New York Public Works Projects Saddled with ‘Mob Tax’

The going rate is 2 percent – the rate, that is, of buying labor peace in New York City.  It’s known colloquially as a ‘mob tax.’  In this scheme, a builder receiving a local or state government contract pays a mob-controlled union to look the other way in order to hire non-union help, and pockets the difference at taxpayers’ expense.  Should the contractor cut corners on materials quality or workplace safety standards, well…it’s someone else’s problem.  That’s the damning conclusion of a three-part series published in the New York Daily News in late September.  Reporter Greg B. Smith spent four months piecing together how an unholy alliance of corrupt contractors, mobsters, unions and (by implication) government officials has raised the cost of providing public amenities, often at substandard quality and with extensive delays.    


To many, the mob tax might seem the stuff of urban legend.  But to Gambino crime family member-turned-informant, Michael “Mikey Scars” DiLeonardo, it’s the stuff of fact.  Testifying for the prosecution at Peter Gotti’s racketeering trial, DiLeonardo explained, “It’s just like we are our own government.  The government taxes you one way; we tax it another way.  If we have a contractor around us, even if we are not doing him a union favor, he pays us at times.  I deem it a tax.”  The Gambino family milked “tens of millions” of dollars from city contracts this way, he admitted.  Up the Gambino food chain, family capo Greg DePalma unwittingly corroborated the allegation.  An FBI-bugged phone caught him revealing that the city’s five Mafia families – Gambino, Genovese, Bonanno, Lucchese and Colombo – had reimposed the 2 percent tax:  “Everybody now is going to pay.  It’s going back to the old shit, watch,” said DePalma.  “So if you get a job for $100,000, you got to give them 2 percent.  Tomorrow you get a job for $200,000, you got to give them 2 percent.”  The mystery is why state and local contracting agencies have seemed less than vigilant in keeping participants out of commission.  Since 1995, dozens of businesses previously banned from doing public-sector business due to corruption or safety violations somehow have won more than 100 public contracts worth around $1.2 billion. 


Mobsters have profited handsomely, skimming the cream off construction contracts for schools, highways, playgrounds and other facilities.  A few examples: 


  • Defoe Construction, a firm cited for years by the FBI as mob-controlled, this past May won a $138 million contract from the New York State Transportation Department to repair the Brooklyn-Queens Expressway.  This was only weeks after its president, John Amicucci, was indicted for bribing union officials so he could use non-union help.  Last year, Amicucci allegedly was caught on tape more than once delivering cash payoffs.  He has pleaded not guilty and awaits trial.


  • New York Paving, barred from doing city work since 1998 due to suspected mob ties and labor racketeering, was hired by the State of New York to do a pair of repair jobs at the Long Island Expressway for $7 million.  Yet in October 2004, as repair work began, prosecutors alleged the contractor paid off union officials at Operating Engineers Locals 14 and 15, long suspected by federal officials of being mob-infiltrated.  


  • Scara-Mix Concrete, a Staten Island firm owned by Phil Castellano, son of late Gambino boss Paul Castellano, was hired in 1999 to pour concrete for a city-funded minor-league baseball facility, Staten Island Stadium.  During that time and beyond, said informant DiLeonardo, Scara-Mix made regular payments to the Gambino family to keep competing concrete firms out of the borough of Staten Island altogether.  FBI photos showed that Castellano met regularly with DiLeonardo and Gambino soldier Eddie Garafola at Goodfellas Pizza on Hylan Boulevard.  “If they came to Staten Island, we chased them off,” said DiLeonardo. 


Magnifying the corruption were associated workmanship deficiencies, delays and cost overruns, which served to hike the real mob tax far above 2 percent.  A few examples:


  • The final cost of building Staten Island Stadium was $76 million, up from an initially projected $20 million.


  • Students at Brooklyn’s P.S. 24 learned first-hand the high cost of doing business with the mob.  Trataros Construction, which informants had told the FBI was controlled by the Bonanno crime family, ripped off the city twice – first, during 1996-99 for building the school so shoddily it practically was falling apart, and second, for making substandard repairs to that structure.  Company founder Nicos Trataros pleaded guilty to bribing a government worker to win a contract to build a Bronx post office.  In 2002 the owners of Commercial Brick, a subcontractor on the P.S. 24 project, pleaded guilty to paying off the Lucchese family to use nonunion help.


  • FBI documents revealed that the head of Laquila Contracting from the early 90s until June 2002, when he was arrested, made regular $5,000 monthly payments to the Colombo and Gambino families in return for permission to use nonunion labor.  Laquila proved less than competent in its workmanship, rupturing a fuel line along the Long Island Rail Road, costing taxpayers $230,000 and temporarily shutting down the line.  Also, the company, as a subcontractor, was way over budget and behind schedule on a new Brooklyn federal courthouse it built for the General Services Administration.  Yet for some reason the GSA had not placed Laquila on its debarment list until June of this year.


  • Acme Skillman Construction was supposed to install $800,000 worth of synthetic turf at a playground on the Lower East Side of Manhattan beginning last October.  But two weeks later, prosecutors publicly alleged that Acme was paying off a mob-run union to use nonunion employees.  The job finally started this March, around the time work was scheduled for completion.  Meanwhile, Acme President Guerino Cavaliere was indicted for bribery and subsequently pled guilty.  


New Yorkers know what a traffic jam is.  But in recent years, congestion along certain arteries was worse than usual, thanks to the mob.  On the Brooklyn-Queens, Bruckner, Van Wyck, Cross Bronx, and Long Island Expressways, and on the New York Thruway, construction “projects” appearing to involve no work yielded high revenues for the Mafia, especially the Gambino family.  Consider this case:


  • For two and a half years, lane closures and traffic stops at the Potter Avenue exit in New Rochelle became routine after Persico Construction won a contract from the New York Thruway Authority to fix a bridge along I-95.  Though the firm was under strict orders to clear all lane closures by rush hour, delays caused “significant traffic backups throughout the Tuesday morning rush hour,” wrote an official from Berger Lehman, the project’s engineering firm.  Company owner Robert Persico was ordered banned from the site in 2001 after he cursed over a radio about a female inspector trying to cite the firm for another lane-closure problem.  The Thruway ordered Persico off the site, but he kept showing up.  Midlevel inspectors wanted to impose sanctions on the firm.  In the end, the project was completed – more than a year late and $3 million over budget.  That Persico was allowed to finish may have been attributable to his hiring of lobbyist Albert Pirro, husband of U.S. Senate candidate Jeanine Pirro, in March 2002.  Despite Persico’s less than stellar track record, the Thruway Authority subsequently awarded him two more jobs worth a combined $17.5 million – even as the FBI was taping him repeatedly meeting with the Gambino family’s DePalma.  Persico was indicted this March on racketeering charges.


At several project sites, unsafe operating procedures and building materials put any number of workers in harm’s way – and at least one in an early grave:   


  • At Parkwest Apartments at 323 W. 96th St, floors collapsed, seriously injuring several workers.  One worker told investigators he’d left after just one week because he felt “that the safety issues on the job exposed him to injury.”  His fears were well-founded.  One morning late in 2001, a 7,000-lb. slab of pre-cast concrete collapsed on top of a carpenter, fracturing bones and creating brain damage.  Responding to complaints from a shop steward, the Occupational Safety and Health Administration shut down the site; OSHA inspectors witnessed workers having to hoist heavy loads of bricks over their heads and dealing with an absence of safety netting.  About that time, a no-show “worker,” Richard Gotti, brother of Gambino boss Peter Gotti, entered the picture.  In sworn testimony, District Council Carpenters shop steward Peter O’Keefe told a court-appointed monitor that Gotti approached him at the site early in 2002, jabbed him in the chest with his finger, and warned him to stop reporting safety problems to the union – or O’Keefe would be the one with safety problems.


  • At a job site installing windows at Manhattan College, Gambino capo Greg DePalma was recorded by the FBI discussing ways to make money by cutting corners.  He gave advice on how to win the contract, and then perform the job in a shoddy manner. 


  • Prosecutors had suspected for years that Yonkers Contracting was paying off Operating Engineers Local 15 in order to use nonunion labor.  One morning in May 2000, a worker, Antonio Pedro, was blown off a catwalk on the Manhattan Bridge, plunging to his death in the East River.  OSHA cited Yonkers Contracting for allowing Pedro to work without a harness and for not training him properly.  Later the OSHA imposed safety-related penalties on the company at six other job sites.  For some reason, the State of New York subsequently awarded the firm $584 million worth of highway reconstruction contracts.


To sum up:  The three-part series in the Daily News on the mob tax represents a landmark achievement in investigative reporting.  The Mafia on occasion has been knocked down, but is far from out.  The criminal underworld’s de facto allies among seemingly respectable unions, contractors and politicians have seen to that.  (New York Daily News, 9/25, 9/26, 9/27).