Chicago Tribune


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.

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