By EDMUND MAHONY
December 23, 1999

BOSTON - One of the FBI's former top organized-crime investigators was arrested Wednesday on charges of conspiring to arrange payoffs from two notorious gangsters while protecting them from arrest and helping them extort real estate from a young South Boston couple.

In a lengthy racketeering indictment, retired FBI Special Agent John Connolly in effect was charged with going to work for James "Whitey" Bulger and Steven "The Rifleman" Flemmi - two informants he was supposed to be handling for the FBI's Boston division.

Connolly, who was arrested in his Lynnfield, Mass., home, pleaded innocent in federal court to the five- count indictment and was set free on $200,000 bail. Flemmi, currently jailed on related charges, and Bulger, a fugitive, were also charged in the indictment unsealed Wednesday afternoon.

Barry Mawn, special agent in charge of the FBI's Boston office, apologized for what he said was Connolly's violation of the public trust. "I am certainly on the one hand saddened, but on the other I'm angered," Mawn said.

But Connolly's lawyer, Robert Hopedale, said the indictment was flimsy and an embarrassment to the FBI and the Justice Department. "I'm telling you, we'll take it apart," he said.

He said Connolly was being blamed because he participated in FBI-sanctioned dealing with mobsters that the agency now regrets.

"The government now seeks a scapegoat and have decided that John Connolly is the best person to play that role," he said.

Connelly retired in 1990 and now works as director of security for Boston Edison.

For decades, Bulger and Flemmi have been legendary figures in New England crime, imposing their Winter Hill gang's stranglehold on the South Boston rackets. Since the late 1990s, though, the FBI has conceded under court order that the two were at the same time the Boston division's two most productive confidential informants, delivering the evidence the bureau needed to lock up top members of the Italian mafia.

But other law enforcement agencies have long complained that Bulger and Flemmi had an uncanny ability to learn in advance of any criminal investigations directed at them. Detectives with various New England state police agencies believed the two were using a small number of agents in the Boston FBI office to eliminate their competition for the area rackets and win protection from prosecution from other agencies.

Among the crimes Bulger and Flemmi have long been suspected of - but repeatedly able to distance themselves from - is the 1981 murder of former World Jai Alai owner Roger Wheeler. After Wheeler's murder on an exclusive Tulsa, Okla., golf course, two men believed to have had evidence about the crime were violently killed themselves.

The indictment unsealed Wednesday, based on work by a special federal investigative strike force, seems to support the longstanding view that Bulger and Flemmi had an unusually close relationship with the FBI. Connolly and the two, one time informants are named in a five-count indictment accusing them of racketeering, racketeering conspiracy, obstruction of justice and conspiracy to obstruct justice. Flemmi is accused alone in the fifth count of obstruction for passing classified information from Connolly to Patriarca crime boss Francis "Cadillac Frank" Salemme.

The indictment of Connolly, a highly regarded, retired FBI agent, is an extraordinary event. It could not be immediately determined late Wednesday whether a retired FBI agent has ever been linked to criminal activity he was formerly assigned to investigate. Connolly has repeatedly insisted that he has done nothing wrong.

Connolly was an FBI agent from 1968 until January 1990. Midway through his career he returned from New York to his hometown of Boston where, as a youngster, he had grown up with and befriended Bulger. Once back home as an FBI agent, Connolly became a highly regarded member of the Boston division's organized crime squad. Monday's indictment puts him right in the middle of the people he was once assigned to investigate.

Specifically, the indictment unsealed Wednesday charges:

During the 1980s, Connolly helped Bulger and Flemmi pay $7,000 in cash in three payments, as well as two cases of expensive wine, to former Boston FBI supervisor John Morris. Morris was Connolly's boss on the organized crime squad.

Morris admitted taking the money and wine while testifying under a grant of immunity in 1998 as a witness in a related case in a Boston federal court.

Evidence was presented at that hearing that Bulger and Flemmi had an odd social relationship with a variety of federal agents, sometimes dining and exchanging gifts with them. Morris is no longer with the FBI.

Connolly and the two informants also are collectively accused of conspiracy and extortion in the illegal takeover of a South Boston liquor store. There was evidence at the related federal hearing that Bulger and Flemmi extorted Stippo's Liquor Mart from a young couple in 1984. In the Stippo's case, Connolly is also accused of conspiring to prevent other FBI agents from investigating the extortion.

Connolly also is accused of tipping Bulger and Flemmi to law enforcement investigations of which they were targets. In 1988, according to the indictment, Connolly told them an associate named Baharoian was the subject of an FBI wiretap in Roxbury. He is accused of telling the two in December 1994 that they and others were about to be indicted for racketeering. Flemmi is accused of immediately passing that information along to Salemme. The predicted indictment was in fact returned on Jan 10, 1995.

As a result of the tip, Bulger and Salemme became fugitives. Salemme was apprehended in Florida in August 1995. Bulger remains at large.

Flemmi was arrested before he could flee from the 1995 indictment. While sitting in jail for months awaiting trial, he decided to mount a defense claiming that he should be cleared off all charges because whatever he was accused of doing, he did while working for the FBI as an informant.

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