By RAEL JEAN ISAAC

MONDAY, JULY 27, 1998

When the Justice Department entered into an "operating agreement" with LIUNA, the mob-ridden Laborers International Union of North America, Attorney General Janet Reno hailed the agreement as a new model for racket-busting. Under the February 1995 agreement, the union would clean its own house over three years, and if the Justice Department was not satisfied with the union's progress, it would have authority to impose a previously agreed-upon consent decree and take over as it had the Teamsters. Laborers President Arthur A. Coia, described in a Justice Department memo as a "mob puppet," would remain in place, supervising the cleanup.

But although Justice professes itself satisfied with progress and has extended the arrangement until next January, there is evidence that there is less to the internal reform than meets the eye. Justice had best return to the drawing board while the threat of the consent decree still gives it clout over the union.

Raised Eyebrows

The agreement raised eyebrows at the outset, for it created the appearance that Mr. Coia's wooing of Bill and Hillary Clinton had paid off. LIUNA was one of the largest donors to the Democratic Party, and Mr. Coia contributed the maximum possible to Mr. Clinton's legal defense fund. What's more, Mr. Coia was an outspoken political ally, even breaking ranks with the entire labor movement to campaign for the North American Free Trade Agreement. Financial and political support brought social access, from breakfasts at the White House with Mrs. Clinton to trips on Air Force One with the president. A House Judiciary subcommittee documented more than 120 such contacts.

The Justice Department's draft complaint under the Racketeer Influenced Corrupt Organizations law demanded Mr. Coia's ouster and declared that LIUNA has been "continuously and systematically controlled, exploited and dominated in the conduct of its affairs by the Cosa Nostra." The complaint arrived on Mr. Coia's desk the same day as the president's thank-you note for the gift of a specially made golf club.

When the Justice Department abruptly backed down on its demand for Mr. Coia's ouster, the appearance of White House interference led to July 1996 House hearings. But those hearings backfired on the Republicans. Justice Department officials stoutly denied that any pressure had been brought to bear. Rather, they said, .Justice had been given an attractive offer: Never before had a union offered to purge itself of mobsters at its own expense, backing this up by hiring a team of former federal prosecutors and FBI agents, with no one, Mr. Coia included, off limits for investigation.

Last Nov. 6 Robert D. Luskin, LIUNA's attorney who is acting as chief prosecutor of corruption within the union, announced that he was finally instituting corruption charges against Mr. Coia. But eight months later, union members do not know what the specific charges are or what has transpired in the secret internal proceedings. Kenneth Boehm of the watchdog National Legal and Policy Center says that although the team has at its command numerous former FBI field agents, there have been no in-depth investigations of Coia's activities in Rhode Island, his home base, or in Connecticut, where Mr. Coia had close ties to Local 230 and the District Council.

"This isn't a reform process," says the business manager of a small local in San Francisco. "It's a retreat until the government is out of the way."

This shouldn't be surprising. The .Justice Department had claimed that its decision to allow LIUNA to investigate itself was based not on Mr. Coia's high-profile friendship with Mr. Clinton but on the credentials of the investigative team. LIUNA's general counsel, Michael Bearse, later assured Congress that the union, "by entrusting oversight and enforcement to independent officials of unquestioned integrity," had ensured that investigations would be conducted "free from all internal or external political considerations."

But Justice should have seen a glaring conflict of interest at the outset. For the man who sold Justice on the proposal that saved Mr. Coia's neck was LIUNA's lawyer, Mr. Luskin. True, earlier in his career he had served as special counsel to the Justice Department's organized crime section. But was it realistic to expect him to turn overnight from Mr. Coia's advocate into Mr. Coia's investigator, while he continued to be paid by the union? A telling early sign suggested that Mr. Luskin continued to think like a Coia-partisan. In April 1995, U.S. district Judge Emmett G. Sullivan asked why, given the Justice Department's 212-page draft complaint against Mr. Coia, he had not been removed. Mr. Luskin's response, according to the Providence Journal-Bulletin, was that the draft complaint was a government bargaining tool not an accurate depiction of the union and Mr. Coia.

Equally troubling, it turns out that Mr Luskin, at the very time he was working out the unprecedented agreement between Justice and Mr. Coia, was allegedly accepting "hot" money, to the tune of $700,000, from Stephen A. Saccoccia, a Patriarca crime family associate now in prison for money laundering.

Mr. Luskin was representing Saccoccia on appeal from his 1993 sentence of 660 years. Saccoccia's assets were frozen under a court order, and the money had come to Mr Luskin in the form of gold bars and Swiss wire transfers. Mr. Luskin settled a case brought by the U.S. attorney's office in Rhode Island, which accused him of "willful blindness" in accepting these "surreptitious and anonymous payments." Earlier, a federal judge had shot down Luskin's argument that his financial arrangements with Saccoccia were protected by attorney-client privilege. Mr Luskin, claiming he had no idea the money was part of Saccoccia's ill-gotten gains and calling the government's action "despicable," nonetheless forfeited $245,000.

A second member of the four-man team in charge of LIUNA's anticorruption campaign has political ties to Mr. Coia's pal the president. W. Neil Eggleston, who has the role of appeals officer, worked in the Clinton White House counsel's office when the Whitewater investigation began and now represents Mr. Clinton in his effort to assert attorney-client privilege in the Monica Lewinsky investigation. Mr. Eggleston also represents Labor Secretary Alexis Herman, now the subject of an independent counsel probe into suspected corruption.

While the other two members of the investigative team do not carry political baggage, it is hard to imagine results embarrassing to the White House surviving the LIUNA internal appeals process under Mr Eggleston's control. And given that the Clintons ignored repeated warnings fron both Justice and the FBI to stay clear of Mr Coia, his ouster would embarrass them.

The effect of the operating agreement so far as been to reinforce Mr. Coia's power in LIUNA. Overnight he became the champion of "reform," and he has taken credit for the trusteeships imposed on disrict councils in New York, Chicago and Buffalo-an unavoidable action, given the detail with which the Justice Department's draft complaint described the mob's robbery of Laborers' pension and welfare funds in these councils.

But elsewhere, Laborer rank-and-file reformers complain that the old pattern of corruption backed by intimidation and violence continues, with the Luskin team failing to take appropriate action. In July 1997, 53-year-old Steve Manos, vice president of Local 230 in Hartford, Conn., was threatened, cursed at and beaten when he probed union expenditures at an executive board meeting. Mr. Manos was wearing a wire; audible on tape are a string of unprintable curses, the sound of Mr. Manos being slammed against a concrete floor, and the ominous cry "We own you now!" as he is chased to his car. But although this local had a record of corruption (the previous business manager is in prison for takng a $500,000 bribe to invest $5 million of union pension funds in a worthless real esate scam), this incident resulted only in a mild reprimand from Mr. Luskin. On May 4, Mr. Manos testified in a congressional rearing that "Luskin's actions, in effect, have facilitated the racketeering activities directed at me."

Severe Head Injuries

Joe Portiss, a member of Local 1089 in Sarnia, Ontario, and his daughter, Laura, say they have compiled extensive documentation on violations of LIUNA's ethics code by the local's executive board. Ms. Portiss says the Luskin team has ignored their complaints. She describes a long patern of intimidation and violence, of which the worst was a 1983 group assault on her father at a LIUNA meeting, in which he sustained severe, permanent head injuries. She says she now endures a steady stream of harassment and threats but is prepared to keep up the struggle "no mater how much they scare me-and they do, to be perfectly honest. I am afraid of them. "

Few Laborers expect Mr. Coia will be gone when the government's chance to inervene lapses in January. Alex Corns, business manager of a small Hod Carriers local in San Francisco, has been struggling against corruption in his district council with scant help from Mr. Luskin's team. Says Mr. Corns: "This isn't a reform process. It's a retreat until the government is out of the way."

Ms. Isaac writes on public policy issues.