Report to the President
and the
Attorney General
PRESIDENT'S COMMISSION ON
ORGANIZED CRIME
HONORABLE IRVING
R. KAUFMAN, CHAIRMAN
* Commissioner Rodino, in view of his position as
Chairman of the Committee on the Judiciary of the United States House of Representatives,
takes no position concerning the recommendations included in Section Eleven of this
Report.
THE HOTEL EMPLOYEES AND RESTAURANT EMPLOYEES
INTERNATIONAL UNION (HEREIU)
Someone else owns the international.
-Paul Castellano, former boss
of the Gambino crime family. 1
Aiuppa and Accardo [underboss and boss of
the Chicago Outfit, respectively]
continue to exert great influence over the
union and its president
.-Joseph Hauser.2
The Hotel Employees and Restaurant Employees International Union
(HEREIU) was founded in 1891 as the Waiters and Bartenders Union. It
quickly became the union of choice for bartenders, waiters, maids, cooks, porters,
busboys, and related service workers in the United States and Canada.3 Almost
100 years later, HEREIU has a documented relationship with the Chicago
"Outfit" of La Cosa Nostra at the international level and subject to the influence of the Gambino, Colombo, and Philadelphia La Cosa
Nostra families at the local level.
During the union's early years internal conflicts developed
between a Chicago faction, headed by W.C. Pomeroy, and the rest of the union, led by Jere
Sullivan. At the 1896 convention Sullivan charged Pomeroy with misuse of funds; when Sullivan was elected general secretary-treasurer in 1899 he ousted
Pomeroy from control in 1900 and embarked upon a program of reorganization with the
support of Samuel Gompers and the AFL. Although the luxury hotel business boomed during
the first two
decades of the 1900's, opening numerous jobs for service
employees, HEREIU was not a force in the trade because Sullivan refused to organize the
unskilled and foreign born. Moreover, HEREIU lost about one-third of its
membership almost immediately following the enactment of Prohibition in 1920.
With Sullivan's death in 1928 and the ascent of
the new president Edward Flore, HEREIU fully responded to the demands for organizing the
unskilled. By the early 1950's union membership was near its present day
figure of 400,000, and key steps had been taken to centralize internal power - primarily by allowing international officers to intervene directly in the affairs of
HEREIU locals.
Criminal infiltration, which has consistently
plagued HEREIU, was exposed at the union's 1936 national convention, where Harry Koenig of
Local 16 in New York City was murdered. Subsequent investigation by the Special Commission
on Crime, headed by Thomas Dewey, revealed a flourishing restaurant racketeering business
in New York City. In 1937 three officials of the national
were convicted of crimes, Local 16 was suspended, and those members associated at the time
with criminal activities were expelled.4
In 1958 the McClellan Committee revealed that
organized crime had infiltrated the Chicago restaurant industry through
its control of three union locals. Business agent John Lardino, who
was believed to be one of the chief lieutenants
to Tony Accardo, the long-time boss of the Chicago Outfit, controlled Local 593. Both
Accardo and Lardino appeared before the McClellan Committee and invoked their privilege
against self-incrimination. Chicago Outfit representative Louis Romano then controlled
Local 278. In 1935 the Outfit extended its power to Chicago's suburbs by obtaining the charter of Local 450. Those who influenced Local 450 were
believed to be Frank "The Enforcer" Nitti, Murray "The Camel"
Humphreys, and Louis Romano. Joseph Aiuppa, at that time a gunman for Al Capone, was
listed as the secretary of Local 450 on the application filed with the international in 1935.5
For 40 years Joseph Aiuppa, now the underboss of
the Chicago Outfit, and boss Tony Accardo wielded power in the Chicago area locals and the
HEREIU joint executive board. Their actions took on national proportions when Edward
Hanley, who began his career in Local 450 as a business agent in 1957, was elected to the
HEREIU presidency in 1973.6
Joseph Hauser, a convicted defrauder of union benefit funds,
appeared before the Senate Permanent Subcommittee on Investigations in April 1983 and
testified that Chicago crime boss Tony Accardo hand-picked Edward Hanley
for the HEREIU presidency.7 Hauser noted, "Aiuppa and Accardo continue to
exert great influence over the union and its president, Ed
Hanley." According to the Senate Report, the reign of Hanley
has been surrounded by allegations of organized crime's influence in the choice of
international union organizers, operation of benefit funds, and conduct of union affairs.8
Since Hanley took office in 1973, union assets dropped from $21.4
million to less than $14 million in 1982. Nearly $6 million of this money went into three
loans executed with private developers, one of whom was Morris Shenker,
an associate of the late Kansas City organized crime leader Nicholas Civella. Shenker received the largest single loan from the Teamsters Central States Pension
Fund, a portion of which has never been repaid.9
The Subcommittee found that the union's assets have been used to
enrich the top officers of HEREIU's hierarchy. Base salaries augmented by expense accounts
and "allowances," lifetime employment contracts, and increased expenditures of
tangible items have resulted in expenditures for HEREIU officers
skyrocketing from $229,051 in fiscal year 1973 to $1,689,370 in fiscal year 1983.10
Former HEREIU general secretary-treasurer John Gibson was found guilty
in May 1980 of misusing the union's airplane and of conspiring to
embezzle union funds. Gibson received concurrent four-month sentences, which he served in
1983, while receiving his lifetime contract checks from the union. 11 The list
of employees and organizers hired after Hanley became HEREIU president includes organized
crime
associates and numerous patronage jobs.12 In addition,
one of Hanley's early moves was to hire the current Teamsters president, Jackie Presser,
as an international organizer in 1973; Presser was already an officer of a HEREIU Local in
Cleveland. He resigned the HEREIU post in September 1976, when he became an IBT
international union vice-president.
Most troubling to the Subcommittee was the
unprecedented degree to which Hanley has been able to centralize authority within HEREIU
and to control local chapters through the use of mergers, trusteeships,
and personnel transfers, an action which mocks the
goals of local autonomy and members' rights as embodied in the Landrum-Griffin Act.
HEREIU's president has almost absolute authority to effect mergers and has done so more
than 136 times since 1973. Hanley has also consolidated 16 separate pension funds with
total assets of approximately $75 million and 35 separate health and welfare funds into
single funds under the control of the international union in Naperville, Illinois.
Hanley's Assertion of the Fifth Amendment
The
Permanent Subcommittee on Investigations sought Hanley's perspective on his union's
increasing identification with organized crime. He refused to testify.l3
Hanley's refusal to respond to questioning and his assertion of his Fifth Amendment
privilege before the Subcommittee deprived the Senate of the opportunity to explore this
steady movement of HEREIU money and
Page 75
power to Chicago. Hanley declined to answer a series of questions
which focused on his understanding of the obligation
of trust imposed on union officials. He rejected the
opportunity to explain HEREIU's merger policy. Finally, Hanley found no purpose to be
served by responding to questions about his relationship with the leadership of the
Chicago outfit, murdered racketeer Allen Dorfman, or attorney Sidney Korshak.
Atlantic City
HEREIU Local 54, which is located in the Atlantic City, New Jersey
area, came to prominence in 1978 after the opening of Atlantic City
casinos and the concomitant rise in the demand for waitresses, waiters, and bartenders.
With the increase in potential union members came a struggle for control
between factions of the Philadelphia family of La
Cosa Nostra. Department of Labor Special Agent Ron Chance testified before the
Commission about Local 54 and its influence in Atlantic City:
Local 54, in Atlantic City, is a classic case study in organized crime and labor racketeering. Several of the officers of this union and its predecessor unions boast convictions for murder, arson, extortion, drugs, bribes, kickbacks and racketeering. Next to the ownership of the casino itself, the control of Local 54 is the most important prize in the Atlantic City sweepstakes. . . . In 1978, when the casinos opened, Local 54 began to rise in stature and importance. Prior to the casino gambling, they only had about 2,500 members and most of them were employed in seasonal jobs in the hotel and restaurant industry in the seashore. The opening of each casino, though, brought between 1,500 and 2,000 new members into the local, and they now have about 15,000 members.l4
Indeed, the stakes were high for this "most important
prize." Membership increases contributed so substantially to total
dues collection that the local's annual income swelled from $269,000 in 1979 to $1,389,000
in 1982, and permitted the local to contribute more than $15 million a year to the
international's Health and Welfare Fund.
On December 15, 1980, John McCullough, the
president of Philadelphia Roofers Union Local 30, was shot to death at his home by Willard
E. Moran, allegedly due to his attempts to organize the Bartenders in Atlantic City away
from HEREIU Local 54.15 After his conviction, Moran decided to cooperate with
prosecutors and testified that he was recruited, employed, and trained to kill McCullough,
an associate of Philadelphia LCN boss Angelo Bruno by former HEREIU
Local 54 vice-president Albert Diadone and Raymond "Long John" Martorano, an
associate of Atlantic City LCN boss Nicodemo Scarfo. Moran testified that these two
actually escorted him to McCullough's home and drove him home after the
murder. Both Diadone and Martorano have been convicted and sentenced to life imprisonment.
In 1979 Frank Gerace was appointed president of Local 54 after the
previous president, Ralph Natale (another Bruno associate) was convicted and sentenced to
30 years' imprisonment for a variety of offenses, including narcotics trafficking.
Page 77
Local 54, under the presidency of Frank Gerace,
has been the focus of several investigations by law enforcement
agencies, as well as the U.S. Congress. Gerace has been named in Senate testimony as a
significant criminal associate of the Scarfo crime family. The
investigations have focused on Local 54's benefit funds, mob ties, and corruption of
public officials. In 1980 the New Jersey Commission of Investigation reported that Larry
Smith, head of Rittenhouse Consulting Enterprises, Inc. in Cherry Hill, New Jersey,
profited handsomely from Rittenhouse's consulting work to arrange dental
care services for HEREIU Local 33. Ultimately, HEREIU Local 33 was absorbed into Local 54
of Atlantic City. In tracing Rittenhouse's and Local 54's disbursements, New Jersey
commission investigators determined that $153,000 in cash from the Local's fund could not
be accounted for.
After a three-year inquiry, the Senate Permanent Subcommittee on
Investigations said that Smith had controlled Local 54's dental plan almost since its
inception, for the benefit of Philadelphia organized crime interests,
and that the nature of "consulting" services rendered by Rittenhouse for
substantial fees could not be determined.16 Subsequently Larry
Smith was one of 41 individuals or entities named in a Department of Labor civil suit. It
charges that past and present Local 54 trustees and the corporations formed to administer
the $1.2 million dental plan violated the Employee Retirement Income Security Act (ERISA)
by failing to solicit bids for a dental plan
contract in 1980.17 Neither Local 54 itself nor its
current officers are named in the suit, which asks that the defendants
pay all losses resulting from their alleged actions and that new
arrangements be made to provide Local 54 employees with dental care.
Local 54 and Corruption of Public
Officials
Frank Lentino, a former business agent for Local
54, recently pled guilty to one count of Hobbs Act conspiracy and one count of obstruction
of justice. During that investigation Lentino bragged that he controlled labor for
Nicodemo Scarfo, the current head of the LCN faction in Atlantic City and Philadelphia.
Lentino also claimed that Local 54 officials helped the Scarfo group exercise a corrupt influence over former Atlantic City Mayor Michael
Matthews. Before his election as mayor of Atlantic City, Matthews
solicited an illegal campaign contribution of $125,000 cash from Local 54's Frank Gerace,
Albert Diadone, and Frank Lentino. Matthews received the cash in several installments with
at least one payment being picked up at the union hall. Matthews was ultimately convicted
of receiving bribes from a federal undercover agent.
When he was questioned about the $125,000 cash contribution,
Matthews admitted that he approached the Local 54 officers to obtain money from the Scarfo
La Cosa Nostra group. In return Matthews agreed to assist the
Scarfo family obtain a tract of land partially owned by the city, where the Scarfo's group would
Page 79
build a casino. Lentino described the meetings
and the purchasing of the election in conversations intercepted by the FBI and DEA.
Lentino stated:
[[W]e had Mike Matthews in here, the last time I ate here with Gerace and Al Daidone . . . He [Matthews] had his eyes on that uh, mayor's, mayor's job
...
If he wins it uh, you get favors. Some guys put up a lot of money. . .[a] hundred and twenty five [thousand]... That's a lot of money for an election down here. 18
The Efforts of the Casino Control Commission
In 1981 the New Jersey Casino Control Commission
and the Division of Gaming Enforcement, state agencies charged with regulating persons and
entities began an investigation of Local 54 to determine if the local was fit, under state
statute, to represent persons employed by the casinos. A central focus
of the state investigation was the allegation that the Scarfo LCN group controlled the
union. Based on its finding in 1982 that this control
existed, the Casino Control Commission ordered that, in the event Gerace and the two
others were not removed from their union posts, Local 54 would be prohibited from
collecting dues from any casino employee.
Following this order Local 54 sought a Federal court injunction
barring enforcement of the Commission's order. After losing in the
District Court, the union successfully argued in
New Jersey Superior Court that federal labor law, specifically the
National Labor Relations Act and ERISA, preempted the field of labor relations. The state,
however, obtained a reversal in the U.S. Supreme Court, which held that the state had the
authority with some limitations to regulate in the area.l9 The Supreme Court
noted in its decision that:
...Congress apparently has concluded that, at least where the States are confronted with the public evils of crime, corruption, and racketeering, more stringent state regulations of the qualifications of union officials is not incompatible with the national labor policy as embodied in §7 (of the National Labor Relations Act).20
Following the Supreme Court's decision, the Casino Control
Commission issued a new order, which directed Gerace and the other officials to resign.
After Gerace refused to do so, the state sought enforcement of the order and a contempt
citation from the state courts. Gerace and the others then resigned their posts. Rather
than divorcing himself completely from the union, however, Gerace now holds the post of
consultant in non-casino affairs, at an unknown
salary.
The Supreme Court found that the casino industry employees'
freedom to select Local 54 to represent them in collective bargaining was not affected by
the qualification criteria of New Jersey's Act. However, the Court left undecided the
issue of whether the dues collection sanction, imposed by New Jersey's Act, will so
incapacitate the union as to prevent it from performing its functions as the employees'
chosen bargaining
agent, thus abridging members'
rights under the National Labor Relations Act. As a result, the decision
does not definitively resolve how to reconcile Federal efforts to define labor rights with
state efforts to regulate industries in which labor racketeers flourish.
The New York HEREIU locals are also influenced by organized crime.
New locals have been chartered with due consideration to La Cosa Nostra territorial
needs. Until January 1983 (when Local 100 was chartered), the main HEREIU local under LCN control was Local 6. Local 6 retained jurisdiction over those
restaurants located in hotels and clubs, while Local 100 has a
wide-ranging jurisdiction. Recent indictments have focused on the leaders of HEREIU Locals
6 and 100: international vice president and HEREIU Local 6 officer Vito Pitta, an
associate of the Colombo family, and John J. DeRoss, officer of HEREIU Local 6, officer of
HEREIU Local 100, and a member of the Colombo family. 21 In a
conversation intercepted by the FBI at Paul Castellano's home, Anthony Amodeo and John
DeRoss complained to Paul Castellano about the failure of Local 6, and Vito Pitta, to
abide by the agreed-upon jurisdictional allocation with Local 100:
Amodeo
: He's not supposed to go into another. . . In fact, that's a part of their agreement. When they made the merger, from what I understand, they stay in whatever they've been in. They
have the hotels and restaurants and so forth. Now, 2 months ago, we sat down, Vito [Pitta], me, and Charlie, right? Sat down. He says, How about if I go organize on Long Island? . ; . You stay with yours. Long Island is ours. Hotels, restaurants, whatever.
Castellano
: They're supposed to stay.
DeRoss
: Right. I know.22
In the same conversation, Castellano subsequently described the
limits of his influence over HEREIU. Because the international was
controlled by other organized crime groups, Castellano's ability to remedy an apparent
encroachment by the Colombo family was not a simple matter:
Castellano
: . . . You had the locals and somebody else had the international. . . This is what I was trying to tell Vito of. I said, Vito [Pitta], take it easy. You know, I gotta, I gotta watch, like someone else owns the international. See, I don't like these doing. . . something that they have a right to do. In the meantime, the only reason why they're doing it, because Vito is setting up something in my. . . I don" do that.
. I was happy with the [international union] elections, you know? They were happy about it, but Pitta wasn't . . . I tell you what, what brought them over here. This is with my local, and I don't want anybody to touch it. . . .23
HEREIU Locals 6 and 100 were used to dictate the
way in which restaurants could do business in New York. In return for payoffs, restaurant
owners could pay reduced wages and pension and welfare fund contributions, or buy a lease
on a restaurant
shut down because it owed money to the union, or
hire and fire without regard to grievance procedures, or operate without regard to union
work rules. What appeared to be a jurisdictional split between two HEREIU locals was, in
fact, a market allocation of New York's entire restaurant business between the Colombo and
Gambino crime families.
The IPSSEU Merger: Building A Larger Union
HEREIU used means other than forced merger and the issuance of
charters to the Gambino and Colombo crime families to consolidate and expand the existing
power of La Cosa Nostra. In one instance HEREIU absorbed an
independent union, the International Production Service and Sales Employees Union
(IPSSEU), an organization influenced by organized crime.
In the mid-1950's IPSSEU was created by the
merger of several independent local unions. By 1978 IPSSEU had organized some 25,000
members in eight locals employed in seasonal work, usually in toy, plastic and candy
factories. As Robert Rao, IPSSEU's general president, once explained, the union organizes
anyone except the "building trades." At one point Rao testified in court
proceedings that between 25 and 40 percent of IPSSEU's members were paid only the minimum
wage. During its history IPSSEU turned down merger overtures from
several AFL-CIO unions, the United Mine Workers, and the Teamsters Union.
At present IPSSEU's former secretary-treasurer, Benjamin Ladmer,
and Teamster official Anthony Di Lapi are serving ten-year prison sentences for using
bribery and threats to obstruct an attempt by nonunion truck drivers in a garment center
trucking company to form their own union. Di Lapi explained the conspiracy in these words:
. . . There's a million truck drivers, a million warehouses. They'll get all new guys, new identity completely, new corporation, new everything. . . Well this is economics. . . There's no violence, there's no nothing. . . but it's like a Family. . .24
IPSSEU, with its ties to the Luchese family, was a prime candidate
for merger with HEREIU. The merger occurred with the creation of HEREIU Local 21S in 1983,
and Robert Rao's appointment as an international vice president of HEREIU. merger has not
harmed Rao. Rao received combined salary, allowances and expenses amounting to $142,380 in
1984 from HEREIU.
During the Commission's investigation it became clear that
legitimate trade unionists are aware of the mob ties to HEREIU and await government action
to oust the mob from the union.
1Court authorized electronic surveillance, June 3,
1983.
2Hotel Employees and Restaurant Emoloyees International Union: Hearings before the Permanent Subcommittee on
Investigations of the Senate Comm. on Governmental Affairs, 97th Cong., 2nd Sess.,
Part III, at 34 (1982).
3The union has
changed its name several times since its creation, most recently in 1981
at the 39th general convention. For more details on the history of HEREIU, and for a
comprehensive analysis of the union and its infiltration by organized crime today, see
Hotel Employees and Restaurant Employees International Union, a report by the
Permanent Subcommittee on Investigations of the Committee on Governmental Affairs of the
U.S. Senate, August 1984 [hereinafter referred to as HEREIU Report.] This section
of PCOC's report relies heavily on the excellent work recently completed by that
Subcommittee.
4HEREIU Report, supra
note 3, at 13.
5Id.. at 14-15.
6See Hotel Employees and Restaurant Employees
International Union: Hearings be fore the Permanent Subcommittee on Investigations of the
Senate Comm. on Governmental Affairs, 97th Cong., 2nd Sess., Part I, at 6 (1982)
[hereinafter cited as HEREIU Hearings].
8HEREIU Report supra note 3, at 17.
9Id. at 25-32.
Page 86
13These are some of the questions,
posed mainly by Senator Roth, which Hanley refused to answer, some in apparent violation
of AFL-CIO ethical practices policy:
Q: Are you president of the International Union of Hotel Workers & Restaurant Employees?
Q: What is your occupation?
Q: Could you explain the international union's basic policy concerning mergers of local unions?
Q: What sort of policy and criteria are used by the International union in hiring?
Q: What do you believe are your fiduciary responsibilities as president of the Hotel Employees & Restaurant Employees International Union, both to the union and its members?
Q: Have you ever told Jeff McColl, the Las Vegas local union leader, you would "pull" the Local 226 charter if he capitulated to demands that the health and welfare funds return to Vegas for local control? [In 1977, the health and welfare funds of Local 226 were returned to Chicago only after the murder of union officer Al Bramlett in Las Vegas. Bramlett was said to oppose moving the fund to Illinois.]
Q: Mr. Hanley, did you, in fact, have a conversation with Sidney Korshak about merging hotel workers locals? [This question was based upon an electronically intercepted conversation between Korshak and Dorfman in which Korshak claims to have discussed with Hanley the merger of two West Coast HEREIU locals.]
Q: Did you know Allen Dorfman before he was murdered?
Q: As you know, Mr. Hanley, we have heard evidence relating to a possible association between yourself and Mr. Anthony Accardo and also Joseph Aiuppa of Chicago. Let me ask you, do you know either of those gentlemen?
HEREIU Hearings, supra note 6, at 23.
14See Organized Crime and Gambling: Hearings before the
President's Commission on Organized Crime, June 1985, at
243-244.
15HEREIU Report, supra
note 3, at 65.
16Id. at 110, 111, and 113.
17 See Brock v. Frank Gerace et al., U.S.
District Court, District of New Jersey, Civil Action No. 85-3669.
18 Court authorized electronic surveillances, March, 1982.
19 Brown v. Hotel and Restaurant
Employees and Bartenders International Union Local 54, 52 U.S.L.W. 5042
(July 2, 1984).
20 Id.
21 See U.S. v. Persico, 84 Cr. 809 (S.D.N.Y. 1984).
22 Court authorized electronic
surveillance, June 3, 1983.
23 Id.
24 Court authorized electronic surveillance, April 24,
1978.