By DOANE HULICK
Journal-Bulletin Staff Writer
March 5, 1996
--- A Superior Court judge says that the state does not have to
pay an organization formed to defend union members against criminal
charges some $163,800 in interest on money that the organization
kept in an account at the bank that was looted by Joseph F. Mollicone
Judge Richard J. Israel said that the North
American Laborers Defense League was treated no less fairly than
any other depositor at the Heritage Loan & Investment Co.
- the bank that Mollicone, as president, looted. Israel ruled that the Laborers Defense League is not entitled to collect interest on the $420,000 that it had
kept at Heritage, in an unorthodox passbook account that paid
no interest. The Laborers Defense League got its money
back in 1994 - four years after the state took over Heritage,
following the bank's collapse.
In April 1994, court-appointed Special Master
William J. McAtee had granted the Defense League's claim, saying
that the organization was entitled to the full $420,000 that it
had deposited. McAtee also ruled that the Defense League was entitled
to interest, at the rate of 12 percent per year, from Jan. 25,
1991, to the date of his order, or about $163,800.
The state had questioned the unorthodox practice
of keeping $420,000 in an account that paid no interest, and McAtee
agreed that it was "unusual." But he ruled that the
account was valid and ordered the money repaid. And on June 24, 1994, the Defense League
was paid $420,000 by the state Depositors Economic Protection
Corporation (DEPCO), which had been formed to recover money owed
on debts left from the state's 1990 banking crisis and had taken
control of the remainder of Heritage' s assets. But DEPCO refused
to pay the interest.
The Defense League then filed a lawsuit,
asking the court to enforce McAtee's order concerning the payment
of interest. The Defense League said that it had been
treated unfairly because the receiver - in this case, the state
- had refused to pay the interest allowed by the special master.
The Defense League also argued that it had had to wait longer
than other depositors to get back its money.
Other depositors received interim distributions,
but the Defense League did not.
Judge Israel disagreed with the Defense
He said that the Defense League had not been
treated unfairly, and that there were no legal grounds for ordering
the payment of interest. "The receiver had no obligation to treat
all depositors alike, so far as time of payment is concerned,"
Israel said. "In fact, the receiver had a duty to ensure
that each depositor had a legitimate claim to funds from Heritage."
The receiver, the judge said, "acted
within (its) authority to pursue an investigation of accounts"
that appeared unusual. "Given the state of the records and
finances of Heritage," Israel added, the receiver "would
have been remiss in (its) duties to the taxpayers of Rhode Island,
who were providing assets to DEPCO to pay depositors' claims,
had (the receiver) paid out such account monies without a thorough
investigation and consideration of any irregularities."
The judge struck down the portion of Special
Master McAtee's order that allowed payment of interest.
League defended union members
The North American Laborers Defense League
was formed in 1980 to defend union members against criminal investigations
and charges. Shortly after that, the Defense League solicited
donations to help union officials, including Arthur A. Coia, now
president of the 770,000-member Laborers International Union of
North America, and his father, Arthur E. Coia, who had been indicted
in 1981 for racketeering, along with New England crime boss Raymond
L. S. Patriarca.
Three years later, a federal judge dismissed
the charges, saying that the government had not filed them in
time. Last year, the junior Coia resolved a Justice
Department racketeering investigation of the Laborers by agreeing
to oversee internal union reforms.
The Defense League's Heritage Loan &
Investment passbook contained Arthur A. Coia's name. Investigators
concluded that Coia's signature had been forged to cover up Mollicone's
theft of the money from the bank. Coia declined requests for an
interview about the Defense League. He has acknowledged that he
contributed to the organization, but he testified at hearings
on the state's banking crisis that he had had nothing to do with
organizing the Defense League.
The Defense League's administrator is James
Merloni, president of the Massachusetts Laborers' District Council,
with offices in Hopkinton, Mass. The apparent reason the Defense League kept
the money in an account that paid no interest was to conceal its
financial affairs from the government.
Copyright © 1996 The Providence