Matt O'Connor and Ray Gibson, Tribune Staff Writers.

November 18, 1996

A Northwest Side bank faces a fine of $800,000 and 5 years' probation after pleading guilty last week to a longtime illicit relationship with two union officers.

Capitol Bank and Trust admitted bribing two officials of the Central States Joint Board, an umbrella labor organization, with more than $5 million in personal and business loans at unusually favorable rates.

In return, the bank obtained about $4.5 million in deposits of union funds and took over the lucrative assignment of managing about $16 million in union pension and welfare plan assets.

In conjunction with the guilty plea, the owners of the bank's holding company, Gildo Mazzolin and his daughter, Amalia, have agreed to give up participation in the bank's affairs and to sell the bank in a year. Neither has been charged with wrongdoing.

The bank, at 4801 W. Fullerton Ave., is cooperating in the government's continuing investigation.

The illicit relationship with the two union officials took place between August 1986 and May 1992 under previous bank management.

The federal charges didn't identify the union officials, but sources have previously identified them as John Serpico, a longtime powerful union official in Chicago, and a close aide.

Capitol Bank provided personal and business loans to the two officials for eight different investments and purchases.

According to the bank's plea agreement, the men allegedly made between $500,000 and $800,000 in profits from the arrangement with the bank.

One of the transactions with Capitol Bank that first attracted federal scrutiny involved Serpico's previous dealings with corrupt banker James Wells.

Wells, the former chairman of Cosmopolitan National Bank, entered an agreement in 1989 to buy a $1.6 million West Side complex that was to be used as a branch bank for Cosmopolitan.

Serpico and three politically connected partners had borrowed $1.6 million from Capitol Bank to build the complex, but hid their ownership interest in a secret land trust at the bank.

The deal fell through when federal regulators ousted Wells from the bank for misusing bank funds. He was later convicted of federal fraud charges and sentenced to prison.

Serpico's partners in that deal included former state Sen. John D'Arco Jr., and D'Arco's brother-in-law, attorney Pasquale DeLeo, both of whom were convicted on separate bribery charges stemming from Operation Gambat.

Serpico heads the Central States Joint Board, which comprises eight local unions including Local No. 8 of the Laborers International Union, which he founded.

Labor leaders seized control of the union last summer in a move to purge Local No. 8 of suspected mob influence. The local represents mostly semi-skilled factory and foundry workers.

Serpico is also chairman of the Illinois International Port District.