Now, a New Probe of Donovan

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Federal investigators also failed to pass along all the information they had concerning allegations that Donovan's construction firm had cozy relations with a Mafia-dominated subcontractor. The FBI did give the Hatch Committee a 19-page memo about various claims that Schiavone had done business with racketeers, but contended that it could not determine whether the charges were true or false. Neither the FBI nor the Justice Department informed the committee that federal agents had been bugging the offices and tapping the telephones of one such mobster, William Masselli, for seven months before Donovan's confirmation. What the official eavesdroppers overheard would surely have been of interest to the Senators.

TIME has learned that the recordings establish a strong link between Donovan's company and Masselli, whom the FBI describes as "a self-admitted soldier" in the Genovese Mafia family. Although he had virtually no expertise in the construction business, Masselli nevertheless in 1976 muscled a longtime acquaintance, Louis Nargi, out of control of a company that was helping Schiavone excavate subway tunnels in Long Island City and Manhattan. The takeover was a typical Mob operation. Nargi had run into unexpectedly difficult excavation problems, which made his subcontracting work for Schiavone more expensive than he could handle. He made the mistake of twice borrowing $50,000 from Masselli. When Nargi could not repay the loans on time, Masselli took over Nargi's trucks, loaders and other equipment, began writing checks on Nargi's bank accounts, and hired Nargi's workers.

Masselli did so in the name of a company he created in 1976 called Jo-Pel Contracting and Trucking Corp. Masselli became president of Jo-Pel. Joseph L. Galiber, a Bronx Democrat who is still a New York state senator, was vice president. Masselli put $3,600 into forming the company, and Galiber invested $3,800. In the past four years, their firm was paid more than $8 million on its contract work for Donovan's firm.

Even by Mob standards, that is not petty cash. When the Bonanno family protested within Mafia circles that Masselli had violated a territorial agreement, the Genovese and Bonanno factions held a council "sitdown" to hear the dispute. Masselli argued that he had simply foreclosed on bad loans. The council absolved him of infringing on a Bonanno jurisdiction. Salvatore (Sally Blind) Frascone, a Bonanno soldier specializing in vending machines, made the fatal mistake of continuing to protest the pro-Masselli decision. Frascone was openly executed in October 1978 by Mob hit men as he got out of his car in The Bronx.

All of that may show that Donovan's company had been doing business with a most unsavory gangster when it was dealing with Masselli and that Masselli associated with racketeers and murderers in the Mob. But it certainly does not demonstrate that Donovan had any personal knowledge of Masselli's criminal connections. The only mention of Donovan in the FBI eavesdropping that has been acknowledged so far by the Justice Department seems innocent enough. Masselli is heard telling his son Nat that he planned to attend some type of unexplained "affair," requiring admission tickets and an airplane trip, with "Ronnie [Schiavone] and Ray Donovan."