Ray Donovan

DONOVAN CLEARED OF FRAUD CHARGES BY JURY IN BRONX

By SELWYN RAAB

Published: May 26, 1987

Former Labor Secretary Raymond J. Donovan and seven other construction executives were acquitted yesterday of state charges of fraud and grand larceny after an eight-month trial in the Bronx.

The jury deliberated barely 10 hours over two days. One juror, Caesar Brown, said later that little discussion was needed and that just one ballot was required to find each defendant not guilty.

When the last verdict was announced at 4:42 P.M. by the jury forewoman, Rosa Milligan, cheers and applause enveloped the courtroom. Most of the 12 jurors stood and applauded as they watched the defendants, their relatives and defense lawyers shouting with joy, embracing and slapping one another's backs. Backing of Reagan

In the same courtroom, when the trial began last September, the chief prosecutor, Stephen R. Bookin, had told the jury, ''This case is about greed, plain and simple.''

Mr. Donovan, who was the first sitting Cabinet officer to be indicted, came under scrutiny soon after his nomination t as Labor Secretary in December 1980. The charges against him did not involve his Reagan Administration position, but he resigned from the Cabinet two years ago, after having been ordered to stand trial.

Yesterday, in a statement from the White House, President Reagan said: ''I have always known Ray Donovan as a man of integrity, and I am happy to see this verdict. I have never lost confidence in him.''

Mr. Donovan and five other executives of the Schiavone Construction Company of Secaucus, N.J., were on trial, along with State Senator Joseph L. Galiber, Democrat of the Bronx, and William P. Masselli. Mr. Galiber and Mr. Masselli were partners in the now defunct Jopel Contracting and Trucking Corporation of the Bronx. Political Motive Charged

The eight men and their two companies were accused of scheming to defraud the New York City Transit Authority of $7.4 million on a subway construction project in the late 70's and early 80's.

Mr. Donovan steadfastly asserted his innocence yesterday, as he had throughout his indictment and trial. He maintained that the accusations by the Bronx District Attorney, Mario Merola, were politically motivated.

''It's a cruel thing they did to me,'' Mr. Donovan said as he left the courthouse in the South Bronx with his arm wrapped around his wife, Catherine, as they prepared to return to their home in Short Hills, N.J.

''After two and half years, this nightmare is behind us,'' the 56-year-old Mr. Donovan said earlier in an impromptu news conference in the corridor just outside the courtroom. ''The jury has reawakened my faith in our system of justice. It was shattered here for nine months.

''The question is, should this indictment have ever been brought? Which office do I go to to get my reputation back? Who will reimburse my company for the economic jail it has been in for two and a half years?''

Defense lawyers gambled on a strategy of not calling any witnesses after Mr. Bookin rested his case last month. The defense lawyers relied on summations in which they sharply attacked Mr. Merola and Mr. Bookin, saying the prosecutors had sought the indictment of Mr. Donovan for publicity and to advance their own careers. Interruption by Distraught Juror

After the verdict, the jury forewoman, Ms. Milligan, was asked in an interview whether she agreed with the defense contention that the case was politically motiviated.

''Yes, in some ways,'' Ms. Milligan, an X-ray technician, said.

Mr. Brown, a computer operator, declined to say how the jury's deliberations had been affected by an interruption Friday when a juror, Milagros Arroyo, became distraught and had to be dismissed from the jury.

Over the protests of the defense lawyers, the presiding judge, Acting Justice John P. Collins of State Supreme Court, seated an alternate juror Saturday and ordered the reconstituted jury to resume deliberating ''anew'' on Saturday.

Six of the eight defendants had refused to agree to the seating of the alternate juror and demanded mistrials, which Justice Collins denied Saturday. $13 Million in Defense Costs A lawyer for the Schiavone company, Theodore W. Geiser, said the legal costs for the Schiavone executives in the case ran to $13 million. Schiavone executives said that since the indictment in September 1984, the company had been disqualified from bidding on projects in New York State.

Defense lawyers said they would review Federal and state laws to determine whether the Schiavone company and the executives could sue Mr. Merola or the city for financial losses.s Companies Found Not Guilty The reconstituted jury of six men and six women deliberated about five hours Saturday and five hours yesterday. Almost half the time was spent listening to secretly recorded conversations involving Mr. Masselli and hearing the judge's definition of grand larceny in the second degree.

Each defendant was accused of one count of grand larceny and nine counts of falsifying business records in the first degree and offering a false instrument for filing in the first degree. Schiavone and Jopel also were defendants. Jopel, which is out of business and was not represented by a lawyer, was found not guilty, together with Schiavone.

The grand larceny count, which both sides agreed was the pivotal charge, carries a maximum prison sentence of seven years.

Yesterday, the jury listened to the tapes for about two hours in the morning. After lunch, the jurors asked Justice Collins to repeat his instruction on grand larceny. Forty minutes later, at 3:55 P.M., Justice Collins announced that the jury was returning. Taken to the Well

The eight defendants, who throughout the convoluted trial had sat in the front row of the spectators' section, were taken to the well of the courtroom and seated directly behind the desk of Mr. Bookin and two other prosecutors.

The jurors filed in at 4:08, with none glancing at the defendants. Courthouse lore holds that jurors never look at defendants when they are about to pronounce guilty verdicts.

Mr. Donovan, closest to the jury box, was the first defendant to arise. He looked directly at Ms. Milligan as she declared him ''not guilty'' 10 times.

As the verdict was about to be disclosed, Mrs. Donovan, seated in the spectators' section, dabbed with a handkerchief at her eyes and face and clutched the hand of a Schiavone employee at her side. Shouts From Jurors

It took Ms. Milligan 32 minutes to deliver the verdict - 100 times she said ''not guilty'' - on 10 counts for each of the eight men and the two companies.

After the jury had filed out - with some of the members shouting ''hallelujah'' and ''yippee'' - Mr. Donovan reached up to Justice Collins on the bench and shook his hand.

A defense lawyer, Theodore V. Wells Jr., wept as the verdicts were read. Later, Mr. Brown, the juror, said that it was Mr. Wells's cross-examination of a prosecution expert witness, an accountant, that convinced him and other jurors that the prosecution had no case.

''It took three years out of my life,'' Senator Galiber said in an interview after the verdict. ''But I am not angry. It takes too much time out of life to be angry.'' Denial by Merola

The president of Schiavone and a defendant, Joseph A. DiCarolis, denounced Mr. Merola and Mr. Bookin. ''Mr. Bookin took the facts and twisted them around for his own ambition, and Mario Merola gave him his blessing,'' Mr. DiCarolis said. ''Thank God for the jury system.'' Mr. Merola, at a news conference last night, denied that he had been politically motivated. The evidence, he said, had been uncovered during an investigation of the 1982 murder of Mr. Massellii's son, Nat, and another murder.

''I'm not ashamed,'' Mr. Merola said. ''We had an obligation to pursue these facts, and that's how we ended up indicting Schiavone, Donovan and the rest of them.''

Mr. Merola attributed much of the delay in the cumbersome trial to defense motions and tactics. He emphasized that both Federal and state judges had refused to throw out the indictment. Reports About Silverman

Justice Collins had ordered the jury sequestered, on May 14, after unconfirmed reports that a special Federal prosecutor, Leon Silverman, who investigated Mr. Donovan in 1982, had reopened an inquiry into possible perjury by Mr. Donovan.

Mr. Silverman refused to comment on the reports at the time, and his aides said he was in Italy on business until late in the month.

The prosecution based its case on 40 witnesses and 558 exhibits presented over seven months. Much of the evidence concerned intricate details about subway excavation and payments to subcontractors.

Defense lawyers relied on summations to refute the prosecution's contention that Mr. Donovan, while he was the executive vice president of Schiavone, had conspired with the other defendants to cheat the Transit Authority.

The tangled case arose from an undercover inquiry by the Federal Bureau of Investigation of Mr. Masselli, who, in the late 70's, was identified by law-enforcement authorities as an associate in the Genovese crime group. Minority-Group Subcontractors

In 1978, Schiavone was awarded a contract to construct the IND East 63d Street tunnel between Queens and Manhattan. The contract called for Schiavone to make ''good faith efforts'' to award 10 percent, or $18.6 million, of the maximum contract price to subcontractors owned by members of minority groups.

Schiavone reported to the authority that it gave $12.4 million - two-thirds of the minority-group work - to the Jopel Company, headed by Mr. Galiber, who is black, and by Mr. Masselli, who is white, to haul dirt and rock.

The F.B.I. inquiry of Mr. Masselli ended abruptly in 1979, when agents learned that an informer, Michael Orlando, had committed robberies and a hijacking while infiltrating Mr. Masselli's operations.

Mr. Orlando, while also serving a Federal prison term for hijacking, came forward in 1982 and informed prosecutors that he had new information about mob crimes. Under a grant of immunity from the Bronx District Attorney's office, he admitted that in 1978 he shot to death an underworld rival of Mr. Masselli, Salvatore Frascone. Mr. Orlando, according to the prosecutors, contended that Mr. Masselli had ordered the murder, partly to resolve a dispute over lucrative construction contracts with Schiavone.

Mr. Bookin contended that Jopel was paid, at most, $5 million of the $12.4 million Schiavone had reported. At least $7.4 million earmarked for minority-group contractors, Mr. Bookin argued, had been retained by Schiavone through a ''bogus'' arrangement in which Jopel said it had paid Schiavone for leased equipment. Allegations have hounded Mr. Dono-van since his Cabinet nomination. In 1982, Mr. Silverman, in two reports, found ''insufficient credible evidence'' that Mr. Donovan had witnessed union payoffsor that he had links to organized crime.

During the trial Mr. Masselli said he was ill with bleeding ulcers and said he was undergoing other tests. He is free on $200,000 bail, awaiting trial in the murder of Mr. Frascone. The prosecutor in the homicide case is Mr. Bookin, and his principal witness is Mr. Orlando.

Other Schiavone executives who were acquitted were Richard C. Callaghan, senior vice president; Morris J. Levin, second vice president and corporate counsel, and Gennaro Liguori, second vice presidention. Albert J. Magrini, who retired as vice president, was also acquitted.