Sunday September 24, 1995

Laborers fund sues state over Heritage account

Union president Arthur Coia says he has no connection to the secretive fund, which kept $420,000 in a no-interest account.


Journal-Bulletin Staff Writer

Five years ago, investigators combing through the rubble of the looted Heritage Loan & Investment Co. found a mysterious passbook locked in the vault.

The passbook recorded the fact that a secretive customer, the North American Laborers Defense League, had kept $420,000 in a savings account at Joseph Mollicone's bank on Federal Hill in Providence.

This was no ordinary account. It paid no interest, a fact that helped conceal the league's financial affairs from the government.

And the passbook contained a name that was well known in national and local labor circles: "Arthur Coia."

Now the mystery surrounding the North American Laborers' Defense League has taken a new turn.

Although the league got its $420,000 back last year, it is now suing to collect back interest - even though the money was in a non-interest-bearing account.

The defendant, as it happens, is the state of Rhode Island, which took over Heritage following its collapse in 1990.

Meanwhile, Arthur A. Coia, who has risen to the presidency of the 770,000-member Laborers' International Union of North America, declined to be interviewed about the league.

Despite the presence of his name on the passbook, and evidence of ties between Coia, the union and the league dating to 1981, the Laborers, in a statement, said that Coia has no formal connection to the league or the account.

THE LEAGUE was formed in 1980 to defend union members against criminal investigations and charges. Shortly after that, the league solicited donations to assist union officials - including Coia and his father, Laborers secretarytreasurer Arthur E. Coia - indicted for racketeering along with New England mob boss Raymond L.S. Patriarca.

The league's recent lawsuit against the state brings new attention to the secretive organization at a time when Coia and the Laborers have come under federal scrutiny for alleged labor racketeering and misuse of union funds.

Earlier this year, Coia resolved a U.S. Justice Department racketeering investigation of the Laborers by agreeing to oversee internal union reforms.

In July, the Journal-Bulletin reported that Coia personally benefited last fall when another legal fund, also run by Laborers officers, bought an office building that was partly owned by Coia.

Those associated with the league decline to discuss it.

James Merloni, the league's administrator and president of the Massachusetts Laborers' District Council, could not be reached at his office at the Laborers training facility in Hopkinton, Mass., at the Arthur E. Coia Conference Center.

. IN THE SUMMER of 1980, while newspaper headlines trumpeted the sweeping federal probe of nearly two dozen Laborers officials, including the Coias, and mobsters, including Patriarca, the New England Laborers' Defense League, as it was originally called, quietly set up shop.

The league was run by three trustees: Charles J. Rogers Jr., a one-time lawyer for Patriarca; Monsignor Galliano Cavallaro, a Federal Hill priest who had vouched for Patriarca at a parole hearing; and Dr. Albert C. Picozzi, a North Providence dentist who helped found the Arthur E. Coia Educational Scholarship Fund.

Its bylaws recognized that "working people and their representatives do not possess or have available the degree of economic resources" to defend themselves. The league submitted those bylaws and other records to the state in support of its claim on the money on deposit at Heritage.

The bylaws said the league would solicit funds to assist union members facing investigation or indictment. In a worst-case scenario, the league would "assist such persons who may be incarcerated or unable to secure employment as a result of such charges."

In an interview, Rogers said he was asked to be a trustee by one of the Coias - he doesn't remember which one - and that the trustees would meet at the Laborers offices on South Main Street in Providence.

The younger Coia, then a top Rhode Island union official and a Providence lawyer whose law firm was in the same building, told a reporter in 1981 that the league was started at his suggestion.

Coia said he bowed out of the league's operation once it was established.

Asked if he would draw from the fund for his defense, Coia replied: "If I have to."

Coia said, however, that the league was formed to help all union members, not just himself and others targeted in the federal racketeering case.

IN 1981, THE COIAS and Patriarca were indicted along with 18 others, including Laborers general president Angelo Fosco of Chicago. Prosecutors charged that Coia and his father steered lucrative union insurance business to a company in return for kickbacks, which they split with Patriarca.

Not long after the indictment, Monsignor Cavallaro, pastor of Our Lady of Mt. Carmel Church, appealed to rank-and-file Laborers throughout New England - the ditch diggers, the construction workers, the government clerks - to reach into their pockets and donate money to help defend their leaders.

Writing on the stationery of the New England Laborers' Defense League, Cavallaro thundered that the Laborers leaders were "the targets of a concerted and well-orchestrated campaign by the federal government to repress individual rights."

Three years later, a federal judge dismissed the charges, saying the government had not filed them in a timely manner.

How the Coias ultimately financed their defense is unclear. League officials won't say how much they collected for the Coias' defense, or how it was spent.

In spite of the league's existence, the Coias drew on union funds to pay at least some of their legal bills.

In 1986, the President's Commission on Organized Crime criticized the Laborers "extraordinary expenditures," particularly for criminal defense fees.

The commission singled out $200,000 the elder Coia had spent on private investigators to track the federal investigation of the Laborers'.

The elder Coia also helped his son obtain $40,000 from the union for legal expenses, the commission said; when the union's controller sent the bills to a union lawyer for authorization, the elder Coia ordered them paid "without question."

ANOTHER WINDOW into the early operation of the defense league is provided by a government informant named Ronald Fino.

Fino, a former Laborers executive in Buffalo, N.Y., and onetime confidante of the elder Coia, said in an FBI statement obtained by the Journal-Bulletin that union officials outside New England were receiving money.

Fino, who has testified against several Laborers officials and organized crime figures, told the FBI that he saw the elder Coia give a large amount of cash to another defendant in the racketeering case at a hotel restaurant in Florida.

The money, "to take care of (his) personal and legal expenses regarding the upcoming trial," came from the union's legal defense fund, Fino recalled the elder Coia telling him.

Fino also remembered the elder Coia telling him about the defense league.

"This particular fund is a 'pet' of Coia, Sr. and it was set up and controlled by Coia, Sr. solely," Fino's FBI statement says.

Federal prosecutors have brought dozens of criminal cases against Laborers' officials around the country since the defense league was formed. But who has received money from the league is a mystery.

There is no way to know whether the money has gone exclusively to union executives or whether any rank-and-file Laborers have gotten help.

"As far as I was concerned, the union had some type of help for people who couldn't pay for lawyers," says Rogers, the league's former chairman.

Rogers said the league officials would meet and review written requests for assistance from members.

Rogers said he remembers meeting in the Laborers offices in Providence, and that the walls were decorated with framed photographs of former New York Yankees ballplayers: Babe Ruth, Lou Gehrig, Joe DiMaggio.

But Rogers said he can't recall any specific cases.

By 1988, Rogers had resigned. The league's new chairman was George F. McDonald, a Cranston lawyer and former state representative who had had his own legal troubles.

In 1975, McDonald pleaded guilty to soliciting a bribe as chairman of the state Bicentennial Commission from a company that wanted to manufacture bicentennial souvenirs. The company had planned to hire then-House Speaker Joseph A. Bevilacqua as its lawyer.

McDonald declined to discuss the defense league.

IN 1982, THE LEAGUE changed its name to the North American Laborers' Defense League. The reason it gave, according to league minutes: the "strong, consistent and enthusiastic support of laborers, their officers and representatives throughout the United States and Canada."

Through the 1980s, after the Florida case had ended, the league continued to raise money.

At its Oct. 5, 1988, meeting, the league reported a balance of $290,000, and bank accounts in Rhode Island and Massachusetts, according to its minutes.

Rank-and-file Laborers were called on to give.

In a grimy union hall in Boston, home of Laborers' Local 88 of the Compressed Air Tunnel Workers, Robert Schleiff said he learned about the defense league in the late 1980s.

Schleiff, who operates a tunnel-boring machine, said that members were told they would have to pitch in $100 in cash - $50 if they weren't working. A bucket was placed in the union hall, he said, and members tossed their money in as someone stood by, checking their names off a list.

"The guys complained, but they coughed up," said Schleiff.

IN 1987, THE LEAGUE asked its lawyer for advice on the desirability of moving its money to interest-bearing accounts. The no-interest accounts had cost them significant interest income as the league's coffers swelled with cash.

The lawyer, Robert Bogucki of New York, responded with a letter that laid out the implications of collecting interest: The league would have to pay taxes and file income tax returns, exposing itself to the possibility of audits that would open its books to the government.

"It should be recalled that the IRS, in many instances, functions in cooperation with other government agencies (e.g. Department of Justice)," Bogucki advised.

The lawyer could cite only one "significant disadvantage" to keeping league funds in non-interest bearing accounts: "the loss of income."

Bogucki said it was up to the league's committee to decide "at what point does the loss of investment income outweigh the implications of filing annual returns and paying applicable taxes."

The following year, the committee opened a $280,000 account at Mollicone's Heritage Loan & Investment Co. - in a non-interest-bearing account.

The minutes of the league's Oct. 5, 1988 meeting reflect that the trustees voted to open a "holding account" at Heritage for "the prompt deposit of voluntary contributions."

But the passbook was locked in the vault at Heritage, and no individuals ever contributed to the account directly.

In July 1990, the league deposited another $140,000, by wire transfer from another bank, bringing the balance to $420,000.

EARLY THAT MONTH, banking examiners began digging into the records at Heritage, eventually uncovering a multimillion dollar embezzlement.

That fall, Mollicone fled Rhode Island, leaving a statewide financial disaster in his wake. The state took over the bankrupt Heritage and began paying out most depositors.

But the state questioned the North American Laborers' Defense League account. Heritage records indicated that Coia had withdrawn the money and used it to buy stock in the bank.

Later, investigators would conclude that Coia's signature had been forged to cover up Mollicone's theft of the money. Coia testified that he had not authorized the withdrawal; in fact, he said, he had nothing to do with the account.

The state also questioned the unorthodox practice of keeping $420,000 in an account that paid no interest. The Superior Court special master who heard the case agreed it was "unusual," but ruled last year that it was a valid account and ordered the money repaid.

MOLLICONE'S EMBEZZLEMENT has obscured the question of why the league put money at Heritage in the first place.

When Coia testified in the receivership case in 1993, the state's lawyer, Laurel Bristow, asked him about his relationship with Mollicone and whether it had anything to do with the account being opened.

Coia said he had known Mollicone since the late 1970s, and that he did some personal banking at Heritage. In April 1990, Coia dealt with Mollicone directly on a $50,000 loan from Heritage - a loan for which, Coia testified, he put up no collateral.

Bristow asked if Coia had ever discussed the defense league's account with Mollicone.

"I don't know," Coia answered. "I could have and may not; I'm not sure."

Bristow asked if Mollicone had expressed a desire to Coia to have the defense league put some of its funds in Heritage.

"I don't - I'm not sure if he did or not," Coia replied.

Coia also testified that he was not involved in the decision to form the league.

The union leader said he wasn't even sure if he knew the league had money at Heritage until after the bank closed, and he was shown the passbook with his name on it when he went in to see about his own account.

THE MATTER of the mysterious $420,000 bank account at Heritage didn't end with the state's repayment of the money last year.

This spring, the North American Laborers' Defense League sued the state demanding back interest on the money for the four years the state held it.

Lawyers for the league argue that the state unreasonably delayed paying the league's claim even after it agreed that Mollicone had stolen the money. Consequently, the league was forced to hire lawyers to pursue its claim "at significant cost."

One of the two law firms that has represented the league in the Heritage case is Coia & Lepore. Coia is a partner in the firm.

As a result of the state's delay, the league contended, it "has been unequally and unfairly treated."

The state counters that it was justified in delaying repayment while it investigated this unusual account.

"Ordinarily, most depositors of a financial institution do not put hundreds of thousands of dollars in an institution with no expectation interest will be paid," the state's lawyers argued in court papers.

The league's demand for back interest "is especially ironic," the state noted, "in that (the league) insisted throughout the course of these proceedings that its $420,000 'deposit' was not interest bearing."

MEANWHILE, THOSE most familiar with the league remain silent. They won't discuss the league's affairs, including how much money has been raised, how it is spent or whether Coia has received any, as a lawyer or a defendant.

Merloni, the league's administrator, was away recently at a union conference in New Mexico. His secretary said he would have no comment.

Monsignor Cavallaro declined, through the doorman at his downtown Providence residence at Park Row West, to meet with reporters.

McDonald, who was listed as league chairman as recently as 1990, refused comment. A former Journal-Bulletin reporter, McDonald said he charges his standard legal fee of $250 an hour for interviews.

Picozzi, the league's other original trustee, died in 1991.

Mollicone, who is serving a 30-year prison term at the Adult Correctional Institutions, did not respond to a written request for an interview.

Coia told the Journal-Bulletin in 1993 that he has contributed to the league but knows little of its affairs.

The Laborers, in the recent statement, said that Coia is acquainted with the league's trustees, and that Monsignor Cavallaro is Coia's "confessor."

The statement said, however, that Coia no longer has any connection to the league.

"Ben Franklin discovered electricity, but Thomas Edison developed the light bulb," the statement said. "The analogy holds true for Arthur Coia and the North American Defense League: The idea was Mr. Coia's, but he played no role in its creation and has no role in the organization now."

The statement said Coia does not recall discussing the league with Mollicone; it also said Coia is not aware of any legal work performed for the league by his firm, Coia & Lepore.

Coia referred all questions about the North American Laborers' Defense League to Bogucki, its general counsel.

Said Bogucki, "It's simply an ironclad practice of mine not to coment on clients' activities."

* * *

CAPTION: ON THE BLOCK: People wait outside the Heritage Loan & Investment Co. on Atwells Avenue in Providence before an auction in 1991.

JOSEPH MOLLICONE is in prison for looting the Heritage Loan & Investment Co. Arthur A. Coia is president of the Laborers' International Union of North America. Charles J. Rogers Jr., left, was a trustee of the North American Laborers' Defense League.

Contents copyright 1982 to 1995 by The Providence Journal Co

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