The Bureau of National Affairs


Mob-Dominated Laborers Local Agrees to Supervision Agreement

By Michael Bologna

Volume 44 Number 2201

Wednesday, October 28, 1998

CHICAGO--One of the most notoriously mob-dominated locals of the Laborers' International Union of North America has been placed under the control of a supervisor, the international union's internal investigators told BNA Oct 15.

LIUNA Local 5, based in Chicago Heights, Ill., has been placed under supervision by the international union through a cooperative agreement reached between the local's officers and LIUNA's Office of the General Executive Board Attorney. The local, which has 739 members, primarily supplies labor to the construction industry.

The agreement, dated Oct. 6, accuses the local of financial malpractice, improper recordkeeping, undemocratic practices, and withholding meeting minutes and financial reports for review by members. The agreement also pointed to former Local 5 officers' "strong ties to organized crime" as a factor in the imposition of the supervision.

Local 5 is infamous for its associations with the Mafia in Chicago, locally known as "The Outfit." Several senior officers of the local have been accused of mob-related crimes over the last 25 years, including a recent secretary treasurer who is awaiting trial for murdering a businessman who failed to make payments on a "juice" loan--one made at exorbitant interest. Alfred Pilotto, a former Local 5 president, did time in federal prison for racketeering and was reputed by law enforcement authorities to be boss of the Outfit's notorious Southside gang based in Chicago Heights.

"This local has really had a long and colorful history of associations with the mob," said Wayne Johnson, chief investigator for the Chicago Crime Commission. "It was part of the Chicago Heights crew and that group has been as notorious as any in Chicago. Al Pilotto's role in Local 5 alone tells you something. He is one of the hallmark members of the Chicago mob going back to the Capone era."

Robert D. Luskin, LIUNA's GEB attorney, said William Clancey, a former FBI agent and an investigator within LIUNA's Office of the Inspector General had been named supervisor of the local. He said that Clancey currently is conducting a detailed audit of Local 5 with the cooperation of its officers and staff. Luskin said his office may exercise a stronger degree of control over the local depending on the outcome of the audit. The audit will likely be completed within three weeks.

Union Chose Supervision Over Trusteeship

Luskin described "supervision" as a less severe tool for imposing reform on corrupt union locals than "trusteeship," which permits an international union to remove the local's officers and business personnel and hire a new team to administer its activities for up to 18 months. In the case of Local 5, Luskin said his office chose supervision because the local officers agreed to cooperate with the investigation and reform process. Supervision also saves the Office of the GEB Attorney considerable time and money over a full-blown trusteeship.

"In circumstances where the local has expressed a willingness to work with us, we've imposed a supervision agreement," Luskin said. "With supervision, they are essentially writing us a blank check."

Luskin noted, however, that the supervision agreement does not preclude his staff from imposing a trusteeship on Local 5 or some other disciplinary action. The result of the audit and the local's willingness to continue to cooperate with Clancey will determine how the GEB Attorney will proceed with its reform effort, Luskin said.

Widespread Corruption Alleged

The supervision agreement gives only a broad description of the charges pending against Local 5. But Jim McGough, leader of a reform group called "Laborers for Justice" and a former member of Local 5, accused the local's leadership of mob ties and corruption practices.

Among other things, McGough said members were forced to pay hundreds of dollars to business agents for their union cards. He also alleged the union leaders negotiated "sweetheart deals" with employers, permitting them to avoid paying union scale in some cases and avoid payments into LIUNA pension and welfare funds in others. McGough doubted the local conducted a contested election in the last 20 years and noted that union officers rarely, if ever, reported their activities or the local's finances to the membership.

A federal source who has monitored Local 5 corroborated many of McGough's allegations relative to uncontested elections and mob connections. He also questioned the financial practices and personal integrity of Local 5's officers. Despite a very small membership base, the investigator said officers drew exorbitant salaries.

A 1996 Labor Department LM-2 report shows Frank Zeuberis, Local 5's president and business agent, received $137,908 in total compensation. James DiForti, who was Local 5's secretary-treasurer until last year, drew a compensation package totaling $94,525. Zeuberis' wife Joan, who performed clerical duties for the local, received a salary of $38,500.

"When you see things like this, you really have to wonder about the people running the local," the federal source said.

Even more shocking, the source said, is Local 5's lengthy relationship with organized crime.

The most recent example was the arrest of DiForti in July 1997 for a 1988 murder. Cook County prosecutors have alleged that DiForti, acting as a juice loan collector for the Outfit, went to a businessman's office to collect on an outstanding $100,000 debt. When the man refused to pay, a gun battle erupted, killing the businessman and wounding DiForti. Blood found at the crime scene was matched to DiForti nine years later. DiForti, who stepped down from Local 5 after his arrest, is awaiting trial on the murder charge.

Golf Course Assassination Attempt

Johnson said Pilotto was the most renowned mobster to operate from Local 5. Pilotto, who served as president between 1970 and 1982, had a long career as a crime boss on the south side of Chicago stretching back to the era of Al Capone. He was even the target of a botched mob-instigated assassination attempt in 1981 on the eighth tee of a golf course in suburban Chicago. He left the local in 1982 to serve a 20-year sentence in federal prison after being convicted in Florida on RICO conspiracy charges associated with accepting kickbacks from an insurance company seeking to do business with LIUNA-related pension and benefit funds.

Other Local 5 officials convicted on mob related activities include Dominick "Tootsie" Palermo and Nicholas Guzzino, who a federal judge found managed a "Mafia fiefdom" in northwest Indiana. Guzzino, a member of the Local 5 executive board, and Palermo, a field representative for Local 5, were convicted in 1991 of substantive RICO charges relating to their operation of an illegal gambling operation. Guzzino was sentenced to a 40-year prison term and received a $185,000 fine. Palermo received a 32-year sentence and a $250,000 fine.

Considering this history of corruption and criminal behavior, McGough said Local 5 should have been disciplined by LIUNA years ago. At the same time, he conceded that actions aimed at Local 5 had to take a back seat to the GEB's reform activities against LIUNA's Chicago District Council, a regional body which oversees the operations of 21 Chicago locals and their pension and health and welfare funds. In February, the union's independent hearing officer supported the GEB Attorney's case for trusteeship over the District Council after a lengthy hearing process (33 CLR 1221, 2/11/98).

"I've waited for 11 years for this to happen, I guess I can wait a little longer," McGough said.

Copyright © 1998 by The Bureau of National Affairs, Inc., Washington D.C.

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