Donovan: "Insufficient Evidence"

But questions persist about a cover-up during his confirmation

Labor Secretary Raymond Donovan was understandably jubilant. "The special prosecutor," he said, "has confirmed what I have told you all along: that none of these allegations would prove to be true." President Reagan, claiming that Donovan had been "unfairly and unjustly assailed," declared the case "closed." Said Reagan: "Certainly I'm going to be sticking with him."

Those pleased responses followed Special Prosecutor Leon Silverman's release of a four-volume, 1,025-page report on his investigation into the claims of various unsavory characters, including gangsters who turned Government informers, that Donovan and his New Jersey construction company had close ties to organized crime. Silverman investigated upwards of 24 separate allegations--a "disturbing" number, he said--but concluded that there was "insufficient credible evidence" to support a successful prosecution of Donovan for any crime. A federal grand jury, which heard the evidence produced by Silverman, voted not to indict Donovan on any charge.

While Donovan had every right to claim vindication, Silverman pointedly declined at a press conference to say that the Secretary had been "exonerated" or "cleared" by the six-month investigation. Silverman repeatedly stressed that he could only say there was "insufficient credible evidence," explaining that in some cases the testimony of a single individual "would be sufficient--if your source is a pillar of strength." The persons accusing Donovan of witnessing or making payoffs to labor racketeers were not in that category.

The fact that Donovan was not charged with a crime, however, is not likely to be the end of the matter. The Silverman report makes clear that the FBI withheld important information about Donovan and his company from the Senate Labor and Human Resources Committee during his confirmation hearings. If the committee members had been given all that information at the time, it seems doubtful that Donovan would have been confirmed for his post.

Never passed along to the committee, for example, was an FBI report that "one source indicates the upper management of the Schiavone Construction Co. [where Donovan was a vice president] is closely aligned with the Vito Genovese family of L.C.N. [La Cosa Nostra]." It named the company official, who was not Donovan, allegedly providing this Mafia tie. This report was initialed by two top FBI officials, Francis Mullen and Charles P. Monroe. Both appeared at the confirmation hearings, but report told the committee of this alleged Mafia connection.

Mullen also failed to tell the committee about a series of wiretaps on the phones of William Masselli, a Genovese family "soldier." Those wiretaps, according to the Silverman report, show that Masselli boasted of how "I get along good with all the bosses" of the Schiavone Co.; he was overheard naming the five top officers, including Donovan.

The wiretaps also show that Masselli claimed he got an interest-free $200,000 loan from Schiavone. The check, according to the Silverman report, was cosigned by Donovan. Masselli complained that he had to pay $20,000 to Schiavone as a kickback to get the loan. An FBI report showed that Schiavone officials contend this accusation was an attempt by Masselli to extort money from the company.

Also heard on the wiretaps, according to the Silverman report, were attempts by officials of Schiavone to get Masselli to contribute money to Reagan's 1980 presidential campaign. Masselli, who had muscled his way into control of a company handling subcontracts for Schiavone, readily agreed to give $1,000. The Silverman report notes that Donovan and other Schiavone officials asked some 200 subcontractors doing business with the construction firm to kick in at least $1,000 each to the Reagan campaign. Two of the subcontractors told Silverman that they felt the request for funds implied that failure to comply would end their business with Schiavone. While Silverman concluded that no crime was committed in this fund-raising tactic, he sent the information to the Federal Election Commission to see if any civil violations of campaign funding laws were involved.

The Silverman report suggests that Fred Furino, a Mafia bagman whose body was found in an abandoned car on June 11 in New York City, may have been murdered because of his role in the Donovan probe. Furino flunked a lie-detector test on April 27, when he claimed that he had never collected any payoffs from Donovan. He later made two appearances before the grand jury investigating Donovan. On June 2 Silverman subpoenaed John DiGilio, Furino's superior in the Genovese family, to appear before the grand jury as well. The next day Furino vanished. Silverman's report calls for an investigation into whether Furino's slaying was an obstruction of justice.

The special prosecutor also discloses that the FBI asked him on several occasions not to call specific informers because their testimony might endanger their lives or jeopardize "a major organized-crime investigation." Silverman agreed. At least one of these witnesses, TIME was told, would have claimed that Donovan and his company had ties to organized crime.

Utah Republican Orrin Hatch, chairman of the Senate committee, is pressing on with hearings into a possible conspiracy by the White House and FBI to conceal what might have been damaging information about Donovan. TIME has learned that the original discussions between Reagan's transition team and the FBI about the Donovan appointment were conducted on higher levels than had previously been admitted. In early December of 1980 FBI Director William Webster conferred with Edwin Meese, Reagan's transition chief, about Donovan.

Some Reagan aides are hoping that Donovan will step aside to spare the Administration any possible embarrassment. But Donovan has other ideas. "I have no plans tc resign," he said last week. "I think I'm a political asset."

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