Providence Journal-Bulletin

Judge: No interest owed on union fund

He rules that a legal defense fund for Laborers Union members was not treated less fairly than other depositors in the bank Joseph Mollicone looted.


Journal-Bulletin Staff Writer

March 5, 1996

PROVIDENCE --- A Superior Court judge says that the state does not have to pay an organization formed to defend union members against criminal charges some $163,800 in interest on money that the organization kept in an account at the bank that was looted by Joseph F. Mollicone Jr.

Judge Richard J. Israel said that the North American Laborers Defense League was treated no less fairly than any other depositor at the Heritage Loan & Investment Co. - the bank that Mollicone, as president, looted. Israel ruled that the Laborers Defense League is not entitled to collect interest on the $420,000 that it had kept at Heritage, in an unorthodox passbook account that paid no interest. The Laborers Defense League got its money back in 1994 - four years after the state took over Heritage, following the bank's collapse.

In April 1994, court-appointed Special Master William J. McAtee had granted the Defense League's claim, saying that the organization was entitled to the full $420,000 that it had deposited. McAtee also ruled that the Defense League was entitled to interest, at the rate of 12 percent per year, from Jan. 25, 1991, to the date of his order, or about $163,800.

The state had questioned the unorthodox practice of keeping $420,000 in an account that paid no interest, and McAtee agreed that it was "unusual." But he ruled that the account was valid and ordered the money repaid. And on June 24, 1994, the Defense League was paid $420,000 by the state Depositors Economic Protection Corporation (DEPCO), which had been formed to recover money owed on debts left from the state's 1990 banking crisis and had taken control of the remainder of Heritage' s assets. But DEPCO refused to pay the interest.

The Defense League then filed a lawsuit, asking the court to enforce McAtee's order concerning the payment of interest. The Defense League said that it had been treated unfairly because the receiver - in this case, the state - had refused to pay the interest allowed by the special master. The Defense League also argued that it had had to wait longer than other depositors to get back its money.

Other depositors received interim distributions, but the Defense League did not.

Judge Israel disagreed with the Defense League.

He said that the Defense League had not been treated unfairly, and that there were no legal grounds for ordering the payment of interest. "The receiver had no obligation to treat all depositors alike, so far as time of payment is concerned," Israel said. "In fact, the receiver had a duty to ensure that each depositor had a legitimate claim to funds from Heritage."

The receiver, the judge said, "acted within (its) authority to pursue an investigation of accounts" that appeared unusual. "Given the state of the records and finances of Heritage," Israel added, the receiver "would have been remiss in (its) duties to the taxpayers of Rhode Island, who were providing assets to DEPCO to pay depositors' claims, had (the receiver) paid out such account monies without a thorough investigation and consideration of any irregularities."

The judge struck down the portion of Special Master McAtee's order that allowed payment of interest.

League defended union members

The North American Laborers Defense League was formed in 1980 to defend union members against criminal investigations and charges. Shortly after that, the Defense League solicited donations to help union officials, including Arthur A. Coia, now president of the 770,000-member Laborers International Union of North America, and his father, Arthur E. Coia, who had been indicted in 1981 for racketeering, along with New England crime boss Raymond L. S. Patriarca.

Three years later, a federal judge dismissed the charges, saying that the government had not filed them in time. Last year, the junior Coia resolved a Justice Department racketeering investigation of the Laborers by agreeing to oversee internal union reforms.

The Defense League's Heritage Loan & Investment passbook contained Arthur A. Coia's name. Investigators concluded that Coia's signature had been forged to cover up Mollicone's theft of the money from the bank. Coia declined requests for an interview about the Defense League. He has acknowledged that he contributed to the organization, but he testified at hearings on the state's banking crisis that he had had nothing to do with organizing the Defense League.

The Defense League's administrator is James Merloni, president of the Massachusetts Laborers' District Council, with offices in Hopkinton, Mass. The apparent reason the Defense League kept the money in an account that paid no interest was to conceal its financial affairs from the government.

Copyright © 1996 The Providence Journal Company

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