President's Commission on Organized Crime

Report to the President

and the

Attorney General


Organized Crime,

Business, and Labor Unions



Jesse A. Brewer, Jr.

Manuel J. Reyes

Carol Corrigan

Honorable Peter W. Rodino, Jr.*

Justin J. Dintino

Charles H. Rogovin

William J. Guste

Barbara A. Rowan

Judith R. Hope

Francis A. Sclafani

Philip R. Manuel

Samuel R. Skinner

Thomas F.McBride

Honorable Strom Thurmond

Eugene H. Methvin

Phyllis T. Wunsche

Edwin L. Miller

James D. Harmon, Jr.
Executive Director and Chief Counsel

* Commissioner Rodino, in view of his position as Chairman of the Committee on the Judiciary of the United States House of Representatives, takes no position concerning the recommendations included in Section Eleven of this Report.



Summary of Recommendations



Section One

Overview and Summary of Recommendations

Section Two

A Look at Modern Labor Racketeering: The Methods and Objectives of Corruption

Section Three

International Longshoremen's Association

Section Four

Hotel Employees and Restaurant Employees International Union

Section Five

International Brotherhood of Teamsters

Section Six

Laborers International Union of North America

Section Seven

The Independent Unions

Section Eight

Organized Crime and the Meat Industry: A Study in Competition

Section Nine

Organized Crime and the Construction Industry: A Study in Collusion

Section Ten

Current Laws and Strategy

Section Eleven

Recommendations for a National Strategy

Section Twelve

The Labor Management Racketeering Act of 1986




Someone else owns the international.
-Paul Castellano, former boss
of the Gambino crime family. 1

Aiuppa and Accardo [underboss and boss of
the Chicago Outfit, respectively]
continue to exert great influence over the
union and its president
.-Joseph Hauser.2

The Hotel Employees and Restaurant Employees International Union (HEREIU) was founded in 1891 as the Waiters and Bartenders Union. It quickly became the union of choice for bartenders, waiters, maids, cooks, porters, busboys, and related service workers in the United States and Canada.3 Almost 100 years later, HEREIU has a documented relationship with the Chicago "Outfit" of La Cosa Nostra at the international level and subject to the influence of the Gambino, Colombo, and Philadelphia La Cosa Nostra families at the local level.

During the union's early years internal conflicts developed between a Chicago faction, headed by W.C. Pomeroy, and the rest of the union, led by Jere Sullivan. At the 1896 convention Sullivan charged Pomeroy with misuse of funds; when Sullivan was elected general secretary-treasurer in 1899 he ousted Pomeroy from control in 1900 and embarked upon a program of reorganization with the support of Samuel Gompers and the AFL. Although the luxury hotel business boomed during the first two

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decades of the 1900's, opening numerous jobs for service employees, HEREIU was not a force in the trade because Sullivan refused to organize the unskilled and foreign born. Moreover, HEREIU lost about one-third of its membership almost immediately following the enactment of Prohibition in 1920.

With Sullivan's death in 1928 and the ascent of the new president Edward Flore, HEREIU fully responded to the demands for organizing the unskilled. By the early 1950's union membership was near its present day figure of 400,000, and key steps had been taken to centralize internal power - primarily by allowing international officers to intervene directly in the affairs of HEREIU locals.

Criminal infiltration, which has consistently plagued HEREIU, was exposed at the union's 1936 national convention, where Harry Koenig of Local 16 in New York City was murdered. Subsequent investigation by the Special Commission on Crime, headed by Thomas Dewey, revealed a flourishing restaurant racketeering business in New York City. In 1937 three officials of the national were convicted of crimes, Local 16 was suspended, and those members associated at the time with criminal activities were expelled.4

In 1958 the McClellan Committee revealed that organized crime had infiltrated the Chicago restaurant industry through its control of three union locals. Business agent John Lardino, who

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was believed to be one of the chief lieutenants to Tony Accardo, the long-time boss of the Chicago Outfit, controlled Local 593. Both Accardo and Lardino appeared before the McClellan Committee and invoked their privilege against self-incrimination. Chicago Outfit representative Louis Romano then controlled Local 278. In 1935 the Outfit extended its power to Chicago's suburbs by obtaining the charter of Local 450. Those who influenced Local 450 were believed to be Frank "The Enforcer" Nitti, Murray "The Camel" Humphreys, and Louis Romano. Joseph Aiuppa, at that time a gunman for Al Capone, was listed as the secretary of Local 450 on the application filed with the international in 1935.5

For 40 years Joseph Aiuppa, now the underboss of the Chicago Outfit, and boss Tony Accardo wielded power in the Chicago area locals and the HEREIU joint executive board. Their actions took on national proportions when Edward Hanley, who began his career in Local 450 as a business agent in 1957, was elected to the HEREIU presidency in 1973.6


Joseph Hauser, a convicted defrauder of union benefit funds, appeared before the Senate Permanent Subcommittee on Investigations in April 1983 and testified that Chicago crime boss Tony Accardo hand-picked Edward Hanley for the HEREIU presidency.7 Hauser noted, "Aiuppa and Accardo continue to exert great influence over the union and its president, Ed

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Hanley." According to the Senate Report, the reign of Hanley has been surrounded by allegations of organized crime's influence in the choice of international union organizers, operation of benefit funds, and conduct of union affairs.8

Since Hanley took office in 1973, union assets dropped from $21.4 million to less than $14 million in 1982. Nearly $6 million of this money went into three loans executed with private developers, one of whom was Morris Shenker, an associate of the late Kansas City organized crime leader Nicholas Civella. Shenker received the largest single loan from the Teamsters Central States Pension Fund, a portion of which has never been repaid.9

The Subcommittee found that the union's assets have been used to enrich the top officers of HEREIU's hierarchy. Base salaries augmented by expense accounts and "allowances," lifetime employment contracts, and increased expenditures of tangible items have resulted in expenditures for HEREIU officers skyrocketing from $229,051 in fiscal year 1973 to $1,689,370 in fiscal year 1983.10 Former HEREIU general secretary-treasurer John Gibson was found guilty in May 1980 of misusing the union's airplane and of conspiring to embezzle union funds. Gibson received concurrent four-month sentences, which he served in 1983, while receiving his lifetime contract checks from the union. 11 The list of employees and organizers hired after Hanley became HEREIU president includes organized crime

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associates and numerous patronage jobs.12 In addition, one of Hanley's early moves was to hire the current Teamsters president, Jackie Presser, as an international organizer in 1973; Presser was already an officer of a HEREIU Local in Cleveland. He resigned the HEREIU post in September 1976, when he became an IBT international union vice-president.

Most troubling to the Subcommittee was the unprecedented degree to which Hanley has been able to centralize authority within HEREIU and to control local chapters through the use of mergers, trusteeships, and personnel transfers, an action which mocks the goals of local autonomy and members' rights as embodied in the Landrum-Griffin Act. HEREIU's president has almost absolute authority to effect mergers and has done so more than 136 times since 1973. Hanley has also consolidated 16 separate pension funds with total assets of approximately $75 million and 35 separate health and welfare funds into single funds under the control of the international union in Naperville, Illinois.

Hanley's Assertion of the Fifth Amendment

The Permanent Subcommittee on Investigations sought Hanley's perspective on his union's increasing identification with organized crime. He refused to testify.l3 Hanley's refusal to respond to questioning and his assertion of his Fifth Amendment privilege before the Subcommittee deprived the Senate of the opportunity to explore this steady movement of HEREIU money and

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power to Chicago. Hanley declined to answer a series of questions which focused on his understanding of the obligation of trust imposed on union officials. He rejected the opportunity to explain HEREIU's merger policy. Finally, Hanley found no purpose to be served by responding to questions about his relationship with the leadership of the Chicago outfit, murdered racketeer Allen Dorfman, or attorney Sidney Korshak.

Atlantic City

HEREIU Local 54, which is located in the Atlantic City, New Jersey area, came to prominence in 1978 after the opening of Atlantic City casinos and the concomitant rise in the demand for waitresses, waiters, and bartenders. With the increase in potential union members came a struggle for control between factions of the Philadelphia family of La Cosa Nostra. Department of Labor Special Agent Ron Chance testified before the Commission about Local 54 and its influence in Atlantic City:

Local 54, in Atlantic City, is a classic case study in organized crime and labor racketeering. Several of the officers of this union and its predecessor unions boast convictions for murder, arson, extortion, drugs, bribes, kickbacks and racketeering. Next to the ownership of the casino itself, the control of Local 54 is the most important prize in the Atlantic City sweepstakes. . . . In 1978, when the casinos opened, Local 54 began to rise in stature and importance. Prior to the casino gambling, they only had about 2,500 members and most of them were employed in seasonal jobs in the hotel and restaurant industry in the seashore. The opening of each casino, though, brought between 1,500 and 2,000 new members into the local, and they now have about 15,000 members.l4

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Indeed, the stakes were high for this "most important prize." Membership increases contributed so substantially to total dues collection that the local's annual income swelled from $269,000 in 1979 to $1,389,000 in 1982, and permitted the local to contribute more than $15 million a year to the international's Health and Welfare Fund.

On December 15, 1980, John McCullough, the president of Philadelphia Roofers Union Local 30, was shot to death at his home by Willard E. Moran, allegedly due to his attempts to organize the Bartenders in Atlantic City away from HEREIU Local 54.15 After his conviction, Moran decided to cooperate with prosecutors and testified that he was recruited, employed, and trained to kill McCullough, an associate of Philadelphia LCN boss Angelo Bruno by former HEREIU Local 54 vice-president Albert Diadone and Raymond "Long John" Martorano, an associate of Atlantic City LCN boss Nicodemo Scarfo. Moran testified that these two actually escorted him to McCullough's home and drove him home after the murder. Both Diadone and Martorano have been convicted and sentenced to life imprisonment.

In 1979 Frank Gerace was appointed president of Local 54 after the previous president, Ralph Natale (another Bruno associate) was convicted and sentenced to 30 years' imprisonment for a variety of offenses, including narcotics trafficking.

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Local 54, under the presidency of Frank Gerace, has been the focus of several investigations by law enforcement agencies, as well as the U.S. Congress. Gerace has been named in Senate testimony as a significant criminal associate of the Scarfo crime family. The investigations have focused on Local 54's benefit funds, mob ties, and corruption of public officials. In 1980 the New Jersey Commission of Investigation reported that Larry Smith, head of Rittenhouse Consulting Enterprises, Inc. in Cherry Hill, New Jersey, profited handsomely from Rittenhouse's consulting work to arrange dental care services for HEREIU Local 33. Ultimately, HEREIU Local 33 was absorbed into Local 54 of Atlantic City. In tracing Rittenhouse's and Local 54's disbursements, New Jersey commission investigators determined that $153,000 in cash from the Local's fund could not be accounted for.

After a three-year inquiry, the Senate Permanent Subcommittee on Investigations said that Smith had controlled Local 54's dental plan almost since its inception, for the benefit of Philadelphia organized crime interests, and that the nature of "consulting" services rendered by Rittenhouse for substantial fees could not be determined.16 Subsequently Larry Smith was one of 41 individuals or entities named in a Department of Labor civil suit. It charges that past and present Local 54 trustees and the corporations formed to administer the $1.2 million dental plan violated the Employee Retirement Income Security Act (ERISA) by failing to solicit bids for a dental plan

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contract in 1980.17 Neither Local 54 itself nor its current officers are named in the suit, which asks that the defendants pay all losses resulting from their alleged actions and that new arrangements be made to provide Local 54 employees with dental care.

Local 54 and Corruption of Public Officials

Frank Lentino, a former business agent for Local 54, recently pled guilty to one count of Hobbs Act conspiracy and one count of obstruction of justice. During that investigation Lentino bragged that he controlled labor for Nicodemo Scarfo, the current head of the LCN faction in Atlantic City and Philadelphia. Lentino also claimed that Local 54 officials helped the Scarfo group exercise a corrupt influence over former Atlantic City Mayor Michael Matthews. Before his election as mayor of Atlantic City, Matthews solicited an illegal campaign contribution of $125,000 cash from Local 54's Frank Gerace, Albert Diadone, and Frank Lentino. Matthews received the cash in several installments with at least one payment being picked up at the union hall. Matthews was ultimately convicted of receiving bribes from a federal undercover agent.

When he was questioned about the $125,000 cash contribution, Matthews admitted that he approached the Local 54 officers to obtain money from the Scarfo La Cosa Nostra group. In return Matthews agreed to assist the Scarfo family obtain a tract of land partially owned by the city, where the Scarfo's group would

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build a casino. Lentino described the meetings and the purchasing of the election in conversations intercepted by the FBI and DEA. Lentino stated:

[[W]e had Mike Matthews in here, the last time I ate here with Gerace and Al Daidone . . . He [Matthews] had his eyes on that uh, mayor's, mayor's job


If he wins it uh, you get favors. Some guys put up a lot of money. . .[a] hundred and twenty five [thousand]... That's a lot of money for an election down here. 18

The Efforts of the Casino Control Commission

In 1981 the New Jersey Casino Control Commission and the Division of Gaming Enforcement, state agencies charged with regulating persons and entities began an investigation of Local 54 to determine if the local was fit, under state statute, to represent persons employed by the casinos. A central focus of the state investigation was the allegation that the Scarfo LCN group controlled the union. Based on its finding in 1982 that this control existed, the Casino Control Commission ordered that, in the event Gerace and the two others were not removed from their union posts, Local 54 would be prohibited from collecting dues from any casino employee.

Following this order Local 54 sought a Federal court injunction barring enforcement of the Commission's order. After losing in the District Court, the union successfully argued in

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New Jersey Superior Court that federal labor law, specifically the National Labor Relations Act and ERISA, preempted the field of labor relations. The state, however, obtained a reversal in the U.S. Supreme Court, which held that the state had the authority with some limitations to regulate in the area.l9 The Supreme Court noted in its decision that:

...Congress apparently has concluded that, at least where the States are confronted with the public evils of crime, corruption, and racketeering, more stringent state regulations of the qualifications of union officials is not incompatible with the national labor policy as embodied in §7 (of the National Labor Relations Act).20

Following the Supreme Court's decision, the Casino Control Commission issued a new order, which directed Gerace and the other officials to resign. After Gerace refused to do so, the state sought enforcement of the order and a contempt citation from the state courts. Gerace and the others then resigned their posts. Rather than divorcing himself completely from the union, however, Gerace now holds the post of consultant in non-casino affairs, at an unknown salary.

The Supreme Court found that the casino industry employees' freedom to select Local 54 to represent them in collective bargaining was not affected by the qualification criteria of New Jersey's Act. However, the Court left undecided the issue of whether the dues collection sanction, imposed by New Jersey's Act, will so incapacitate the union as to prevent it from performing its functions as the employees' chosen bargaining

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agent, thus abridging members' rights under the National Labor Relations Act. As a result, the decision does not definitively resolve how to reconcile Federal efforts to define labor rights with state efforts to regulate industries in which labor racketeers flourish.

New York City

The New York HEREIU locals are also influenced by organized crime. New locals have been chartered with due consideration to La Cosa Nostra territorial needs. Until January 1983 (when Local 100 was chartered), the main HEREIU local under LCN control was Local 6. Local 6 retained jurisdiction over those restaurants located in hotels and clubs, while Local 100 has a wide-ranging jurisdiction. Recent indictments have focused on the leaders of HEREIU Locals 6 and 100: international vice president and HEREIU Local 6 officer Vito Pitta, an associate of the Colombo family, and John J. DeRoss, officer of HEREIU Local 6, officer of HEREIU Local 100, and a member of the Colombo family. 21 In a conversation intercepted by the FBI at Paul Castellano's home, Anthony Amodeo and John DeRoss complained to Paul Castellano about the failure of Local 6, and Vito Pitta, to abide by the agreed-upon jurisdictional allocation with Local 100:

Amodeo: He's not supposed to go into another. . . In fact, that's a part of their agreement. When they made the merger, from what I understand, they stay in whatever they've been in. They

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have the hotels and restaurants and so forth. Now, 2 months ago, we sat down, Vito [Pitta], me, and Charlie, right? Sat down. He says, How about if I go organize on Long Island? . ; . You stay with yours. Long Island is ours. Hotels, restaurants, whatever.

Castellano: They're supposed to stay.

DeRoss: Right. I know.22

In the same conversation, Castellano subsequently described the limits of his influence over HEREIU. Because the international was controlled by other organized crime groups, Castellano's ability to remedy an apparent encroachment by the Colombo family was not a simple matter:

Castellano: . . . You had the locals and somebody else had the international. . . This is what I was trying to tell Vito of. I said, Vito [Pitta], take it easy. You know, I gotta, I gotta watch, like someone else owns the international. See, I don't like these doing. . . something that they have a right to do. In the meantime, the only reason why they're doing it, because Vito is setting up something in my. . . I don" do that.

. I was happy with the [international union] elections, you know? They were happy about it, but Pitta wasn't . . . I tell you what, what brought them over here. This is with my local, and I don't want anybody to touch it. . . .23

HEREIU Locals 6 and 100 were used to dictate the way in which restaurants could do business in New York. In return for payoffs, restaurant owners could pay reduced wages and pension and welfare fund contributions, or buy a lease on a restaurant

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shut down because it owed money to the union, or hire and fire without regard to grievance procedures, or operate without regard to union work rules. What appeared to be a jurisdictional split between two HEREIU locals was, in fact, a market allocation of New York's entire restaurant business between the Colombo and Gambino crime families.

The IPSSEU Merger: Building A Larger Union

HEREIU used means other than forced merger and the issuance of charters to the Gambino and Colombo crime families to consolidate and expand the existing power of La Cosa Nostra. In one instance HEREIU absorbed an independent union, the International Production Service and Sales Employees Union (IPSSEU), an organization influenced by organized crime.

In the mid-1950's IPSSEU was created by the merger of several independent local unions. By 1978 IPSSEU had organized some 25,000 members in eight locals employed in seasonal work, usually in toy, plastic and candy factories. As Robert Rao, IPSSEU's general president, once explained, the union organizes anyone except the "building trades." At one point Rao testified in court proceedings that between 25 and 40 percent of IPSSEU's members were paid only the minimum wage. During its history IPSSEU turned down merger overtures from several AFL-CIO unions, the United Mine Workers, and the Teamsters Union.

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At present IPSSEU's former secretary-treasurer, Benjamin Ladmer, and Teamster official Anthony Di Lapi are serving ten-year prison sentences for using bribery and threats to obstruct an attempt by nonunion truck drivers in a garment center trucking company to form their own union. Di Lapi explained the conspiracy in these words:

. . . There's a million truck drivers, a million warehouses. They'll get all new guys, new identity completely, new corporation, new everything. . . Well this is economics. . . There's no violence, there's no nothing. . . but it's like a Family. . .24

IPSSEU, with its ties to the Luchese family, was a prime candidate for merger with HEREIU. The merger occurred with the creation of HEREIU Local 21S in 1983, and Robert Rao's appointment as an international vice president of HEREIU. merger has not harmed Rao. Rao received combined salary, allowances and expenses amounting to $142,380 in 1984 from HEREIU.

Government Action Awaited

During the Commission's investigation it became clear that legitimate trade unionists are aware of the mob ties to HEREIU and await government action to oust the mob from the union.

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1Court authorized electronic surveillance, June 3, 1983.

2Hotel Employees and Restaurant Emoloyees International Union: Hearings before the Permanent Subcommittee on Investigations of the Senate Comm. on Governmental Affairs, 97th Cong., 2nd Sess., Part III, at 34 (1982).

3The union has changed its name several times since its creation, most recently in 1981 at the 39th general convention. For more details on the history of HEREIU, and for a comprehensive analysis of the union and its infiltration by organized crime today, see Hotel Employees and Restaurant Employees International Union, a report by the Permanent Subcommittee on Investigations of the Committee on Governmental Affairs of the U.S. Senate, August 1984 [hereinafter referred to as HEREIU Report.] This section of PCOC's report relies heavily on the excellent work recently completed by that Subcommittee.

4HEREIU Report, supra note 3, at 13.

5Id.. at 14-15.

6See Hotel Employees and Restaurant Employees International Union: Hearings be fore the Permanent Subcommittee on Investigations of the Senate Comm. on Governmental Affairs, 97th Cong., 2nd Sess., Part I, at 6 (1982) [hereinafter cited as HEREIU Hearings].

7Id., Part III, at 34.

8HEREIU Report supra note 3, at 17.

9Id. at 25-32.

l0Id at 41.

llId. at 44.

12Id. at 33.

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13These are some of the questions, posed mainly by Senator Roth, which Hanley refused to answer, some in apparent violation of AFL-CIO ethical practices policy:

Q: Are you president of the International Union of Hotel Workers & Restaurant Employees?

Q: What is your occupation?

Q: Could you explain the international union's basic policy concerning mergers of local unions?

Q: What sort of policy and criteria are used by the International union in hiring?

Q: What do you believe are your fiduciary responsibilities as president of the Hotel Employees & Restaurant Employees International Union, both to the union and its members?

Q: Have you ever told Jeff McColl, the Las Vegas local union leader, you would "pull" the Local 226 charter if he capitulated to demands that the health and welfare funds return to Vegas for local control? [In 1977, the health and welfare funds of Local 226 were returned to Chicago only after the murder of union officer Al Bramlett in Las Vegas. Bramlett was said to oppose moving the fund to Illinois.]

Q: Mr. Hanley, did you, in fact, have a conversation with Sidney Korshak about merging hotel workers locals? [This question was based upon an electronically intercepted conversation between Korshak and Dorfman in which Korshak claims to have discussed with Hanley the merger of two West Coast HEREIU locals.]

Q: Did you know Allen Dorfman before he was murdered?

Q: As you know, Mr. Hanley, we have heard evidence relating to a possible association between yourself and Mr. Anthony Accardo and also Joseph Aiuppa of Chicago. Let me ask you, do you know either of those gentlemen?

HEREIU Hearings, supra note 6, at 23.

14See Organized Crime and Gambling: Hearings before the

President's Commission on Organized Crime, June 1985, at 243-244.

15HEREIU Report, supra note 3, at 65.

16Id. at 110, 111, and 113.

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17 See Brock v. Frank Gerace et al., U.S. District Court, District of New Jersey, Civil Action No. 85-3669.

18 Court authorized electronic surveillances, March, 1982.

19 Brown v. Hotel and Restaurant Employees and Bartenders International Union Local 54, 52 U.S.L.W. 5042 (July 2, 1984).

20 Id.

21 See U.S. v. Persico, 84 Cr. 809 (S.D.N.Y. 1984).

22 Court authorized electronic surveillance, June 3, 1983.

23 Id.

24 Court authorized electronic surveillance, April 24, 1978.

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