George Lardner Jr

December 11, 1981

The White House said yesterday that President Reagan was informed a week ago of a new FBI investigation into Secretary of Labor Raymond J. Donovan's conduct as a construction company executive before joining the Cabinet.

White House communications director David Gergen said, "There is no information known to the president that would cause him to have any lack of confidence in Secretary Donovan."

But Gergen also told reporters that the president has not been briefed on the details of the matter.

Sources said the investigation revolves around an alleged $2,000 payment in 1977 by an executive of Donovan's New Jersey construction company to the head of a Laborers Union local in New York City.

The FBI is checking into assertions that Donovan, who was then president of Schiavone Construction Co. of Secaucus, N.J., was present at the meeting at which the cash payment was made, allegedly by another Schiavone official.

The alleged recipient of the money was Louis Sanzo, president of Laborers Local 29, which is also known as the Blasters Union. Its members blast out pavement, rocks and dirt on big construction projects, including the New York City subway expansion that Schiavone and several allied contractors were undertaking.

It is a violation of the Taft-Hartley Act in most instances for an employer to "pay, lend or deliver any money or other thing of value . . ." to an official of any labor organization representing or seeking to represent "any of the employes of said employer."

Donovan declared yesterday morning that he had not been aware of the investigation--a "preliminary inquiry" under the Ethics in Government Act-- and asserted that he knew no more about it than he had just read in the newspapers.

"The secretary knows of nothing that lends substance to these reports and we will have no further comment," a spokesman for Donovan said.

Additional details about the preliminary FBI probe, which is aimed at determining whether a special prosecutor should be appointed, dribbled out throughout the day.

The allegations, sources said, came from an informant named "Mario," a Laborers Union official who had already testified for the government in a criminal trial this summer and who told authorities he had been present at the 1977 meeting in a New York restaurant. According to a broadcast on the NBC Nightly News last night, his full name is Mario Montaruo, a former Blasters Union treasurer who also happens to be "a convicted heroin dealer."

Senate Labor Committee Chairman Orrin G. Hatch (R-Utah), who presided over Donovan's stormy confirmation hearings last winter, said yesterday that he was still in Donovan's corner and had "no reason to doubt his integrity."

"What little I do know of the investigation is that there have been statements made by people who may not be savory," Hatch told a reporter. "I have to question any allegations made by anybody from the Laborers International Union. . . . I think I'll take Mr. Donovan's word unless I have hard proof--more than the word of a 'source.' "

Hatch said he intended to keep "hands off" the investigation until it is completed, but later in the day he reportedly agreed with a request from the committee's ranking minority member, Sen. Edward M. Kennedy (D-Mass.), to seek a Justice Department briefing on the matter.

The FBI investigated dozens of allegations linking Donovan and his firm to union corruption and organized crime before his confirmation last Feburary, but it was unable to corroborate any of the claims. Donovan denounced the charges as lies, denied any wrongdoing and at one point, assured the Senate committee:

"No executive officer of Schiavone Construction Co., no employe of Schiavone Construction Co.,has ever bought labor peace."

The purpose of the alleged payment to the Laborers officials was not entirely clear, although one source described it as a "one-time payment for temporary labor peace."

NBC said it was described as " 'a token of appreciation' apparently for labor peace."

The money was allegedly turned over to Sanzo in an envelope by Schiavone's senior vice president, Joseph Di Carolis.

Sanzo was convicted of tax evasion and conspiracy in federal District Court in Brooklyn earlier this year but was acquitted on charges of racketeering and violating the Taft Hartley Act.He was sentenced Aug. 14 to three years in prison but is free on appeal.

At day's end, the Labor Department issued another statement on Donovan's behalf, reiterating that "he has no direct knowledge of these allegations."

"He will obviously coooperate with the appropriate government officials in this matter and he quite clearly is anxious to put this whole thing to rest," the statement continued. "Mr. Donovan finds it completely inappropriate to comment on information apparently being passed out by unnamed, unidentified sources." The Justice Department continued to refuse even to acknowledge that an investigation is under way. The White House said Reagan was told of it by Attorney General William French Smith on Dec. 3.