By James Warren and John O`Brien.
May 7, 1987
The U.S. Department of Labor will seek to
recover more than $12 million for a union employee benefit plan
that it alleges was manipulated by Chicago- based union officials
and organized-crime figures over a 10-year period, sources disclosed
Wednesday. The department`s effort, outlined partly
in a civil lawsuit filed in U.S. District Court here, charges
that the Laborers Union`s health and welfare plan paid unreasonable
and excessive compensation to a Chicago firm for dental services
and that kickbacks were paid to former trustees of the plan.
The suit follows the recent criminal convictions
in Miami of four Chicago-area men, including the son of Angelo
Fosco, Laborers Union president, for conspiring to swindle the
union. The suit names as defendants Consultant and
Administrators Inc., 220 S. Ashland Ave., which provides dental
benefits to the Laborers Union; key officers of the firm; and
19 current or former union and management trustees of the union`s
health and welfare plan.
The current or former trustees named as defendants
include Paul Fosco, 37, of Chicago, son of the union president;
Ernest Kumerow, president of Laborers Local 1001 in Chicago; Alfred
Pilotto, a former top Laborers Union official and onetime south
suburban rackets boss; James Pinckard, who is Pilotto`s son-in-law
and head of a company that worked with Consultants and Administrators
on the union contract; and Donald Dvorak, president of the Builders
Association of Chicago.
No estimates of lost funds were mentioned
in the lawsuit, which was filed on May 1 and announced Wednesday.
Government officials previously had charged
that such losses exceeded $2 million. But sources said Wednesday
that Labor Department officials will ask Chief U.S. District Court
Judge John Grady, to whom the suit was assigned, to broaden the
scope of the action, which could result in the recovery of more funds.
As filed, the suit focuses on alleged wrongdoing
that occurred between 1974 and 1977, the same time period covered
by two related criminal trials in Miami. Sources said the Labor
Department wants to extend the period from 1977 to the present
and believes another $10 million has been similarly swindled during
that time. The civil suit results from the indictment
in 1981 of 16 men for allegedly conspiring to swindle the union
through manipulation of lucrative benefit plans. Essentially,
prosecutors charged that kickbacks were paid to union officials
and mobsters so that a Miami insurance firm, controlled by convicted
swindler Joseph Hauser, could get the union`s health, vision and
dental insurance business.
In 1982, a jury convicted Pilotto and seven
others. Those acquitted, however, included Anthony Accardo, reputed
boss of the Chicago crime syndicate, and Angelo Fosco.
Other defendants were brought to trial this
year and on April 25 a jury convicted four in connection with
the same conspiracy: Paul Fosco, 37, of Chicago; Pinckard, 50,
of Chicago Heights, who allegedly ran a dummy insurance firm as
part of the scheme; James Norton, 56, of Lake Geneva, Wis., president
of a firm which processed insurance claims; and Dr. Paul DiFranco,
a Park Ridge dentist and vice president of a Miami firm created
largely to treat union members.
Pilotto, who was sentenced to 20 years, is
the only defendant in prison. The others convicted in both trials
are either out on bond pending appeals or have not yet been sentenced.
The lawsuit alleges that trustees violated
the federal Employee Retirement Income Security Act by assuring
that the fees of Consultant and Administrators were excessive,
"grossly" overstating the value of its services, not
securing competitive bids and through kickbacks paid former trustees
Pilotto and James Caporale.
Hugh Arnold, a Chicago attorney for the current
trustees, declined comment on the substance of the allegations
because the suit is pending. But he said that allegations in the
suit predate the tenure of current trustees, such as Dvorak. "These
allegations are very old and the current board is doing a fine
job," he said.
Paul Fosco is a vice president of Consultants
and Administrators, which still administers the union`s various
benefit plans. Norton continues as the firm`s president and DiFranco as an officer,
while Pinckard still performs services for the union.
Copyright 1998, The Tribune Company.