Bad Company?

More doubts about Donovan

In the first week of the new Administration, only one of President Reagan's Cabinet officers remained unconfirmed: Labor Secretary-designate Raymond Donovan. A Senate committee still had questions about some allegedly dubious dealings of the Schiavone Construction Co.; Donovan was executive vice president and part owner of the firm. The FBI reported to the panel that it had developed information, which it could not confirm, that the New Jersey company's upper management was "closely aligned with organized crime."

Donovan vehemently denied any improprieties and testified: "We were never extorted." By an 80-to-17 vote, the Senate confirmed his appointment. But nagging questions about the company he kept have continued to haunt Donovan. In May a federal grand jury in Brooklyn charged that Schiavone Construction was extorted by Harry Gross, a New York Teamsters Union official. According to the indictment, Gross forced Schiavone to place his chauffeur on the company payroll as a "ghost" who never showed up for work. Donovan claimed at his hearings that the arrangement was part of a collective bargaining agreement with the Teamsters. The Justice Department is prepared to argue, when Gross's trial begins at a federal court in Brooklyn, that the arrangement was illegal.

Further questions have also been raised about Donovan's relationship with William Masselli, who has been described by the FBI as an alleged Mafia "soldier." Masselli is president of Jo-Pel Contracting and Trucking Corp., which was a subcontractor for Schiavone. At Donovan's confirmation hearings, the FBI mentioned his alleged connections with Masselli, but shed little light on them. "I do not have any background whatsoever on him," Executive Assistant FBI Director Francis Mullen told the Senate committee. He added that there was "no reference" to Donovan in FBI wiretaps used to monitor organized crime "in New Jersey."

Perhaps not in New Jersey, but court-sanctioned wiretaps of Masselli's operations in New York City did indeed record conversations between Masselli and Donovan. Mullen says he did not volunteer this information because disclosure would have compromised the investigation into Masselli's activities, and the recorded conversations were "non-criminal and related to business." Masselli has been charged with running a meat hijacking ring and conspiring to manufacture synthetic drugs.

Donovan raised some $600,000 for Reagan's campaign and hosted a $200,000 fund raiser, featuring Frank Sinatra, at a country club owned by Schiavone Construction. Co-host of the event was Insurance Executive William McCann, who has been appointed Ambassador to Ireland. During the campaign, Reagan attended a rally with Donovan at a New York City site where Schiavone Construction, with the help of Masselli's Jo-Pel Contracting, was working on a new midtown subway tunnel. A source familiar with the construction project told TIME that Donovan introduced Masselli and another man indicted with him, Joseph Bugliarelli, to Reagan. Says a spokeswoman for Donovan: "No introduction was made to the President that the Secretary recalls."

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