United States General Accounting Office

13L77#3-

GAO
For Release on Delivery Expected at 1O:OO a.m. EDST Monday August 29, 1988

Testimony

Abusive Crime in in

Labor the

Practices Construction City

Used

by

Organized

Industry

New York

Statement of David C. Williams, Office of Special

Director Investigations

Before the Subcommittee on Environment, Energy and Natural Resources Committee on Government Operations House of Representatives

136772

GAO/T-OSI-88-7

Mr. Chairman

and Members of the

Subcommittee:

I appreciate discuss allegedly New York recent currently River study the results

this

opportunity inquiries crime of our

to

appear into

before

you today labor

to

of our

abusive construction

practices industry a in

used by organized City. study As a part of the North

in the

examination, Wastewater

we reviewed Treatment on the recently Plant,

River

under

construction, City.

which We also

is

located the

Hudson published City

in New York entitled

reviewed

Corruption Industry,

and Racketeerinq prepared by the

in the

New York

Construction Crime the

New York

State will

Organized discuss

Task Force. results

of

A representative study later during

of that this

agency hearing.

the

We learned the with Labor Force; construction representatives Racketeering: and the

of the industry

pervasive

effects City

of organized from our of Labor, Crime

crime discussions Office Task

on

in New York U.S.

of the the

Department State

of

New York State

Organized of will

New York of

Commission agencies detail price

Investigation. appear here such and labor industry today. today

Representatives and provide practices racketeering

some of these considerable concrete City

you with as bid-rigging, in the

concerning controls,

New York

construction

I would discussing industry Commission Commission published

like

to

set of

the

stage

for

today's

hearing

by

two studies in New York of

organized

crime

in the
by by

construction New York President's studies were I State

City --one

conducted other

the the

Investigation

and the Crime.

on Organized in

The results

of these

1985 and 1986 respectively. results of discussions currently involved

Where appropriate, we have had with in this issue. law

have added the enforcement

officials

The President's 1986 report Labor on the inflates projects. political business." important relationship Unions entitled revealed

Commission The Edge: that industry cost a situation corruption assembled City

on Organized Organized

Crime

in

its

March and influence

Crime,

Business, its

organized in

crime,

through

construction the It

New York of public in which as just substantial have

City,

significantly building business, cost and

construction creates view

and private labor, "another

figures

of doing that

The report unions witn

evidence

in Hew York organized

or had a documented

crime.

According construction crime through

to law enforcement industry various funnels forms of

officials

we interviewed, projects to organized

the

money from labor

racketeering vJe were told leaders, that

and dominance that these

clubs

of construction are alliances

contractors of contractors, operate

clubs.

labor to assure
2

and criminal free-market

figures.

The clubs

competition industry. bids for

does not Contractors most major tribute

often

occur

in

New York agree

City's

construction to inflated rig

in the construction

clubs

among themselves The bids crime figures in the are

projects. organized

to provide officials necessary

payments

to

and union
clubs

whose participation for the clubs'

and cooperation effectiveness.

are

The law enforcement a contract-bid pays family. a percentage competition, to the

officials the

told winning

us that, contractor

typically, immediately or LCN, the

after

controlling figure

La Cosa Nostra, then selects

A designated

criminal the

project's building Often, the

subcontractors materials, suppliers for these

and directs such as concrete,

contractor from certain

by

to purchase suppliers. crime. leaders

selected payments witn

are

controlled

organized and labor construction

In return

to tne

LCN figures crime, tne

associated clubs building

organized labor peace,

contractors and move disputes. a contractor a rigged to compete In such bid,

receive

permission

to purchase enforcer clubs. against attempts

club s

materials,

and an outside agreements

in club If

The LCN enforces attempts or if against instances, will

and

made by the

to break a contractor the

club,

an agreement from the outside

and compete the in club on the will suddenly

be

LCN steps contractor will

behalf. that labor

the

competing subcontractors

find

problems

surface, building

become unavailable, accessible.

materials

will

no longer

Featherbedding

is

an example crime

of an abusive to bleed

labor

practice for

used by members of organized construction involves materials, Investigation featherbedding individuals teamster employees often in the into their

money provided featherbedding labor, of

coffers. of

In general,

utilization

superfluous The New York

and unwanted State

and equipment. reported practices the in

Commission of

1985 that in New York

a common example City is the mechanic

employment and working of these

of

capacities

of master

foreman. in 1984, little and,

Based on surveillance tne Commission found

of a number that work these

employees for A

performed high mechanic required

or no productive in some instances, supervises contracts engineers to all

in exchange salaries.

relatively master and is

enormous operating

ostensibly by labor

engineers at a job Contractors were not site in at

be present are used. when they

when five New York work. master actually supposed stewards terminals. therefore,

or more operating City have paid in

master

mechanics

Moreover, mechanics present

some instances, and overtime work duties site.

contractors

have even paid were not foreman is

regular at the the

wages when they A working teamster

to perform are already

of a shop steward. to teamsters teamster at their foreman

However, truck is,

shop

provided

The position redundant.

of working

Most employers labor organizations. is

feel

compelled

to comply

with

demands by to resist

The rare soon faced in significant met. with

employer work financial

who chooses slowdowns losses

such attempts that can result are

and stoppages if construction

deadlines

not

Featherbedding York City that the

had become such a widespread New York State Commission of

problem Investigation on the

in

New

conducted Their

an extensive

investigation in the

and hearings December

matter.

findings

were published of the Building

1985 report Industry: Report

Investigation of Conclusions

and Construction

and Recommendations.

Some of

the

findings

of these

hearings

are

as follows:,

--

The payment teamster on the job

of wages to

master

mechanics are

and working not paid foster present by or

foremen is

when these pure

employees and simple, to encourage,

"tribute,

developers guarantee

and contractors the good will of

union

leaders."

--

A master

mechanic,

George

Morrison,

who was employed approximately learned

at the "vJorld Financial $340,000 in salary

Center, 1984.

received

during

Investigators

that single

he was being day. Other being

paid

for

more than mechanics to

24 hours received

in

master required

overtime joo.

pay without

be present

on the

The average annual fringe salary

working of

teamster plus

foreman another fact

earns

an estimated in annual

$50,847 dased

$23,179 that

benefits.

on the

approximately in the the New

150 working City area,

teamster the

foremen

are

employed cost to

estimated industry is

annual

construction

$11,103,900,

Twenty-four reported

percent employed

of during

tne

working

teamster

foremen of

1984 have been convicted More than 31) percent

some criminal same working record. labor

offense. teamster

of these of criminal of

foremen teamster

had some type foremen

Two working racketeering

had histories

and extortion.

--

Surveillances revealed foremen for which that, are

on a number as a general for are hours reported

of working rule, far in

teamster

foremen

working excess

teamster of the hours job.

paid

they

as present

on the

-a

During foremen

their

assigned

working

hours,

working Teamsters

teamster Local 282

were observed

chauffeuring

union running

officials, personal

frequenting errands,

bars or simply

and social staying

clubs,

at home.

Law enforcement working City than teamster in other Local

officials

told

us that

the

position

of

foreman parts This

has become more prevalent of the union of country is due to the

in New York very nature for the of

Teamsters transportation materials the union

282.

solely

responsible

and delivery to every to control construction the

building site

and construction in the city. This

allows

progress

of work

at construction

sites.

Another is the

factor

that

contributes of

to the organized

power of this crime. According Office

union to

considerable

influence of the.U.S.

an investigator Racketeering, pattern Former personal Gambino Cody is Former teamster extortion. was also trunk trial

Department of Teamsters in by its

of Labor, Local

of Labor a

the

history

282 evidences and agents.

of corruption Teamsters associate Local

engaged

officers

282 President

John

Cody was a close figure Carlo

of deceased of

La Cosa Nostra labor of racketeering LCN figure Gross,

and was convicted also Local

and extortion. Ettore Zappi.

a known associate 282 business agent

Harry for

who was a working and Bruce stuffed Kay, who

foreman,

was indicted of Cody's

labor former

racketeering cnauffeur

The corpse a working

teamster Airport indictment.

foreman, during

was found the period

in a car

at La Guardia on a murder

he was awaiting

Teamsters Sasso, president. Sasso is

Local

282 is

currently

headed during

by President tenure as

Robert

who was secretary/treasurer According reported including of the the to to the

Cody's of Labor various

Department with

investigator, organized crime Di

be associated the missing

elements, Bernard0 Salerno,

and presumea family

deceased "Fat

Robert Tony"

Gambino crime of tne

and Anthony family.

boss

Genovese

crime

Mr . Chairman, abusive Plant, Agency's, grants labor a prolect

you also

asked

us to

look

specifically Wastewater

into Treatment

practices funded

at the under

North the

River

Environmental program. grants which is carried Control

Protection The construction to plan, are out Act, design, to the

EPA, construction proyram awards local treatment

grants

communities facilities, program Pollution

and build control provisions (33 U.S.C.

wastewater water pollution.

needed under

This Water

of the 1251 et

Federal seq.).

as amended

In 1977, state role

the

Act was amended to provide the construction into grants

for

an increased program. an EPA region federal are their

in managing agreements EPA is are for

Delegation and a state. requirements responsible successful

can be entered responsible for

between that

ensuring

met by all managing

grantees. projects

The grantees to ensure

their

completion.

According York State, the

to the state

delegation manages the the City award

agreement construction
of

between

EPA and New program. are acting

grants

Key decisions to for

be

involving

construction State

contracts
officials

made by New York

and New York

EPA.

An EPA headquarters construction process treatment grants

official

told

us that on the

under

the

program, reasonable

EPA relies prices for

competitive wastewater

to obtain plants.

constructing

The North under cost grant. identified For example, North with River the construction. is to
be

River

Wastewater Approximately funded studies of the

Treatment

Plant

is

currently $1.1 billion

75 percent as part of

of the

federally

EPA's construction River, we

In reviewing several at

conducted indicia the

at North

of abusive union locals

labor

practices. with the

least

one of

associated

construction

project families. teamster These

has a documented In addition, foremen

relationship one master at the in Mr.

La Cosa Nostra and four working

mechanic site salary in

were employed $513,941 Finally,

1984 and 1985. and overtime one of the

employees

were paid of 1985.

during working

1384 and part teamster

Chairman, River

foremen of the

employed
New

at North State not to be

was surveilled of

by an investigator in

York

Commission

Investiyation

1984 and was discovered

9

at the However,

work

site

on several

occasions

for

which

he was paid. records crime or

none of these

individuals with

had prior any identified

criminal

were known to be associated figures.

organized

Abusive projects, such cases, directly

labor

practices those

can affect funded increased by the

all

construction government. costs are borne In

including the

federal

resulting taxpayer.

building

by the

Mr. find

Chairman,
to

the the

Subcommittee's
abuses I

efforts

in

attempting are vitally to propose

to

solutions

have discussed before

today

important.

Witnesses the

will

appear

you today

ways in which without the

construction

industry

can successfully of organized crime.

operate

interference

and control

This inform organized will

be

concludes

my statement. problems of

Thank

you for

allowing

us to and City. I

you of the crime pleased

bid-rigging, industry

featherbedding, in New York you may have.

in the to

construction to

respond

any questions

10