Senate panel poised to probe Donovan affair
New York — The US Justice Department may have withheld vital, potentially damaging information from Senate investigators prior to Secretary of Labor Raymond J. Donovan's confirmation hearings early this year, say key congressional sources.
They say that Senate Labor and Human Resources Committee investigators want to find out if either the Federal Bureau of Investigation (FBI) or top Justice Department officials sought to withhold this information because it might have blocked Donovan's conformation.
These allegations come at a time when several informed government sources say the appointment of a special prosecutor to probe the Donovan affair is imminent.
One of the major points at issue is a luncheon Mr. Donovan is said to have attended in 1977, when he was executive vice-president of the Schiavone Construction Company of Secaucus, N.J. At that luncheon, another top Schiavone official is said to have handed a union president an envelope containing $2,000.
It is a violation of Section 302A of the Taft-Hartley Act for an employer ''to pay or deliver . . . any money or any other thing of value to any representative of any of his employees. . . .''
FBI sources say that no one in the FBI ever received the allegations involving the 1977 lunch before Dec. 3, 1981.
Thus, while informed sources say the luncheon question may be the most damaging if true, the fact that it wasn't known before Dec. 3 would tend to discredit allegations by a key government witness who claims he informed federal authorities about the matter much earlier.
This witness, Mario Montuoro, former secretary-treasurer of Blasters, Drillrunners, and Miners Union Local 29 in New York, says the money was given to local president Louis Sanzo at a luncheon Donovan attended at Prudenti's restaurant in Long Island City. Montuoro has been convicted both on federal narcotics and weapons charges. Federal officials assert, however, they have little reason to doubt Montuoro's basic credibility as an informant.
Donovan testified at his confirmation hearings in January that his company had ''never been extorted'' or had ''never made a payoff.'' This was in response to questions about allegations that Schiavone had made a series of payoffs to union officials for ''labor peace.''
Donovan has refused comment on the new allegation that he was present at the luncheon meeting or on other questions under investigation by the FBI. President Reagan said at a news conference last week that he had assurances from his labor secretary that there were ''no grounds to the charges.''
Edward S. Darrell, press secretary to the Republican majority on the Senate Labor Committee, says Montuoro's claims were never raised with the committee. ''We just didn't have the data,'' he says.
One informed government source says,''We're asking for a full explanation. . . .It sure does not look good.'' Another says that it looks like a ''cover-up.''
The Senate Labor Committee has launched an investigation into why it had not received a full account of all the allegations against Donovan. It has asked the FBI to make available all additional information the committee had not received before the hearings.
''At no time,'' says an informed government source ''did the FBI or the Justice Department ever say (to the committee) that Donovan had been present when the (alleged $2,000) payoff was made. Apparently, this information was available to people who should have made it available to the committee.''
This source adds that the Senate Labor Committee chairman, Sen. Orrin Hatch (R) of Utah, may hold hearings on why this information - if it indeed was available to the FBI and Justice Department - was not forwarded to the committee.
The allegations by Montuoro about the luncheon are not the only allegations to surface in the past three months to prompt the Justice Department to reopen the Donovan case.
Two former bookkeepers for Local 29 said that union officials received a number of checks from Schiavone during the course of a subway construction project. Schiavone, a tunnel and bridge construction company, has been cutting a tunnel for a new crosstown subway line on Manhattan's Upper East Side for the last several years.
Because of the seriousness of allegations under investigation by the Justice Department during the last three months, observers expect US Attorney General William French Smith to recommend the appointment of a special prosecutor to probe these allegations. Senator Hatch said over the weekend that he was informed that a prosecutor would be recommended ''around Christmas.''
If Attorney General Smith appoints a special prosecutor to examine the new charges the prosecutor would, of necessity, have to delve into whether the committee did not get the ''whole story'' in the first place, close observers say.