, and Michael Slattery, a former agent of the F.B.I. and one of the firm's managing directors.

Their host upstairs at the warehouse, Thomas F. Gambino, was the president of his company, Consolidated Carriers Corporation, the largest and most influential trucker in the garment center. According to Federal and state prosecutors who often pasted his photo on charts of the underworld, Gambino was also a caporegime , one of 21 crew chiefs, or captains, in the Mafia family that bore his name and that law-enforcement officials generally regard as the largest and most potent Mafia clan in the nation. The Gambino boss since 1985 had been John Gotti, who would be sentenced the next day to life in prison for murder and racketeering.

Last February, the 62-year old Gambino and his 55-year-old brother, Joseph, facing extortion and enterprise-corruption charges in State Supreme Court in Manhattan, had interrupted their trial to plead guilty to a single felony count of illegally restraining trade. Under the plea bargain, they were spared jail in exchange for a $12 million fine, an agreement to cease anti-competitive practices and to get out of the segment of the business they had long controlled -- the trucking of shipments from the Seventh Avenue manufacturers to and from the sewing shops where the garments are actually produced. The Gambinos, through their lawyers, contended that the long-established system not only was not coercive but worked to the benefit of many small entrepreneurs. The prosecution claimed that this control was a choke hold, enabling the Gambinos to dominate a key trucking operation and reap enormous profits by imposing what amounted to a 5 to 7 percent mob tax on finished garments.

To oversee compliance with the agreement, and the sale or liquidation of Gambino interests by next March, the court appointed McGuire. As the so-called special master, McGuire was empowered over his five-year tenure to issue rules and orders to restore industry competition. McGuire, his partners and his counsel, Elkan Abramowitz, a former prosecutor and leading criminal lawyer, had to learn everything they could about garment-center trucking and the company assets being disposed of. And where better to start than with Thomas Gambino himself?

Reclusive and elegantly if conservatively tailored, Gambino cut a patrician figure. He lived not in one of the blue-collar neighborhoods of Queens or Brooklyn favored by his mob compatriots, but off Fifth Avenue on East 68th Street, in an 1881 mansion once owned by banking princes. His fortune was estimated at $75 million. Last year, the Gambino name was affixed to a unit of Schneider Children's Hospital of Long Island Jewish Medical Center, to which the brothers had donated $2 million for the construction of a bone-marrow transplantation center.

The eldest son of the late Carlo Gambino, perhaps the last true boss of bosses of the American Mafia, Thomas cemented ties to another powerful mob clan with his marriage to the daughter of Thomas Lucchese, boss of his own Mafia family. After graduating from Manhattan College in 1951, Gambino went to work in his father-in-law's dress factory in Peckville, Pa., according to a 1958 Senate report. In 1966, Thomas joined his brother Joseph at Consolidated, founded in 1957 by a group of shareholders including Hyman Ruff, later one of the Gambinos' trucking partners. As partners died or retired, the Gambinos acquired a controlling interest. Prosecutors do not list Joseph as a Mafia member.

By the end of 1989, according to charts compiled by the Manhattan District Attorney's office, the Gambinos controlled at least a dozen trucking concerns, which in the previous three years had grossed about $70 million. Of this, nearly $50 million was generated by shipments into and out of the sewing shops. Some $22 million of this was profit, a return of about 40 percent. In contrast, the Gambinos' over-the-road trucking generated a far more modest 15 percent return.

Also significant was the fact that the Gambino profits were built on pennies: a dress that retails for $160 would cost the store itself about $80 to buy and the manufacturer about $40 to produce -- of that, the trucking cost was perhaps only 40 cents. Thus do the Gambinos exemplify what prosecutors called "the importance of being unimportant."

Gambino appeared to be sharing some of his proceeds. In 1986, a state bug had captured a loose-tongued Gambino soldier, Angelo Ruggiero, reporting to Gotti: "This guy gave me a stack of [ expletive ] tens last night."

"Who?" Gotti asked.

"Tommy Gambino. I just cashed them in here."

Gotti must have been impressed, as the tape documented: "It looks like you have $50 million there."

The purpose of McGuire's visit to the Consolidated office at 141 West 35th Street on June 22 -- an office that had been cleverly bugged by the State Police (Box, page 34) -- was to learn the nature of the business and how the routes were assigned. The Kroll people had made the appointment with Gambino's lawyer, Michael Rosen. They hadn't necessarily expected Gambino to be there.

As the bemused Slattery fixed a tight smile on his face, Gambino, in a blue double-breasted suit and red tie and accompanied by his lawyers, showed the visitors around the office, answering questions about trucking operations. "We were not off in the realm of organized crime," McGuire said later. "Our focus was vertical pricing and markets."

Afterwards, Gambino showed them around Consolidated's freight terminal on 11th Avenue at 23rd Street and then turned them over to Raymond Buccafusco, the company's manager for Chinatown, who had pleaded guilty in the same case to criminal solicitation, a misdemeanor. Buccafusco guided them to a Chinatown sewing shop served by the Gambinos and recommended a favorite Chinese restaurant for lunch.

TO OUTSIDERS, THE garment center can be a perplexing place of seasons out of sync, where summer dresses sprout amid winter snows and summer heat brings forth winter woolens, where manufacturers do not manufacture and transport is governed by arcane rules underwritten by custom and fear.

It is, in fact, less a center than an agglomeration of offices, showrooms and trimming shops along Seventh Avenue in the 30's and low 40's where sample garments are designed, orders are taken and fabrics are cut. Then, along with the "trimmings" of buttons or zippers or lace, the cutwork is trucked to Chinatown shops, where immigrants often toil in miserable conditions at piecework rates, or to other outlying sewing shops and factories where the garments are stitched together. Finally, the finished garments are trucked back to the manufacturer or directly to a customer. Because the seasonality of fashion makes the shipment of garments in some ways as time-sensitive as that of food, anyone in a position to monopolize -- or thwart -- timely delivery gains enormous leverage. For more than half a century, since Seventh Avenue opened its doors to racketeers to oust Communist unionists, prosecutors say, the mob has built up that leverage.

Virtually every sewing shop was allocated, or "married," to one of several large truckers linked to a cartel dominated by the Gambino and Lucchese families. The truckers sold or traded shops among themselves, with no say on the part of the often-reluctant brides. If a manufacturer wanted to move goods in his own trucks or hire a "gypsy," or independent hauler, he had to pay his regular trucker anyway.

A few unwritten rules governed. If a shop changed hands, the existing trucker automatically serviced the new business. If a shop closed and lay empty for six months, a new trucker could claim it when it reopened. If that closed shop had sewing machines inside, it was claimable by a new trucker only after 12 months.

The cartel's dominance was so entrenched that violence was all but unnecessary. A glance, a whispered name -- "Gambino" -- and would-be renegades tended to fall quickly into line.

Some manufacturers insist they have no quarrel with the system. What they fear more than organized crime, they say, is disorganized chaos. Aaron Freed, president of a company called Ms. Interpret Inc., which sells women's sportswear and coordinates to major department stores, said in an interview that the Gambinos helped him find sewing shops to do his work. When he had trouble meeting bills, he said, they let him go months without paying. As for having to pay Consolidated even when he used a gypsy trucker, Freed acknowledged: "It cost me, but I put it in the price of my garment."
But more typical are industry veterans like Richard Wallace, until recently a production manager at Nicole Miller, who testified in court earlier this year that the first thing he learned when he entered the business was that garmentmakers had no say over who moved their cutwork to and from the sewing shops. Complaining was futile, he testified, bending his nose aside with a forefinger in a gesture signaling organized crime.

In 1987, Wallace related, he was working at a since-closed dress manufacturer called Lu'elle, where garments were being prepared for shipment to New Jersey via a gypsy trucker. A Consolidated salesman came in and sought to block it. An argument ensued. The salesman made a call and within 15 minutes, Wallace testified, "four or five guys showed up who just came in and stood around in trench coats with their hands in their pockets" until the gypsy trucker fled. It later developed that there were only two, but the enforcers -- known in the garment center as "the Blues Brothers" -- were apparently sufficiently menacing to be remembered as many more.

A manufacturer named George Schneider, now retired in Florida after a 50-year career in the garment business, recalls once arranging to lease a truck to haul his own shipments. Staying in a Manhattan hotel room that night, he got a call from a trucking salesman. As he remembers it, the conversation went this way:

"I understand you're going to be going into trucking for yourself?"

Schneider said, yes, he was considering it.

"George," the caller went on, "you want to be smart, don't do it. I wouldn't advise it. There are too many accidents on the road."

Schneider says he got the message. "If you found out I'm in a hotel already, forget it," he recalls answering. He quickly dropped his plan. "It scared the pants off me," he says.

The Gambinos declined to be interviewed for this article. Thomas Gambino's lawyer, Michael Rosen, explained that Gambino was still under Federal indictment, having earlier been severed from a racketeering case against John Gotti and Frank Locascio. Rosen said the Gambinos held it "absolutely not true" that manufacturers were unable to choose their own truckers. Rather, he contended, sewing shops that were set up in business by the Gambinos were obligated to use Consolidated.

ELIOT SPITZER took a different view. An earnest Princeton-educated assistant district attorney, Spitzer worked in a narrow office off an elevator shaft on the seventh floor of the monolithic Criminal Courts building in lower Manhattan. Twenty-eight years old in 1987, when the Gambino investigation began, he had joined the prosecutor's office out of Harvard Law School the year before. As he wrote in an internal memo in January 1988, an extensive "foundation of information" existed on the Gambino family's domination of the garment center. From 1979 to 1982, Manhattan State Senator Franz S. Leichter released three staff reports documenting the proliferation of sweatshops and the influence of gangsters over the garment industry.

To Spitzer, Thomas Gambino was a target more prized than the so-called Teflon Don. Gotti, Spitzer thought, was where the mob had been -- in rackets, drugs and murders. Gambino was where it was going -- into legitimate businesses where it could dominate by subtle intimidation while picking the pockets of the public. To Spitzer, the future seemed more frightening than the past. With Gotti, at least you knew where you stood.

Yet, Spitzer wrote, "Despite the fact that 'everybody knows' that the mob controls the industry, there have been no cases brought against the primary figures and no real efforts to loosen the mob's grip on a critical New York industry."

More than a year before, Spitzer's boss, Robert M. Morgenthau, the Manhattan District Attorney, had vowed to throw the weight of his office against mob elements he believed were sapping key segments of the city's business economy. Rather than targeting individuals, Morgenthau said, he would seek to "retake the industries." Thus began a series of probes into the construction trades, mob-infiltrated unions at the convention center, the newspaper delivery unions -- and the garment center.

Even before writing the memo, Spitzer had launched a preliminary probe. A 30-year-old undercover police officer posing as a gypsy trucker named "David Chan" was driving around Chinatown with a truck marked Lok Kee, wearing a body wire and seeking business from sewing shops with the aim of bumping up against the Mafia. He quickly found that each shop was claimed by a big trucker, in many cases by Consolidated. When one shop owner told him that he had to pay the regular trucker even when he used his own truck or a gypsy for a rush order, Chan acted surprised. Then the manufacturers had to pay twice?

"That's right," the shop owner said. "As you know, Gambino has a lot of power."

"Gambino?" Chan asked.

"Gambino's uh . . . whatever, the Mafia," came the answer.

What about independent truckers? Chan wanted to know.

"They run into problems," the shop owner said. There were no secrets on the street, he warned. The big truckers had people going around checking.

"What kind of people?" Chan asked.

"Company people."

As Chan was making his rounds, another undercover police officer loading garments at the Gambinos' trucking warehouse at 202 11th Avenue learned that the allocation system was policed by roving company "salesmen" who spied and reported on movements of garment-center goods. Before being hired, he was interviewed by Joseph Gambino, who he said laid out two rules: no drugs and no stealing. If he was caught stealing, he said Gambino told him, "We don't call the police -- we take care of it ourselves."

By early 1988, Spitzer was pressing for a more ambitious initiative. To gather further evidence, he wrote in a second memo, "we will need to control a sewing contractor being victimized by the Gambino family's extortionate scheme." With no existing contractor willing to cooperate or in a position to be forced, Spitzer said, "I believe it is worth purchasing a sewing contractor in the garment district."

FROM THE OUTSIDE, Chrystie Fashions looked like any other of the hundreds of sweatshops in lower Manhattan -- an open 1,500-square-foot shop crammed with sewing machines, one of four similar lofts sharing the ninth floor of an old building at 195 Chrystie Street.

But although the work force was real enough -- men and women hired from state unemployment lists -- the operation was a part of an elaborate sting that included hidden video cameras and telephone taps. Running the shop was a muscular, pony-tailed undercover State Police trooper who went by the name of Maximo Rivera and who -- knowing the business from years spent moonlighting in a garment-industry shop in the same building, as it happened, as the Consolidated offices on West 35th Street -- had answered an ad in El Diario and arranged to purchase the shop from its owner for $10,000. The shop's previous trucker was Consolidated. By the 12-month rule, it should still belong to Consolidated.

Within several months of opening in August 1988, the shop was sewing orders for a number of manufacturers, including Allison Tracy, Jeffrey Craig and M & B Sportswear, that had been persuaded to use Chan's Lok Kee and other gypsy truckers to augment Consolidated. Deliveries were sometimes fouled up, and a policeman who operated the button machine did a terrible job. Some of the buttons, one customer complained, dangled "like drop earrings." But there was plenty of business. In all, the shop would sew 43,000 garments.

One October morning, Rivera got his first visit from a Consolidated salesman, a middle-age man with a moustache and graying hair who gave his name as Roger Kunka. He was angry about the gypsy truckers. "I want you to come say hello to my boss," he told Rivera. "I want you to say hello to Mr. Gambino." Rivera, who thought the Gambinos might recognize him, took a pass.

The following spring, Kunka, accompanied by another Consolidated salesman, Sam Andrew, a balding grandfatherly figure, visited Chrystie Fashions again. This time, using one of the shop's tapped phones, he called one of the manufacturers who was using gypsy truckers to carry his cutwork to and from the shop. "Hear me out," Kunka told the nervous manufacturer, Baruch Rabinowitz. "We are the truckmen of this stop here. O.K.?"

Rabinowitz called Rivera in a panic. "I know that they are connected with the Mafia," he said. "I don't want to start with them."

On April 12, 1989, Andrew visited the shop to deliver a blunter warning. "This is a Consolidated stop, you know," he told Rivera. "We bring it in and we like to take it back out again." When Chan left the office, Andrew spelled it out more clearly. "I don't want to say he's gonna get his [ expletive ] kicked," he said. "But he will sooner or later. . . . Maybe my guys won't do it, but somebody will. One of the [ expletive ] truckers will take him apart. He'll be spending the next six months in the [ expletive ] hospital."

Chan never did get hurt, perhaps because the Gambinos suspected he might be an agent or perhaps because he wasn't much of a commercial threat. In fact, Kunka seemed to make a point of saying that Rabinowitz was entitled to use Lok Kee: "It's a free country."

Several months later, in a further effort to test the system, Rivera visited another trucker, I.M.C. He wanted to switch from Consolidated, he said. "You have to use him," said I.M.C.'s Shelly Sussman, a large man with a cigar, referring to Consolidated. "We're not interested." Two days earlier, Rivera had been similarly rebuffed in a visit to another big trucking company, Triple A.

The shop had served its purpose. On Aug. 11, 1989, after a year of operation, investigators staged a phony arrest, bursting in with guns and seizing Rivera and a package of flour made up to look like cocaine. Seeing Rivera wrestled out in handcuffs, many of the workers cried.

Three months later, a bug planted by State Police technicians and the District Attorney's squad in Consolidated's West 35th Street warehouse recorded the Gambinos making day-to-day decisions that, Spitzer argued, showed them enforcing their trucking cartel and gave the prosecutor the last pieces needed for a search warrant.

The search yielded four truckloads of company records, including a special prize, Roger Kunka's notebook documenting the double-billing of manufacturers who did their own trucking. Kunka himself, confronted with the detailed evidence, reluctantly agreed, like Sam Andrew, to become a prosecution witness. Kunka was so disoriented he initially believed that investigators had conspired with his dentist to plant a microphone in his teeth -- otherwise, he asked one of the undercover agents, how did they know so much?

The office bug caught Joseph Gambino's bravado reaction to the search. "They're gonna say to themselves," he announced, " 'Do you wanna know something? These [ expletive ] Mafia guys really run a solid business.' "

KROLL'S ROBERT McGuire was not ready to go that far in his own assessment. But as an agent of the court charged with overseeing the Gambinos' surrender of trucking into and out of the factories, and with issuing orders to foster competition, he wanted to be sure that he wasn't crippling the garment industry in the process. Manufacturers had all kinds of arrangements in place to move their garments. Would independent truckers service their routes and customers reliably day in and day out, as the Gambinos had? Would gypsies help finance sewing shops and other small contractors, as the Gambinos claimed, with some justification, to have done? Or should the financing of sewing shops by truckers be banned or sharply limited?

Thomas Gambino and Rosen, McGuire felt, had made some reasonable arguments why garment-center trucking operated as it did and why precipitous change could disrupt a vulnerable industry, buffeted by foreign competition. With all the different moving operations -- cutwork and trimmings in, finished garments out -- it was easier to bill by the garment than by the trip, they maintained: hence the single round-trip price whether or not a manufacturer chose to do any part of his own trucking.

Although McGuire agreed with the District Attorney's "creative approach" in achieving a settlement that aimed to reform an industry, McGuire was also concerned that the agreement may have been widely misunderstood. It did not call for the Gambinos to get out of trucking, only the shipment of cutwork to the factories and finished work out. They could continue to haul garments from manufacturers to stores around the city and out of state. If the Gambinos swapped routes with other truckers, building up their other business in the process, would the outcome be ridiculed as a debacle? Who could forget that a similar effort to oust the mob from the Fulton Fish Market had foundered? Then, too, he worried, if the special master was pledged to restore free competition, why would anyone pay for the Gambino routes? And who would buy into an industry whose rules were yet to be formulated?

If the Gambinos had been gripping the garment district in a choke hold, and that choke hold was now loosened by the plea agreement, did it follow that the system would automatically open to competition? Or would someone or something else come along to dominate it? Would garment prices really drop? Most of all, he didn't want to launch a failure.

Eliot Spitzer voiced confidence that reform would work, although he wouldn't be around to monitor it -- after six years he was leaving for private practice in a large Manhattan law firm. Over-the-road trucking, where the Gambinos would now have to concentrate their business, he believed, was more competitive and thus resistant to domination. As for crippling the garment district, he said, "the goods will get from the manufacturers to the contractors, I'm not worried about that. You could always put them in a station wagon or van the way contractors have been doing for years -- only now you won't have to pay the Gambinos for the right to do it." SECOND-STORY JOB

THE BUGGING OF THOMAS GAMBINO'S garment-district trucking office was a commando-style operation, according to State Police Sgt. Daniel Wiese, a veteran undercover trooper and senior investigator. On Halloween night 1989, State Police officers using blue and white Consolidated Edison trucks sealed off West 35th Street between Seventh Avenue and Broadway. The phones had already been tapped by experts who had knocked out the lines and posed as repairmen to gain entry. Others sent in as city fire inspectors had reported back on the types of locks they would need to pick.

The break-in team included Jack Breheny, a retired detective and expert lock-picker now working for the state's Organized Crime Task Force. After Breheny picked the first of some 13 locks, using a six-inch-long stick of spring steel with a point filed to a flattened diamond shape, the team disabled one visible alarm and discovered a second -- hidden -- motion-sensing alarm. Because this could not be immediately disabled, the investigators were withdrawn and the entire operation was aborted. Ten days later, on a Sunday night, it was mounted all over again from the beginning, complete with Con Ed trucks. This time, the experts defeated the silent alarm by hooking it up to their own power source.

In the Gambinos' inner office, an enclosure suspended within the trucking loft, they blasted into the concrete ceiling to install a power line for the bugs. To Wiese's dismay, however, a cell transmitter didn't work through the walls. And by oversight, they had brought with them only a single Brady bug, an inch-square wafer with an open microphone that would transmit sounds via a phone line to the District Attorney's office two miles downtown. They planted it in a hollowed-out ceiling tile midway between the desks and brazenly snaked the exposed wire down along a door frame, hoping no one would notice.

No one did. When arresting officers, a year later, made a show of standing on a ladder and removing the bug, Wiese recalled, Joseph Gambino's jaw dropped. Just seeing that, Wiese said recently, "was worth a year's salary -- mine, not his."

TALK ABOUT TOUGH COMPETITION HOW BILL RUCKELSHAUS IS TAKING ON THE NEW YORK MOB
By RICHARD BEHAR REPORTER ASSOCIATE RAJIV RAO
January 15, 1996

(FORTUNE Magazine) – WILLIAM Ruckelshaus was lunching with a group of editors and reporters at the New York Times in Manhattan when the question was popped. It was 1992, and the chairman of Browning-Ferris Industries, America's second-largest trash hauler, was preparing to seek a foothold in a city that never sweeps. "Hey, who picks up our garbage?" asked one Times man. "The Mob," blurted a second journalist, triggering a gaggle of giggles around the table. "You think it's funny," responded Ruckelshaus, whose company is based in Houston. "Here you are, in the financial center of the Free World, with an essential service delivered by a cartel, and you guys are all amused."

A year and a half later a Times editorial lauded BFI's entry into a marketplace it called a "well-documented disgrace" and a haven for "gougers and racketeers." Even so, FORTUNE has discovered, the newspaper's own rubbish at headquarters is still hauled away by Vigliotti & Sons, one of 23 companies indicted last summer by Manhattan's district attorney for alleged participation in a Mafia-dominated cartel. The judge in the case, citing a "substantial probability" of convictions, has appointed monitors to oversee Vigliotti and its so-called competitors, whose assets ($269 million) could ultimately be forfeited. Every defendant has pleaded innocent.

Welcome to the roughest trade in the roughest town around--an entrenched underworld of smelly, leaky loading docks where rats not only live in compactors but own them; where the price gouging takes place at 3 a.m. while chief financial officers snore safely in the suburbs; where tuff-tawking goons teach each other lessons with baseball bats; where bids are rigged and trucks are torched and skulls are split and courage is uncommon.

The New York City region has long distinguished itself as America's only Mob-entrenched commercial garbage market and a place where no public company dared to operate. Law enforcement experts believe it is now the Mob's most lucrative "legitimate" business (the illegitimate ones being loansharking, gambling, and dope). In New York City--a $1.5 billion rubbish market in which 300 trash haulers serve 250,000 businesses--a customer-allocation scheme has resulted in overcharging by more than 40%, or $600 million annually. The Mafia's rake-off: at least 10%, or $60 million a year; prosecutors say it could be twice that.

Enter Ruckelshaus, 63, a tall, quiet, fifth-generation Hoosier who is at least exceptionally brave and could end up looking canny. Sensing a golden opportunity in a market that was ready for change, in 1993 he dispatched a team of salesmen to start roaming the sidewalks of New York in search of fearless customers. Backing him up was Robert Morgenthau, Manhattan's indefatigable 76-year-old district attorney, who for the past two years has given BFI (1995 revenues: $5.8 billion) a leading role--and a feeling of considerable safety--in his massive probe that led to the indictments of BFI's biggest rivals. On this playing field, of course, when somebody shouts, "Kill the ump," the crowds usually run for cover. Even so, this rare alliance between a prosecutor and a chief executive is beginning to yield home runs for BFI and New York City businesses.

The changes are overdue by about four decades. The city began requiring all commercial enterprises to have their garbage picked up privately in 1956. The bad guys wasted little time: Within months there was evidence that a "property rights" scheme was in place, and nearly 20 investigations throughout the entire New York metropolitan region have failed to crack it. A paucity of prosecutions has given carters the confidence to believe "that they could exploit customers in perpetuity," concluded a 1987 study by the Rand Corp. The scheme works like this: Carters own customers' locations, known as "stops." Carters who "steal" stops (i.e., compete) are known as "outlaws." If you're an outlaw, you get four choices: Return the customer, keep the customer and pay a one-time multiple of 30 to 60 times monthly revenues to the previous carter, swap the customer for another, or do nothing and get your face batted in.

One former trash kingpin, Harold Kaufman, put it bluntly in testimony before the state's Senate Select Committee on Crime in 1984: "Property rights means that if I do the garbage, [I] get the first month's fee. It could be a little vegetable stand. All of a sudden IBM wants to put a plant where that vegetable stand was. I get IBM."

VIRTUALLY every business in New York has a trash tale worth whispering about. D.A. Morgenthau lunched recently with an executive who explained how, ten years ago, he wrote to various carters soliciting bids. That prompted a phone call to his home one night. "The caller said, 'You will have your head split open if you continue,' " says Morgenthau. "One of his stores was then burned to the ground." Similarly, a restaurant owner found a bunch of pig farmers in New Jersey who were willing to lug away his leftovers for free. That lasted about two weeks, until his former carter showed up to insist that he quash the arrangement or he'd never see the pig farmers again. "He told the carter to go to hell," says Morgenthau. "He never saw the pig farmers again, and the old carter said, 'It will now cost you double, to teach you a lesson.' "

A young construction contractor in Manhattan named Wayne Bellet was incensed at his garbage costs in the late 1970s. "I called and told the carter that if the price was not lowered he'd leave me no alternative but to hit the pavement and try and get it for less," recalls Bellet today. "He chuckled and said, 'Listen, son, I'm going to come back to you like a bad penny.' " Bellet never found another carter willing to service him--and every Christmas "three or four big, ugly garbage men would ring the bell, put their hands out, and extort their holiday gifts."

HOW have these carters been able to rule like this for so long? The many family ties among the firms clearly help foster cooperation. What's more, the government virtually condones bad behavior with a toothless and antiquated regulatory system. Garbage luggers are required to list their customers with New York City's Department of Consumer Affairs. That's fine with the carters: Most of them buy and sell customers among themselves for big bucks without any written contract binding customer to carter. Thus the city, through its customer filing system, has placed itself in the bizarre position of running a property-rights registry for the cartel. "The city, in a sense, legitimizes, oversees, and puts its imprimatur on a scheme that has been established by the organized-crime families," says U.S. Congressman Maurice Hinchey, an expert on the trash trade.

The DCA has set the maximum rate a garbage man can charge a customer today at $14.40 per cubic yard, vs., say, $9 in Los Angeles, $5 in Chicago, and $4.25 in Philadelphia. Corrupt carters, sounding big-hearted, insist they never charge their customers the maximum rate. They don't need to: The gouging occurs by overestimating the amount of material they cart away, an activity that takes place in the wee hours when nobody is watching. Not surprisingly, few people bother to complain. For the month of October, for instance, just nine companies--0.004% of the total--called the city to wail about an overcharge. That's practically six-sigma quality.

Who could blame the national waste conglomerates for ignoring New York City like a rotten apple? "New York has always been an imposing, looming, foreboding presence for us," explains BFI official Philip Angell, who oversees the company's New York foray. "It's that part of the woods you stay away from, since nobody's ever given you a road map. Who wanted to go into that heart of darkness if you didn't have to?"

But Ruckelshaus felt he had to. New York City produces 5% of America's commercial waste; no denser market exists. With so many Mafia bosses in jail, he figured the cartel might be vulnerable. Moreover, a new city recycling law meant that corporations might begin to pay more attention to what they're tossing away. Ruckelshaus began to view New York as a last frontier waiting to be conquered.

He had another reason for charging in. "I think institutions like ours need challenges in order to get better," he explains over lunch at Cite, a Manhattan media-district restaurant that was being charged for 309 cubic yards of garbage a month by its carter when a BFI audit claimed the true haul was around 170. "People in corporations like to be proud of what they do," he adds. "The public may not think that hauling is the highest calling of mankind, but when a company takes a step with broader public interest, that is a tremendous energizer for an organization."

Some BFI managers were skeptical about taking on the New York City cartel, but Ruckelshaus turned them around. "The longer you're involved with an organization, the harder it is to see that change is possible," he says. "Sometimes it takes someone from the outside to see the possibilities." Ruckelshaus was just the man for the task. He served as the first director of the Environmental Protection Agency in the early 1970s and earned a reputation for standing up to polluters. In 1983 he returned to restore public trust to the agency, which had become mired in corruption ("I can't say no to a President unless I have an extraordinarily good reason why"); the media crowned him "Mr. Clean." Between his EPA stints Ruckelshaus displayed unshakable integrity when he resigned as Nixon's Deputy Attorney General rather than execute an order to fire Watergate special prosecutor Archibald Cox.

BFI's board hired Ruckelshaus in 1989 to clean up the company, which had an odious reputation with regulators and the media. Through acquisitions, BFI had grown into a confederacy of autonomous family-run firms. Controls were lax, and the company was entangled in a bunch of price-fixing and pollution cases from Louisiana to Niagara Falls. A New York State congressional report concluded in 1986 that BFI had "used many of the same tactics associated with the organized-crime carters." By the time Ruckelshaus emptied the company's garbage, more than $45 million had been paid in fines, settlements, and one jury award. "All it takes is one guy to do something dumb," says Ruckelshaus. "I know of no case of wrongdoing that stemmed back to senior management in Houston."

EMPLOYEE safety was the main worry when BFI executives engaged in vigorous debate about how to roll into New York. "One camp felt we should go into a startup mode without waving a flag or creating a great deal of notoriety," recalls Bruce Ranck, then the company's president and, as of October, BFI's new CEO. "Another camp felt we should be extremely visible and make sure that everyone knew we were there." The splashy plan won. BFI arrived in late 1992 and began generating lots of attention--but precious few customers. Then, in early 1993, BFI received a grisly reminder of what it was doing: the freshly severed head of a large German shepherd, laid like a wreath on the suburban lawn of one of the company's top local executives. A piece of string tied the dog's mouth around a note that read, "Welcome to New York."

The note and string were flown to an FBI crime lab in Washington, while BFI's Ruckelshaus, Ranck, and Angell raced to New York to comfort frightened employees. The company's Manhattan office was still four months from opening its doors, so the men holed up in a suite at the Waldorf-Astoria Hotel to reassess strategy. Was this an isolated event from a low-level, Godfather-mimicking thug? Or was it a real signal? BFI decided to increase security and surveillance at its New York operations and stay the course. No perpetrator was ever caught.

In the months to follow, BFI salesmen received threatening, anonymous calls. Worse, many customers the trash giant was signing up, at savings of 30% to 60%--Cite restaurant, for example--were calling to cancel before service had begun. "Previously dated contracts with their old carters would suddenly appear," says BFI's Angell. "In other cases their old carters would pay them an intimidating visit." Cite's snubbed carter (who is unindicted) produced a previously signed contract as well as a letter agreeing to lower the restaurant's future trash bill by nearly 25%.

BFI will now sue customers who break their contracts; this enables the company to take depositions from rival carters, which could prove useful to the D.A.'s investigation.

Ruckelshaus was having particular trouble signing up major accounts. Take Tishman Speyer, one of the city's big names in commercial real estate. Managing director Charles Mahoney agreed to sit down with BFI but opened the meeting with a story about how his former boss, real estate billionaire Harry Helmsley, once decided to save money by buying his own trucks to tote trash for himself and his friends. But Helmsley quickly changed his mind when, on the day he was set to begin, one of the trucks was set on fire. "Now," said Mahoney, turning toward the BFI salesman, "what is it you wanted to talk about concerning trash in New York?"

BFI proposed to drop Citicorp's carting costs 40%. But during a meeting at the bank's Park Avenue headquarters, Ira Rimerman, a senior vice president of Citicorp, reluctantly turned down the offer. "He said he knew that the business was controlled by organized crime, and he was concerned that the bank's retail ATM network could be sabotaged or vandalized," recalls BFI's Angell. A second Citicorp executive, Howard Schusterman, told BFI that he had sought the advice of a friend who worked in the organized-crime unit of the city's police department. "He said his friend advised him not to switch carters," says Angell. Citicorp's hauler, Philip Barretti, who is pleading innocent to arson and antitrust charges, has been identified by law enforcement sources as an associate of the Gambino crime family, a link he denies. "They own these stops," insists District Attorney Morgenthau. "Citibank belongs to Barretti."

A vice president at another major bank served by indicted hauler Angelo Ponte told two BFI salesmen that his philosophy was, "If it ain't broke, don't fix it." When told that BFI could save him several hundred thousand dollars a year, he replied, "That ain't broke." (For the record, the trash of Time Inc., FORTUNE's parent, is hauled by an unindicted New York carter called Waste Management, unrelated to the giant national firm of that name.)

TO GAIN intelligence on the industry, BFI retained Kroll & Associates, corporate America's leading gumshoes. Kroll's Robert McGuire, a former New York City police commissioner, suggested a visit to the district attorney. By late 1993, Ruckelshaus was seated in Morgenthau's office, complaining that his low bids were being ignored. "We know," said Morgenthau. "We've been tracking your movements through our own undercover investigation." The two men, while not friends, had respected each other when they worked together in the Justice Department two decades earlier. Morgenthau knew he could be frank. "You have two choices," he said. "Either come in and cooperate with our investigation or stay out of the market."

BFI typically entered markets through acquisitions. But do that in a wasteland like New York, warned Morgenthau, and you may just find yourself indicted along with everyone else. BFI made that mistake in New Jersey in the early 1980s, leading to the firm's indictment (along with 23 other haulers) on charges of fixing prices and dividing up customers. Although BFI was acquitted after two trials, Ruckelshaus was not eager to repeat history. The only way to win in New York was to wipe out the cartel, a goal that required the chairman and the prosecutor to work together.

Entering a Mobbed-up market was one thing, but adopting a secret role in a government investigation was a tougher decision for BFI. The small circle of executives involved in the matter had many heated discussions. Fearing retaliation, regional head Jim Cosman was an initial voice of dissent. "I'd be riding on an airplane and wondering if it was the right thing to do," he recalls. "Will somebody get hurt? Why would a corporation do this?"

But Morgenthau sat down with Cosman and his colleagues and showed them examples of other major companies that had worked on cases with law enforcement agencies. Ruckelshaus's history in the Justice Department also gave them comfort. "People have so little trust these days in our government institutions," says Ruckelshaus. "That really bothers me. I trust Morgenthau implicitly. You don't have to talk to him long to see what a determined man he is to root out crime in New York City in his 70s. That is not a normal fella. Besides, we would have been flying blind without him. Our main concern was employee safety, and a prosecutor is in the best position to warn us about problems."

Morgenthau's first lucky break in the case was what we'll call XYZ Co., a legitimate "outlaw" carter that had come to him to complain about the cartel. For 15 years Morgenthau had tried unsuccessfully to persuade similar companies to let him plant an undercover agent in their ranks. XYZ was willing, and now Ruckelshaus was the second key ingredient he needed. Neither man will go into details about BFI's role in this secret alliance, but Ruckelshaus calls it "pretty deep." He waited a year before telling BFI's outside directors he was cooperating. In the meantime he kept Morgenthau apprised of everything--bidding contests, efforts by rivals to keep BFI out of the marketplace, even offers by two-faced haulers to cut secret deals with BFI in case the cartel crumbled. As for Morgenthau, "he was very open with what he was telling me," says Ruckelshaus, "as if we were still in the Justice Department." Says Morgenthau about his temporary partner: "He's a guy with some guts."

In terms of resources, the Morgenthau garbage probe is the biggest investigation he has ever conducted in his 21 years in office--ten assistant D.A.s on the case, raids by 500 cops on 26 locations, more than 3,000 hours of electronic surveillance, even a videotape showing physical threats made to a driver for a rival carter who was beaten within a hair of his life with planks and baseball bats. Says Daniel Castleman, Morgenthau's investigations chief: "Some of the defendants are guilty of having big mouths. They spoke to the agent about how organized crime runs the business, and he recorded the conversations."

The indictments paint a portrait of the city's trash industry as a mixed family affair. In the driver's seat is 57-year-old Joseph Francolino (Duffy Waste), a reputed protege of John Gotti who is believed to be the new godfather of garbage for the Gambino crime family. He replaced James "Jimmy Brown" Failla, 76, who has a thing for brown clothes, walks with crutches, and allegedly ran the show for three decades until his imprisonment for conspiring to commit murder (he pleaded guilty in 1994). Hauler Angelo Ponte (V. Ponte & Sons) is allegedly the "wastepaper" point man for the Genovese crime family. The main vehicle of control for the Mob in Manhattan: the Association of Trade Waste Removers of Greater New York (and its sister, the Waste Paper Association), where disputes are mediated, payments negotiated, and carters satiated by X-rated porno films.

UNDER Morgenthau's direction, XYZ Co. allegedly doled out $790,000 in dues and extortion money to the carters, casting a wide net over trash haulers that are part of the fabric of New York City. One carter with reputed ties to the Genovese family, Vincent "Jimmy" Vigliotti (ABC Recycling; Ava Carting; Vigliotti & Sons), is accused of taking $126,000. Three months before his indictment, he was honored at the Bronx Chamber of Commerce's 100th anniversary luncheon. The keynote speaker was the governor's new economic development czar. Vigliotti, like several other indicted carters (such as Ponte and Barretti), has benefited greatly from tax-exempt industrial development bonds, an area now under investigation by law enforcement. FORTUNE has learned that Vigliotti's customers include the popular Royalton Hotel and the legendary Palace Theatre.

Next on the extortion list is Patrick Pecoraro (Delmar Recycling; V. Marangi Carting), who is allegedly linked to the Gambino family and who is accused of pocketing $110,000 from XYZ. His customers include Starbucks coffeehouses, Yankee Stadium, the New York Athletic Club, and the Essex House Hotel.

Sizing up the two largest indicted carters--Barretti and Ponte--is kind of like comparing Al Pacino's Scarface to Marlon Brando's Godfather. Barretti is charged with arson for torching one of XYZ's garbage trucks. Ponte was named an "honorary" sanitation commissioner under former mayor Abe Beame in the 1970s. Barretti was arrested in October for allegedly assaulting his longtime mistress, smashing her furniture and ripping the telephone out of the wall as she tried to call 911--all because she supposedly wanted to date other men. (The woman declined to press charges.) Ponte is a prominent member of Archbishop John O'Connor's Committee of the Laity, which raises funds for Catholic charities, a post he got just four months before being named as a "made member" of organized crime in testimony before a state senate committee in 1984. Ponte vehemently denies any Mob link.

Barretti was once indicted (and later acquitted) for bribing an inspector to allow illegal dumping. Ponte is a founder of Cop Shot, an organization that rewards people who rat on cop killers. Barretti was a player in a strange stock deal involving principals of a penny-stock boiler room that settled SEC charges last year. When Gulf war heroes returned to a victory parade in New York in 1991, guess who picked up the trash for free?

Ponte teamed last year with Dale Carnegie & Associates to pay for a statue of the founder of the city's marathon. He also gave $100,000 for a library exhibit on the history and politics of garbage that, needless to say, included no mention of the Mafia. Barretti's son punched an environmental protester in the head outside his father's smelly paper plant. Junior got five days of community service, while Dad's plant was shut down by the state for operating without a permit. And Ponte? His paper mill was partially financed by a HUD grant with the help of New Jersey Senator Bill Bradley.

"Barretti scares me--he always did," says Tishman Speyer's Charles Mahoney. "But Angelo is a perfect gentleman." Tishman Speyer has a five-year contract with Ponte that can be broken at any time on 30 days' notice, but "I'm sticking with him," says Mahoney, who is active on the charity circuit with Ponte. "You wouldn't want to meet a nicer man. It's hard to believe that somebody with a heart like he has is guilty of some serious crime."

The sentiment is shared by Vincent "Jim" Peters, former CEO of Cushman & Wakefield, the giant property manager. "I've known this man for 38 years, and I will stand behind him anytime," he gushes. "He is my friend, and he will never be anything but that. And I think a lot of people in this town would tell you the same thing about Angelo Ponte. I don't know about these Mobs. All I know is the man. I wish all of my friends were as loyal and as good as this guy, and I've met a lot of people in my lifetime." Peters doesn't believe that Ponte's customers are stuck with him. "Angelo is the kind of guy who, if you wanted to cancel [the contract], you could cancel it," he says. "That I promise you. He would never stand in anybody's way if they felt uncomfortable."

That kind of thinking flabbergasts Morgenthau, who calls Ponte a bid rigger and the Genovese family's "representative" in the wastepaper business. The prosecutor, as part of a larger investigation into the city's real estate industry, has subpoenaed the trash-hauling records of many commercial property managers. "The question is, are there payoffs being made?" wonders Michael Cherkasky, the D.A.'s former investigations chief, who helped launch the trash probe five years ago. "I would suggest that the probability is that substantial payoffs are being made to individuals in those firms who are negotiating those deals." (The real estate sources interviewed for this story deny knowledge of any such payoffs.)

MORGENTHAU is mystified as to why more big corporations aren't overcoming their fears and dumping their indicted carters. "It's a damn good question," he says. "I'm surprised. If I were in their shoes, I wouldn't want to be doing business with a company that has been charged with criminal conduct, price fixing, and enforcing it with strong-arm tactics. I also think that from a business standpoint, it's shortsighted. If the cartel remains in charge, prices will go up higher. This is a golden opportunity now to break loose, and I don't know why they're not." When asked about Ponte's distinguished charitable service to New York, a faint smile appears on Morgenthau's lips. "That could be a consideration on sentencing," he says.

Lewis Rudin, a centimillionaire and the founder of the Association for a Better New York, is very happy with Ponte. That's because Ponte agreed to service one of his 14 New York City office buildings for free for five years. "He did it in the hopes that when the five-year agreement was up, in 1993, he'd get all our buildings on a bid basis," explains Saul Shey, operations chief at Rudin Management. "But Ponte was never guaranteed the buildings." Then why do it for free? "Good faith, whatever you want to call it--a gamble on his part," says Shey. Sure enough, Ponte won the bid and now enjoys a five-year contract that Rudin cannot break except in the case of default--a highly unusual deal in the trash business.

When questioned about the arrangement, the 68-year-old Rudin blows his stack. "We go out for bids every year for insurance coverage, okay?" he says. "These are all responsible companies--Aetna, Travelers--and all of a sudden the prices are about the same. Why doesn't the district attorney fucking investigate that? I think they're making a mountain out of a molehill with these guys [the indicted carters]."

During a recent swing through the city, Ruckelshaus stopped for a brief meeting at One Battery Park, headquarters of the New York City Partnership, a prestigious club of CEOs who meet regularly to try to solve the city's problems. Ruckelshaus hopes that by joining the group he can drum up more garbage business. But a prominent member of the partnership (and its chairman until last year) is Jerry Speyer, of Tishman Speyer fame. Rudin, too, is a popular member. In fact, he owns the building that houses the partnership. A sneak into the loading dock confirms that Ponte picks up the litter.

In a recent visit with FORTUNE, the 70-year-old Ponte was gracious and good-humored. "Have you never eaten at my restaurant?" he asked. "Shame on you. Shame on you." Prosecutors say Ponte's Manhattan dining room, F.Illi Ponte, was the scene of extortion negotiations between various carters, including the undercover agent working for XYZ. Ponte disputes it. "Nobody ever gave me a nickel," he says. "This company grew from hard work--and nothing else." His eyes glistening, he recalls how his father, Vincent, launched the business with a horse and wagon in 1919 and how he (Angelo) had to drop out of school to help him. Today the family has 50 trucks, six times that many employees, and more than 40 buildings in lower Manhattan. "BFI is the best competitor on the street," concedes Ponte. "But let's see how well they do now that the price of paper is coming down."

Ponte contends that BFI's low bids are due mostly to the company's growing ability to sell recyclables. In early 1992, for example, mills wouldn't pay a nickel for "mixed" office paper. But by last June the mills were paying $120 a ton. Now the price has plunged to $2.50. BFI's Angell calls the argument nonsense. Says he: "We were cutting waste bills by 30% to 60% even before the paper market spiked upwards--and we were still making money. Besides, for most businesses, recyclables are a small part of the garbage. Guys like Ponte weren't even lowering their prices until we came into the market." In response, Ponte maintains that he has a "history of always giving price reductions."

Until the indictments, BFI's successes came slow. The Village Voice, that bastion of liberal muckraking, was allowing its journalists' crumpled first drafts to be hauled out the door by Barretti until last summer, when it switched to BFI. The Parker Meridien Hotel cut its carting costs 50% by switching to BFI. But it did so only after phoning the Hotel Intercontinental, another BFI client, to make sure it hadn't suffered any retaliation. The Intercontinental had switched only after a similar conversation with United Parcel Service, another BFI customer. Call it the "I'm okay, you're okay" chain letter. BFI's Angell says he respects the fear factor and understands that it's a major hurdle for some corporations to clear. "The longer we're here and the more they see their peers and competitors sign up, the better it will be," he says.

In some cases BFI has to race to pick up the trash of new clients because the old carter simply refuses to stop hauling the trash. One night four police cars had to keep the peace between two BFI trucks and a rival carter who were arguing outside a midtown Manhattan deli. Traffic was gridlocked for blocks as bemused cops wondered what on earth they were doing adjudicating a dispute over who got to drag off leaking bags of rancid food. A Chinese counterman finally came to the rescue. In broken English he announced, "BFI pickup! BFI pickup!" Only in New York. Says Ruckelshaus: "These people have operated for so long under their own rules that they see us as the rule breakers. They really believe that what we are doing is unethical."

Spurned carters try other tactics as well. The D.A. accuses Mongelli Carting of blocking the entrances to a former customer's plant so that trucks couldn't enter, as well as fracturing the skull of an outlaw driver (attempted murder). Mongelli once hauled the waste of Columbia Presbyterian, the city's largest hospital, until officials there noticed they were being charged for five hauls a week when its containers were full only half that time. BFI landed the account, cutting the hospital's bill 60%. Louis and Paul Mongelli, a father and son team, visited the hospital in 1994 to try to win back the account. "They tried a subtle strong-arm tactic," recalls Richard Parillo, a hospital official. "They kind of intimated that 'If we can't have it, nobody will have it.' I essentially told them, 'You know, those days are over. And my name ends in a vowel too.' "

Those who work with BFI also face risks. Rob Donno runs Suffolk Waste, a Long Island hauler that handled BFI's pickups in New York City on a subcontract until last March. He was on the frontlines every day. Early on his secretary received the following phone message: "Tell those guys to stay out of the city, and tell Robby we're going to hurt him too." Donno bricked up the windows on his garages or used wire mesh to prevent objects from being tossed inside. Armed guards sometimes followed his garbage trucks into the city. His containers were stolen, his drivers were yelled at, and one of his rolloffs was taken for a joy ride.

SO WHY did Donno persist? "When you drive down Fifth Avenue and you see some guy hanging off the side of the building washing windows, maybe you've done your part to save his job because you've helped reduce the cost of doing business in New York," says Donno, who founded a charity that brings 80 poor children into the U.S. each year for heart surgery. "It's kind of like, in 100 years we'll all be dead, and what we make here, what we do here, isn't going to come with us. It's the spirit with which we live our lives that's going to count for something. You have to try and do what's right. Sometimes that takes courage."

Not everyone has it. A major entertainment complex, fearful of retaliation, has warned BFI that if its name appears in this article it will cancel its new contract with the hauler. (Hint: It's in Midtown.) And what about other legitimate carters, notably WMX Technologies (formerly Waste Management), America's largest garbage hauler, with sales of $10 billion? At a recent trash symposium sponsored by Goldman Sachs, every company present, including WMX, disclaimed any intention of entering New York. But WMX has aided the cartel by operating a waste transfer station that many of the indicted carters used. "We need them here picking up the garbage," says Ruckelshaus. "If we can attract legitimate companies, the market will open up."

After three years in New York, BFI has just 390 customers, representing less than 1% of the market's revenue. Yet plenty of signs are encouraging. Only 10% of the 200 customers that have climbed aboard since the indictments have changed their minds. There's the McDonald's franchisee in Harlem who decided she'd had enough intimidation and threw some thugs from her old carting company out of her restaurant. There's the deli owner in the Wall Street area who switched to BFI and then held his ground while two "torpedoes"--how cops describe goons who are thus shaped--stood in his shop for five straight days just eyeballing him. Perhaps sensing that times are changing, Ponte and other haulers even met with investment bankers a year ago to explore the possibility of going public--an attempt to cash out at the top.

BFI's entry has clearly been bringing prices down. The World Trade Center, for example, has seen its trash bill plunge from $2.7 million a year to $667,000--savings that fall straight to the bottom line. "In 1991 bids were running at about 20 cents per square foot of real estate," says Richard Fuller, president of Great Forest, the city's largest recycling consultants. "Now bids are running around 2 cents or less." Says BFI's Angell: "Many of the carters are now making a concerted, orchestrated effort to lowball us out of town."

In October, BFI started servicing British Airways at Kennedy airport. The airline's executives, fearful of possible retaliation to their planes or facilities, were locked in intense debate on the subject. "A lot of people in the organization were not interested in taking the risk," says Ken Deming, a British Airways executive. "But we were being charged an exorbitant rate by the previous carter. The waste removal industry has put a hidden tax on businesses. It's just another issue that makes companies want to leave New York."

Until recently Barretti carried off most of the bones and guts at New York's Fulton Fish Market, the world's largest seafood bazaar. But Mayor Rudolph Giuliani, in his continuing effort to boot the Mob from the market, helped BFI land the business. The city is also hoping to establish "character" checks for carters, who would then be allowed to bid for the right to pick up all the trash in designated "zones." The scheme would cut down on noise and traffic--some buildings with many tenants are serviced by half a dozen different carters--but it might just create minicartels unless enough honest companies join the bidding.

Ponte's attorneys, Frederick Hafetz and Susan Necheles, believe that an unholy alliance has been formed by BFI and the district attorney's office. The two Manhattan defense lawyers complain that Morgenthau has been encouraging CEOs to switch carters. "Morgenthau virtually invited BFI to get a foothold in the city," says Hafetz, who coordinates the defense strategy for all the indicted carters. "If the D.A. has a case, his job is to indict and be quiet, not to mount a public campaign designed to injure defendants. You pollute the public image of these companies by what they are doing. It's an abuse of power." D.A. investigations chief Castleman throws a counterpunch. Says he: "We are not shilling for BFI, but we should be helpful to people who come in and cooperate. We want BFI to succeed--to a point. They did the right thing and should reap some rewards." British Airways' Deming says he met and consulted with Morgenthau in his office before switching to BFI, but recalls that the prosecutor "took great pains to distance himself and not promote BFI."

Not long after the indictments were announced, a Ponte truck allegedly tailed a BFI truck into New Jersey, while its goony occupants yelled at the BFI driver. Judge Leslie Crocker Snyder warned Ponte that if it happened again, he'd be locked up in jail without bail. "This is your one chance to put out the word to your people," she said, glowering at the carter in her courtroom. "If a Ponte truck goes near a BFI truck, you're in." Ponte says the chase incident never took place.

BFI enjoyed record profits of $385 million in 1995, up from $279 million in 1994. Ruckelshaus's $300 million capital investment in recycling, once sneered at by analysts, is also beginning to pay off. Today the company has more recycling centers than landfills. BFI employees seem proud of their company's inroads against the Mob, and many walked over to share their feelings with Ruckelshaus at the company's rodeo extravaganza in Houston in October. That's an annual event--unique to this industry--in which BFI's most skilled employees compete in contests such as navigating their garbage trucks around cones and gently breaking eggs with bulldozers. Ruckelshaus has let it be known that New York is a frontier town for the company, where careers and fortunes can be made. In that gold rush spirit, salespeople who come to New York City get free housing for a year.

But BFI still has a long way to go before it can declare its New York City mission a success. Not one large bank or real estate company is a major customer. Moreover, many customers, afraid to change, are instead using BFI's bids to get their current haulers to lower their bills. "I think this market is broken, and we're seeing early signs of the cartel's deterioration," says Ruckelshaus. "It'll just take a while for the people of New York to believe it."

FORTUNE recently joined BFI for some cold-call sales canvassing on the streets of lower Manhattan--an arduous way to build a business. At the Showtime Delicatessen & Restaurant, just blocks from the D.A.'s office, a BFI salesman made his pitch about how his company is the only publicly held player in the market and how he could lower the restaurant's trash bill. Owner Jimmy Poulos listened carefully. He said he'd love to save some money. But then he handed back the salesman's card. Making the sign of a gun with two fingers and pointing it at his own head, he explained, "If I change companies, I'm finished."

IN GRIP OF MOB FIRST THE COLISEUM, THEN JAVITS CENTER
By TOM ROBBINS
Sunday, March 12th 1995

Corruption has long been a part of the New York convention scene, as inbred as nametags and hospitality suites.

And last week, when Gov. Pataki demanded the resignations of the 13 board members of the Jacob Javits Convention Center, he confronted a problem, whose solution has eluded politicians for more than a generation.

Javits is plagued by a network of organized crime influences that create sky-high prices in a highly competitive industry.

It's a network that already was in place at the old Coliseum on Columbus Circle, where mobsters were just as brazen as the gangsters swaggering into Javits .

"The Coliseum belonged to us . . . I secured many jobs for people there," mobster-turned-informant Vincent (Fish) Cafaro told the FBI almost 10 years ago.

When the Coliseum closed and Javits opened in 1986, the mob was first in the door.

Then, as now, the mob's influence stemmed from control of three key unions the Carpenters, Teamsters and Exposition Employes. Jobs at the center were considered plums. And to get one, you had to know someone.

Although the powerful Genovese crime family has exerted the most control at the center, according to authorities and mob informants, Javits is shared among several crime families.

Until he disappeared in 1987, a key Javits figure was Colombo crime family captain Jimmy Angellino.

"Angellino controlled hiring of carpenters on a day-to-day basis," Cafaro said. Today, Angellino's son operates a trade-show decorating firm at the center.

The mob's scams are simple and lucrative according to Cafaro and other informants. With control over union foreman positions, mob lieutenants are able to list employes on payroll sheets whether they work or not.

Decorating firms that hire and pay workers are caught in a vise and are faced with expensive slowdowns if they balk.

As at the Coliseum, Javits also offers vast ripe pickings for thieves. Boats, jewelry and heavy equipment are regularly stolen.

Last year, Javits Inspector General Sebastian Pipitone recaptured three motor boat engines worth $100,000 that insiders had swiped and hidden in one of the building's labyrinthine corridors.

Today, despite several prosecutions, mobsters remain so pervasive that police intelligence detectives regularly stake out the parking lots at the West Side landmark to shoot photos and take down license plate numbers.

Among those going in and out of the center's W. 34 St. employe entrance is Anthony Fiorino, the Carpenters union chief and brother-in-law of Genovese street boss Liborio (Barney) Bellomo.

The shop steward of the powerful Exposition Employes, Local 829, is another reputed Genovese associate, Steven (Beansie) Dellacava, who got his job after his release from prison on federal drug charges.

Control of the Teamsters union at the center was passed from Robert Rabbitt Sr. to his son, Michael Rabbitt, when the father pleaded guilty in 1992 to making phony payroll documents.

As a result of federal civil racketeering lawsuits charging mob influence, both the Teamsters and Carpenters unions are under court-appointed monitors.

Charles Carberry, an ex-federal prosecutor responsible for weeding mobsters out of the Teamsters, has won the removal of three alleged mobsters from Local 807, and a fourth is pending.

His investigation of the local also led to a trusteeship of the local by national Teamsters President Ron Carey.

Former federal Judge Kenneth Conboy, who monitors the New York District Council of Carpenters, has filed union corruption charges against Fiorino. A hearing is scheduled for later this month, and charges against another 10 carpenters are expected shortly.

But there is no monitor for the Exposition Employes, Local 829.

"We're too small to attract the feds," complained one rank-and-file member, who added that honest workers suffer from mob rule by being shut out of work.

Three years ago, Manhattan District Attorney Robert Morgenthau won indictments against 27 members of the Teamsters and Exposition unions.

Morgenthau launched a new probe of the Exposition workers last year after Pipitone helped expose a major featherbedding scheme.

Instead of allowing mob-linked union stewards to hand out payroll checks to members, Pipitone ordered workers to provide identification and have their picture taken on payday.

The reform caused a short work stoppage and also turned up evidence indicating that more than two dozen employes had engaged in no-show jobs, sources said.

In another reform measure, city and state officials named Fordham Law School Dean John Feerick as Javits labor arbitrator.

Feerick said his rulings have ended the practice of paying workers for unnecessary weekend and lunch shifts.

But he adds that his arbitrators, available to either labor or management, are not used as much as they could be. "This mechanism could be more actively utilized," said Feerick.

Javits officials have long complained that their control over the work force is limited, since most workers are employed by decorating firms hired by exhibitors.

"The Javits management has nothing to do with negotiating for labor charges," said former center president Fabian Palomino. "Those prices are negotiated on behalf of the show managers."

Palomino, a close friend and adviser to former Gov. Mario Cuomo, said charges that he had failed to press the unions for changes because he didn't want to lose their political support were "damaging and misleading."

But in a pre-election event in October, Palomino and Cuomo went to the offices of the New York District Council of Carpenters to join union chief Fred Devine in a celebration of a new contract between Carpenters and decorating firms at the center.

Palomino characterized the agreement as an additional reform that increased Carpenters' working hours and reduced overtime pay from double time to time and a half.

Conboy, however, contends the deal allowed Fiorino to dole out cushy work to a small group of union insiders. And a federal civil racketeering lawsuit against the Carpenters described union president Devine as close to several top mobsters.

"I wouldn't know about that," said Palomino.

Ex-Mayor Ed Koch said that he urged Cuomo when Javits was due to open to avoid future labor problems by making workers at the center civil servants.

The idea "still holds merit," Koch said last week. "I do remember very vividly that Mario wanted this to be a private sector operation and wouldn't accept my suggestion," said Koch.

Cuomo said he didn't recall the conversation. "It must have been the first time Ed ever said something should be Civil Service," he said. "Conservatives want privatization."

They Cover the Waterfront
The Mob's Latest Maritime Maneuvers
Tom Robbins
Tuesday, February 26th 2002

There was never any mystery about what drew the mob to the city's waterfront: The loot of the world passed through New York harbor—from auto parts to perfume, steel to furs—all stored in the holds of the thousands of ships that plied the Narrows to berth at piers in Manhattan, Brooklyn, New Jersey, and Staten Island.

He who controlled the gangs of tough men with strong backs who carried that cargo on and off the ships won not only opportunities for massive theft and pilferage. He also won power over the timetables of arrival and departure on which giant corporations depended, and on which fortunes often rested. No wonder the union that arose among the waterside workers was the roughest, and the one most dominated by organized crime.

Instead of offering heated hiring halls where men could await calls to work, the early International Longshoremen's Association left its members on the cold docks at the beck and call of a crew boss's whistle. Its leaders were a motley crew: John "Cockeye" Dunn ran downtown until he was sent to the electric chair in 1949 for killing a stevedore; Alex "the Ox" DiBrizzi, with 23 gambling arrests, controlled Staten Island; Murder Inc. chief Albert Anastasia, and his brothers, Anthony "Tough Tony" and Gerald "Gerry Bang Bang," ruled Brooklyn; convicted payroll robber Mickey Bowers and his brother Harold had the West Side.

The ILA? It was "a nest for waterfront pirates—a racket, not a union," said city garment workers leader David Dubinsky.

Then, starting in the early 1950s, a series of events helped undo the worst excesses. A real waterfront priest, Father John Corridan— later portrayed on-screen by Karl Malden—made cleaning up the docks his mission and nurtured rank-and-file rebels fed up with their corrupt leaders. Then-governor Thomas E. Dewey convened crime hearings that kept the city riveted for weeks. A Waterfront Commission was created which curbed, if not eliminated, the most sinister elements on the docks. All this was followed by a series of prosecutions that, over a 10-year period, sent more than 100 ILA officials and waterfront figures to jail.

As late as 1990, a sweeping civil racketeering case against the ILA was painstakingly assembled by federal prosecutors in Manhattan. Union officials agreed to a consent decree that brought powerful outside monitors to watchdog the biggest and most corrupt locals in Brooklyn, Manhattan, and New Jersey.

And yet, and yet: Nearly 50 years after On the Waterfront, a dozen years after that prosecutorial full-court press, here was the Brooklyn U.S. attorney last month, flanked by the local head of the FBI and the city's top organized-crime cops, at a press conference announcing the indictment of no less a figure than Genovese crime family boss Vincent "the Chin" Gigante, his son, and six other alleged mob figures in a new round of waterfront crimes.

Gigante's crew had succeeded in infiltrating the longshoremen's union and dominating some of the most powerful companies doing business on the docks, said U.S. attorney Alan Vinegrad. As a result, the prosecutor charged, the crime family had won "extortionate control of the New York, New Jersey, and Miami piers."

How was it, Vinegrad was asked in an aside, that there were still such powerful wrongdoers in an area where the Justice Department had put so much energy and had already claimed at least partial victory? "The mob has a way of getting back in," he said. "They're always trying."

The Mafia's chief re-entry route, the government claims, is Andrew Gigante, 45, the eldest son of the imprisoned mob chieftain. Unlike his father, Andrew Gigante has no criminal record, and until his arrest last month, he was a supervisor on the New Jersey docks for a firm that repairs shipping containers. He has worked there quietly for 27 years, since he was a teenager. His only notable public appearances came in 1997 when he held his father's elbow, as the unshaven, feeble-looking mob chief shuffled from his East Side townhouse to federal court in Brooklyn. The elder Gigante was convicted of running the Genovese family despite his lawyers' claims that he was mentally unfit to run his own home, much less a network of criminals.

After his father went to prison, prosecutors allege, Andrew Gigante became the Chin's relay man, bringing messages from the jailhouse to top crime family leaders like alleged capo Dominick "Quiet Dom" Cirillo and the family's reputed acting street boss, Ernest Muscarella. Many of those relayed instructions involved family policy on the docks, authorities claim. Prosecutors call Andrew Gigante "a power on the New Jersey waterfront in his own right."

It's a contention his attorneys vigorously contest. "He's 45, he's stayed away from this stuff all his life," lawyer Peter Driscoll told a court hearing last month. "Andrew Gigante has nothing to do with organized crime, nothing," said another lawyer, James Culleton.

Andrew Gigante's employers agree. Seated in a cozy office paneled in knotty pine on the second floor of a two-story brick building on Newark's gritty outskirts, shipping company executive Christopher Guido gives short shrift to the prosecution's claims. "The government says things like that," he says dismissively. "We know the government's motivation is to make careers, and nothing makes them faster than organized crime. People love it. Look at The Sopranos."

Outside Guido's windows it is deep Sopranos country. His Portwide Cargo Securing Company, a division of his family's A.G. Ship Maintenance Corporation, is surrounded by mountains of rusting steel shipping containers. Ranging from 20 to 40 feet long and eight feet high, they are stacked six and seven to a tower. Beginning in the 1960s, these containers revolutionized the maritime industry. Instead of requiring gangs of 27 men to haul freight piece by piece, the cargo was stowed inside the huge boxes, lifted on and off ships by giant cranes and derricks, and placed atop tractor trailers or freight trains.

The ILA leadership and its mob associates initially resisted containerization but eventually gave way and signed contracts that guaranteed annual wages for its declining membership and created new trades for those maintaining the containers. Guido's father, Bert Guido, and his grandfather, Albert Guido, founded one of the first and largest container repair firms, starting in Brooklyn and then expanding to New Jersey.

By the 1970s, Waterfront Commission investigators claimed, Bert Guido had a near monopoly on the harbor's container repair business. He was also president of the trade association of the growing industry, a group of some two dozen businesses organized as the Metropolitan Marine Maintenance Contractors Association. Known as Metro in the industry, the trade group handles all the collective bargaining with the ILA, and its officers sit on the pension and benefit funds—worth hundreds of millions of dollars—along with ILA officials.

Prosecutors insist Metro is little more than a mob-created front, a joint enterprise of the Genovese crime family and the Gambino mob designed to "augment" their control of the ILA.

In any event, Bert Guido landed in trouble when he and three other trustees of the Metro-ILA benefit funds pleaded guilty in 1990 to criminal conspiracy stemming from their mishandling of the funds. Guido served no jail time, but he was forced to relinquish ownership of his companies.

Prosecutors call Bert Guido a Genovese associate and allege that while Andrew Gigante may work for the Guidos on paper, in reality Gigante's the one running the show. In one recent instance, authorities say, Bert Guido handed over a $50,000 extortion payment to a Genovese soldier. In a bail hearing for Gigante last month, Assistant U.S. Attorney Paul Weinstein told the court, "The business that this defendant purportedly works for is actually controlled by him on behalf of the Genovese family." The Guidos scoff at all of these assertions. "It's not true," says Christopher Guido.

What is clear, however, is that Andrew Gigante has done better than the average dockworker. At the bail hearing his lawyers said he owned property in New Jersey worth $4.2 million, as well as interests in two waterfront companies. At his home in leafy Old Tappan in northern New Jersey, he keeps legally registered 9mm and .357 Magnum pistols.

The fulcrum for the mob's continuing influence on the waterfront, prosecutors allege, is the trade group, Metro. Two current Metro employees and one former aide were among the group indicted last month, charged with shaking down business owners, trying to loot benefit funds, and money laundering. Alleged Genovese soldier Michael "Mickey" Ragusa, 36, who formerly worked in another mob-tied association representing drywall contractors, held a "sham" no-show job at Metro, prosecutors say. His lawyers deny it.

Another defendant, Thomas Cafaro, 43, was best man at Andrew Gigante's wedding and worked at Metro for 12 years until the mid 1990s, when he quit and moved to Florida with a $120,000 annuity from the association. Cafaro carries heavy mob baggage. His father, Vincent "the Fish" Cafaro, a top Genovese lieutenant, was a well-schooled gangster from East Harlem who later became one of the first mobsters to enter the witness protection program, spilling mob secrets that helped send several of his former colleagues to prison. To win back the family honor, Tommy Cafaro allegedly wiretapped his own mother and sister, officials say. But he has never been admitted to mob membership, allegedly because of his father's status.

Cafaro's lawyer disputes the allegations. "He's not an associate of anything nefarious; he's a good husband, a good father," said Mike Rosen. "All this about his father, it's just window dressing."

The biggest target in the contractor's association was Metro's longtime, $100,000-a-year vice president, Pasquale "Patty" Falcetti. Described by the FBI as a soldier in the Genovese crime family, Falcetti's job put him in charge of bargaining with the ILA's Local 1804-1, based in North Bergen, New Jersey, and Local 1814 in Brooklyn. The contracts are some of the biggest in the industry, covering 1300 workers, according to Department of Labor figures.

Falcetti, 42, has no previous criminal record, and Metro's counsel submitted a letter to the court calling him "a good and valuable employee." Falcetti's lawyer, George Santangelo, pointed out that his client has survived at Metro for 19 years without interference from the Waterfront Commission or the 1990 civil racketeering case.

But on tapes made over a three-year period by a mob informer for the FBI, Falcetti sounds like a very different kind of business executive. According to the government, shipping industry executive Falcetti is heard proclaiming on subjects ranging from the problem of dealing with Albanians to handling negotiations with the top echelons of the Genovese family.

"I hate these fuckin' Albanians, I hate them. If you have a beef with them, you have to kill them right away. There's no talking to them," Falcetti is alleged to have said in May 2000.

When a dispute arose between two rival, mob-tied tow-truck firms, Falcetti offered his solution to the problem: "Take a few guys and go and beat the shit out of the kid. That's what I would do."

But Falcetti's most telling, and potentially most damaging, comments came during long, detailed discussions about how to cope with a Genovese family senior citizen named George Barone, who was booted off the docks by the Waterfront Commission in the late 1960s and who then set himself up as a key ILA figure in Florida.

Barone, 78, was once a feared enforcer. In 1954—the same year On the Waterfront swept the Academy Awards—Barone was working as a hiring boss on a Lower West Side pier when he was arrested for beating a longshoreman who had had the nerve to complain about not being picked for a work crew. "Are you looking to make trouble?" Barone allegedly said before he and two others dragged the man into a Ninth Avenue meat market, where Barone proceeded to beat the dissident unconscious with a metal bar.

The felonious assault charge was later knocked down to disorderly conduct, and Barone continued his swagger through the docks, running a downtown ILA local that was renowned as a haven for ex-cons. Called before the Waterfront Commission, he went mum. The agency later lifted his license to work on the docks, and he headed south, where he helped found ILA Local 1922 in Miami. By 1980, Barone was in trouble all over again, convicted on federal charges of selling labor peace and sentenced to 15 years.

After his release from prison, Barone still controlled the Florida docks, law enforcement officials claim, but younger, ambitious Genovese hoods were chafing under his rule and showed the aging gangster little respect.

"He's a senile old #%@&#%@ man, this guy," Falcetti was recorded last March saying of Barone. In the same conversation, Falcetti described how top Genovese family officials had ordered Barone to "stay away from the international [union], stay away from the #%@&#%@ big delegates that they put there." Barone was free to continue controlling Florida, but he had to "stay away from the Jersey piers, away from guys that have been close to him for years." Falcetti added, "It was a hairy #%@&#%@ thing."

Much of Barone's problems, Falcetti said, stemmed from a run-in with Andrew Gigante. "He bumped the son," said Falcetti as he touched his own chin in gangland sign language to indicate crime boss Vincent Gigante.

Andrew Gigante had his own company in Florida, Falcetti said, and Barone allegedly failed to help him. "Whatever the kid says," said Falcetti referring to Andrew Gigante, "it comes from him," again patting his chin. "Who's gonna challenge that?"

One of "Chin" Gigante's orders, the government says, was to keep Barone "close" and "comfortable" so that when the time came to eliminate him, he would suspect nothing. Barone is supposed to be under house arrest, with electronic monitoring, at his condominium in Miami. His telephone has been disconnected and his lawyer did not return repeated calls.

ILA officials insist that while they know of people like Barone, they are just ancient history. "It is puzzling as well as baffling," said ILA vice president James McNamara. "There was great concern, and it was disheartening to hear this, but unless there was a specific allegation, we can't investigate a press release."

Mafia Runs Fulton Fish Market, U.S. Says in Suit to Take Control
By ARNOLD H. LUBASCH
Published: October 16, 1987

LEAD: Federal prosecutors filed a lawsuit yesterday seeking to seize control of the Fulton Fish Market in lower Manhattan, declaring that it is dominated by the Mafia.

Federal prosecutors filed a lawsuit yesterday seeking to seize control of the Fulton Fish Market in lower Manhattan, declaring that it is dominated by the Mafia.

In an attempt to expand use of Federal racketeering laws, the civil suit asked a Federal court to appoint supervisors to oversee the operations of the busy market and its main union, United Seafood Workers Local 359 of the United Food and Commercial Workers, A.F.L.-C.I.O.

The prosecutors, asserting that fish prices were driven up by racketeering, said the suit described both the market and the union as ''captive organizations of the Genovese crime family.''

Several telephone calls to the offices of the seafood union and the market's association of employers failed to reach anyone yesterday for comment on the suit.

It is the first time the Government has filed a racketeering suit to put ''an entire commercial center under court supervision,'' according to Rudolph W. Giuliani, the United States Attorney in Manhattan. He said that only three other suits seeking court supervision of unions had been filed in the country. Koch's Friend

At a news conference to announce the suit, Mayor Koch said he had initiated the investigation three years ago when a friend who operates a fish restaurant told him of being required to make payoffs at the market.

The Mayor said he had taken the complaint to top officials of the Police Department, which joined with the Federal Bureau of Investigation in an inquiry that culminated in the suit.

While he declined to name the friend who owns the restaurant, the Mayor suggested that a measure of the suit's success might be, ''Will he reduce the cost of fish on his menu?''

The suit was described by Thomas Sheer, the head of the F.B.I. office in New York, as a major investigative effort that could be ''a blueprint for the future.''

''What we hope to do,'' Mr. Sheer added, ''is return our economy to our society and leave the Mafia like a fish out of water, flopping on the shore.'' 'A New Tactic'

Police Commissioner Benjamin Ward read an excerpt from an article in The New York Times about efforts to clean up the Fulton Fish Market. He added, amid laughter, that the article was printed in 1934. ''Now,'' he said, ''we are going to try a new tactic.''

Shortly after the suit was filed in Federal District Court in Manhattan, Judge Lee P. Gagliardi signed an order temporarily restraining the union from destroying any records. The prosecutors handling the case, Randy M. Mastro and Edward T. Ferguson, said a hearing on the suit was set for Oct. 26.

The market, which supplies fish in a region extending from Boston to Washington, includes about 100 wholesale seafood companies in a series of shops and warehouses in the South Street Seaport area along the East River. The companies belong to an employers association that handles collective bargaining with Local 359.

The 43-page suit described the market as ''the center of New York's wholesale seafood industry and source of most of the fresh seafood sold in the New York metropolitan area.'' 'Several Billion Pounds of Fish'

Each year,according to the suit,approximately one billion pounds of seafood pass through the Fulton Fish Market. Ultimately, that seafood is distributed to consumers in New York, New Jersey, Connecticut and other parts of the United States.

Trucks delivering fish to the market arrive during the night and are unloaded by union crews, the suit said. The fish is taken to wholesale stalls, where buyers for retail stores and restaurants make their purchases from about 3 A.M. to 8 A.M.

The suit said that because ''fish is a perishable commodity,'' speed was essential, giving the union power to extort payments by threatening to delay the operation.

Besides extortion and labor payoffs, the suit said, the market area was riddled with thefts, illegal gambling and loan-sharking, as well as threats of violence, including murder.

The suit asks the court to appoint administrators to oversee the market's operation, with the powers necessary to ''prevent acts of racketeering activity from occurring at the Fulton Fish Market.'' It also asks for the appointment of trustees to ''supervise the daily affairs'' of Local 359 and its welfare and pension funds until supervised elections are held. Defendants Named

The defendants named in the suit include Local 359, its pension and welfare funds, along with their officers, the market's employers' association and ''the Genovese Organized Crime Family of La Cosa Nostra.''

''The Genovese family has controlled the Fulton Fish Market and Local 359 since the 1930's,'' according to the suit. It said they were run in the 1970's by Carmine Romano, a Genovese member now serving a 12-year prison sentence for racketeering. He was convicted in 1981 with his twin brother, Peter, who received an 18-month sentence.

The suit charged that another brother, Vincent Romano, ''currently runs the Fulton Fish Market for the Genovese family'' and that he reports to Thomas Contaldo, identified in the suit as a captain in the crime family.

''Anthony Cirillo, the nominal president of Local 359, was handpicked by the Genovese family for that office in 1983 and ran for office unopposed,'' the suit continued. It portrayed Vincent Romano as ''the de facto head of Local 359.'' Previous Conviction

The suit seeks to enjoin the three Romano brothers, Mr. Contaldo, Mr. Cirillo and more than 20 others from participating in the affairs of the union and the market.

In 1980, the union was indicted by a Federal grand jury in Manhattan on charges of obtaining $65,000 in labor payoffs from 46 wholesale fish companies in the market. The union was convicted and fined $200,000.

At the news conference yesterday, Mr. Giuliani said organized crime controlled the fish market ''primarily through its control of the union.'' He predicted that the suit would establish a mechanism to rid the market of the worst aspects of organized crime in a few years.

The Government is using civil suits under the Racketeer Influenced and Corrupt Organizations Act to attack the economic power of organized crime, Mr. Giuliani said. He added that more criminal cases might be filed involving the fish market.

The three previous suits to control unions, he said, involved Local 560 of the International Brotherhood of Teamsters in New Jersey, Local 6A and the District Council of Cement and Concrete Workers in New York, and Local 814 of the Teamsters in a recent Brooklyn case focusing on the Bonanno crime family.

All the cases were in the New York metropolitan region, he said, because it is ''the focal point of organized-crime activity.''

How To Run the Mob Out of Gotham
Steven Malanga
Winter 2001

For 100 years, organized crime, working through corrupt unions, has levied a huge tax on New York’s economy. Now prosecutors and pols are learning how to fight back.

One of the worst consequences of New York’s long love affair with the labor unions has been the power it has given to organized crime. For decades, the mob, working through corrupt unions, has infiltrated whole swathes of Gotham’s economy—everything from the garment industry to garbage carting to construction—while timid politicians, fearful of losing union support, have determinedly looked the other way. As a result, the wise guys have levied a steep mob tax on the city—enforced by intimidation, violence, even murder—that has added billions of dollars to the already high cost of doing business in New York.

Recently, criminologists have proclaimed that organized crime is dead in Gotham. This report is, emphatically, premature. True, over the last decade, prosecutors have at last begun to figure out how to break the mob’s hold; they have thrown some big racketeers in jail and forcibly injected economic competition into mobbed-up industries. What’s more, both Mayor Rudy Giuliani and Governor George Pataki have shown a lot more backbone in fighting gangsters than their predecessors and have gotten real results. But recent indictments in the construction industry are a stark reminder that the mob’s costly, malignant influence persists, so that prosecutors must intensify their efforts to clean up mob-corrupted markets and politicians must be willing to legislate changes that make industries less liable to mob influence. It will take unflagging political will to get the job done.

The mob’s control of labor unions, which gives it power over New York’s economic life, goes back to the 1920s, when unions, their members mostly Jewish and Italian immigrants, turned to street gangs to provide muscle against strikebreakers and rival workers’ groups. These petty immigrant gangs took advantage of Prohibition’s vast opportunities for bootlegging to build themselves into larger, more organized crime groups with their own system for divvying up criminal markets. With Prohibition’s end in 1933, these gangs—forerunners of the five families that dominated organized crime in the city for much of the twentieth century—changed their relation to organized labor: they moved beyond breaking kneecaps for union bosses to taking control of big unions themselves.

The crime families’ command over labor unions gave them the power to shake down company bosses who sought to buy labor peace or an exemption from onerous union work rules or merely the assurance that their jobs would get done on time. As Genovese crime soldier Vincent “Fish” Cafaro told prosecutors in 1988: “With the unions behind us, we could shut down the city, or the country, for that matter, if we needed to get our way. . . . We got power over every businessman in New York. With the unions behind us, we could make or break the construction industry, the garment business, to name a few.” Worse, power over the unions gave the mobsters leverage to gain hidden ownership of companies and power over employer associations, creating cartels that have controlled entire industries within the city. “Every industry I’ve ever seen the mob take control of started with their influence in the union,” says Daniel Castelman, chief of investigations for Manhattan District Attorney Robert Morgenthau.

The saga of New York’s garment district shows exactly how the mob and the unions first became symbiotic, how the wise guys typically use corrupt unions to take over an industry, and how prosecutors, after decades of ineffectiveness, at last learned how to fight back.

In the early 1920s, the United Hebrew Trades union asked Lepke Buchalter and his Jewish and Italian gangster pals from Brooklyn to work as union enforcers. Buchalter deployed 250 toughs, who threatened owners and threw acid on the merchandise of companies that dared buck the union. Sometimes, his troops squared off with those of another Jewish gangster, Dutch Schultz, who broke strikes for the garment bosses. Occasionally, the two hoodlums would work both sides of a strike for mutual benefit. Buchalter also struck up an alliance with Sidney Hillman, legendary founder of the Amalgamated Clothing Workers Union that represented 50,000 garment industry laborers and a close advisor to Franklin Delano Roosevelt. Working for Hillman, Buchalter battled company goons and fought to keep Communists from taking over the union.

But the ambitious Buchalter wasn’t content merely with being hired union muscle. Grasping how the industry functioned, he launched a plan to control it. The business, he realized, couldn’t operate without the 1,900 workers who cut the cloth and shipped the goods. If you had the power to withhold their labor at will, you’d have leverage over the entire industry.

By the early 1930s, Buchalter had persuaded the Amalgamated cutters’ local to align with him by offering their officials protection from rival union forces, and he managed to get the drivers behind him, too. In exchange for labor peace—he could now shut down business with a word—Buchalter coerced the garment companies into doling out sweetheart contracts to trucking firms that gave him kickbacks. News accounts from the thirties estimate that, at the height of their power, he and his crew took home $5-10 million yearly from these criminal enterprises—$50-100 million in today’s dollars. Buchalter died in the electric chair in 1944 for the murder of a trucker, detailing his links to Hillman and the Amalgamated before he went to the chair. But neither the union nor Hillman ever faced charges, some said because of the union leader’s close ties to FDR. Meanwhile, Buchalter’s garment-district rackets went to his associate, Albert Anastasia, chief executioner of Murder Inc., the murder-for-hire organization that evolved out of their old street gang.

It took Carlo Gambino, who assumed control of the garment district in 1957, after a mob hit at a Manhattan barbershop had rubbed out Anastasia, to transform what was a mob-influenced industry into a full-fledged organized crime cartel. He and his family used their control of the unions to take over the trucking companies that serviced the garment district, so that few manufacturers could get a delivery or make a shipment without their say-so.

Already in the early 1950s, Carlo had set up his son Joseph as a minor partner in Consolidated Carriers Corporation, in exchange for giving that firm a union-friendly edge on the competition, and son Thomas joined later. As other Consolidated partners retired, the Gambinos became owners of what had become the district’s most important trucking company, and they acquired interests in other trucking firms, sometimes partnering with rival crime families like the Luccheses. By the mid-1980s, operating 90 percent of the trucks that serviced the garment district, the mob held the industry in a vice-like grip. In the early 1990s, to take just one example, a production manager for fashion designer Nicole Miller testified that once, when he tried to use a small gypsy trucker, trench-coated mob goons showed up and stood around menacingly, hands in pockets, until the frightened independent operator fled. District kingpin Thomas Gambino, honored as the garment industry’s Man of the Year at a 1981 dinner at the Plaza Hotel, grew extremely rich: by 1992, investigators estimated his personal wealth at $75 million.

But the $2.5 billion garment industry suffered. Records from the early 1990s showed that mob trucking companies generated yearly revenues of about $50 million and operating profits of $22 million, a hefty 44 percent profit margin, compared with the 10 to 15 percent margins that typical city truckers averaged. The added costs that mob trucking imposed, in other words, amounted to $15-17 million yearly. The estimated mob tax on the district as a whole—if you include extortion, double billing, and other illegal activities—was a staggering $60 million a year by the early 1990s. Combined with New York’s inflated legitimate taxes, it accelerated the flight of garment jobs from the city. From the mid-1950s, when the Gambinos took over the garment district, until 1992, the business shrank 75 percent, costing New York 225,000 jobs. The mob helped bump off a once vibrant industry.

Where were the cops? you might ask. They kept jailing foot soldiers one by one, only to see others immediately take their places, leaving the mob’s infrastructure intact. But beginning in the late 1980s, prosecutors worked out a way to cripple that infrastructure in the garment district and elsewhere. First, they fostered competition in mobbed-up industries, by using existing antitrust laws aggressively and protecting competitors brave enough to risk the mob’s wrath. Second, after a seven-year fight, they persuaded the state legislature to pass the Organized Crime Control Act (OCCA), which expanded their power to charge mobsters for criminal conspiracy, letting them reach beyond the union functionaries and leg breakers to snare the kingpins. Finally, after these new weapons had broken open a mob cartel, they kept up the pressure to prevent the wise guys from coming back.

Key to bringing down the Gambinos was Manhattan D.A. Robert Morgenthau. He’d been trying to boot the gangsters out of the apparel industry ever since the early sixties, when, as a federal prosecutor, he had approached David Dubinsky of the International Ladies Garment Workers Union and asked for help in an investigation of the district. Dubinsky said no. “He told me that he would only help if Bobby Kennedy asked, but when I got Kennedy to ask, he still refused,” remembers Morgenthau.

Twenty years later, now Manhattan D.A. and armed with OCCA, Morgenthau tried again, without union help. At midnight on Halloween 1989, his agents picked 13 locks and disabled two alarm systems to plant a bug in the Gambino offices. The bug caught Thomas and Joseph Gambino bluntly describing how they’d carved up the market, how mob-owned trucking companies allocated customers, and how threats kept competitors out.

Meanwhile, Morgenthau’s investigators also bought a small apparel company, Chrystie Fashions, for $10,000 and staffed it with undercover cops who tried to get a rise out of the Gambinos by replacing them as the firm’s truckers. The ruse worked: a Gambino “salesman” made a call to a Chrystie’s client from a bugged phone, telling him that he shouldn’t ship anything to the firm unless it went via a Gambino truck—if he knew what was good for him.

In October 1990, Morgenthau indicted the Gambinos under OCCA, also charging them with antitrust violations. When agents arrested the Gambinos, they ostentatiously ripped the bug from the ceiling as the mobsters watched.

In the city’s first major win against the mob, the D.A. reached an innovative deal with the Gambinos: in exchange for not going to jail, they agreed to get out of the business and pay $12 million to fund a special monitor to oversee the industry for five years and sell off mobbed-up companies. It took almost two years for garment-district companies to believe that the mob was really gone and that they could sign up with new truckers without fearing reprisal. Soon, some 75 independent truckers, many of them enterprising ethnic Chinese, flooded into the district. The cost of shipping dropped from 40 cents a garment to 15 cents.

The prosecutors’ new approach has had its most important success in garbage carting, a huge, city- wide, $1 billion-a-year industry in the early 1990s, serving fully 250,000 establishments, from the Empire State Building to Jerry’s Sub Shop. Organized crime seized control of the industry in the late fifties, after taking over the private garbage workers’ union. The mob cartel charged customers the highest price allowed by the city’s Department of Consumer Affairs (which nominally was supposed to be supervising the industry), and then the mobbed-up carting companies gilded the lily further by overstating how much trash they picked up from a client—by 40 to 50 percent. The wise guys enforced their rule with ruthless brutality: in one notorious instance, the Lucchese family murdered two rebel Long Island carters in 1989.

A fearless, heavyweight national carting firm proved the key to breaking the cartel. In January 1993, Houston-based Browning-Ferris Industries began to solicit New York customers; in February, a BFI supervisor awoke one morning at his new home in suburban New City, New York, to find a bag on his lawn, containing a severed dog’s head. A message taped inside its mouth read: “Welcome to New York.”

BFI soon discovered that the mob was operating with near impunity in the garbage industry. Despite the warnings of his Consumer Affairs commissioner, Mayor David Dinkins showed little enthusiasm in taking on the cartel, and the city’s establishment had reconciled itself to permanent mob control of garbage collection, as BFI head William Ruckelshaus (a former FBI chief and deputy attorney general of the United States) discovered in a meeting with members of the New York Times editorial board. During the meeting, a Times editor naively asked: “Who picks up our garbage?” After a few snickers, a less clueless editor enlightened him: the mob. “That was the problem,” says Ruckelshaus. “The financial capital of the world was being shaken down, and no one would do anything about it”—including the nation’s newspaper of record and self-proclaimed champion of good government. “That breeds cynicism.”

And New York businesses were deeply cynical. Few showed interest in BFI: why risk it? An executive at Tishman-Speyer, a big owner of Manhattan office towers, began a meeting with BFI sales representatives by relating how developer Harry Helmsley once hired his own people to collect garbage at buildings he owned, only to have his trucks burned. “After he finished the story,” recalls Phillip Angell, former special assistant to Ruckelshaus, “he told us the company was satisfied with its carting contract, and that was the end of the meeting.”

So BFI turned to prosecutor Morgenthau, who, having just busted the garment-district mob, had begun to investigate the garbage carters. In June 1993, Ruckelshaus and Morgenthau crafted a plan for BFI to work undercover to help nail the carting cartel.

Morgenthau already had a cop working undercover as the manager of 55 Water Street, a financial-district building owned by Alabama Retirement Systems, whose head was the D.A.’s friend. The undercover officer, calling himself Paul Vassil, managed a staff of 34 building workers. Wearing new suits that the D.A.’s office had bought for him from discounter Moe Ginsburg, Vassil set out to become known in New York’s real-estate world. He got newspapers to quote him as a real-estate expert, negotiated with real-estate brokers on tenant leases, and lunched with Angelo and Vincent Ponte, who controlled the carting company that served the building. (Subsequently, “Vassil” left the NYPD and became a real-life building manager.)

Playing his role to the hilt, Vassil told the Pontes that his boss wanted him to cut costs, so he’d have to put the carting contract up for bid. Prosecutors then brought in BFI to make an offer but didn’t tell the firm that 55 Water was currently paying a whopping $100,000 a month to have its recyclable paper hauled away. BFI concluded that it could profitably serve the building for about $120,000 a year. To keep the contract, carting boss Vincent Ponte paid Vassil a series of bribes cumulatively worth $10,000. Ponte also asked Vassil if he could see the lowest bid in order to beat it—in violation of antitrust law.

Slowly, BFI began landing a few contracts from recession-squeezed businesses. The Hotel InterContinental on Lexington Avenue, pressed by corporate bosses to cut its $15,000 monthly carting cost, signed on after BFI bid 40 percent less. Restaurateur Alan Stillman, whose chain includes Smith & Wollensky and Cité, asked BFI to audit his garbage bills and learned that carters were charging him for 40 percent more garbage than they were picking up. He too signed on with the Houston company.

The mob began to harass BFI’s operations, sending trucks to pick up garbage at BFI’s new clients before the company’s own trucks arrived and then bringing the garbage back—earning clients city fines. In a scene right out of The Sopranos, a tail followed a BFI truck out of the Lincoln Tunnel one evening and nearly ran it off the road in New Jersey. Morgenthau put police escorts on BFI trucks.

At times, the cartel’s attempts to stop BFI bordered on the comical. In one taped conversation, mob bosses talked about buying BFI, not realizing that it was a Fortune 500 corporation with a market capitalization far beyond their reach (in 1999, Allied Waste purchased the company for $7.3 billion). Cartel reps sat down at the Waldorf Astoria’s Bull & Bear restaurant with senior BFI managers, suggested that the firm was hurting its shareholders with low prices, and threatened a shareholder suit.

At this point, Morgenthau’s undercover efforts, many undertaken with BFI’s help, began to pay off. Bugs planted in carting-industry associations turned up further incriminating evidence. An undercover cop working at one of the few independent trucking companies in the city received mob bribes and threats. Morgenthau eventually had enough evidence to close in: in June 1995, he indicted the four mob-controlled carting groups, 17 individuals, and 23 companies for antitrust violations and for criminal conspiracy under OCCA.

Hoping to pry open the market further, Morgenthau then asked some of the city’s biggest landlords to entertain BFI bids. Even with mob carters under indictment, many refused. Some even defended the carters. Prominent developer Lewis Rudin, founder of the Association for a Better New York, told Fortune: “I think they’re making a mountain out of a molehill with these guys.”

Recognizing that indictments alone were not enough, Mayor Rudy Giuliani proposed establishing a carting commission to oversee the industry: it would require background checks on carting companies and deny licenses to those with mob connections. After a bitter fight in the City Council—where some members, including Stephen DiBrienza from Brooklyn and Julia Harrison from Queens, accused the Giuliani administration of favoring outsiders like BFI over local businesses—the Council approved the plan. It denied many mobbed-up companies licenses, and other national carters joined BFI in bidding for New York contracts. Unfortunately, the Giuliani plan retained the government’s right to set prices, limiting the free-market competition that helped break the cartel in the first place, and it set no cut-off date for the carting commission, leading to fears that it might become a permanent bureaucracy. “I would feel more comfortable if the commission would sunset at some point,” admits former BFI executive Angell.

One thing that makes organized crime so difficult to eradicate is that the mob’s close union connection keeps politicians—especially Democrats heavily dependent on union support—extremely hesitant to mess with it. New York’s most spectacular illustrations of the truth of this proposition are the city-owned Fulton Fish Market and the state’s Javits Convention Center.

Mob control of the Fulton Fish Market began in the 1920s, when a tough fish handler, Joseph “Socks” Lanza, organized the market’s largely Italian immigrant workers into United Seafood Workers Local 359. Lanza insisted that only his workers could unload the ships that dropped off their daily catch on the docks, and he levied a $10 “union” fee on each ship for the service. He also charged market wholesalers up to $2,500 a year to keep labor peace.

Even after fish began to arrive not by ship but by truck from as far away as Florida, Lanza maintained his domination by controlling just a few hundred union workers and six loading and unloading companies. He brought in mob associates, including the Bonanno family and his ultimate successor Carmine Romano, to run several of the loading companies. Together they ruled the market as a fiefdom, even creating parking spaces on city property that the fish delivery trucks had to pay to use, putting an extra $250,000 a year into their pockets. In 1975, the union formed a protection association that charged wholesalers $1,300 a month to safeguard them from theft, though the mob itself did much of the stealing.

Despite these outrages, for decades the mob’s domination of the market faced little resistance from city law enforcement, though federal prosecutors sometimes interfered. In the late seventies, the feds removed Lanza’s successor Romano from the seafood union for shaking down wholesalers and enforcing a cartel, but Romano’s handpicked candidate won the union presidency in an unsupervised election. In 1987, U.S. Attorney Rudolph Giuliani filed a successful federal RICO suit against Local 359. A federal court appointed a new monitor for the union, but he had little control over other mob activity in the market.

These federal prosecutions failed to galvanize the Koch or Dinkins administrations into asserting control over Fulton. “The city was essentially an absentee landlord,” says Randy Mastro, former deputy mayor under Giuliani, because, Mastro believes, neither Koch nor Dinkins believed that he could really succeed in driving out the crooks. “It was symptomatic of a mindset in New York by the early 1990s that saw certain problems as intractable,” Mastro says. In 1992, then-U.S. Attorney Otto Obermaier ended the monitor’s role at Local 359, pointedly observing that it was time for the city to take responsibility.

It took a change of administrations for the city finally to step up to the plate. Soon after taking office in 1994, Rudy Giuliani charged Mastro with the task of kicking the mob out of Fulton. Mastro crafted legislation to allow the city to manage the market and ban union members with mob connections. The day after the administration announced the legislation, a market building went up in flames—presumably torched by the mob. The outrage that the arson provoked propelled the bill through the City Council—a rare case of anti-mob legislation meeting with little resistance. The Giuliani administration also evicted mob-owned wholesalers and ended the gangsters’ grip on loading and unloading. In the mob’s place, the administration installed Laro Maintenance, which won the contract after agreeing to charge $1.10 per each 100-pound box of fish that it unloaded, a 19 percent cut from the mob rate. The price for a parking spot to unload deliveries fell from $20 to $4.

A year after these changes, statistics from the National Marine Fisheries Service found that, while the wholesale price of fish nationwide rose 13 percent, the overall price of fish at Fulton fell 2 percent. The volume of fish coming into the market increased to 183 million pounds that year, up 32 percent since 1992. In other words, it had taken only a matter of months for the city to liberate the market, once it made up its mind to do so.

Incredibly, nobody cheered. Both the New York Times and the Village Voice asked whether the new administration was running the fish market with the same “ruthless efficiency,” in the Voice’s phrase, as the mob had run it. These stories voiced a persistent, cynical New York belief: that the mob rationalizes complicated industries for businesses. But though the mob created an orderly transition at the fish market when boats gave way to trucks, consumers ended up paying higher prices. And there’s a moral price paid when organized crime can operate freely and violently, and on government-owned property to boot. Says Ronald Goldstock, former head of the state’s Organized Crime Task Force: “The mob tax can also be measured in a loss of freedom and democracy in institutions like unions, and in the cynicism it breeds in ordinary citizens and businesses, who see how things work and think that they, too, must cheat to succeed.”

The failure of government to police the mob was even more disastrous at the state-owned Javits Center, where the gangsters engaged in stealing on an industrial scale.

The stealing started even before construction began in 1980. Thanks to a mob-ruled cartel, in which seven crooked concrete companies met every other week to divvy up bids on big public contracts, the state got only two bids for the concrete needed to build Javits, one for $30 million and one for $40 million, on a quantity whose free-market cost would have been an estimated $18 million. After a second call for bids produced only the same two offers, the state gave the contract to mobster Anthony “Fat Tony” Salerno’s S&A Concrete, sticking New York taxpayers with an extra $12 million cost (part of an estimated $40-50 million a year in overcharges that the New York State attorney general’s office determined the concrete cartel reaped in the mid-1980s, largely on public works projects).

Corruption continued after Javits opened in 1986. A lethal mix of supine state officials and mobbed-up unions had produced contracts paying laborers, electricians, carpenters, and other workers double and sometimes triple what convention centers in Chicago, Atlanta, and other major cities paid. Equally absurd work rules required, for instance, that only electricians—at $80 an hour—could plug in lamps. Hiring practices reeked of corruption. In most unionized industries today, the employer controls hiring, and workers only join the union once the firm engages them. But a federal exemption allows (though it doesn’t require) construction unions to run old-time “hiring halls,” where the union hires workers, runs apprenticeship-training programs, and dispenses workers to companies—an enormous source of patronage and power, and, of course, the practice at Javits.

With the hiring hall’s help, the mob turned Javits into a nest of cronyism. In 1995, investigators accused the head of the teamsters union at Javits of dishing out a host of center jobs (including some with $100,000-and-up salaries) to friends and relatives of gangsters. Many of the jobs were no-show.

Lawlessness and disorder were epidemic. Police estimated the center lost nearly $1 million a year in pilferage. In the loading dock, a giant, rat-infested trash heap rose where workers discarded their garbage. For fun, workers would take forklifts and drive them into the center’s walls, leaving great gouges. “The inmates were in control of the asylum,” says Robert Boyle, a former construction-industry executive who eventually received the assignment to clean up the center.

The Javits Center gained such a reputation for high costs and unruly workers that from 1992 to 1995 it didn’t attract one new show. Its largest tenant, the New York Auto Show, threatened to leave.

Chalk up the mob’s unopposed takeover of Javits to the extraordinary cowardice of Governor Mario Cuomo’s administration. Mayor Koch alerted the state to widespread complaints about organized crime’s influence at the center soon after it opened, but Cuomo did almost nothing, beyond holding a news conference. In 1991, he appointed his general counsel and longtime friend Fabian Palomino as Javits president. Four years later, a state audit accused Palomino of mismanaging the center, adding to its long list of woes.

Cuomo’s passivity was sadly typical of Democratic officeholders, who, confronted with obvious union corruption, too often refuse to act for fear of alienating organized labor. Cuomo’s apathy sent a dispiriting message to prosecutors. “The specter of being accused of union busting always hung over us when we pursued cases of the mob in unions,” says Robert Castelli, a former investigator with the state’s Organized Crime Task Force.

The turning point for Javits didn’t come until Republican George Pataki became governor and appointed Boyle as president in 1995. An investigator from Morgenthau’s office, Gerald McQueen, became the new inspector general. The new team took hiring away from the unions, fired lots of people, advertised for new workers, and started performing background checks on workers. The center also renegotiated contracts with the unions to eliminate onerous work rules. Many of the reforms, it turned out, required only simple administrative procedures.

But a Pataki bill that would have allowed the center’s management to fingerprint prospective employees and check the prints against an FBI criminal database foundered in Albany, sunk by the Democratic-controlled State Assembly. Boyle accused Democrats of protecting the perpetually mobbed-up District Council of Carpenters, which had contributed heavily to the campaigns of state officials, including the Assembly Democrats’ campaign committee. The following year, the Assembly passed a bill giving back the carpenters’ union the right to control hiring, but fortunately the Republican-controlled State Senate blocked it.

The new team improved things dramatically. A state audit praised Javits’s leadership in 1996, as costs dropped as much as 40 percent on some shows. The center, with revenues of $36 million in 1995, when it lost $1.6 million, recorded revenues of about $100 million in 2000, earning a $4 million profit. Just as at Fulton, all it took to get the mob out of Javits was political backbone.

Even after being kicked out of the garment district, garbage carting, the fish market, and the Javits Center, the mob remains a strong presence in New York. It looms large in the city’s huge, $25 billion construction industry, adding hundreds of millions of dollars a year to the already sky-high cost of building in the city. Just this September, the Manhattan D.A. brought a series of new indictments against the Lucchese crime family for bid rigging and bribery in construction contracts. Also indicted: the latest head of the District Council of Carpenters, the third council president since 1980 to have charges brought against him.

Corruption in New York’s construction industry goes back at least 100 years—when United Brotherhood of Joiners boss Robert Brindell gained control of all the construction unions and made a cynical deal with the Building Trades Employers’ Association that drove independent contractors out of town and tripled or even quadrupled construction prices in the city. But New York’s five big crime families have had a lock on many of the main construction unions since the 1920s. By the 1980s, the state’s Organized Crime Task Force observed, mobbed-up unions gave the wise guys a grip on numerous facets of construction, including transportation, cement and concrete work, masonry, painting, carpentry, and plumbing. Prosecutors estimated that the mob controlled 16 of the 31 unions representing general laborers. In the familiar pattern, the mobsters used their influence in unions to obtain interests in companies and to create cartels in the concrete, drywall, painting, and plumbing businesses.

A mob cartel’s ability to control the flow of workers through a corrupt union’s hiring hall allows it to scare off potential competitors without even resorting to real strong-arm stuff, as Lucchese crime soldier Salvatore Avellino explained in a secretly recorded conversation: “We gotta have the [union] strength, so when a f-ker comes along and bids on a contract that is supposed to be limited to members of the family, tomorrow he’s got four Gold Tooths [Lucchese strong men] in front of him saying, ‘Now that you have the contract, where are the workers?’ That’s the power.”

Mob-controlled unions have extracted large concessions and extraordinary work rules in negotiations with timid construction-contractor associations. These rules often serve as a means to extort payments from businesses. Throughout the 1980s, for example, the master contract between the painters’ union and its contractors’ association in New York City stipulated that contractors could only use paintbrushes on jobs, even though spray guns and rollers would be more efficient. Wiretapped conversations of union officials showed that the absurd rule was simply a tool for shaking down contractors who wanted workers to be able to use spray guns or rollers. “It’s clear that some work rules are just negotiated by unions as a way of encouraging bribery,” says prosecutor Morgenthau.

On a big, unionized construction project, the mob tax, extorted principally from subcontractors, could be huge. The painters’ unions and carpenters’ unions, under Lucchese crime family control, extracted a hefty 10 percent tax on contracts. Drywall contractors paid a 2 percent mob tax. Every window installed on public projects and on private unionized projects required until 1991 a $1 or $2 mob charge. In the mid-1980s, when mob control of sectors of the industry was at its height, the tax often totaled 5 percent of a major project. These days, say prosecutors, even if the mob tax is 1 or 2 percent, that still amounts to $250-500 million yearly added to the cost of building in the city.

Though the construction industry is an easy mob target—work is seasonal and goes in boom and bust cycles, so contractors often feel compelled to get jobs done at any cost, even if it includes payoffs to get around union work rules or government requirements—excessive government regulation has made the business even more susceptible to mob influence. The city’s labyrinthine building regulations discourage big national construction companies, who’d have the heft to resist mob takeover attempts, from competing in the city for building contracts. It’s just too difficult for outsiders to get permission to build.

In addition, New York State’s prevailing wage law, which requires that municipalities pay workers union wages on all public building projects, fosters mob corruption. The law creates an incentive for mobsters and contractors to enter into illegal agreements to evade it. In last September’s indictments, prosecutors charged members of the Lucchese crime family and their union associates with extorting payoffs from contractors on government jobs—among them, three School Construction Authority contracts worth in total $32 million—in exchange for letting the companies get around the prevailing wage laws.

Even worse is the state’s 80-year-old Wicks Law. Wicks requires government agencies to issue four separate contracts—for plumbing, electrical work, heating and ventilation, and the actual building of roofs and walls—for every government building project costing over $50,000, instead of bidding the job to one major contractor who could use its market leverage and expertise to enlist smaller subcontractors at favorable prices and supervise their work carefully. By multiplying the number of small contractors—98 percent of New York City’s 10,000 construction firms employ fewer than 100 people—Wicks makes the bidding process harder to police. Moreover, the smaller firms have little power to resist the mob, and their employer associations, which negotiate union contracts, are invariably weak.

Using Rico suits and trusteeships, prosecutors have wrested control from mobbed-up unions representing concrete workers, masons, and painters. They have seized companies run by mobsters in the drywall, window-replacement, and painting industries to bust up cartels. But if the mob’s influence has diminished, recent indictments make clear that it hasn’t disappeared.

With such problems in mind, Mayor Giuliani proposed legislation in 1998 to extend the structural reforms in carting to construction by forming a commission to perform background checks on companies and deny licenses based on associations with organized crime figures. The administration also demanded that companies with questionable records hire certified auditors to vet their integrity.

Builders, union officials, and developers reacted angrily and used their influence to keep the law stuck in the City Council’s finance committee. But now that the recent indictments have given renewed urgency to calls for reform, members of the Building Trades Employers’ Association, to head off tougher reforms, have begun discussing industry self-regulation, including background checks and licensing, says chairman Louis Coletti. In formulating its counterproposals, the industry clearly has emphasized its own interests over the public’s. The employers’ organization has urged more funding for inspectors to ensure compliance with prevailing-wage laws—a popular item with unionized contractors, because it keeps out non-union bidders.

With his term running out, Giuliani is unlikely to get his current version of the commission bill passed. But without structural reform, the construction industry is certain to remain highly vulnerable to corruption.

Some changes are obvious. New York should junk the Wicks Law, which serves only to protect union jobs without regard to the integrity of the industry or to the cost to municipalities. The state’s prevailing wage law similarly contributes to corruption and needs repeal. New York City should also simplify its building regulations to encourage national competitors to enter the market. On the federal level, Congress should outlaw construction-union-run hiring halls, and, in the meantime, New York’s builders should work hard to negotiate them out of future contracts. Finally, it may be up to the next mayor to consider whether the construction industry, or at least segments of it, needs a monitor or oversight commission (ideally with a sunset clause) to organize and direct the anti-mob efforts of various law-enforcement agencies and to develop anti-corruption reforms.

In the war against the mob, Morgenthau rightly says, “We can’t declare victory and walk away.”