SCHOOL BUSES, UNIONS AND THE MOB: A SPECIAL REPORT; SCHOOL BUS CONTRACTS GO TO COMPANIES WITH TIES TO MOB

December 26, 1990 – Without competitive bidding, New York City consistently awards the most expensive school bus contracts in the nation, and many have gone to companies linked to suspected organized-crime figures. One company that transported handicapped children in Brooklyn was run by a professional mob killer.

The last large-scale competition for school bus contracts in the city came in 1979. Since then, several contractors and law-enforcement officials assert, unions influenced by organized-crime figures have obtained a stranglehold over the costs and hiring practices of many of the companies whose yellow buses carry 136,000 riders every school day.

EX-MOB LAWYER LINKS THE MAFIA TO SCHOOL BUSES

$1.6 Billion to Bus Companies

Many current and former school officials say the Board of Education’s unorthodox policy of extending contracts with yearly cost-of-business increases provides better bus service at a lower price than could be obtained by periodically seeking new bidders. They say bidding is unpredictable and led to higher payments in 1979 and in 1986, when it was tried with a small number of contracts.

But several critics, including former Schools Chancellor Frank J. Macchiarola, say the board should have given bidding a better chance to work. He argued, however, that school officials had “no incentive” to cut costs because the state pays almost 80 percent of the bus contracts.

In the last decade, the board has paid $1.6 billion to bus companies through a system of periodically renewed contracts. The board in the 1989-90 school year spent $227.2 million — an average of $1,701 a student. This means that New York not only spends more per student than any other large school district in the country, but that it also spends almost twice as much as many nearby suburban school systems.

Interviews with officials of the largest school districts in the country found that New York is the only one that routinely extends contracts. The others rely on competitive bidding or operate their own bus fleets.

The second highest cost, $1,639 per pupil, was found in Los Angeles, where officials say costs are high because 70 percent of the buses are used for integration, with round-trip routes of up to 80 miles. The lowest average cost, $333, was in largely suburban Fairfax County, Va., which has its own fleet.

Among big cities, Milwaukee had the lowest average cost, $683 a year. Richard F. Wenzel, assistant director of school transporation, said competitive bidding every three years helped reduce costs. “It’s worked for us,” he said. “With bidding, it’s a dog-eat-dog world for contractors.”

This school year the board in New York City is providing contract bus service for 39,000 handicapped private and public school students and 97,000 general students who are normally not in walking distance of their schools.

Law-enforcement officials in New York say the Mafia appears to control segments of the industry with the aid of union officials. Organized-crime groups have used similar tactics to obtain illicit payoffs in the city’s construction and trucking industries.

From interviews with investigators and an examination of court and Board of Education records, these apparent affiliations between reputed organized-crime members, unions and bus companies emerge:

*Robert Bering, who has admitted participating in Mafia murders, obtained about $2.2 million in contracts. Mr. Bering, who became a Government informer, told investigators that companies with organized-crime ties profited from “sweetheart” collective-bargaining deals arranged with some unions.

*Julius Bernstein, a top official in the Amalgamated Transit Union, Local 1181-1061, which represents most of the city’s 3,000 school bus drivers, acknowledged in an interview that he had had meetings with men identified as leaders in the Gambino and Genovese organized-crime families. He said the meetings were unrelated to union or school bus matters.

*Frank Dapolito, who is described by the Federal Bureau of Investigation as a captain in the Gambino family, is the personnel manager for a group of companies that have $12 million in contracts this year.

*Edward Lino, another reputed captain in the Gambino family who was slain last month, controlled a company that got $8.2 million in fees.

*Nicholas Grancio, who the F.B.I. has identified as a member of the Colombo organized-crime family, has been a consultant for a company with $17.5 million in contracts this year.

*Anthony Zappi, the head of Local 854 of the International Brotherhood of Teamsters, which represents employees at nine bus companies, has been cited by a Federal court-appointed investigator as a member of the Gambino family.

The Deputy Schools Chancellor for Operations, Stanley S. Litow, said problems relating to mounting bus costs and organized-crime influence were “obviously disturbing.” He added that methods of awarding and supervising contracts were being re-examined.

“There will be major changes and soon,” Mr. Litow said. “This is a complicated system that has existed for 10 years. But before we change it we want to make sure that we make it better.”

Last summer, the board canceled contracts with 20 companies; 10 for poor service and 10 for links to organized-crime elements. But the board also renewed the contracts of the nine companies that have agreements with Mr. Zappi’s union, as well as the companies that employ Mr. Dapolito and Mr. Grancio.

Asked why these contracts had been extended, Mr. Litow said the decisions had been made with the “knowledge” and “full cooperation” of the Manhattan District Attorney’s office, which, along with the Federal Labor Department’s Office of Labor Racketeering, has been investigating the bus program for three years.

Awarding Contracts: Union Pressure Alters Process

School bus payments comprise the largest category of municipal contracts awarded without competitive bidding.

They are awarded under a waiver, approved by the State Legislature in the early 1960’s, that allows school districts to bypass laws requiring that municipal agencies generally award contracts to responsible companies that submit the lowest bid. Under the system of extended contracts, all yearly increases are limited to rises in the regional consumer price index.

It was not until 1979, however, that the current system solidified, with the virtual end of competitive bidding. That year, in an effort to foster competition, the board decided to reassign many of the routes held by Varsity Transit, which had 80 percent of the city’s business. But before the new contracts could be awarded, drivers from Local 1181 — which represented most of Varsity’s employees — disrupted service for three months with a wildcat strike over job security and wage guarantees.

A settlement was reached only after the school board agreed to provisions that new contractors would be required to employ former Varsity drivers on the basis of a seniority list compiled by the union.

AMPLY POWER & LOGAN BUS ANNOUNCES ELECTRIC SCHOOL BUS PILOT PROJECT IN NYC

Fear of Retaliation

In interviews, about a dozen contractors asserted that these provisions, which are still in effect, gave Local 1181 enormous sway over profits made by the bus companies. The contractors spoke on condition of anonymity, saying they feared retaliation from organized crime.

Just as the union could insist that a company hire from its seniority list, the contractors said, so could it refrain from organizing a particular company. Often, they said, Local 1181 failed to organize employees at companies controlled by Mafia members. And since Local 1181’s wages and fringe benefits are the highest in the industry, companies without Local 1181 drivers stand to make the largest profits.

The local’s top wages, about $665 a week, and benefits are the same as those paid to the city’s Transit Authority bus drivers. By contrast, in New York’s suburbs, where busing costs are considerably lower, drivers generally work on a part-time basis, four or five hours a day.

The president of Local 1181, John Ambrosio, disputes allegations that his union has driven up the cost of bus contracts.

“We have not got a stranglehold,” he said. “We have stabilized the industry by putting every contractor on an even keel with the same contract terms.”

Mr. Ambrosio said his local, which represents employees at 64 of the 88 bus companies, had tried to organize everyone but had been unsuccessful.

The policy of extended contracts has permitted four major companies and three cooperatives that share garages and other operations to obtain most of the contracts, mainly through mergers and acquisition of smaller companies. The seven got $142 million of the $227 million in payments last year.

The largest contractor is Dominic F. Gatto Jr., chief executive of Atlantic Express and the Staten Island Bus Company. Mr. Gatto, who began with 160 routes in 1980, covers 700 routes for about $44 million this year.

‘Should Have Stuck to Bidding’

Mr. Gatto maintained that extended contracts limited profits for all contractors and reduced costs for the city. He said he had expanded his operations by keeping “fixed costs down” and acquiring other companies that had obtained contracts in 1979.

But Mr. Macchiarola, who as chancellor in 1979 oversaw the last citywide bidding, insists: “We should have stuck to bidding. It wasn’t given a real test.” He asserted that many school administrators and board members lacked the incentive to resume bidding because the state subsidized most busing costs.

Since 1980, state aid for busing has amounted to $1.2 billion, 76 percent of the $1.6 billion paid to contractors. The state normally reimburses local districts for 90 percent of the cost of transporting physically and mentally handicapped pupils and 90 percent for all pupils who live at least a mile and a half from school.

The most recent contract extensions for 88 companies came last summer. At the same time, the board discontinued contracts for 20 concerns that were transferred to existing companies without competitive bidding.

Kevin F. Gill, the director of pupil transportation, said 10 of the companies were denied renewals because their employees at some time had been represented by Local 118 of the Electrical Production and Industrial Workers Union.

Federal and state investigators said that Mr. Bering, after his arrest in 1987, told them that Local 118 had been permitted by Local 1181 to organize employees at the 10 companies.

Mr. Bering said those companies were tied to organized-crime figures who helped them obtain collective-bargaining deals that called for lower wages and benefits than required by Local 1181. Before being dropped, the companies got $55 million in contracts.

Charles Hayden, a lawyer for Local 118, said there was “no basis” to the allegations.

Local 118 records were recently subpoenaed by Federal prosecutors in Brooklyn, who last summer assumed jurisdiction over the investigations of the bus program. Mr. Hayden said he believed that the investigation was focusing on bus companies and not the union.

Mr. Bernstein of Local 1181 described Mr. Bering “as a creep trying to make a deal to get out of jail.” Local 1181, Mr. Bernstein said, had been unable to organize all companies because “we didn’t have enough men to send to them.”

In another law-enforcement matter, five companies whose owners or employees were convicted this year of misdemeanors or violations for offering bribes to state safety inspectors were granted three-year contract extensions. Mr. Litow said the renewals were made “in close cooperation” with the Brooklyn District Attorney’s office, which brought the charges.

But the chief of the Rackets Bureau in the District Attorney’s office, Dennis Hawkins, said prosecutors “took no position” on renewal of the contracts.

The Executive Murderer: ‘Coffee’ Meetings With the Gambinos

Mr. Bering, who has testified in court that he participated in three Mafia murders and an attempted murder, operated a school bus company in Brooklyn, the E & A Transportation Corporation, for at least six years in his wife’s name and obtained $2.2 million in contracts. He is in the Federal Witness Protection Program, serving a 15-year prison sentence for murder.

Mr. Bernstein, a general organizer for Local 1181, acknowledged in an interview that he was a long-time friend of Matthew (Matty the Horse) Ianiello, who Federal prosecutors say is a captain in the Genovese organized-crime family. Mr. Bernstein said he frequently visited Mr. Ianiello, who is serving a 24-year Federal prison sentence for racketeering and other crimes.

He said he also met occasionally “for coffee” with men identified as high-ranking members of the Gambino family, including Gene and Peter Gotti, the brothers of John Gotti. John Gotti, who the F.B.I. says is the family’s boss and the nation’s most powerful Mafia leader, is now in jail awaiting trial on Federal racketeering charges.

Maintaining that he had “no business relationships” with Mr. Ianiello or the suspected Gambino family members, Mr. Bernstein said the meetings were unrelated to union or school bus matters.

‘Above Board’ Connections

Mr. Dapolito, who is described by the F.B.I. as a Gambino captain, is the personnel manager for five companies that operate out of one garage and office in Brooklyn and have $12 million in contracts this year. Joseph A. Curcio, the president of the Lonero Transit Company, who hired Mr. Dapolito in 1986 at a yearly salary of $40,000, said Mr. Dapolito’s connections to the companies were “above board.”

Mr. Dapolito is a former vice president of Teamsters Local 854, which represents drivers at nine school bus companies, including four of the companies that share Mr. Curcio’s headquarters. Mr. Dapolito did not respond to telephone requests for an interview.

In August, a Federal court-appointed investigator who is examining teamster union-Mafia ties, accused Mr. Zappi, who is the secretary-treasurer and top official of Local 854, of being a Gambino family member.

Mr. Zappi, at an administrative hearing last May, said he had accompanied Mr. Dapolito on visits to the Bergin Hunt and Fish Club in Queens and the Ravenite Club in Little Italy, which authorities say are John Gotti’s meeting places. Mr. Zappi did not return telephone messages to his office in Valley Stream, L.I.

Another school bus company tied to the Gambino family is the Embassy Transportation Company in Brooklyn, which got $8.2 million in fees before its contract was canceled for “poor performance” last summer. Federal and state investigators said the company had been controlled by Edward Lino, the Gambino captain who was slain last month.

Mr. Grancio, who law-enforcement officials have identified as a member of the Colombo crime family, has been a consultant since last year for Pupil Transportation Systems, which has $17.5 million in contracts this year.

Mr. Grancio retired abruptly as the vice president of Teamsters Local 717 in August 1989 after learning that he faced possible removal on charges that he was in the Colombo family. The local in recent years has represented employees at several school bus companies.

Denying any role in organized-crime activities, Mr. Grancio said in an interview that he had worked freelance as a “human-relations adviser” for Pupil Transportation.

This ARTICLE was written by Selwyn Raab and published in The New York Times, on December 26, 1990.