If you have issues viewing or accessing this file, please contact..-._- us at NCJRS.gov. ---_ ------. ---- \
r . . ',-. ~ .... -i 0# • D '. • Pennsylvania Crime Commission
oalFraud: Undermining a VitolResource
~ ~ I •
VlSg February 1985 COMMONWEALTH OF PENNSYLVANIA /1 v ~ 7 3
PeJl1l1l1syl~~llrnia Crime Commission Coal Fraud: Undermining a Vi~al Resource '--
110973 u.s. Department of Justice National Institute of Justice This document has been reproduced exactly as received from the person or organization originating it. Points of view or opinions stated in this document are those of the authors and do not necessarily represent the official position or policies of the National Institute of Justice.
Permission to reproduce this copyrighted material has been granted by Pennsylvania Crime Commission
\ to the National Criminal Justice Reference Service (NCJRS).
Further reproduction outside of the NCJRS system requires permis sion of the copyright owner.
ISBN 0-8182-0000-6 Printed in the Commonwealth of Pennsylvania 1100 E. Hector Street Conshohocken, Fa., 19428 215-834-1164 Introduction...... 5 Coal For Korea: Anything Goes...... 9 Coal Tax Shelters: Mining Investors, Not Coal .. 33 Corporate Looting: Pocketing the Profits ...... 51 Heavy Equipment Theft ...... 69 Bank Theft ...... 69
2 Pennsylvania Crime Commission
Charles F. Scarlata, Esq., Chairman Alvin B. Lewis Jr., Esq., Commissioner Thomas F. Lamb, Esq., Commissioner Dean Wm Roach, Commissioner Trevor Edwards, Esq., Commissioner Wallace P. Hay, Executive Director
Frank R. Booth, Assistant Director for Investigations Willie C. Byrd, Special Agent-In Charge, Conshohocken Christopher J. DeCree, Special Agent-In-Charge, Pittsburgh William J. Fry, III, Special Agent-In Charge, Harrisburg George R. Van Durick, Special Agent-In-Charge, Scranton Carl P. Brown, Director of Intelli gence Gino L. Lazzari, Inspector of Field Operations Wasyl PoIischuk, Assistant Director for Administration Christopher M. Roberts, Special Assistant for Communications
Legal: John J. Contino, Esq. Richard L. Schultz Joan Weiner, Esq. Gregory C. Smith Paul J. Spear Special Agents: Donna J. Vogel Thomas J. Connor Victor N. DiCicco Intelligence~ John P. Ditmore Carl P. Brown ~~.J~~ Joseph P. Dougherty Nancy B. Checket Daniel S. Fedeanis Sharon A. Rockey Deborah A. Feurer fda~ ~ 19138 William F. Foran Non-Investigative: Stephen B. Hohenwarter Sharon L. Beerman Paul S. James Eileen Commons ~~@tJ@1Vg~NS James F. Kanavy Regina M. McBride Steven R. Keller Margaret A. Millhouse Anthony T. McDonald Nancy S. Monzi Dwight L. McKee Lois Ryals Russell· J. Millhouse Diane L. Schwandt Edward,J. Mokos Deborah J. Smith Gerald D. Rockey Richard W. Williamson
3 Bunco Artists Take to the Coal FieldsoQ Investor Confidence Eroded
!'
5 There were two other incentives theft of heavy equipment, loan that spawned investor interest in sharking, narcotics trafficking and coal. They also undoubtedly price fixing. helped open the coal industry's door to the organized criminal. By December of 1977, the problem had become so immense Coal once was king in Pennsyl The first was Ruk 146, adopted that the SEC issued a rare warn vania, a mighty economic force by the U. S. Securities and ing to the American public to be honeycombed in hills and Exchange Commission (SEC) in aware of coal swindles. hollows, providing jobs, 1974 to make qualified private producing prosperity. In its investment offerings easier and Two years later, in a grant heyday, the state's anthracite cheaper by exempting them from application to the federal govern industry alone turned out 100 SEC regIstration. While it accom ment, the founding agencies of a million tons of coal a year and plished its goal, Rule 146 also multi-state strike force to be employed 150,000 men. tended to insulate these offerings known as the Leviticus Project Association noted: But the day came when cheap from scrutiny by the SEC's enforcement arm, much to the and convenient oil and gas took I!lm Criminal elements are delight of coal-country swindlers. its place, and Pennsylvania's coal acquiring substantial interests in industry withered and towns died The second incentive was a series and control of th'~ American coal as the mines shut down. It would of favorable Internal Revenue industry including coal resources, take an event thousands of miles Service (IRS) rulings that enabled mining, and support industries. away to spark coal's comeback. investors to deduct the entire cash IiEJ Througl1 the use of foreign In 1972, the Arab nations and note amount of an investment in a coal mining venture for the coal purchase contracts, these imposed their now famous oil criminal elements are defrauding embargo and a year later America tax year in which the investment was made. foreign purchasers of American had her "energy crisis." Govern coal and bankrupting American ment and industry alike sought This high degree of "leveraging" coal producers. alternative domestic sources of made coal deals attractive tax energy to reduce the United shelters for high tax bracket The Leviticus Project was formed State's dependence on foreign oil. investors. And it made the specifically to investigate and It wasn't long until America had investors reluctant to cooperate prosecute criminals operating in turned to coal, which soon was in with investigators for fear that the Appalachian coal region. It great demand. fraudulent schemes would borrowed its name from the jeopardize past tax deductions and Bible: "Ye shall not steal; neither Domestic electric utility result in major assessments for shall ye deal falsely, nor lie one to companies converted from oil to back taxes. As it turned out, the another." Leviticus 19.11. coal-fired generators and rapidly lion's share of these investors hoarded coal reserves in antici were more interested in tax It received its first federal pation of a miners' strike. Coal savings than they ever were in funding in February of 1980. A mine operators were suddenly coal. month later a New York grand selling coal that had been stock jury returned the first of many piled as unsalable only a few By the spring of 1977, law indictments that would stem from months earlier. Foreign orders for enforcement and regulatory project investigations. U. S. coal also rose sharply. agencies in Alabama, Georgia, and Kentucky had begun investi As of September 30, 1984, In an effort to deal with this gating fraudulent coal investment criminal charges stemming from increasing demand, a variety of schemes and other related crimes. Leviticus-sponsored probes have investment incentives were They soon discovered that most of been brought against 233 developed to hike domestic coal the major criminal activity was defendants. Civil charges have output. They included the interstate in nature. Pennsylvania been brought against 179 individ exemption of long-term coal and other states soon joined in. uals and businesses. production contracts from wage and price controls, the exemption In a short time these state In addition, Leviticus Project of the coal industry from the agencies, induding the Pennsyl members have, as of that date, windfall profits tax, and the vania Crime Commission, were referred approximately $168 government authorization of $750 documenting cases of grand million in suspect investments to million in loan guarantees to coal larceny, securities fraud, tax the Internal Revenue Service. mine operators who opened new fraud, bank fraud, insurance Additional referrals to the IRS mines. fraud, political and business involving between $20 million and corruption, murder, extortion, $40 million have either been made 6 since September 30, 1984, or are appropriate, six coal-producing too often are vented on the expected to be made in the near states and New York formed their worker himself and on his family. future. own strike force. " And while the workers watch their wages and dreams fall apart, the Today, the Leviticus Project, America's "energy crisis," of real perpetrators of the scam-the which still is federally funded, course, is behind us now. And fly-by-night coal operators-count consists of 16 law enforcement coal may not be booming like it their undeserved and illegal and regulatory agencies from was a decade ago. But there is profits. " seven states: Pennsylvania, reason to be cautiously optimistic Alabama, Georgia, Indiana, about the industry's future. Oil Noted James Hooton, executive Kentucky, New York and and natural gas no longer are the director of the state Senate Virginia. The Pennsylvania Crime cheap alternatives they once were. Environmental Resources and Commission is a charter member. Nuclear energy, once so prom Energy Committee, at another ising, has been bogged down by Commission hearing: Other members: heavy fallout from environmental The Alabama Securities activists and corporate decision "If the fraud your (Crime Commission, the Alabama makers who aren't sure which Commission) investigations have Department of Public Safety, the energy path to follow. uncovered goes unchecked, the Birmingham, Ala., Police reputation of the industry as a Department, the Georgia But if coal's future is to be whole could suffer, and our hopes Organized Crime Prevention bright, investor confidence will for future expansion could be Council, the Georgia Bureau of have to be restored. For, unfortu undermined. The industry simply Investigation, the Georgia nately, the criniinals who robbed cannot afford a reputation for Secretary of State's Office, the the coal industry of its money, dishonesty. " Indiana Securities Commission, also soiled its reputation. the Indiana State Police, the Kentucky Division of Securities, There are lending institutions the Kentucky Attorney General's today that consider investments in This anthology was compiled as Office, the Kentucky State Police, coal ventures too risky. And part of the Crime Commission's the New York County District that's understandable considering mandate to report to the Pennsyl Attorney's Office, the Pennsyl that between 1979 and 1984 there vania General Assembly on its vania Securities Commission, the were 116 Pennsylvania coal investigative findings. It includes Virginia State Police, and the companies that went bankrupt, Leviticus-sponsored investigations Virginia Attorney General's some as a result of fraudulent the Commission has conducted Office. schemes that funneled corporate since the formation of the multi funds into people's pockets. Many state task force in the fall of Newsweek magazine, in the banks. and in vestment firms sus 1978. spring of 1983, summed up tained heavy financial losses. Leviticus' creation this way: It reflects the efforts of the Richard Trumka, president of entire Commission staff. But "Not long after the federal the United Mine Workers of there are certain agents, attorneys, government sweetened the tax America, touched on the subject and supervisors who deserve laws to encourage investments in at a Crime Commission public special mention because of their the coal industry, bunco artists hearing in January of 1983. close involvement in the took to the hills of Appalachia. probes: Joan Weiner, Esq., He noted that such corporate They hijacked heavy equipment, Leviticus counsel; Donald E. "bust-outs" leave miners with sold bogus mineral leases and, Johnson, Esq., the Crime unpaid wages and benefits, while most creatively, peddled phony Commission's former chief stiffing states for unpaid taxes, tax shelters. For a time these coal counsel; Frank R. Booth, unemployment insurance pay assistant director for investi country criminals had the upper ments, and workers' compen hand because they operated across gations; William J. Fry III, sation premiums. boundaries that confounded local special agent-in-charge, Harris law enforcement agencies. A "The financial and psychological burg office; Christopher J. typical scam would move from damage that this situation causes DeCree, special agent-in-charge, the hollows of Kentucky to the for the miner cannot be over Pittsburgh; and agents Thomas J. putting greens of the Sun Belt to stated," Trumka testified. Connor, Victor N. DiCicco, John the financial canyons of Man P. Ditmore, Deborah A. Feurer, hattan. When the Department of "The economic and social William F. Foran, Michael R. Justice showed less interest in problems that accompany (the Hoey, Dwight L. McKee, Russell attacking these problems than resultant) unemployment lead to J. Millhouse and Albert B. some local officials thought bitter anger and frustration and Risdorfer. 7 ------.. --~.-
This report was compiled by Christopher M. Roberts, the Commission's special assistant for communications" Throughout the report, reference will be made to organized criminals. Both the Leviticus Project and the Pennsylvania Crime Commission (going back to its inception in 1968) have defined organized criminals as persons who take part in illegal conspira torial acts with economic gain the ultimate goal. Organized crime is not synony mous with the Mafia or La Cosa Nostra. It is not limited to such criminal acts or unlawful services as gambling, prostitution, drugs, loansharking, or racketeering. It can, and often does, include such sophisticated activities as laun dering of ill-gotten money through legitimate businesses, securities fraud, or hi-tech thievery committed not with guns, but with computers. Organized crime attempts to get a toehold wherever there is a potential for profit. So, when we mention organized crime in this report we are not usually talking about the Mafia. But sometimes we are. And sometimes we are talking about the same org~nized crime figures who have been listed over the years in other Crime Commis sion reports, reports dealing mostly with crime in Pennsyl vania's big cities. As it turns out, the coal fields outside her little towns were preyed upon too.
8 Coal jor KoreaoO Anything Goes
9 thracite market, a market that is Under the contract, the coal was estimated to pump about $105 to be tested prior to leaving the million annually into the Com United States. On Nov. 29, 1979, monwealth's economy. the Inspectorate, a testing lab located at 4041 Ridge Ave. in Prior to March of 1982, the Philadelphia, was appointed to During the early 1980s, the Office of Supply, Republic of Crime Commission examined examine the silt on the first five Korea, (OSROK), handled all coal shipments. According to an fraudulent practices involving purchases from the United States. anthracite silt shipments from the officer of United Young Co., Fuel Engineering Co. of Thorn United States to the Republic of One of the first firms that wood, N. Y., tested the coal for Korea. I This coal silt, destined to OSROK contracted with to pur be transformed into briquets to chase U. S. anthracite was United the sixth shipment. heat the homes of indigent Ko Young Co., a former wig import Cert:ficates of analysis issued by reans, came from')uppliers in ing business located on Broadway the Inspectorate showed the coal northeastern Pennsylvania and in New York City and run by Che to meet or exceed all contract was shipped from ports in New Yung Choi, a Korean national specifications with the exception Jersey and New York during 1981 who was working in this country of moisture content, a condi- and 1982. Some 265,000 metric on a permanent visa. tion that resulted in a penalty tons of silt valued at nearly $16 of $122,587 being assessed by Choi, who has since returned to million was invulved. OSROK. 4 Korea, had no experience in brok During its investigation, the ering coal. Neither did many of Upon submission of the Commission uncovered evidence the others who were drawn to the certificates of analysis and other of attempted bribery, bribery, Korean anthracite deals. They shipping documents to the Korean fraud and forgery which resulted would include a tire innertube Exchange Bank, $4.9 million was in substandard coal being importer, a former railroad released to United Young Co. transported overseas. Shippers, conductor, an unsuccessful candi suppliers and others, including the date for a city council seat in an On arrival in Korea, Dai Han Korean Government, lost more eastern Pennsylvania town, and a Coal Corp., a government agency than $4 million. convicted gambler. responsible for monitoring the quality of incoming coal, found The Republic of Korea, a Despite Choi's lack of knowl the silt to be of substandard resource poor nation, is heavily edge about coal, OSROK, on quality, falling well below dependent on foreign energy to Sept. 14, 1979, entered into a contract specifications. fuel an ambitious economic revi contract with United Young to talization program. Korea's use of supply 350,000 metric tons of coal is expected to accelerate anthracite silt (plus/minus 5% at greatly in the 1980s and beyond, seller's option.) according to information gathered Twelve days later, a letter of by the U. S. State Department. credit was issued by the Korean The Korean government is setting I Exchange Bank, Seoul, Korea, in Silt is an extremely fine coal by-product up long-term coal supply con which results from an earlier mining process the amount of $11.5 million and tracts, promoting Korean invest such as wa~hjng. advised through the First Chicago ment in overseas coal mines and International Banking Corp. of , A letter of credit is a formal legal document diversifying as much as possible issued by the buyer's bank to a seller of New York.~ the sources of imported coal. merchandise or services. It specifies the terms and conditions that will institute payment of a The contract called for the coal certain sum of money to the seller, also known Pennsylvania suppliers are in a silt to meet certain specifications in financial circles as the beneficiary. The letter position to take advantage of this regarding such characteristics as outlines and specifies where and what docu ments must be presented to prove absolute expandin, market-a market that calorific value (KCALs) and sul conformance to its terms and conditions. (See currently handles 3.5 million tons phur and moisture content. It also accompanying box on pg. 12 for additionai of imported anthracite and has a stipulated that should the coal fall detaiL) projected demand f0 r bituminous short of certain specifications, , KCAL stands for kilo calorie, a measure of coal imports of better than 13 penalties would be assessed potential energy or heat produced from a nat ural re~ourcc such as coal. Another familiar million tons by 1986. against the seller. J unit of energy potential is the British Thermal Unit, or BTU. One BTU equals one KCAL However, fraudulent schemes United Young Co. eventually times I.S. like the ones examined by this supplied 175,898 metric tons of commission will only serve to coal via six shipments - some , The Crime Commission was unable to obtain the certificate of analysis issued by Fuel Engi undermine foreign buyer confi 174,102 metric tons shy of the neering for the sixth shipment due to juris dence in the Pennsylvania an- amount originally ordered. dictional constraints. 10 In a telex to the Inspectorate on Harmelin testified at a Crime Q. You really do nct know what Nov. 25, 1980, OSROK officials Commission hearing on Jan. 5, the coal was on that ship, and yet stated: "We were shocked and 1984, that the incident occurred in you are stating that it was sam dismayed at your inadequate Philadelphia during the period pled and the report was issued and insufficient inspection of that the Inspectorate was testing stating what the quality of that the calorific value of the coal coal for the United Young ship coal was? in question ... " ments. He stated that Choi was traveling that day with another A. Right, Basically, what he had As a result of Dai Han Coal United Young officer, Shin 11 to do was the next best thing ... Corp. 's findings, the coal ship Kim. This exchange took place: a side of the mound of coal that ments stopped. was taken to put on the vessel, Q. Did you have any conversa that didn't go on the vessel. The Pennsylvania Crime Com tions with Mr. Choi and Mr. Kim mission, aware that certificates about this money after you sent Q .... in effect, what you are of analysis had been falsified it back? telling me is that Inspectorate in other Korean coal deals, sampled at the site. The ship had A. I don't think so. attempted to obtain from the left, but you assumed that what Korean Exchange Bank the docu Q. However, they never said it was at the site went on the ship? ments pertaining to the United was not their money? Young shipments. Officials of the A. We had to do that in that A. No. bank, however, stated that all rec one case. ords had been lost. Q. Why? The Commission did learn from Spare Tires and Coal an official of a firm that had sup Some of the coal silt that arrived A. Because the vessel was gone. plied silt to United Young that in Korea had KCAL ratings sig nificantly below what the Inspec Q. Didn't you know when the Choi had said not to worry about vessel was coming in? the quality of the coal-that he torate's records had indicated, ac cording to Dai Han Coal Corp. 's had "people" in Korea who A. As I recall, I think we got findings. For instance, on the sec would' 'take care of it. " In fact, late notification from United ond shipment, transported on the one sales contract for 75,000 met Young Company. ric tons between United Young motor vessel Silvretta, Inspec and Popple Brothers, a coal sup torate reported a KCAL/KG The discrepancy between what plier in Pittston, Pa., simply value of 8,156, Dai Han a value Inspectorate reported and Dai called for the quality of coal to be of 4,880-about half as much. Han's findings eventually resulted "as is." As it turned out, the coal that in OSROK claiming a loss of $663,272. Pennsylvania coal sup was loaded onto the Silvretta was The Crime Commission also pliers and truckers also suffered not sampled at the port because surfaced evidence of a bribe financial losses in their dealings the inspector assigned to the job attempt-something it would with United Young Co. On June find not uncommon as its investi said he arrived at the pier after the vessel had sailed. Instead, 23, 1981, a civil suit was filed in gation progressed. Lackawanna County the inspector stated that a pile r:ourt against the firm. On Nov. 1, 1983, Andrew believed left behind was tested, Harmelin, Inspectorate's financial generating the lab report for the The plaintiffs included Popple director, told Crime Commission Silvretta shipment. Harmelin Brothers, which sought to recover agents that on May 12, 1980, was asked about the incident. $296,670 for coal supplied; Choi, when exiting a car driven George W. Bone Jr., Pittston, by Harmelin, tossed a plain white Q. Why would (the Inspectorate $170,165 for coal supplied; envelope onto the back seat and tester) have gone to the pier to Anthra Trans, Inc., Moscow said, "Here." Harmelin said that test coal after the ship had (Pa.), $291,730 for hauling serv when he opened the envelope he already departed? ices; and Kearney's Inc., Port found five $100 bills. Harmelin A. It took less time to load it land, (Pa.), $164,598, also for further stated that he mailed the hauling services. money back to Choi the next day than we had anticipated .... (via a money order) with a note Q. When you issue a certificate Judgment in favor of the stating: "It seems that you unfor (of analysis), is the certificate plaintiffs was obtained by default tunately left an envelope in the based on coal that was shipped? on Aug. 21, 1981, in the amount back of my car containing $500 in of $978,723. cash ... When I realized that you A. Well, coal that we sampled had mistakenly left it half opened and coal that we assumed was I tried to return it to you . . ." shipped. 11 By then, however, United Young The James Mart.in Coal Co. was Co. had gone OLlt of business. thus formed with Yoo serving as president and Choi as chairman. A LETTER OF CREDIT David M. Grosz, the coal inspec On Sept. 23, 1981, after the two A letter of credit is a formal legal tor who had tested the silt on the men had travelled to Korea to document in writing issued by a dock after the second ship, the negotiate with OSROK officials, buyer's bank and addressed to a Silvretta, had sailed, stated in an James Martin Coal was awarded seller of merchandise or services. It internal company memo dated specifies the terms and conditions the remaining United Young busi that will institute payment of a April 24, 1980, that "the coal at ness with one condition: It would certain sum of money to the seller the pier site at the time of arrival have to make up for the poor or beneficiary. The letter outlines of the inspector (for the first ship quality silt that already had and specifies where and what docu ment on the Motor Vessel George) been shipped. ments must be presented to prove was approximately 250 tons of conformance to its terms and coal or approximately 10 truck According to Yoo, Choi was to conditions. loads .... (It was) reported that receive one-third of the profits of In actuality, the procedure substi adjacent to the pier area in a James Martin Coal Co. Other tutes the credit worthiness of a leased yard were approximately officers of the newly created bank for that of the buyer. It as sures a seller that if he performs 10,000 MIT (metric tons) of coal firm were Yoo's wife, Kyung Bin precisely in accordance with the dust fines, some unscreened and Yoo who served as secretary letter of credit's requirements, that some screened .... 5 It was quite treasurer; and Young Nam Kim, bank will pay regardless of the evident that the unscreened mate general manager. financial stability of the buyer. rial contained impurities ane par The buyer has no right of inspec ticles up to 250 mm (millimeters) On Sept. 25, 1981, a letter of tion and no right of rejection. Of in length, railroad ties, breaker credit was issued through the course, if a bank has knowledge rocks, and all varieties of items Hanil Bank, Seoul, Korea, and and proof of a perpetrated fraud, which could not be: shipped in advised through the bank's New the payment can be pul in escrow satisfactory completion of the York branch in the amount of pending some equitable resolution. However, a bank makes its determi contract. " $12.3 million. The beneficiary was nation to pay on the face value of James Martin Coal Co., Inc. the documents alone and is not re Grosz further stated in a nota Three months later the letter of sponsible for their falsification or tion dated April 25, 1980, that he credit was re-advised through the leBal effect. was informed by personnel at the Girard Bank in Philadelphia. pier that "large breaker rocks and Some key terms in a letter of credit transaction: coal chunks, a spare tire, and J ames Martin Coal supplied other material was being loaded 165,262 metric tons of anthracite Beneficiary-The seller of goods onto the George." coal silt under its contract with or services to whom the letter of OSROK. Three of the nine ship credit is addressed and who is Despite the demise of United ments were exported from the entitled to its benefits. Young, Choi did not get out of United States, five from Asia and Issuing bank-The financial insti the coal brokerage business. In one from Africa. Because of juris tution that initiated and wrote the September of 1981 he met with dictional constraints, the Pennsyl letter of credit extending its guaran Yung Sao 1'00, another newcomer vania Crime Commission did not tee and liability to pay if the terms to coal, who served as president pursue the non-U. S. shipments. and conditions are fulfilled. of James Martin and Co., Inc., Advising bank-The bank, usually a tire innertube importing firm The domestic coal came from in the beneficiary's country, whose located in Elizabeth, N. J. Ar northeastern Pennsylvania and primary job is to pass on the letter rangements were made for Yoo was shipped on three vessels: The of credit to the beneficiary. The Didymi, carrying 31,911 metric advising bank normally is a corre to provide the remainder of silt sponding bank of the issuing bank, called for under the United tons of silt, sailed from Camden, meaning that the two parties have Young-OSROK contract. N. J., on Jan. 15, 1982; the Aqua exchanged authenticating Glory, 38,001 metric tons of silt, procedures such as a1\thorized sailed from Newark, N. J., on signatures. March 4, 1982; and the Nan Feng, 31,978 metric tons, sailed from Camden, March 11, 1982 .
• Coal dU5t fines are the finest form of anthra cite coal, close to a powder. 12 Forged Documents Commission developed informa Johnson: Continue. tion regarding attempted bribery Release $4.4 Million and bribery involving the James Gongloff: Okay. Then he asked Certificates of analysis issued by Martin transactions. us to walk out into the hall, and Fuel Engineering Co. of Thorn we did. wood, N. Y., for the Didymi ship Thomas Paul Barrett J r., a ment and by Hampton Roads former Fuel Engineering employee Johnson: That would be you Testing Laboratories, Hampton who was involved in sampling and Mr. Barrett? Roads, Va., for the Aqua Glory coal for James Martin in January Gongloff: Myself, Mr. Barrett, and the Nan Feng showed that the of 1982, testified at public hear and Mr. Y 00; and then Mr. Y 00 coal did not meet contract specifi ings held by the Crime Commis said, "If you take care of my cations at the time of loading and sion in Harrisburg on Feb. 22-23, problems, I will take very good that the moisture level was well 1984, that he had been ap care of you." I said, "No, thank beyond the rejection point of proached by Yoo. you. I couldn't do that." He said, 12 percent. Barrett stated: "(Yoo) knew that "Okay," and I walked away from The certificates of analysis the moisture in his coal was too him and left. ::iubmitted by James Martin Coal high, and he said something to the Crime Commission agents inter Co. to Girard Bank to effect the effect like you scratch my back viewed Y 00 in his office in Eliza release of the money for the three and I will scratch yours, and he beth, N. J., during May of 1983. shipments, however, showed the wanted us to do something so At the time, Mr. Yoo stated that coal meeting specifications. that the results would be in he had provided $3,000 to Choi Consequently, the bank, unaware his favor .... " who, according to Yoo, was to that the documents it had in its give the money to a coal broker possession had been altered and Thomas Gongloff, Barrett's named Robert Durall to bribe an forged, released some $4.4 million supervisor, also testified. Excerpts official of Fuel Engineering Com as the three ships sailed towards of that testimony follow: pany. Y 00 further alleged that Korea. Donald E. Johnson, the Crime Choi had advised him: "Duran Upon docking at Inchon, the Commission's chief counsel: In will fix all the paper." In ex Dai Han Coal Corp. (DHCC), the your capacity as an employee for change for the $3,000, Yoo said same Korean government agency Fuel Engineering, did you sample he did receive an altered certifi that had tested the United Young coal for James Martin Coal Co. cate of analysis. Co. shipments, inspected the coal on a coal shipment to Korea on Duran, who faces unrelated on the Didymi, the Aqua Glory the boat the Didymi? charges of grand larceny in con and the Nan Feng. Gongloff: Yes, I did. nection with the theft of $4.1 mil In a telex to James Martin Coal lion from New York's Chase Johnson: During the sampling Co., dated June 7, 1982, OSROK Manhattan Bank, was brokering of that coal, did you meet and stated: "We have to inform you coal for Yoo, trading under the speak with Yoo, president of with our great regret that the name Continental Coal CO.6 In J ames Martin Coal Co.? coals shipped on (the) three private hearings, Duran denied ever bribing anyone at Fuel Engi vessels were found to have con Gongloff: Yes sir, I did. siderable defects upon receipt neering. The Crime Commission of DHCC's te.:.t results on Johnson: Specifically, did the subsequently attempted to talk to 27 May .... " president, Mr. Y 00, ask you to do the firm's employees, but they something regarding his coal? refused to answer questions, The telex also advised James invoking their 5th Amendment Martin that it still owed $663,272 Gongloff: Yes sir. Mr. Barrett privilege on the advice of counsel. as compensation for the poor and myself went in there (an Several employees later testified, quality coal supplied by United office at Camden Port) and when but only after receiving grants Young, and that because of new ever we went in I gave this gentle of immunity. penalties that were being assessed man, Mr. Yoo, the moisture the debt had climbed to $2.1 mil results from the specific samples , Duran was indicted with six other men on lion. OSROK threatened to debar that were taken and he told me Nov. 17, 1982, on the grand larceny charges. James Martin Coal Co. from con "no good." According to the indictment, the money was stolen by means of illegal loans granted by two ducting any future business with former bank executives to American Coal and Korea if the financial obligations Johnson: Who told you they Energy, an apparent paper corporation con were not met. were no good? trolled by Duran and two of the other defendants-lames J. Durkin Sr. of Dallas, Gongloff: Mr. Y 00. Pa., and Irvin Freedman, a real estate devel In addition to showing the docu oper from West Lake, Calif. The company ments had been altered, the Crime lacked property, equipment or mineral leases. 13 JAMES MARTIN COAL COil, INCB CERTIFICATE OF ANALYSIS "Didymn" Shipment ORIGINAL ALTERED
Fuel Engineering C, .ponu 01 New York " '·r:,·· I:",,, 1 1,' ',1 •. I T"atRepQtt.r~ Simple IdentlUuUon j .t' .... l ASRf:C£lVEt! .\IRDlI.Y on Hatuur. 22.10= - ""T.'T,T lliiX Alh 2l.93:t lJ.1U JI';,721 Vol.-tih lJ."J.l; B."51 8.561 Fhd C.1rbm~ ~1.30% $9.Qn: f.O.7n 'iuH,u 0.51%: O.G41 0.65% lIe.Ht"gVo1h.e 1195 '.1M) 1(01)7 It c.:lorl"l1 4)]j !i~91 ~~~9 I .. I 512,,"'lSIllI)= ~~::: s ~ f * ~ S :. :. ~ ,S.~g'!;~,~:'C;:C·,gLS',~1'g:lli"W:dt: The Crime Commission was able A Lot of Money for Lanier: Yes, I did. to obtain a copy of the original a Lot of Water certificate of analysis issued by Johnson: Attached to it is Fuel Engineering for the Didymi. Robert Fulton Lanier, a marine (exhibit) C-1IA (the document That report is contrasted below to and analytical chemist who is vice presented to the bank). That the doctored certificate of analysis president of Hampton Roads document purports to be a certifi that was presented to Girard Testing Laboratories, testified at cate of analysis issued by Hamp Bank. In examining the two docu the public hearings about the ton Roads Testing, signed by you, ments, keep in mind that the letter alterations made to the original for the motor vessel Aqua Glory. of credit stipulated a moisture documents after they were issued Was C-1IA issued by Hampton rejection point of 12 percent and by his firm-alterations that were Roads? a minimum caloric value of 5800 carried out with a rubber signa Lanier: No, it was not. KCALs. ture stamp and a sheaf of blank forms. Johnson: Did you ever sign that M/V Didymi Johnson: Would you tell me document? what (this exhibit) C-ll is, please? Original Fraudulent Lanier: No, I did not. Report Report # 328660 # 328660 Lanier: That is the original Moisture* 22.10°70 11.921\10 document, a copy of the original Ash 30.34 30.34 document issued by Hampton Volatile 8.45 8.45 Roads Testing for the motor ves Fixed Carbon 59.97 59.97 Sulphur 0.64 0.64 sel Aqua Glory. Heating Value 9883 10448 K Calories** 5491 5804 Johnson: Did you sign the *As received basis onginal? **Air dry basis 14 Lanier went on to testify that the altered document showed a moisture content of 7.85070, while the document issued by Hampton Roads listed moisture content at 1/..· ...' 21.43% - almost nine percentage ~j J points above the rejection level. He also testified that the calorific value of the coal had been increased by 270 kilocalories per .. ;--' \/1/,1 It kilogram on the doctored certifi # . cate. He termed both alterations 4 "significant changes." '} il Johnson: ... C-ll (a copy of the original document) declares the coal not in conformity with the contract and C-IIA (the document presented to the bank) finds conformity and would demand payment . . .? Lanier: That is correct. C-ll, obviously, the moisture content being 21.43 was a very high moisture content . . . . Johnson: That is really 25 percent water? Lanier: Right. Johnson: C-llA was presented Coal silt, the consistency of pudding, is unloaded from a to the bank and caused $2 million dump truck for shipment on the Motor Vessel Didymi. The to be released for that shipment ship left Camden, N.J., on Jan. 15, 1982, en route to of coal. Korea with 3 J ,911 metric tons of silt. Lanier: Amazing. In recapping Lanier's testimony During its investigation, the Lanier was then shown the regarding the James Martin coal Crime Commission was able to original and altered certificates of shipments, Commissioner Alvin locate a former secretary of James analysis fo" the Nan Feng ship B. Lewis Jr. remarked: Martin Coal Co. who told ment. Again, he testified that he Commission agents that she had "On these two ships ... the had not signed the document that been instructed to type numbers Aqua Glory and Nan Feng-one was presented to the bank and on blank certificates of analysis resulted in somewhere up to $2 that the figures that had appeared bearing Hampton Roads' letter million in fraud, and the other on the original had been altered head. She also stated that a resulted in approximately significantly on the phony rubber stamp bearing a signature $600,000 in fraud. And that again document to conform to contract facsimile of Robert Lanier was defrauded . . . the government of specifications - the moisture owned by James Martin Coal Co. Korea, and presumably the poor content dropping from 21.12 people in Korea that . . . got a The secretary, Barbara percent to 7.90 percent and the poor quality of coal that burned Kowalczyk, testified at the calorific value being increased by at a lower heat because of the Commission's public hearings. 300 kilocalories per kilogram. moisture and calorific value Excerpts of her testimony follow: The altered document was frauds in the analysis. Is that a Johnson: Yesterday I showed presented to Girard to secure the fair summation of what you are you what has been testified to, release of $1.5 million. However, talking about? and I marked it C-2, and is a through penalties on other ship Lanier: "Also, you might say small certificate of analysis issued ments, the Koreans eventually that they paid a whole lot of by Hampton Roads Testing paid $575,000 for the coal. money for a whole lot of water." Laboratories, Virginia, is that correct? IS Kowalczyk: Correct. Johnson: Did you ever learn of Philadelphia Bank or find a facsimile stamp of Loses $614,000 Johnson: And you have that in Robert Lanier's signature while front of you? working at James Martin Coal On Oct. 22, 1981, James Martin Co? Coal Co. entered a coal hauling Kowalczyk: Yes, 1 do. agreement with Horwith Trucks, Kowalczyk: Yes, it was found Johnson: When you were Inc., Coplay, Pa. The firm's by Helen Kim. She was another employed by James Martin Coal president, Frank Horwith, agreed secretary .... Co., did you ever see any forms to deliver anthracite coal from Schuylkill County to Beckett identical to C-2, the one in front Johnson: Where did she find it? of you? Street Terminal in Camden, N. J., Kowalczyk: On her desk. at the rate of $12.20 per metric Kowalczyk: Yes, I did. ton. Horwith hauled 30,911 Johnson: Can you describe it? metric tons of anthracite for the Johnson: The forms you saw as first shipment (the Didymi) and secretary, were they blank? Kowalczyk: It was a rubber was fully compensated through an stamp of Mr. Lanier's signature. assignment of proceeds of the Kowalczyk: Yes. letter of credit with Girard Bank. Johnson: How do you know it Johnson: Do you know if they was Mr. Lanier's signature? After the first shipment was were ever filled in? completed, Yoo approached Kowalczyk: Because we stamped Kowalczyk: Yes, they were. Horwith with a proposal that it. Horwith act as both supplier and Johnson: Who filled them in? Johnson: On what? hauler of coal for future ship ments to Korea. Y00 advised that Kowalczyk: I did. Kowalczyk: Piece of scrap if Horwith agreed to contract for . paper. the purchase and delivery of the Johnson: Who told you to do coal, James Martin Coal Co. that? The following is a comparison of would issue another assignment of the documents issued by Hampton Kowalczyk: Mr. Y. N. Kim. proceeds against the letter of Roads Laboratories for the Aqua credit. Johnson: Who is he? Glory and Nan Feng and the counterfeit documents that were In order to obtain financing for Kowalczyk: Young Nam Kim. presented to Girard Bank. Again, the operation, Horwith took out a He was a general manager . . . . the moisture rejection point was series of loans from Girard Bank 12 percent and the minimum totalling approximately $1.4 mil Johnson: He would give you the acceptable KCAL value 5800. lion. As Horwith purchased coal blank Hampton Roads forms? and incurred expenses, Girard advanced him funds and Kowalczyk: Yes. Aqua Glory documented the obligation to Johnson: What would he tell Original Fraudulent repay said advances with you to do? Report Report promissory notes. The notes were #217493 #217622 secured by the assignment of the Kowalczyk: 1 was to type figures Total l1loi~ture* 21.43(1;'0 7.85(1;'0 letter of credit proceeds. Ash 29.29 28.12 all the way across here. Volatile Matter 9.10 7.37 Sulphur 0.64 0.96 Horwith completed delivery of Johnson: Did you ever ask Mr. CalorificValuc** 5538KCALlKG 5803KCAL! KG 38,001 metric tons of coal to Port Kim where the blank forms came Newark on Feb. 28, 1982, and from? Nan Feng 31,978 metric tons to the port of Camden on March 10, 1982. Original Fraudulent Kowalczyk: Well, I asked Rcport Report However, due to penalties because I was curious as to why 1 #217561 #217493 assessed because of coal quality was typing figures on Hampton Total Moisture* 21.120'0 7.90°:0 problems, Horwith was only Roads Testing papers, and he told A~h 29.04 27.26 partially compensated through the Volatile Mattcr 8.S0 8.89 me not to worry about it, that I Sulphur O.SI 0.78 assignments and consequently was get paid to do my job, so I just CalorificValue**560SKCAL'KG 5911KCAUKG only able to payoff some proceeded to type the figures as I *As received basis $600,000 of the bank notes. was told to do. ** Air dry basis 16 Commerzbank~---~] A.G. Zentrale Auslands Abeilung, Germany RT~ LlC 154909 --~---~------... -- rl~ mN nque de ~~s ';~~---l TRANSACT~ONS Pays- Bas, Hong Kong - LlC 154946 ~---~------ First-~~J National Bank of Boston, Hong KClng ------LlC 155050 Hanil Marn:)"- Girn~~--.KJames ------[ Rod,"", Bank Bank Coal Company de Paris $314,649.91~~n J Ba:~eBas, Hong Konget~es} - Philadelphia - 8izabeth, ' Pays- Korea Hong Kong LlC LlC New Jersey LlCI55505 -{ii$698,250.00 $12,372,384.52 '------~ {~:J- =$1,957,711.90 - -i!~-J =$2,022,824.81 -~~Feng } -- ut~~-}- = $575,420.64------ 8/20/8;---1 $134,525.34 I l_hT~ Released by ------i Che Yung Chol =::J Hanil Bank {M. J. Rudolph. Seoul, Korea eoop=-:=! {GIn"" Bank -"":"':'-=.J Horwith stated that he lost On Aug. 25, 1983, Horwith A. Yes. approximately $692,000 in his testified before the Crime dealings with James Martin Coal Commission on that subject: Q. Did Mr. Yoo say, "Don't Co. He testified on Feb. 23, 1984, worry about the moisture because that he had recently negotiated a Q. Was Mr. Yoo ever concerned I can take care of it?" wL·.1 the moisture content on the settlement with Girard Bank in A. That's right. which he paid an additional first shipment? $122,000 in return for dissolve A. No. Q. Did Mr. Yoo explain how he ment of all judgments against could take care of it? him. Q. Did he ever make statements to that effect to you? A. Through some friends, I According to testimony at the guess, in Korea. public hearings, Girard Bank A. Yes. ended up in the red by some Q. Did Mr. Yoo tell you this? $614,000 as a result of its involve Q. Do you recall any of his ment in the James Martin coal comments? A. He told me he had a lot of deals. friends in Korea. A. He says, "Don't worry about the moisture." Q. Mr. Yoo indicated to you that his friends in Korea could Q. Was his attitude towards take care of his penalties? It soon became clear that there moisture the same for the final was a lack of concern for the two shipments? A. That is correct. quality of the coal being shipped to Korea, especially the moisture content. 17 In a sworn Aug. 9, 1983, state Reitz: Yes. motor vessels Aqua Glory and ment from Joseph Reitz, a coal Nan Feng. Samick Lines, a supplier from Treverton, Pa., Lewis: And someone else was shipper that hauled James Martin Reitz also stated that he had paying him $1,000 a week to buy coal to Korea, filed a civil suit warned about wet coal in his your coal? against OSROK claiming it was dealings with representatives of owed $711,000. And Joseph and Reitz: Yes. James Martin Coal Co., partic Harry Reitz obtained a judgment ularly Duran. He said Duran's Duran appeared before the against Duran based on their response was: "Just load it Crime Commission on Aug. 29, claim of non-payment of $1,209. anyway." Reitz added: "Duran 1983, also testifying under oath. It eVI.'ntually was determined that would have loaded rock off the He denied ever having said he road if he could have gotten away the total penalty to be assessed would or could payoff testers or against James Martin Coal Co. with it .... Throughout my that he could guarantee test dealings with Duran, Duran would be $1,079,000, leaving a results. He did, however, state balance due of $846,000. This bragged about paying off the that it appeared to be common balance was released by Hanil samplers at Camden Port." practice for domestic coal brokers Bank to the assignees under the to make payments to Korean Reitz' brother, Harry Reitz, also letter of credit whereupon Samick government officials in return for gave a sworn statement to the Lines immediately attached the favorable treatment. Commission, stating: "Early in $711 ,000 it claimed it was owed. the operation when we started Q. Do you know of any payoff The remaining $134,000 was supplying coal to Duran, I asked to any Korean government released to the designated Duran about the moisture content officials for favors relating to assignees. of the coal, to which Duran coal deals? On Feb. 1, 1984, the Samick stated, 'Don't worry, I'll take Lines litigation was settled and care of the tester.' " Duran: I was told by the the $711,000 was divided among Koreans-I am talking about Samick, Horwith Trucks, Inc., The Reitz brothers supplied 372 Palmco, I am talking about James M. J. Rudolph Corp., Choi, and metric tons of coal to James Martin, I am talking about United a Korean law firm in SeouL Martin Coal Co. Young. They all claimed they paid people in Korea for this contract. Joseph Reitz testified at the Coal Brokers public hearings that in one deal he Q. Who from J ames Martin told Indicted for Fraud was paying Duran $1 a ton you? It was in the fall of 1983 that the brokering fee for a total of some Pennsylvania Crime Commission $12,000. This exchange took place Duran: Mr. Choi and Mr. Yoo referred its investigative findings between Commissioner Lewis and both when they renegotiated the in the James Martin Coal case to Reitz: contract. the U. S. Attorney's Office in Lewis: What was Duran getting An examination of James Martin Philadelphia. On June 13, 1984, for his $12,000? Coal Co. 's bank records indicated U. S. Attorney Edward S. G. that the firm received some Dennis announced that a federal Reitz: Well, he carne into me to $500,000 on the Korean coal grand jury had returned an indict buy coal. He approached me as a deals. ment against Yung Soo Yoo and broker. We set up a contract with Young Nam Kim charging them him, and Palmco Corporation (a There were other appa.rent losers each with bank fraud, wire fraud, California coal brokering firm besides Horwith Trucking Co., interstate transportation of engaged in a separate Korean coal Girard Bank, and the Korean securities obtained by fraud, and deal). Now, while I was loading people. However, the financial conspiracy. the coal, one of the represen aftermath of the James Martin tatives of Palmco Corporation, I venture was somewhat tangled On July 31, 1984, Kim pled can't think of his name, anyhow, due to outstanding litigation and guilty to one count of bank fraud he carne out while I was loading, penalties assessed on the Asian and one count of conspiracy to and I got a chance to talk to him; shipments. commit mail fraud, wire fraud, and I told him that I was paying and the interstate transportation Duran a dollar a ton. He told me Fuel Engineering filed suit of securities obtained by fraud. he was payirg him $1,000 a claiming it was not paid $7,912 As part of a plea bargain week .... for testing services rendered. agreement, the other counts were M. J. Rudolph Stevedoring, dropped after Kim agreed to Lewis: So you were paying located in Newark, N. J., claimed cooperate fully with the federal Duran as your broker to sell your there was a balance of $48,116 government in the prosecution of coal? due as a result of loading the Yoo. 18 On Oct. 19, 1984, Kim was sentenced to five years probation and fined $2,000. On Nov. 10, 1980, Lauer Investment Co., Inc. of Easton was incorporated in Pennsylvania with Mahion H. Lauer, a onetime train conductor with a theft conviction, listed as president. 7 On July 3, 1981, Sejung M. M. Company, Ltd., Seoul, Korea, appointed Lauer Investment as its sole representative to purchase anthracite silt from the United States. Five ships sailed to Korea, carry ing a total of 168,491 metric tons of coal. For all five shipments, documents pertaining to the coal's quality were forged. More bribes were offered. As in the Korean coal deals already described, payment was tendered through letters of credit. The first was issued on Aug. 5, Mahlon H. Lauer Wide World Pholo" 1981, by the Korean Exchange Bank, Tokyo, to its New York branch in the amount of entered a verbal agreement with he did not care about the moisture $1,880,500. The money was to be Lauer in August of 1981 to supply content. (Did) this statement that released to Lauer Investment upon coal. Mullins said that Lauer told he didn't care what he shipped departure of the first ship, the him that the coal had to meet concern other than moisture? specifications contained in Lauer's Meihou Maru, and upon receipt Nelson: Yes. by the bank of certain documents, contract with Korea, including a minimum calorific value of 5500 including certificates of analysis Q. Could you be more specific? attesting that the coal met KCALs. However, Kevin Nelson, contract specifications. Shamrock's vice president, told Nelson: Ash and BTUs also. the Commission that he got the The Meihou Maru sailed for impression Lauer would take any Q. Did Mr. Lauer state to you Korea on Aug. 28, 1981, carrying coal "as long as it was black." that he did not care what the ash 29,603 metric tons of coal- content was of the coal? 27,576 metric tons supplied by Q. On April 27, 1983, ... you Shamrock Coal Co., Ashley, Pa., stated that Lauer had told you Nelson: He just wanted it black. and 2,027 metric tons supplied by that he had an "in" with Korea He wanted black material North American World Trade and that he didn't care what he delivered to the port in sufficient Group, New York. shipped, that he could get by. Do quantity to load on the ship. He you recall making that statement? didn't care what it was .... at Joseph Mullins, president of several points he said he had paid Shamrock Coal, stated thllt he Nelson: Yes. off the Korean government so it Q. When did Mr. Lauer make really didn't matter, he just had to get the ship over there. 1 Lauer's arrest record dates back to 1956. On this statement? Nov. 17, 1974, he was arrested by the Pennsyl vania Slale Police on charges of stealing Nelson: During the course of the Nelson later was asked if Lauer $32,000 worth of steel from a steel plant where transaction. had told him that he (Lauer) was he worked as a frv _man. The thefts involved paying off a coal tester. Nelson the doctoring of inventories and production figures. He was sentenced to two-to-four years Q. You stated previously that replied, "I think he did, yes." in prison, being released on March 4, 1977. Mr. Lauer made statements that This exchange then took place. 19 Q. Do you know which tester in-law who performed odd jobs realized that what was being done Lauer was referring to that he was for Lauer Investment. wasn't legal. paying off? J o~eph testified under a grant of The documents submitted to the A. I assume it was a Korean. immunity that Nelson used "white Korean Exchange bank in New out" and "white out" tape to York by Lauer were forwarded to Q. You assume it was a Korean delete certain information, the bank's office in Tokyo. On in the United States? including the fact it was a Sept. 7, 1981, the Tokyo bank subsample report, then typed in advised that there were discrep A. No, a Korean in Korea. additional information. He ancies in several of the Q. What would Mr. Lauer be further testified that the altered documents, including the paying a Korean tester for in document was taken to W. E. certificate of analysis, and insisted Korea to do? Repro, a printing shop in Linden, that new documents be sent. N. J., for reproduction. A. To indicate that the shipment Eleven days earlier, Hampton met specifications. In a statement provided to the Roads Testing Laboratories issued Pennsylvania Crime Commission, the composite analysis report for Q. In Korea? the owners of W. E. Repro con the Meihou Maru shipment firmed that they had performed showing that the coal did not A. Right. the work on the Hampton Roads meet specifications. This report was picked up by Joseph who Q. And that would cause the document. returned to Easton, Pa. ship not to incur any penalties, is They said about 50 copies were that correct? produced, that a bill of approx Joseph testified that when Lauer A. That is right, especially with imately $10 was paid, and that the saw this report he was visibly printer who performed the work upset, telling Joseph "to change regard to moisture. He said he would not have to take the was then handed an extra $20 by the document and modify the the customer. When the printer specific areas on it." penalties. protested, he said he was told: Q. Were you told how to change On Aug. 31, 1982, the docu "Keep it. You don't know it but ments pertaining to the coal on you just saved me a million the report? dollars. " the motor vessel Meihou Maru Joseph: As far as specific values were presented to the Korean Joseph was questioned about the to put in there, yes. Exchange Bank's New York altered document. branch. Included among the Q. Who told you that? documents was the forged Q. Did anyone accompany Mr. certificate of analysis which Nelson to the printing shop? Joseph: I believe it was Mal. showed the coal meeting contract Q. Mal dictated to you what specifications .. A. I did, and Mal did originally. percentages to put on the new The altered document appeared Q. When, in order to get it report? to be a compm;ite report which printed, did Mr. Nelson talk to Joseph: What new values to put would represent the quality of the anyone in the store? m. entire shipment-in this case 29,603 metric tons. Actually it A. He just told them that he was a doctored version of a would like to have this document subsample report that had been copied to look like an original. issued by Hampton Roads Testing Q. How much did he pay to Laboratories, Inc .. , Hampton have it printed? Roads, Va., on Aug. 26, 1981. A. I think $30. Composite reports are drawn from numerous subsample reports Q. Was $30 a fair price for the which are derived from tests number of copies made? conducted of coal stockpiles at the mine site, at the pier, etc. A. The price was higher than what would normally be paid for The alterations to the subsample a copy. report "were done and directed by Kevin Nelson," according to Q. Why was that? William Joseph, Lauer's brother- A. Because, I guess, it was Walter Conrad 20 TRANSACTIONS shamro:;:--i Coal co:~ I Ashley. PA Joseph Mullins President Kevin Nelson Vice President Supplied ~J Laue~- ''', , 27,567.39 MIT Korean Investment \\ rl Exchange-- -- Corporation, L ______Meihu Bank Easton, PA Maru $1,64B,843.78 New York \ Mahlon Lauer 29,603,22 MIT $1,880,550.00 \ Presidenl North • 30,000 MIT r/- ~-l '. American World Trade Group Daniel Montgomery President Supplied 2,027.33 MIT Joseph told Commission agents Q. Would you explain . . . the Sampler Offered that he took the document to a pIocedure that you and Mr. $6,000 to Switch Coal friend, Walter Conrad, who ran Joseph used in creating the altered The Printing Place in Easton. He document? The coal supplied by North said a white piece of paper was American World Trade Group inserted over the information he Conrad: We retyped a section, contained a quantity of petroleum wished to change and that the pasted it up on the light table, coke, a by-product of petroleum revised information was added to and I have a photo offset process. refining. It is a high sulphur, high the white piece of paper. The All we have to do is shoot the BTU, low moisture material that altered document was then printed original and we can reproduce it. is similar in size to coal silt, but is and sent off to the Korean grayish in color. Due to its high Exchange Bank as one of the new Q. Did you at any time ... sulphur content it can be harmful documents that the Tokyo office become suspicious that what you to humans when burned. had requested. were doing might be illegal? Daniel Montgomery, president Joseph testified he paid Conrad Conrad: Yes. of North American World Trade between $50 and $150 for the Group, confirmed the presence of Q. What caused you to become "pet-coke" in the coal he sold to work, the muney being provided suspicious? by Lauer. When questioned why Lauer. He provided the Crime he had paid so much, Joseph Conrad: Just the way it was so Commission with certificates of responded: "Because he had systematic, always the same. analysis showing the coal con suspected it was something illegal, There was never any time to really tained sulphur levels of six to and I wanted to pay him that handle it like (in) a normal print seven percent. Pennsylvania much money so that he wouldn't shop. People running in and anthracite normally maintains a tell anybody what was going on." running out, paying me twice or sulphur content of about one three times. percent. Conrad confirmed that he had performed the work for Joseph, a Q. Two or three times what the high school classmate who had job would normally require? recently made an unsuccessful bid for a seat on Easton's City Conrad: Yes. Council. Conrad was asked who had changed the numbers on the documents that were brought to his shop. He replied: "Billy did with my typewriter." 21 CERT~FICATE OF ANALYSIS "Meihou ManJ" Shipment ORIGINAL ALTERED HAMPTON ROADS TESTING HAMPTON I :> TESTJ"IG LAaoFlATORIES LABr fA JFlIES ", .....,_- ...... , ...... ,., •••, Ii<' U~Tl "f RE ..,JtT 10.119. 26. l 'JS l Orrtifirntr of fllIolgois Orrtifirntr of fllIolgsis ~"'Mf't£!ll ~:'tt a;.>,t(.'if ~ .... ,:tt:.',~ '''IIl~Y .D1lWo.."T1(; Kn: p..1Q:,. 'H;l,P-~ !lAr~ RHflHl' ,,"uo;. 26. 1991 llATf ItHll.f:[> ", ..1'1. 16. 1901 PIER ... 9 Nr.W.ro;. H.J. OSROK CCt/TIlACT /,1.). ~rrm '.,',I.~.~t'.1T><. \,,,lIk KrXrp~I(OS·'912UhSH MIoRK PlER It') NEWA'III'. JLJ. M", :>g;1JI1 <;.\.~ ;JI\~iJr.R' 5 ..... UI19 koolut'\ tH.II.! Lt..j .• lIen'l )(<:1n1 JIU'i'Dl. 'JKa/O;". KX:.::Ui n.M WlL1'lI, I(:U. ~li HHJM l.."~r tnv.'l./1Otlnt Co., rUtCln. P. ~;;'11rR'Of~\fliffMs... "f'~lX ~l~nl~nt ;!.!!~"~~~ t :ue'.n~ X.~~,~idTl ~'!.'.t;,Y,'\~'1, If ':lC ~.n2i.~, ~'~/d.. f'"A •.•,., •. .J,.Uwy ••' , " ~ A'~ ;,,~ TUTAI Mfll~--n"~ 'J.'JJ 1.8'1 ToTAl Mr,,'T,1Ir lJ.Oo; In.,,, 62.a) 61.64 2&.\11 10.'.),0,) Hlff '\HII''''"I'''I,f' "'Tll .HH ~WfUl:",'''1J''~ A-.M ''''11 ·'~H' ••·r}"I'f CERTIFICATE OF ANALYSIS "Meihou Marui' Shipment ORIGINAL ALTERED Hampton Roads Te:tfng lJ!boratories, Inc. AU/iU,t.18.19111 cr:RTIl'lon or ANA1.YSIS ~ lAlI. NO. H1648 ,.,. iV f.I' ]1' :~J 1'.'\1"" V.... l, .KIv KltlAOU JQ.1!lJ l",rt Jt!,,,,\:;u,,,;, f'.ortll, .. ". O'Hln!1>:.-. :!'JML72.H.T. Port of t.o.41nq. Part. " .... rk ;:;hIHe'T: ;;"''"_''"1 Ht;lol~II'. 1I.~. r.t'!.. l' 1 ~ QuantitYI 29603.12 H.T. :':U,·nt. U ..lcor !nvrlltr,"'r~ ,', 'F'ratlf'n Shlpp.ra S... ung Hoohan U.K. Lt.d •• Hong Kong Ont .. M !:""'rU" I' AU1'm':>~ t. .0, .')["11 CHent. t.aultr tnv.. e-nt Corpoutle:n Vat,.. o~ j.elld1n·l' CClm'l'n-:;~'l, IIU1Ullt ~~, ~"I'l D'tII of Sampling I AUtJU't 17 " lB, 1981 ~C/llpI/"t/"r', '\"1uat:'1 1,)"<1;' Data of s:.o.d.lngl C'<--.rIcad. Auquat. l~. 19B1 (J\J-'I<.ortlc. ! ~JFply. (;o.'/"n"~"· C'OIIpht.d, Al>g\lat 28. 1.981 Cona.tgn __ t OSIIOK. ertie. of Supply. (lovnn/I!ICnt of thll "~r Jt lH' Tlf yr" .'. Z.~'-'l.Il. I -",,1'" :','WI! d. "'~II, III" tt c .. : ~ c ,"" ',:.t., -. '1,' We heuby cllrtify t.hat. the ab~I\'" d ..c:nb.,d product hill t!e~n II·.~", ,. i 11'''1 f'l analy:ted: I.n~ reported all fclltN.j ;'J,~I"'":,V. T' t.ll ,. ",~-'JTt J.,'1teet"!vr"l",, Tcullrout .. re 99,la.r.C:.l".. dt:alllal 1\ " ~. :.,Ir Try I," i" A.h .i~~" (aU' dry );,1.II1a1 VtJi"'llr H,_I" i,tr Lhy \ "'J." Vplatlll HIItur IJ.O~ .alr dry b ... u~ ~UH"H '.nr .1<",. t L \' Sulphur :,,5. fall' dry b .... l.l ': ,)""tfH" .... ,~ /" ••1,'1]"'" ClllcrlUe valull 1,~JI fall' dry 11... 18) !il" Sl~1I 'oJ -; ~.," 22 ------""'*"'.",..------ Chief Counsel Johnson: Did he offer you money if you would agree to make that switch? Zarko: Yes he did. Johnson: Did he provide you with a specific dollar amount? Zarko: Yes. Johnson: What was that amount? Zarko: He offered me $2,000 Wid\.' \\ llllJ Photo" when he confronted me, told me Kevin Nelson William Joseph while they are loading the ship he In testimony before the Commis Following the guidelines of the would offer me $2,000 more, and sion, Nelson stated that Shamrock letter of credit, a penalty of after it was done two more Coal had shipped an additional $205,088 should have been thousand. 20,000 tons of coal to Port charged for excessive moisture. Newark that was consigned to However, due to the altered Johnson: Did Mr. Nelson have Lauer. He said Lauer was to reports, only $58,908 was paid, the coal samples with him that he obtain another letter of credit for representing an ultimate loss to wanted switched? additional shipments. However, OSROK of $146,180. Zarko: Yes he did. They were in before the letter of credit was the trunk of his car. obtained, Shamrock Coal, OSROK further advised the according to Nelson, sold the silt Commission that no penalty was Johnson: Did Mr. Nelson stuff to another firm. assessed regarding the low KCAL anything in your pocket at that content because the coal froin the time? Nelson testified: "He (Lauer) Meihou Maru was mixed with was absolutely furious when we other high quality shipments to Zarko: Yes he did. sold the coal out from under him, bring it within OSROK's fit to be tied." specifications. Johnson: What was that? Joseph, however, disputed that Joseph was asked if he had ever Zarko: It was a check. account, stating that Shamrock heard "from Mr. Lauer or Mr. Coal wanted to supply additional Nelson or Mr. Yong Gun Kim (an Johnson: In what amount? anthracite silt, but that Lauer associate of Lauer's) that anyone Zarko: $2,000. refused to do further business in Korea was offered money or with Nelson. anything of value to pass the Meihou Maru?" At any rate, the deal had gone sour. He replied: "There were remarks made that it cost a lot of In correspondence with the money to take care of the Meihou Office of Supply, Republic of Maru, which to me indicated that Korea (OSROK) through the apparently they had to make some United States Department of payments over there." State, the Crime Commission determined that tests performed One of the witnesses at the on the Meihou Maru shipment Crime Commission's public hear once it reached Korea showed the ings in Harrisburg was Zigmund coal had a calorific value of 4900 Zarko III, a coal sampler at Fuel KCALs-600 KCALs shy of Engineering who testified that contract specifications. Nelson once had offered him money, a car, and a job if he The Hampton Roads' test results would switch some coal samples. indicated the moisture content of He said the incident occurred the coal at loading was 14.67 during the fall of 1982 at Port percent, better than twice the 7 Newark, N. J. This exchange took percent level specified in the place: contract. Zigmund Zarko III 23 Johnson: Who was that check Johp.son: How did you respond? Marine Industries, Ltd. entered a made payable to? contract with Sejung M. M. Co., Barrett: I thought about it for a Ltd. whereby Sejung agreed to Zarko: Myself. little bit, and I said, okay, and we supply 132,415 metric tons of started talking price and all, and anthracite silt (plus/minus 5070 at Johnson: Do you recall which that was about it. We started bank that check was drawn on? seller's option) to Korea Tacoma talking about it and! got fired at $67.68 per metric ton. Zarko: I just glanced at the the next day (as the result of an check and I gave it right back to unrelated event involving misuse OSROK subsequently opened a of a company car). him. letter of credit with the Korean Exchange Bank, Seoul, in favor Johnson: Did he ever give you Johnson: In addition to the of Sejung M. M. (USA), Inc. for monies, the $6,000 that you have any money? $9,409,939. The negotiating bank under the letter of credit was the just testifi~d to, did Mr. Nelson Barrett: He gave me 20 bucks. Cho-Heung Bank, Ltd., San offer additionally to provide you That was it, 20 bucks. with, to buy you ~ motor vehicle? Francisco, Cali f. Johmon: For the $20, that was Zarko: Yes he did. a down payment? As mentioned earlier, Sejung had appointed Lauer Investment as its Johnson: Did he indicate what Barrett: Yes. sole representative in the importa type? tion of U. S. anthracite to Korea. Johnson: How much were you Zarko: He said anything I to receive? In an interview, Lauer told wanted. Crime Commission agents that he Barrett: Well, I was supposed to had entered an agreement with Johnson: Did Mr. Nelson tell get $50 a day for changing the Sejung under which the profits you that he would give you preliminary results, or whatever, were to be divided equally additional new employment if you and then $2,500 upon completion between two groups-an were fired as a result of taking the of the ship if the results were American group and a Korean money and switching samples? satisfactory to Mr. Nelson. group. The American group was Zarko: Yes he did. comprised of Lauer, Y0ng Gun Johnson: You were only paid Kim, Seung Kyu Kim, and an $20? Zarko further testified that he individuai identified only 2.S Mr. Kong. Members of the Korean notified his supervisor about the Barrett: Yes, I left it go. incident. He said that Nelson, group were identified as Hyun Sik when confronted by Fuel Engi Johnson: So you never altered Kim, Kwang Nam Oh, Young Tae neering officials, denied he had any samples or results? Lee and H. C. Paik. ever offered anyone money. Barrett: No. The bulk of the coal was Thomas Barrett Jr., the former brokered by Nugget Coal Sales, Fuel Engineering coal sampler Nelson appeared (under sub Inc., which was incorporated in who said he was approached by poena) at the public hearings. Pennsylvania on Oct. 14, 1981. Y 00 during the J ames Martin However, exercising his 5th The president of Nugget was Coal deals, also testified at the Amendment rights, he refused to Matthew Whitaker, a convicted public hearings about his dealings answer questions, explaining that gambler and a onetime "foster" with Nelson. He was asked if due to the death of his father a father to Lauer. According to there was a specific conversation week earlier he had not had time Whitaker, the two men happened with the Shamrock Coal vice to consult with an attorney nor to meet in a coffee shop in a hotel president about coal samples review relevant documents. in Pottsville in the fall of 1981. 8 during August of 1982. On April 27, 1983, the Whitaker testified at a private Barrett: Yes, there was. I was Pennsylvania Crime Commission hearing that Lauer asked him sampling in Newark, New Jersey, subpoenaed the books and records during the chance meeting if he and I had never met Mr. Nelson of Shamrock Coal Co. Those knew anyone who had coal. He before, and he came up to me documents were incomplete said he did. that day and just basically asked many had been lost in a fire at Nelson's home. , Whitaker has been arre,ted 15 time~ dating me if there was anything I could back to i939. Many of tho~e arrests were do to change his results to lower related to gambling. His latest arre,t, which resulted in a conviction, occurred on May 24, his moisture in his coal, so, you, 1982, when he was charged with pool selling know, the test would be better for and bookmaking in connection with a large him. On Sept. 5, 1981, Korea Tacoma scale gambling operation that stn:tched to Las Vegas. 24 Q. Were you involved in the The following amounts were The following checks were issued coal industry prior to your dealing released: $2,198,054 on Nov. 12, as "commissions" to Lauer with Mal Lauer? 1981; $2,251,590 on Dec. 11, Investment Corp.: $3,080, Oct. 1981; $2,175,406 on Dec. 29, 22,1981; $12,160, Oct. 29,1981; Whitaker: No. 1981; and $2,019,711 on Jan. 29, and $2,000, dated Dec. 7, 1981. 1982. Q. This was your first The following disbursements involvement in the coal industry? The alterations of th\! certificates from Nugget to Mal Lau.er were of analysis resulted in a non Whitaker: (nods vertically). I marked loans: $33,725, Nov. 18, assessment of penalties and an 1981; $8,000, Dec. 1, 1981; a wouldn't know if they were seIling ultimate loss of $1,611,256 due to rock or coal. second check for $8,000, also excessive moisture content. dated Dec. 1, 1981; $6,000, Dec. The coal was supplied from 31, 1981; and $6,100, also Dec. Lauer skLed that he had entered various sources throughout the 31, 1981. The loans totaled an agreement with Whitaker to Pottsville area. It was shipped to $61,825. receive one-third of Nugget Coal's Korea on four vessels: 34,649 profits. Whitaker denied that such metric tons on Nov. 7, 1981, on In September of 1982, a Nugget a deal had ever been made, saying the Rimba Merbau; 35,699 metric Coal Sales, Inc. check for $61,825 that any payments made to Lauer tons on Dec. 9, 1981, on the was issued to Lauer Investment were "commissions" for shipping Corp. for "payment of commis Cresco; 33,773 metric tons on the coal. Dec. 26, 1981, on the Fort sions." A check for the same Calgary; and 34,767 metric tons amount was issued on the same Whitaker also stated that Lauer day from Lauer Investment to on Jan. 24, 1982, on the Arlberg. had never been an officer or Nugget for "repayment of loan." The four ships sailed from Port partner in Nugget and that he had Newark, N. J. According to not been involved in the firm's The Commission determined this Nugget, it brokered all but 13,398 operations. Whitaker'S wife, was a paper transaction to metric tons of the coal, which was however, who served as Nugget's "wash" Nugget's records of the supplied by another Pennsylvania secretary-treasurer, painted a loans to Lauer. For one thing, dealer.9 different picture in testimony there was not sufficient funds in before the Commission: The first shipment was tested by either account to cover the checks. Fuel Engineering Co.; the Q. Did Mal Lauer ever make Whitaker testified as follows: remaining three by Hampton any decisions for Nugget? Roads Testing Laboratories. All Q. Do you know if Lauer four composite analysis reports Delores Whitaker: He ran the Investment had $61,825 in the showed the coal to be below whole business really. He knew account to back up that check? contract specifications and beyond the bu~iness. That is what I the rejection point stipulated in should be saying. We didn't know A. I know everything balanced the letter of credit. All four re anything about it. He knew the out. ports were forged and altered to Koreans. He knew the coal. He bring the coal within contract knew everything about it. We Q. It balanced out because one specifications prior to being were just to get the coal and give (check) was a credit and one was submitted to the Cho-Heung it to him. It was that simple. a debit, if you want to call it that, Bank. Then we were to give rim so is lhat correct? much money. Upon receipt of the altered A. I don't know. I guess if that documents, Cho-Heung Bank paid The Crime Commission sub is what you are trying to tell me. the amount due per invoice, then poenaed the books and records of Q. In effect they're just paper. telexed the Korean Exchange Nugget Coal Sales, Inc. The They don't mean anything, is that Bank's New York office following "commission" disburse correct? requesting reimbursement for ments were made to Lauer from funds extended and also certifying Nugget via check payable to A. We have to keep the books that all terms and conditions of Lauer personally: $10,100, dated straight. the letter of credit has been Oct. 30, 1981; $15,000, dated complied with in full. Nov. 6,1981; and $19,700, dated Jan. 8, 1982. 9 It is interesting to note that, according to the Pennsylvania Department of Revenue, there i; no record of Lauer Investment Co. filing a Corporation Tax Report for the tax year ending 1982. 25 Joseph told the Commission that Q. And then gave it to Mal Joseph was questioned about the he was amazed that Lauer had Lauer to use? altered report. received any money from either Whitaker or Nugget Coal because A. Right, to transport the Q. Were you given a Fuel Engi at the time he (Joseph) was Koreans around. neering Corporation certificate of analysis by either Mal Lauer or receiving barely enough money to Q. Somewhere along the line S. K. Kim to alter? get by on. you lost this Cadillac. What did " ... he (Lauer) knew of the you do with the Cadillac? A. Yes. financial situation I was in, and I A. It was sold. think he would have made me Q. You were given that certif icate to alter by Mal Lauer? aware even if it was a minimal Q. You sold it to Mal Lauer. amount of money that he A. Most likely, yes. received," Joseph testified. "I A. I could have. think he would have shared it Q. Did he, in fact, tell you to Mrs. Whitaker testified as with me at that time, but that-I alter that document? am not so sure that is 100 percent follows: A. He would have given me the true, either." Q. You at some time owned a specific values that he would have Cadillac . . .? Then you trans Joseph testified that he was wanted on the document, yes. questioned about Lauer's rela ferred the car to the company, tionship with Nugget Coal by two which you owned, so virtually you Q. Did he give you the values to Sejung officials (Seung Kyu Kim still owned the car. What hap put on that document? and Hyun Sik Kim). pened to the car? A. Yes, he did. Q. What did they ask you? A. I never thought of it like that. Mal had it. That is the last I Joseph testified that he returned A. . .. whether he was receiving know. to The Printing Place, Easton, any kickbacks or anything like paying Conrad between $75 to that. I told them that I honesti:,. Q. You don't know where the $100 in cash to alter then reprint didn't know because I was car is now, is that correct? the form. tIe said the original document was destroyed. isolated on the pier, and Mal was A. No, I don't. up in Pottsville. Michael Camanzo, a Fuel Engi The Crime Commission was neering supervisor, testified on Q. Did they use the word unable to find the car either. It kickback? Nov. 7, 1983, that Lauer person also was u~lable to find any ally picked up a certificate of evidence that the vehicle was ever A. They might have used it, an~lysis (believed to be for the sold to Lauer. It did discover that something that connoted the same Rimba Merbau shipment) from on May 15, 1982, the car's title as that. the firm's office in New York was transferred from Delores during the fall of 1981 and that Whitaker to Fries Cadillac Co., On Nov. 12, 1981, a Nugget he brought along a present. Bethlehem, Pa., with Lauer using Coal Sales check in the amount of Follows excerpts from his it and a 1977 P~J'mouth as a $8,800 was issued to Delores testimony: Whitaker for the purchase of a trade-in on a new car. 1977 Cadillac. Within a span of Q. Did Mr. Lauer ever offer six months that car possibly had An Early you anything of value to alter test as many as five owners. Possibly Christmas Present results or to provide blank forms? not. On Nov. 7, 1981, the motor ves A. To an:;wer your question, no. sel Rimba Merbau departed Port Whitaker was asked about the But I was offered a Christmas Newark, New Jersey, for Korea. Cadillac. gift. The coal was tested by Fuel Engi Q. You had a personal 1977 neering Co. which issued a certif Q. What exactly did he state? Cadillac limousine? icate of analysis showing it to be below specifications and beyond A. He said this is an early A. Right. the rejection point. However, the Christmas gift? He had a white document submitted to the Cho envelope, but he didn't say any Q. You sold it to Nugget Coal. Heung Bank in San Francisco to thing like you are saying, change release the funds was altered to of analysis. I don't know what A. Right. make the silt meet "specs." was in the envelope. I can imagine. 26 SEJUNG M. M. (USA), LTD. CERTIFICATE OF ANALYSIS "Rimba Merbau" Shipment ORIGINAL ALTERED ) Fuel Engineering Company Of New York Fuel Engineering Company of New YorK Tnt Heparl ".2!~ S .. mple ld"nUlicaUoII V.... l,,· I'~rt tlf t.o.~I~~, Pon 1I .... rl Shtppu, 5t'i'm!; tlC· II· (USA) ln~. P.O. 11, ____ P.o. , ~~'~;i~C:ii~\~';:''''ir~I~~.~~'{'!~:~~~ 1; ,; \Wlm!l!m:a_lll>l:~ __~·iii'Bi'~m~.tt7~~~OO~ CERTIFICATE OF AN~Y..s·fs ! .l,ppro.~ ~19:!:,..kf~t=- ...... •...-J.. tlt.u Ncw""bot 10. nat K. It. Hathd/--- rn""'''''11~2 £. '::u1 Strue.hI~. a_ ~l tI.u gf Ul.dln., '-M.d. "",", 5. nSI W~ .. lMl. 11_ 1",.. 10,d C::arhhd I'I~¥. 1, 1ge1 "1t""T '''"l rn ~,. ':"uUn ••. OHl~:."~:~:~~: ~r;;~:"t "' . . ~ ;N._.. $'" Ct",luee " ktX'f-KOS~19I).6'~' I ASkECElVW ".",:,:, ~,:::,~' (p~:~~:~"L"""d Co,,,, Kc>htu{\\ -n:To:- 2l.431 /I.1t lOt ..., •. \~h dr, 10,"15) f ... V~htfh H.Hltr IQ: "~J.. idt C!T'I tea' l~) ~ VohtUo 6.65% Pbcdt.nb 111. ~~..o~II" dr"rlhJ hudn h In t""fcr-It, .. t·h t\r cooo.cdU'I d ... crlptl~1I In th~ ("ntun, .nd _u\1".. rf1"tf. IO_lIn ~.v, bnn dul, t~Hd .. lth "ndu til. ,"cnn.,· Q. Did you accept it. The remaining three ships, the M/V Cresco Cresco, the Fort Calgary and the A. No. Arlberg, were, as previously Actual Altered stated, all tested by Hampton Report Report Q. What happened? #216335 #216335 Roads Testing Laboratories, Inc. Total Moisture* 17.91OJo 9.910J0 A. We were walking out. I Again, the certificates of analysis Ash 29.26 26.26 walked him out of the place. It were forged and altered to bring Volatile Matter 9.23 9.23 the silt within the "specs" set Sulphur 0.67 0.67 was late, no one was around. He Caiorific Value** 5623KCALlKG 5823KCALlKG said, "This is an early Christmas forth in the letter of credit. This work also was performed at The gift." I told him it wasn't M/V Fort Calgary Christmas. Printing Place. Actual Altered The actual results certified by The original report figures issued Report Report Fuel Engineering compared to the by Hampton Roads compared to #216577 #216491 altered report follow: the figures contained in the Total Moisture* 17.05OJo 9.23 010 altered reports that were sub Ash 29.33 24.76 Volatile Matter 8.88 9.05 mitted to the Cho-Heung Bank Sulphur 0.66 0.65 M/V Rimba Merbau follow: Calorific 5517KCALlKG 6103KCALlKG Actual Altered Report Report #326380 #326380 Total Moisture* 23.70070 10.47010 Ash 30.11 24.41 Volatile Malter 8.55 8.97 Sulphur 0.64 0.66 Calorific Value** 5400KCALlKG 5815 KCALlKG * As received basis ** Air dry basis 27 M/V Arlberg Q. He was aware of all of them Lewis: Did he know what you (from) beginning to end? were doing? Actual Altered Report Report #216990 #226498 Joseph: Yes. I would have to Joseph: Yes. say yes. Total Moisture* 18.940/0 9.23% Lewis: Did he know you were Ash 29.95 23.31 Volatile Matter 8.86 8.87 Commissioner Lewis: Mr. involved in counterfeiting and Sulphur 0.68 0.66 Joseph, I want to make sure I forgery at that point, altering the Calorific Value**5477KCALlKG 6073KCALlKG understand this. You go to work documents? *As received basis in the summer of 1981 for a com **Air dry basis pany called Lauer Investment Joseph: Yes. Corporation? Is that what you are Representatives of Hampton Lewis: You said that at one time telling us? Roads, shown copies of the certif you were told ... that if there icates of analysis that were sub Joseph: yes. was any problem, the Koreans mitted to the bank, confirmed would fix it. What did you under that they were never issued by the Lewis: And some other people stand by that? company. The signature of the named who? lab's chemist was forged on all Joseph: That whatever had to be three documents. Joseph: Yong Gun Kim, S. K. done, if officials had to be bribed Kim, H. S. Kim, Mr. Lee, Mr. or reports had to be changed, or Joseph testified that he had al Yo, and various other people in whatever it took to get shipments tered the records in order to help Korea who I don't know. accepted, it would be done. his brother-in-law and that Lauer knew about all the forgeries. "In Lewis: For this enterprise, you Lewis: Do you mean in Korea regard to any person other than go to Virginia and into Easton to or here. my brother-in-law asking me to a print shop, and you get at least commit a criminal act, normally I five documents altered, correct? Joseph: In Korea. wouldn't do it, but given the content of the situation, I did not Joseph: Correct. "Mal, You Know, We Can Go to Jail feel that the consequences were Lewis: Counterfeited in a sense? . . ." adversely affecting anybody that At a private hearing before the greatly, and whether it came Joseph: Yes. Crime Commission on Oct. 24, directly from Mal or whether it 1983, Joseph stated that he had came from S. K. Kim or H. S. Lewis: In every sense, right? discussed with Lauer the fact that Kim, I knew of the situation, and a crime was being committed. I knew of the structure of their Joseph: Yes. group. So in order to help him, I Lewis: You knew what you were Joseph: I had indicated to him would have to help his doing, and you knew it was il that I felt uncomfortable and I group ... ," Joseph stated. legal, in fact, criminal? thought it was something illegal, and that I didn't like doing Q. With respect to the falsifica Joseph: Yes. it .... tion of the certificates of analysis, didn't you speak with Mr. Lauer Lewis: I think you also told us Q. What did he tell you? regarding all of the falsifications you participated in the forgery of that were completed by yourself? Robert Lanier's signature, right? A. I don't recall his response to it. Joseph: Either subsequently Joseph: What do you mean by after they were falsified or in the forgery? Q. Did he encourage you to majority of them previously to hang in there and keep doing being falsified, Mal was aware Lewis: Didn't you tell us you cut it ... ? that I was going to modify the out his signature and reprinted it A. Along those lines. papers, the certificates. on these documents? Q. And in all these situations, Joseph: Yes. did he direct you as to how to falsify them and what figures to Lewis: He, Mr. Lauer, use to some degree? came ... with you ... at least one time that you went into Joseph: Yes. Conrad's print shop, right? Joseph: Right. 28 NUGGET COAL SALES, INCa TRANSACTIONS American Bank & First Trust f--+-...., Company, Three Korean Shipments Exchange Korean Pottsville, PA Bank, Exchange "Advising" OSROK Seoul, Bank, Korea New York Branch $9,409.939.56 "Issuingn "Advising" Last Shipment Mahlon Lauer $106,625.00 Loans $61,825.00 Lauer Investment Corp. $17,240.00 Total $185,690.00 Q. Am I jogging your memory a submitting to interviews about ing companies that had hauled the little bit? how the coal deals were struc coal, refusing to pay outstanding tured. However, when subpoenaed invoices. The Crime Commission A. For me to recall exactly what to appear at a private Commis has determined that trucking he said, I would have to recall the sion hearing on Aug. 24, 1983, he firms in Pennsylvania and New instance in which it occurs, and I invoked his 5th Amendment Jersey incurred losses of approx can't relate that specifically. I rights, refusing to answer any imately $102,000 as a result of the don't think there was a specific questions. He also exercised those Lauer-Nugget coal deals. instance. I think it was something rights at the Crime Commission's that might have been ongoing that public hearings in Harrisburg In addition, a law suit filed in I communicated to him, like during February of 1984. Northumberland County Common "Mal, you know, we can go to Pleas Court by the Savitiski jail for what we are doing." Brothers Coal Co., Atlas, Pa., against Nugget Coal, claimed an Q. What was his general Due to the low calorific value of outstanding balance of $19,793 response to you? the coal, OSROK assessed a for coal supplied to Whitaker's penalty of $232,346, of which, ac company. A. I will take care of it. The cording to corporate papers, general response would be sort of $71,000 was eventually passed on As stated earlier, the alterations like, don't worry about it. It will to Nugget Coal. and forgeries of the certificates of all work out in the end. analysis for the four shipments Nugget said it was owed a bal resulted in non-payment of penal Lauer cooperated with Crime ance of $139,855 from Sejung ties and ultimate loss of Commission agents during the M. M. Nugget in turn passed its $1,611,256 due to excessive early stages of its investigation, claimed losses along to the truck- moisture content of the coal. 29 A comparison of the moisture Note: By computing the were releasing the money from the content reported on the forged moisture level of the coal not paid banks. lOr so the Korean govern documents and the consequential for due to the falsification of ment thought. penalties, with the moisture analysis reports and subtracting content reported on the authentic the percentage of moisture from Officials of Hampton Roads, on documents and the penalties that the total amount of coal on the the other hand, had no way of should have been assessed, shipment, the actual tonnage knowing that such sentiment was follows: would be reduced by the follow building overseas, and spreading ing: Rimba Merbau 4,584.15 back to America. They had no M/V Rimba Merbau metric tons; Cresco 2,855.94 met way of knowing their documents Reported - Actual- ric tons; Fort Calgary 2,641.11 were being forged. All they knew 10.47070 23.70070 metric tons; and Arlberg 3,375.93 was that business pertaining to $2,345,091.69* $2,345,091.69 metric tons for a total of Korean coal shipments was falling x 3.47070** = x 28.4070*** 13 ,457.13 metric tons. off sharply. Penalty Paid of Penalty Due of $81,374.68 $666,006.03 At the conclusion of its Lauer Robert Lanier, Hampton Roads' Investment/Nugget Coal inves vice president who testified at the $584,631.35 Difference tigation, the Crime Commission Commission's public hearings, turned its findings over to the said the blackbaUing lasted about M/V Cresco Northampton County District At one year. He estimated his firm torney's Office for review. may have lost between $50,000 Reported - Actual- and $75,000 in potential business 9.91070 17.91070 On Dec. 7, 1984, Lauer was ar before learning of the forgeries $2,416,128.62 $2,416,128.62* rested and charged by that office from a Crime Commission special X 2.91070** = x 16.82070*** Penalty Paid of Penalty Due of with conspiring with members of agent and a lawyer in Hong $70,309.34 $406,392.83 Sejung M.M. (USA) Inc. to assist Kong. in the altering and uttering of This exchange took place at the $336,083.49 Difference forged certificates of analysis per taining to the coal shipments. public hearings between Lanier and Wallace P. Hay, the Crime M/V Fort Calgary Commission's executive director: Reported - Actual- 9.23070 17.05070 As mentioned previously, losses Hay: Would this have come to $2,285,810.78* $2,285,810.78 incurred by shippers, suppliers your attention? Do you ever see x 2.23070** = x 15.30070*** and others-including honest any of these documents after you Penalty Paid of Penalty Due of Pennsylvania business persons and issue them out to the shipper? $50,973.58 $349,729.04 unknowing Korean taxpayers Lanier: No, we do not see the $298,755.46 Difference totaled more than $4 million. And documents any more. that's only for the three coal deals M/V Arlberg the Crime Commission investi Hay: This could have gone on, Reported - Actual - gated. There were probably other and you would have had no way 9.23070 18.94070 deals, other victims. to basically detect or learn of this? $2,353,071.17* $2,353,071.17 Not all the losses can be meas x 2.23070** = x 18.88070*** Penalty Paid of Penalty Due of ured strictly in dollars and cents. Lanier: The only way that we $52,473.48 $444,259.83 Reputations were damaged as could have learned basically well. The potential for future $391,786.35 Difference would be say if the documents business in some cases was were presented to the bank, and Total Difference: $1,611,256 undermined. the bank called us and asked to *Figure ob,ained by multiplying the unit price see if these numbers jibe with our $67.68 by the tonnage shipped. The blackballing of Hampton numbers or something like that. **Figure obtained by subtnlcting the maximum Roads Testing Laboratories is one contract moisture specification, 70/0, from the reported or actual moisture content. example. Hay: Banks do that very ***Figure obtained by using the following frequently? formula contained in the letter of credit: For It wasn't long before the Korean moisture content in excess of 7% up to 12%, government began to suspect Lanier: No, they do not. the invoice amount shall be reduced by the Hampton Roads had a hand in percentage (for C and F value of the ship ment). In excess of 12% up to 15%, the the misrepresentation of the coal's Throughout his testimony, invoice amount shall be reduced by double the quality. After all, it was Hampton Lanier depicted a coal shipping percentage (for C and F value of the shIp Roads that was testing the lion's industry in which attempts to ment). In cases where moisture content exceeds 15% commodity will be rejected at time of share of the anthracite silt. It was fudge figures were rather loading. Hampton Roads' documents that commonplace. As he put it: 30 "In the coal business, when Lanier: In other words, people EDITOR'S NOTE: James people deal with people in bring coal to us and say, "Hey, Hooton, executive director of the shipping coal, they are always this coal represents this boat." Pennsylvania Senate Environmental trying to get you to change this This is happening not only in this Resources and Energy Committee, document, change that document. business, but in several businesses. testified at the Crime Commission's They are always telling you how They will say this 100 pounds of public hearings in Harrisburg on the Korean coal deals. Excerpts of much money you are costing coal represents this boat. Well, his testimony, presented Feb. 22, people; so it is part of the busi that is fine but we will have to 1984, follow: ness going on 30, 40 years that mark that sample "as submitted." Hampton Roads is familiar In other words, we didn't sample Anthracite coal (to stage a come It back) has to be attractive in the two with. " it. was submitted to our labora ways most important to government tory, so that we cannot say we and industry decisionmakers; name At one point Chief Counsel sampled something we didn't. ly price and reliability. Efforts to Johnson asked Lanier if he keep anthracite's price competitive recalled a conversation with Lauer Coal Sampler: may be beyond the scope of this concerning the contents of a cer testimony, but please realize that tain lab report. His reply provided Bribe Offers Not Unusual the anthracite industry's reputation for reliability is really what this in additional insight into the world Thomas Barrett, the former vestigation is all about. of cClal: "Well, the statement was employee of Fuel Engineering made something to the effect that who testified that he was twice Anthracite's customers should not things would be taken care of in approached about changing docu have to be concerned that they Korea, but in the coal industry, as ments, stated that such incidents aren't getting the quantity and quality of coal they paid for. If the I told you, there are all sorts of were not unusual. This exchange fraud your investigations have things. Everybody has their agent took place between Barrett and uncovered goes unchecked, the overseas here, there, and else Commissioner Lewis: reputation of the industry as a where; and they say, 'My agent whole could suffer; and our hopes will take care of the problem we Lewis: Was this the only time for future expansion could be have,' or that sort of thing." (the Kevin Nelson incident), other undermined. than the Yung Soo Yoo conver Export sales, a market with real Johnson: Do you think Mr. sation, that you were asked to potential for growth, are especially Lauer was referring to his agent alter documents or alter samples linked to the reliability issue. The or to people who for some of the for money? industrial countries of western Europe and Asia are looking again money would interfere if any complaints were made about the Barrett: No, I had been asked at American coal, not because of its about it before, but not by any of low price, but because of the coal quality ... ? demonstrated unreliability of the oil these (people). I had been asked flow from the Persian Gulf. Lanier: In my opinion, knowing many times. the way business is done in Korea, The political stability of the U. S. there would be probably exchange Lewis: Many times? is an important buying consid eration to, for example, Koreans of monies taking place. Barrett: Well, you know, but I and West Germans; but Pennsyl never took any but one time, but vania's anthracite industry could be Johnson: In fact, regarding the left out of the equation. The indus James Martin Coal Co., Mr. Yoo, none of these guys had anything try simply cannot afford a reputa chief operating officer, he came to do with that. tion for dishonesty. right out and invited your busi Lewis: Mr. Barrett, without Sen. (D. Michael) Fisher (this ness associate, Mr. (Jay) getting into specifics, are you sug committee's chairman) and I are Williams, to change a certificate gesting that this is something of a confident our state's anthracite of analysis, did he not? industry is not, indeed, fraught common practice that you were with fraud. We know the vast Lanier: Yes. Basically, he engaged in, receiving bribe offers; majority of persons connected with wanted us to present a subsample this is nothing unusual for a coal the industry are honest. This panel, sampler? as it roots out the few, very few as an entire vessel. one would hope, bad apples, is Barrett: Did I receive the offers? taking the kind of positive steps Johnson: Not unlike what we necessary to bolster our state's saw ... with the (motor vessel) Lewis: To be made the offers. valuable anthracite industry; and Meihu Maru? for that, we commend you. Barrett: No, it is not unusual at Lanier: Right. all. Johnson: Analyze a pebble and claim it's a mountain. 31 ------ Lewis: It happens all the time? Barrett: Not all the time, but a good bit of the time. Lewis: So it suggests to you that people who are making these offers thought there may be SClme hope of success-that you might receive and change this sample? Barrett: Yes. Hampton Roads Testing Labora tories, after knowledge of the forged documents became public, eventually was able to rebuild a brisk business testing Korea coal shipments. The climate of mistrust was changing and so was the way of doing business. For one thing, the Dai Han Coal Corp., the government agency in Korea that was responsible for monitoring incoming coal, opened a lab in New Jersey. This lab, which does its own testing, gets "splits" or portions of all Korean-bound coal that is sampled by independent testing companies like Hampton Roads. The Korean government also has begun making on-site inspections at U. S. ports. During the three coal deals dis sected by the Crime Commission, the certificates of analysis were issued directly to the seller, who in turn then submitted them to the bank. That also has changed: the documents now are first sub mitted to Dai Han Coal Corp., which checks them for accuracy. Hampton Roads Testing also made some internal changes. Their certificates of analysis were revamped so as to clearly distin guish whether coal that was tested had been sampled by the firm or by the customer. And their paper stock now carries a watermark, making documents it issues much more difficult, if not impossible, to counterfeit. 32 Coal Tax Sheltersoo Mining Investors, Not Coal 33 portion of the investments and eluded that the scheme mustered moving on to a new deal. revenues in excess of $10 million for the promoters, in excess of And most investors didn't care. $5 million in tax write-offs for They weren't really interested in the investors-and not one shovel coal, only in the "tax profits" the full of coal. In 1974, the U. S. Securities and schemes generated. Exchange Commission adopted Potential mining jobs were lost. Regulation 230.146, known as Michael J. McGinty Jr., a tax Small surface property owners Rule 146. It was designed to spur shelter coordinator assigned to lost expected royalties. investments in such vital but lag I.R.S. 's Philadelphia office, testi ging industries as housing, or the fied at a Crime Commission Perhaps more importantly, exploration of coal, oil and gas. hearing in February of 1982 that investor confidence was under of some 400 coal tax shelters his mined, discouraging future com Under Rule 146, private offer office had examined, only one mitments of fresh capital to ings of securities were made easier appeared to be legitimate. expand coal production. and less costly by exempting them from registration with the S.E.C. By the fall of 1976, fraudulent The investment scheme investi A private offering of any amount coal tax shelters had become gated by the Commission was could be made to an investor who so epidemic that the I.R.S. shielded by a tangled web of had "such knowledge and experi rescinded some of its previous interrelated "shell" companies ence in financial and business rulings, including the provision that were engaged in an elaborate matters that he (was) capable of that non-recourse notes could paper shuffle designed to keep evaluating the merits and risks of be used in engineering the huge the promoters well-insulated not prospective investment" or was tax write-offs. only from the investors, but from "able to bear the economic risks regulatory and law enforcement of the investment." A year later, the U. S. Securities agencies. and Exchange Commission issued Whether or not an investor was a rare warning to the American During the early 1970s, Starford qualified or not was left up to public about fraudulent coal Coal Corp. acquired mineral the promoter of the investment schemes. rights to 1,200 acres of bitumi scheme. nous coal-bearing land in Pennsyl Most of the coal deals were vania's Cambria County from Exemption from S.E.C. regis syndicated as private offerings in tration eliminated many costs and Eastern Associated Coal Corp. the form of limited partnerships, Under terms of the agreement, delays. It also meant, however, a recognized legitimate business that it was more difficult for the Eastern held an option to re entity consisting of a general part purchase the tract. S.E.C. 's enforcement arm to ner or partners and a number of detect and prevent violations of limited partners. By 1976, Starford was in finan the law. cial trouble. Its president and The main legal advantage of a chief shareholder, August A. At the time the S.E.C. adopted limited partnership is that it Rule 146, the Internal Revenue Andre, began looking for a buyer, restricts liability. In a general or for financial backing to help Service relaxed certain tax laws partnership, each partner is equal to likewise encourage investment acquire the type of equipment and liable for all the debts. A needed to mine at greater depths. in coal. limited partner is liable only up to the amount of his investment. Under certain I.R.S. rulings, a It was about this time that taxpayer could invest, for ex Churchill Coal Corp., a New ample, $10,000 in cash in a coal Churchill Coal York-based firm, begun syndi mining venture, plus $40,000 in a It was during the late 1970s that cating tax shelter investments in non-recourse promissory note the Pennsylvania Crime Commis coal mining ventures in Pennsyl (which attached no personal sion, through its membership in vania. Churchill had syndicated liability) and be able to deduct the the Leviticus Project, began to similar tax shelters in Kentucky entire $50,000 from his taxes in investigate a series of suspect tax and had been involved in movie the year he made the investment. I shelters involving coal property in Pennsylvania. I By signing a non-recourse promissory note an With arithmetic like that, coal investor did not take on any personal liability tax shelters were soon booming, After extensive review of finan to repay the note from his own assets, only but they weren't spurring coal cial documents and numerous from whatever assets the coal venture might accumulate. In most coal deals examined by production. Instead crooked interviews with the persons the Leviticus Project, the promoters never had promoters were pocketing the cash involved, the Commission con- any intention of calling in these notes. 34 recourse notes) were the basis for the tax deductions. The investors were advised to deduct the entire amount of their investment from their 1977 gross income for fed eral income tax purposes, accord ing to an investor who was inter viewed. This resulted in a $4 to $5 write-off for each dollar put Up.2 Coal Reserves Understated The subleases provided the in vestors with the right to mine and August A. Andre Placido "Pal." Calantoni remove all of the coal in a partic ular seam underlying their respec tax shelters during the mid-1970s whether any coal was mined or tive parcels. Each investor was -a business venture that resulted sold. If Energy Mining did mine told that the parcel contained an in two of the firm's represent and sell coal, it was required to estimated minimum tonnage of atives later being convicted of tax pay a royalty to Eastern in the recoverable and marketable and mail fraud. amount of eight percent of the net steam coal. sales price per ton of coal. The Churchill Coal needed land to minimum annual royalty was These tonnage estimates were put its latest deal together. In the recoupable against the per based on coal "studies" prepared summer of 1977, Placido "Pat" ton royalty. by Brian H. Sanden, a Canadian Calantoni, a transplanted New mining engineer who had no Yorker who passed himself off as At the Nov. 21, 1977, closing, experience in the bituminous coal Churchill's vice-president, was Energy Mining paid the $50,000 industry, who was not licensed to introduced to Andre and nego royalty for 1978. However, it practice engineering in Pennsyl tiations began for Churchill to ac failed to pay the following year. vania, and who never made on quire Starford's Cambria County On May 3, 1979, Eastern termi site inspections of the properties holdings. Eastern, because of its nated the lease. being "studied." re-purchase option, was drawn into the negotiations. Shortly after the lease was exe Sanden, hired by the Churchill cuted, Energy Mining subdivided Coal conglomerate, told the On Nov. 21, 1977, Eastern re the property and subleased to Crime Commission that it was acquired Starford's property, then investors undivided fractional Calantoni who decided what leased the entire mining tract to working interests in four parcels: names to use for each section Energy Mining Corp.-the first of Adams Properties Program (Adams, Raven, etc.), as well as three shell companies that would (91.7 acres), Raven Properties the tonnage figures for each be created by Churchill. Andre Program (92.7 acres), Hedge section (924,000 tons for Adams, said that as part of the deal, Properties Program (91.3 acres) 935,000 tons for Raven etc.). Churchill negotiated an agreement and Logan Properties Program Sanden said the figures were de under which it would pay Star (159.7 acres). rived by using a seam thickness of ford Coal $650,000 if Starford 72 inches for all the coal under would agree to act as contract Each sublease provided for the lying the properties, a figure he miner for several of the tax payment of a minimum annual said Calantoni, who had no expe royalty to Energy Mining shelter programs. I rience in mining coal, also had $203,000 each for the Adams, supplied. The lease between Eastern and Raven and Hedge programs and Energy Mining was for 30 years $328,000 for Logan, with almost , Investors received tax advice from a New or until coal reserves were ex twice the acreage and stated re York law firm, Esanu, Katsky and Korins. Ini hausted. It required Energy Min serves. The subleases required that tially the firm advised that the entire invest ment was deductible from the investor's gross ing to pay a minimum annual the minimum annual royalties for income in the year of the investment. However, royalty of $50,000 to Eastern, the the first 11 years be paid in ad in light of changes in the tax laws, the firm re royalty being owed regardless of vance. Consequently, in late 1977, vised its opinion, noting that such a deduction was subject to challenge. Nevertheless, the 143 investors turned over to investors, who were all believed to be in the 50 I In addition to the rights to the coal underly Energy Mining in excess of $10 percent tax bracket, deducted the full amount ing the land acquired from Eastern, Energy million. (a total in excess of $5 million) from their 1977 Mining acquired the surface rights by way of gross incomes. The IRS has challenged those assignment from Starford. Starford had ob deductions, offering to accept the cash portion tained those rights pursuant to agreements with These payments ($1.7 million in while disallowing the note portion-a position several surface property owners. cash and $8.6 million in non- that some of the investors are fighting. 35 SANDEN REPORTS Raven1 Adams2 Logan3 Hedge4 Total Acreage 92.75 91.7 159.7 91.3 Coal Acreage 92.75 91.7 159.7 91.3 Coal Thickness (inches) 72 72 72 72 I n-Place Reserves (Tons) 935,000 924,000 1,610,000 920,000 Minable Reserves (Tons) 924,0005 Economically Minable Reserves 924,0005 , Extracted from "Study of Goal Reserves - Raven Section - November, 1977," prepared by Brian H. Sanden. 2 Extracted from "Study of Coal Reserves - Adams Section - December, 1977," prepared by Brian H. Sanden. 3 Extracted from "Study of Coal Reserves - Logan Section - November, 1977," prepared by Brian H. Sanden. 4 Extracted from "Study of Coal Reserves - Hedge Section - November, 1977," prepared by Brian H. Sanden. 5 Extracted from "Confidential Descriptive Memorandum - Adams Properties Program. CHURCHILL COAL CORPORATION'S CAMBRIA COUNTY TAX SHELTERS - COAL Federal Income Tax Aspects of Investment in Programs PROGRAM AMT. OF INVESTMENT AMOUNT OF AMOUNT OF IN INTEREST IN SUBLEASE' DEDUCTIONS2 LOST REVENUE' CASH NOTES TOTAL ADAMS $ 350,000. $1,885,888. $ 2,235,888. RAVEN 350,000. 1,885,888. 2,325,888 HEDGE 350,000, 1,885,888. 2,325,888. LOGAN 625,000. 2,985,750. 3,610,750. $1,675,000. $8,643,413. $10,318,412. $10,318,413. $5,159,201. 1 Eleven years advance minimum royalty, • Assumes total amount of Investment was deducted. J Assumes entire investment was Improper 36 "'I At a Crime Commission public Investors in the four coal pro hearing in Johnstown (Cambria grams were told, based on the County) on Jan. 19, 1983, San Sanden reports, that the prop den was questioned about his erties they were subleasing con "studies" by then Leviticus coun tained an estimated minimum of sel Robert A. Graci. approximately 4.4 million tons of recoverable and marketable Q. To arrive at the tonnage steam coal. calculations in each of these pro grams, particularly these four, Sanden's reports, however, listed Adams, Raven, Logan and the tonnage figures as maximums, Hedge, you assumed, did you not, not minimums. They never that there was a consistent seam claimed the coal to be marketable, of coal, 72 inches thick, under nor did they offer an opinion as lying every square foot of land to whether it was economically owned or leased by the specific feasible to extract it from the programs; is that correct? earth.3 Langnage from one of the Sanden reports follows: A. Yes, sir. "This study indicates that the Q. Is using a 72-inch seam total probable potential recover underlying the entire property Brian H. Sanden able coal reserves of the Adams a reasonable engineering Mining Section . . . will be in the assumption? Q. The Ngional information to neighborhood of 924,000 gross which you refer is a statement by raw tons." (emphasis added) A. No, sir. Gus (August A.) Andre that he Roderick Fletcher, a mining Q. Was it a reasonable assump had intersected 72 inches; is that engineer employed by the Harris tion in 1977? correct? burg consulting firm of Skelly and A. No. A. Yes, sir. Loy, was retained by the Crime Commission to evaluate the prop Q. But you based all of your Q. He never told you that was erties reported on by Sanden. He calculations on that assumption? consistent under the entire prop testified at the hearings that erty, did he? "there was no support whatsoever A. Yes. A. No. for a seam thickness of 72 inches," that it was nearer 35 to Q. You state in the Adams 40 inches. He concluded that report, page 18, that, and I quote, Q. You made that unreasonable mineable reserves on the four pro "From regional information on assumption. grams amounted to only 652,000 the Lower Freeport (D) vein, a A. Yes. tons-less than 15 percent of the vein thickness of 72 inches was total 4.4 million tons promised used in tonnage calculations;" is Q .... you, as a professional investors! Moreover, Fletcher that accurate, sir, page 18? engineer? stated that it would be eco A. Yes, sir. A. Yes. nomically feasible to extract only Q. Now, none of the Pennsylva Q. It was based on Pat nia official books or the U. S. Calantoni telling you to use 72 Geological Survey show a 72-inch inches; was it not? seam in that area, do they? I Sanden said he received approximately A. Yes. $29,000 for his services, two-thirds of which he A. No. said he "kicked back" to Calantoni and a Later in the hearing, then com friend of Calantoni's, Casimir "Casey" Mrowka. Records subpoenaed by the Crime Q. As a matter of fact, your mission chairman Malcolm L. own report at page 10 shows a Commission show payments to Mrowka in the Lazin remarked to Sanden: amount of $16,333.33. Mrowka stated that he range in thickness of the Lower gave half of what he received from Sanden to Freeport seam to be about 30 "I mean, as I gather, what you Calantoni and that Churchill Coal was not aware of the agreement. Calantoni admitted inches; is that correct? did is you just did some simple receiving a share of Sanden's fee, but insisted it A. Yes. multiplication, that is what it was only a couple hundred dollars. Mrowka seems to come down to. . also admitted during private hearing testimony that he set up Casper Coal Co., one of his Q. You used a 72-inch seam? "corporations," to enable him to avoid paying To which Sanden replied, taxes on the full amount obtained from A. Yes. "Yes, sir." Sanden. 37 I CHURCHILL COAL CORPORATION CAMBRIA COUNTY LAND TRANSACTIONS DEED EASTERN STARFORD ASSOCIATED LEASE Surface Property Owners COAL CORP. DEED COAL CORP. I J- I .t... 4ft I SUBLEASE ENERGY CHURCHILL HAWK MINING COf..:P. ~ COAL CORP. !--- CHURHILL COAL CORP. 15'& TABOR I-- ~ ~ I--- U'~ - I HARTSHORN BUTEX - ADAMS f-- I 1BEAVERCREEK I RAVEN f-- r LOGAN I-- HEDGE 1 Entered into 11/21/7: Terminated 513/79. 47,000 tons, or just a shade over considerably less. Starford Coal, There were other problems: one percent of the "total probable the contract miner for the tax potential recoverable" coal touted shelter programs, did not own III The mineral rights underlying in the Sanden reports. a dragline. the Adams property had reverted to the county for unpaid taxes in Fletcher's conclusions should Andre testified at the public 1972, according to Michael have been of little surprise to hearings that he had given the Sincak, the mineral coordinator anyone associated with either Hellenic report to Churchill Coal for Cambria County. Starford Coal or Churchill Coal. officials during their negotiations In 1976, a year before Sanden with Eastern and Starford. (I Other programs, according to conducted his "studies," Andre, Sincak, were placed on land that Starford's president, commis Investors Misled had been mined out; the bound sioned Edward Hellenic, a regis on Mining Activity aries of some programs over tered surveyor, to determine lapped thus diluting the interest recoverable tonnages on the Not only was the amount of coal held by the ir..vestors in those pro entire property-of which less inflated, so apparently was the grams; some of the programs had than a third was used for the tax price. Investors were told they been placed on property for which shelter programs. could expect to receive $24 per mining permits had not been ton of coal mined and sold from obtained from the state. Hellenic concluded that there the properties. Fletcher testified remained 1.8 million tons of strip that the price was closer to $18 to Each program was administered pable coal reserves if stripping $20 per ton. under the terms of a joint oper wa:; conducted to a 90-foot depth. ating agreement, administered by However, he stated that in order an operating manager, in this case to reach that depth, a miner Jackson Mining Management would need a rather sizeable and Corp. Jackson Mining, and its expensive piece of equipment successor, Delta Energy Corp., called a dragline. Without it, the were, like Energy Mining, shell reserve estimate would be companies. 38 The joint operating agreement required the investors to contract with a miner who would be selected by the operating man .JAcrrSON MINING JlfANAGEMENT Com'. ager. Under the terms of the 10 EAST 40TH STRECT mining services agreement, the 5UITr: 1010 NEW YORK. N Y 10016 contract miner was entitled to a fee of $14.35 for each ton of coal mined. The contract miner, as previously stated, was Starford Coal. ADAMS PROPERTIES PROGRAM REPORT: Andre was questioned about the WE ARE PLEASED TO LET YOU KNOW n:AT YOUR MINE IS royalty payments at the public NOW IN OPERATION. hearings: THE COAL IS PRESENTLY BEING STOCKPILED AND READY FOR SHIPMENT AT THE RAILROAD SIDING. Q. Now, under the mining serv WE ARE PROCEEDING AS WE REPORTED TO YOU ON JuLy 31, ices agreement, you (Starford) 1978 AND REMAIN EXTREMELY OPTIMISTIC THA T ALL OUR EFFORTS WILL CONTINUE TO PROVE FRUITFUL AND RESULT were to receive $14.35 per ton of IN AN ONGOING SUCCESSFUL OPERATION. coal mined, is that correct? SINCERELY YOURS, A. That's correct. JACKSON MINING MANAGE:\lENT CORPORATION Q. How much money did you --< J"" -4 .& ... t receive under the mining services 'HHL4.l\ KIHK, agreement? F~E,mE!\1 A. Nothing. Q. Why not? A. There was no coal mined. Yet between June 15, 1978, and Aug. 18, 1978, investors received at least three letters from Jackson Shown abov<:: is a copy of the Aug. 18, 1978, letter that Mining pertaining to the progress Jackson Mining Management Corp. sent investors. of mining activity. The letter of August 18 stated: "We are despite the fact he was so iden Calantoni: That's possibly true, pleased to let you know that your tified by Dun and Bradstreet. yes, but there's vice presidents, mine is now in operation. The every bank has vice presidents. coal is presently being stockpiled This exchange took place Everyone's a vice president today, and ready for shipment at the between Calantoni and counsel but I was not. railroad siding." Graci concerning his relationship to Churchill: Graci: So you were a vice presi Both Jackson Mining and Delta dent of Churchill Coal Corp., sir? Energy were controlled by Graci: I asked, sir, if you were a Churchill associates, particularly vice president of Churchill Coal Calantoni: I was not a vice people like Larry Gordon, Corp. president of Churchill Coal Corp. Churchill's president; Murray Glantz, its chief attorney, and Calantoni: I said I was not a By Donald E. Johnson, the vice president of Churchill Coal Crime Commission's chief Calantoni. The name Churchill counsel: You just told people Coal, however, was never dis Corp. that? closed to investors. Graci: Notwithstanding the fact that the president of the company Calantoni: I possibly did. It is interesting to note that identifies you as a vice president'! Calantoni insisted at the public Johnson: You did and lied to hearings that he was never Calantoni: I don't care what he them? Churchill's vice president, despite wrote. the fact he carried business cards Calantoni: No, if someone which said he was, despite the Graci: Notwithstanding the fact asked me am I a vice president, I fact Gordon identified him as that your business card stated vice would say yes. such in correspondence, and president? 39 SUMMARY OF STATISTICS 1 Raven Adams logan Hedge Total Acreage 92.8 91.7 159.7 91.3 Coal Acreage 57.5 50.4 154.7 91.3 Coal Thickness (inches) 34 34 34 34 In-Place Reserves (Tons) 287,000 252,000 773,000 456,000 Minable Reserves (Tons) 47,000 330,000 275,000 Economically Minable 47,000 Reserves , Reproduced from "Assessment of Raven, Logan and Hedge Coal Programs" prepared for the Pennsylvania Crime Commission by SKELLY and LOY, Engineers - Consultants, dated November 12, 1982. Graci: That is a lie if you are (Kirk resigned his position with Adams, Raven, Logan and Hedge not. Jackson Mining by letter from programs, was used as collateral Australia on May 18, 1979, for the project. Investors Calantoni: It is no lie. What are stating he was unable "to obtain apparently were never told that you talking about, it is a lie? any information as to the progress the money had been diverted. of the company.") Graci: It seems pretty clear to In all, approximately $625,000 me. Investors apparently were never was expended, including a told that a coal washing plant was $402,000 mortgage from Laurel Calantoni: Okay. If that's the needed to make the coal on their National Bank. Due to a sub way you want to do it, but I have properties marketable. According stantial water problem, however, never been an officer of Churchill to Andre, the promoters were the plant never operated effi Coal or any of their subsidiaries. aware of that necessity. Andre ciently. The bank eventually fore A review of correspondence to testified that he told both closed on the mortgage for lack the investors indicates they were Calantoni and Gordon about the of payment. All of the collateral never told that the day-to-day need early on in the negotiations. was lost. 5 operations of the programs were As previously noted, Starford overseen by Calantoni. His Coal was to receive $650,000 from 4 The four coal programs were moved from identity was never disclosed, nor Cambria County to Northumberland County Churchill Coal in return for Star was Gordon's. after Eastern terminated Energy Mining's lease. ford acting as contract miner, On June 23, 1982, Northumberland County Most of that money was used to terminated its lease with Croftshaw Coal Investors apparently were never Corp., yet another Churchill shell company, in told that Eastern had terminated satisfy Starford creditors, with an effort to prohibit other companies from its lease with Energy Mining on $100,000 being withheld by acquiring county property without generating Churchill purportedly, according royalty fees. Investors apparently were never May 3, 1979, because of the de told that this lea~e had been terminated either. faulted royalty payment. 4 to Andre, to finance the acqui Also moved to Northumberland County in the sition of new mining equipment. late summer of 1979 were five limited partner Investors apparently were not ,hip tax shelters that had been moved to Cam bria County 14 months earlier from McCreary aware that the president of Jack Instead, Calantoni decided to use County, Kentucky. son Mining, Brian Kirk, an Aus the money to finance construction tralian, made his home in that of the washing plant. Another • Andre, claiming he was entitled to this $\00,000, filed suit in Cambria County Com country, visiting the U ni ted States $100,000 in certificates of deposit, mons Pleas Court in an effort to recover the only three to four times a year. purchased with funds from the money. 40 Contract Miner Lacks Men and Equipment Starford, as part of the $650,000 deal, signed mining services agree ments with investors in the four programs. The agreements con tained a clause whereby Starford guaranteed it would mine a speci fied tonnage each year: not less than 249,000 tons in 1978, not less than 273,000 tons in 1979 and thereafter. Andre admitted at the public hearing that he did not have the equipment to mine the amount of coal called for. He stated that this problem was discussed with Churchill Coal officials and with Joseph Wolf, president of Energy Mining, Yet on Dec. 29, 1977, Andre, in a letter to Energy Mining offi cials, agreed to mine coal on not four but six properties (Adams, Logan, Raven, Hedge, Boone and Cedar) with separate men and equipment. Aerial photograph of the Starford Coal property taken June 28, 1978, from 6,920 feet shows non-reclaimed areas He was asked about the letter: of the land. Contrasted in the lower portion of the photo is cultivated farmland. Q. In that letter, do you agree . . . to mine not only Q. Because without this (letter) Q. You said, "The people I the Adams property parcel but the $650,000 agreement goes dealt with knew I couldn't five other local programs with down the tubes. perform." Who were those people separate men and separate you were referring to? equipment ... ? A. That's correct. A. Nathan Thomas, Calantoni, A. That's correct. Q. What were you told concern Gordon, Glantz, and Joe (Wolf).6 ing this letter, what did Calantoni Q. This is after you told Mr. tell you? Q. How did they know you Calantoni you could not do this could not perform? under the terms of the mining A. That they had to have the services agreement? letter, the lawyers in New York A. I told them. said they had to have this letter to A. That is correct, and he said make the thing work. Q. In advance? he has to have this to make the whole thing work, that it was very Q. You agreed to mine six sep A. That's right. necessary for me to do this. It arate programs, mining prop Calantoni admitted at the hear was dictated over the phone to erties, with separate men and ing that Starford Coal was "just Ebensburg (the Cambria County equipment. You received about bankrupt." Regarding the seat), it was typed in my office. $650,000, or an agreement to re letter from Starford to Jackson ceive $650,000, to mine the coal, Mining (which he admitted he Q. Dictated by whom? you did not have the ability to might have dictated) the following mine any coal; is that correct? A. Calantoni .... exchange took place: A. Yes. Q. You signed this letter even though you knew you could not h Nathan Thomas, president of Elk Run Coal Commissioner Alvin B. Lewis and Clay, was a "coal tinder" who had en fulfill your obligation under it? Jr. questioned Andre as follows: tered an agreement to become the coal sales agent for the programs. It was Thomas who A. That is correct. introduced Calanloni to Andre. 41 Q. You knew (on Dec. 29, 1977) Calantoni: I can't tell you ex ADAMS that (Starford) did not have actly, I don't know. enough equipment, that he PROPERTIES (Andre) did not have the man Lazin: Well, can you give us a range as to what you received? PROGRAM 1 power to (perform)? Calantoni: Exactly, and that's Calantoni: Maybe $50,000 or oo"o.oc ••• o •• o.o ••• ooo •••• ooo why we were giving him $650,000 $100,000, I'm not sure. ·• CHURCHILL COAL CORPORATION .• to do it. We gave him that : (CCC) : Lazin: Maybe $50,000 or • Larry Gordon, President money. We're saying, "Here, Mr. $100,000. I mean, do you have so ·o.ooe •••••• ooo ooooaoooo •••••. Andre, we're helping you out. much money that the difference SUBLESSOR You are going bankrupt. We Energy Mining Corporation think you can do the job. Here is between $50,000 and $100,000 is (EMC) $650,000. " insignificant to you? Joseph Wolf, President Churchill Coal, according to Calantoni: I don't remember. OPERATING MANAGER Jackson Mining Andre, was well aware that Star Management Corporation ford's financial condition was Churchill Barred From (JMMC) bleak. The investors apparently SeIling Securities Brian Kirk, President were not. To the contrary, they As previously noted, investors were advised that (while) "no as CONTRACT MINER wrote off $5 million in taxes. Starford Coal Corporation surance can be given as to the fi Should those deductions be disal (SCC) nancial strength of (Starford), lowed, the investors would be re Gustave Andres, (August A. Andre), ... (Starford) will be in a posi quired to add the deduction back Owner tion to place sufficient men and into their incomes for 1977 and to equipment on the property to SALES AGENT pay not only the tax due on those Elk Run Coal and Clay, Co., Inc. mine and remove the tonnage re amounts, but also interest and (ERC&C) quired of it." possibly penalties. The tax alone Nathan Thomas would amount to approximately Calantoni had an agreement with 50 percent of the amount Gordon, Churchill's president, CONSULTING invested. 7 ENGINEER which entitled him "to receive Brian Sanden, P.E. one-third of all of the equity in There are other victims of such terest and profit of Churchill schemes. Fletcher, the mining en Coal Corp. arising out of any and gineer, stated that had these four all coal transaction(s)" that programs been legitimate mining Calantoni brought to Churchill. operations - involving the re ported guaranteed tonnages - SPECIAL TAX COUNSEL Calantoni was asked about the they would have generated be Esanu, Katsky, & Korins deal: Attorneys at Law tween 20 and 60 mine or mine Lazin: Now, what was the up related jobs. PENNSYLVANIA front money that you got one COUNSEL Richard L. Trumka, president of Anthony Lupus (Lupas), third of? Esq. the United Mine Workers of Calantoni: I never got my third. America who testified at the hear ings, also noted the trickle-down 1. Extracted from Confidential Descriptive Lazin: You never got your jobs that are lost through such Memorandum and related documents provided to investors in Churchill Coal Corporation's Adams third? schemes - the truck drivers who Properties Program. haul the coal to the rail sidings, Calantoni: No. the railroad workers who trans port the coal, etc. Lazin: You mean, are you trying to tell us that you never got any money from putting together these deals? Calantoni: I did, but I never got • It could be argued that some investors were my third. not victims because their inducement to invest was not to make a profit but to reap tax bene·· Lazin: I see. How much money fits. Several investors interviewed stated that did you get? while the tax break was their primary reason for investing, they eventually expected to prufit from a mining operation. 42 The small surface property own During 1982, Glantz and Gor Among those testifying at the ers lost their expected royalties. don, Churchill's president, along Johnstown hearing was Mark N. Officials of Eastern estimated the with two associates, were con Cohen, the Securities Commis firm lost $1.5 million just in terms victed on various charges stem sion's director of enforcement. of the advance minimum royalty ming from their involvement in payments on which Energy Min movie tax shelters. They were sen Cohen stressed that sales pro ing defaulted. Had Starford tenced on Nov. 8, 1982: Gordon grams such as those launched by mined the tonnages guaranteed to to one month (plus weekends for Churchill "thrive and build upon each of the programs, royalties to six months) imprisonment, a fine the public's constant exposure, Eastern would have climbed to of $210,000, plus three years pro through legitimate media, to the $15 million. 8 bation; Glantz 30 months impris existence of fantastic tax write onment, four years probation, offs or predictions of dramatic and a $250,000 fine. price movements of scarce re sources in an uncertain economy. In March of 1979 the Crime On Aug. 25, 1983, the Pennsyl "The public pre-disposition to Commission referred its inves vania Securities Commission en focus on coal, especially during tigative findings involving tered orders against Delta Energy the oil embargoes and the rising Churchill's ventures in Cambria Corp., Churchill Coal Corp., prices of natural gas, turns a sales and Northumberland counties to Gordon, and Norman Bloom pitch on coal into a method of in the U. S. Attorney's Office in (president of Delta) barring them creasing a sizable return on an in Harrisburg and to the F.B.I. in from offering and/or selling se vestment and provides the illegal Williamsport. curities in Pennsylvania for a peri od of ten years. They also were sales operation with a receptive On July 13, 1983, Murray barred for ten years from associ audience upon which to prey," he Glantz, Churchill's attorney, pled ating with any broker-dealer, said. guilty to conspiracy to commit agent, or investment advisor of "Today, you might hear that mail fraud and filing false tax re fering and/or selling securities in such investments are equivalent to turns and was sentenced on Dec. Pennsylvania. And Gordon and an IRA with growth and tax ad 7, 1983, to three and one-half Bloom were barred (for ten years) vantages and a vehicle to shelter years imprisonment. from holding a position as of income with the advantages of ficer, director or control person in 'rollover' procedures," he added. David Dart Queen, the U. S. any company, corporation, or Attorney for the Middle District business entity offering and/or Cohen listed ten guidelines for of Pennsylvania, said the guilty selling its securities in the potential investors to follow: plea stemmed from Glantz' in commonwealth. volvement in "a massive fraudu 1. Be extremely cautious if a lent coal tax shelter scheme" The Securities Commission had stranger makes contact by a carried out by a syndicate in charged that Churchill, Delta "cold" phone call, unannounced Kentucky, West Virginia, and Energy, Gordon and Bloom had visit to your home, or contacts Pennsylvania. violated registration and anti from a mailing list. fraud provisions of the Pennsylva Queen noted that "by means of nia Securities Act of 1972 through 2. Get the name of the caller, fraudulent deductions, Glantz and the offer and sale of securities in his company, the company's loca his associates were able to reap the form of limited partnership tion and phone number and ask huge profits from their coal interests of Hartshorn Mining for \vritten information concern investments." He added that in Co., Hawk Coal Program and ing the company and the invest working with the Internal Reve Mason Coal Program, all of New ment opportunity. nue Service, his offi..:e was able to York City. freeze over $60 million in assets 3. Don't be intimidated by high held by syndicate members. The Securities Commission al pressure sales techniques "requir leged that in 1976 and 1977 eight ing" that your money be sent, Queen said other individuals Pennsylvania residents were so that "tomorrow is too late," or connected with the syndicate had licited by the three coal syndica that "this is too good to be put in been targeted for investigation. tions, investing $127,000 with a writing." "Too Good to be True" four-to-one tax write-off that re offers usually are just that. sulted in a loss of tax revenues of $508,000. Those deductions, ac cording to the Securities Commis sion, were disallowed by the Inter • That figure aesumes that guaranteed tonnages nal Revenue Service-an action could be mined from the properties and that the coal would sell for $24 per ton. that was appealed. 43 CHURCHILL COAL CORPORATION SYNDICATIONS CAMBRIA COUNTY, PENNSYLVANIA MAY 17,1979 AUGUST 1979 JMMC President Cambria County . Brian Kirk Resigned Programs Trans From All Positions ferred To DECEMBER 1977 JUNE 1978 and Offices Held: Northumberland Four Programs Five Partnerships County, PA Property: Place on Cambria Transferred From County Property: McCreary County, Kentucky To Cambria County, PA Property: ADAMS PROPERTIES PROGRAM HAWK MINING COMPANY, LTD. BEAVER CREEEK COAL CO., LTD. JULY 1979 AUGUST 8, 1980 Jackson Mining KentuckY Partner DEC Purchased Management Corporation MAY 3,1979 ships Transfl3rred JMMC's Stock and Operating Manager Delta Energy Corp. Eastern Associated From Cambria Became Operating Coal Corp. (EACC) (JMMC) General Partner County To Manager of the (DEC) Terminates Cambria Northumberland Programs: County Lease To County, PA Property: Energy Mining Corp. (EMC) SEPTEMBER 10, OCTOBER 15, DECEMBEFI 1981 JUNE 6, 1982 1980 1980 DEC President Northumberland Five Trevorton, Fifteen Burnside, Norman Bloom County Lease to Northumberland Northumberland Resigned From Any Croftshaw Corporation, County, PA County, PA and All Positions: Subleased to EMC Programs/Partner Programs/Partner and Assigned by EMC ships Pooled Under ships Pooled Under to the Adams, Hedge, Unitization r'------, Unitization Arrange Logan and Raven Arrangement: Jack Chartott ment: Programs, Terminated by Order of the Court of Common Pleas of Northumberland County for Failure to Pay Minimum Royalty. Delta Energy Corp. Operating Manager (DEC) FEBRUARY 14, 1982 Frank Lawrence, tla Coal Pool Manage ment Corp., assumed Paul Cohen C,EC's Duties Under Norman Bloom the Same Terms Allen Cobert and Conditions as Marvin Silver Existed Between DEC General Partners and Participants 01 the Trevorton/ Burnside Pools: 44 4. Do not send money or sign a purchase order or contract to pay EDITOR'S NOTE: Richard L. As we are painfully aware, the for an investment until after the Trumka, president of the United U. S. is experiencing record num offering material is examined by Mine Workers of America, testified bers of business failures ... The you and is further checked out by at the Crime Commission's public coal industry, of course, is no hearings in Johnstown on Jan. 19, exception to this severe economic your lawyer, accountant, banker, 1983. Excerpts of that testimony problem. lI./umerous coal company the Better Business Bureau or follow: bankruptcies are causing substantial state securities commission. hardships on the workers that I rep A great deal of money must be in resent. In many cases, the bank 5. Check to see if the company vested to upgrade existing mines ruptcies are due to difficult eco and/ or its agent is registered with and develop new mines. Similarly, nomic circumstances and soft coal we must raise capital for power markets. any federal or state agency. While plant conversion and construction such agencies can't act as your of loading, storage and handling fa I fear, however, that some of the investment advisor, they can tell cilities. And we must encourage in coal companies have gone belly-up you of any adverse public infor vestment in our coal transportation intentionally, leaving the miners mation or of a failure to properly network, both domestically and with unpaid wages and benefits and overse'ls. stiffing the states for unpaid taxes, register. unemployment insurance payments, An important factor in raising the and workers' compensation 6. Be wary of investments being necessary capital to carry out this premiums. sold on the basis of rumor, tips, program is investor confidence. I or "inside information." read with concern the documents These types of operations are submitted to me by this Commis often characterized by an elaborate 7. Deal with established busi sion that suggested that the finan corporate paper shuffle that insu nesses whose reputations are cial community is becoming wary lates and protects the owners of the of investments in the coal industry. company. We have seen one bank known in the community. Investor confidence ... must be in rupt coal company that had estab creased, not destroyed. For the in lished over ten corporations to 8. Be wary of deals, especially in vestor community is an integral operate one coal mine property. the area of future delivery con part of the total picture if we are to tracts, in which you are promised achieve energy independence. Each of the corporations had a verbally that the sale and delivery different function at the mine; one held title to the lease, one leased the of the coal will be made to a com equipment, another produced the mercial user. Some contracts pro coal, another served as broker, an vide for delivery to your home. other was responsible for recla mation, and so on. The apparent 9. Fraudulent investment and April 19, 1979, a notice of viola purpose of this corporate web was sales programs rarely register with to protect the owner of the compa tion was issued to Starford declar ny when he finally pulled up stakes the Securities and Exchange Com ing the operations abandoned and and left owing the miners thous mission, the Commodity Futures indicating DER's intent to forfeit ands of dollars in unpaid wages. Trading Commission or stat~ se performance bonds unless an im curities commissions. And they mediate program to remedy the The financial and psychological rarely are members of national se damage that this situation causes violations was implemented. for the miner cannot be overstated. curities or commodities The economic and social problems exchanges. Ercole testified that Starford that accompany (the resultant) un never replied to the notice of vio employment lead to bitter anger 10. When in doubt, wait. If lation; that notices sent by certi and frustration and too often are something smells fishy, if your fied mail were returned as vented on the worker himself and questions are not satisfactorily an on his family. And while the undeliverable. workers watch their wages and swered, don't commit your dreams fall apart, the real perpetra money. DER subsequently declared the tors of the scam-the fly-by-night bonds forfeited in the full amount coal operators-count their unde of $62,725 - far short of the esti served and illegal profits. mated $250,000-$300,000 needed The state Department of Envi to complete reclamation. .- ronmental Resources estimated it would cost between $250,000 and "The crux of the problem facing $300,000 to complete the reclama the commonwealth as a result of tion of Starford's abandoned per these forfeitures is the depart mit sites. ment's (DER's) inability to reclaim the forfeited areas because J. Anthony Ercole, then director of insufficient funds," Ercole of DER's Bureau of Mining and testified. "Historically, bonding Reclamation, testified that on rates have been (too) low." 45 Bitumco Investors were provided a tax Management, Inc., firms set up One of the Crime Commission's write-off in 1976 of, on the aver specifically for this purpose. They earliest Leviticus Project investi age, 3.76 to 1, effected through were operated by Gilbert Shelton, gations involved the creation and the use of non-recourse promis a friend and associate of the sale of interests in 21 limited part sory notes and advance royalty promoters. payments. nership coal tax shelters based on Securities law requires that pro coal reserves in Pennsylvania, In 1977, 12 additional limited moters in such deals (situations West Virginia and Kentucky. A partnerships promoted by where the promoters want to insu total of $20 million in cash was McKenna, Wellbrock and Heit late themselves from liability) put up by 541 private investors meyer were also filed in the state must keep an "arms length" dis from 29 states who then wrote off of New Jersey bearing the names tance from the activities of the an estimated $42 million in tax Aspen Associates, Birch Asso limited partnerships they promote. deductions. ciates, Cyprus Associates, Fir Cone Associates, Hemlock Asso It is thus interesting to note that The promoters, armed with a ciates, Hickory Associates, Larch the ten corporations created by national network of brokers and Associater" Maple Associates, the promoters (McKenna, Well wholesalers, provided the inves Oak Associates, Redwood Asso brock and Heitmeyer) initially tors with offering memoranda ciates, Sequoia Associates and used the same address as the two claiming the 11,493 acres of land Spruce Associates. They came to management firms-16 Evergreen involved held some 30 million be known as the "Tree Deals." Drive, North Caldwell, N.J. tons of coal. In actuality, much of it was not economically recov With changes in the federal tax It is even more interesting to erable or had a high sulphur con laws that went into effect in Octo note that 16 Evergreen Drive, tent which drastically reduced its ber of 1976, these 12 limited part North Caldwell, N. J., was Heit market value. nerships began utilizing full meyer's home address. There's a recourse promissory notes in con house there, not an office build Based on an analysis of royalty junction with investments in high ing. Shelton also lived there. payments, only 508,880 tons of risk U. S. securities for additional coal were mined. Of that amount, tax leverage. Investors in these 12 In 1981, George Poggel, a the investors received royalties on limited partnerships, which had general partner who was involved only 334,000 tons (or one percent acquired property rights to seven in brokering some of these coal of the total touted by the promot leases and five deeds in Knox and tax shelters, told the Crime ers). As in most limited partner Perry counties, Kentucky, had, on Commission: coal tax shelter cases examined by the average, tax write-offs of 1. 7 Leviticus Project members, the "See, what the Wellbrock, Heit to 1 in 1977. Commission's investigation meyer, McKenna group has done uncovered deceptive if not illegal McKenna, Wellbrock and Heit for years was put deals together business practices, a string of meyer promoted these 21 limited as syndicators, packagers, or pro companies which gave the appear partnerships through ten moters, and these things fall ance of legitimate and distinct companies. apart. They seem to lack mining ventures, and the eventual substance. collapse of those mining ventures The companies, which acted as in February of 1980. sublessors of coal leases to the "Now anybody, God knows, can limited partnerships or investors, have a business failure, it is possi were Atlantic Energy Associates, ble. It is very difficult to run a Atlantic Energy Group, Atlantic business these days and do it In 1976, William L. McKenna, Energy Ltd., Bitumco Associates, right, and profitable, and every Richard D. Wellbrock and Rich Bitumco Properties, Inc., Conen thing else. But when you run, 20, ard A. Heitmeyer filed in Bergen co Associates, Gilcrest Manage 30, 40 (businesses), or whatever, and Essex counties, New Jersey, ment, Inc., Pennco Associates, and everyone fails . . . There is a for the formation of nine limited Pittco Associates, .and Shaco pattern here." partnerships which went under the Incorporated. (These firms will There was a pattern, indeed, in names Alphex Associates, Welrex hereafter be referred to in this the 21 limited partnerships exam Associates, Deron Associates, report as Bitumco affiliates.) ined by the Crime Commission. Setna Associates, Bettex Asso ciates, Cameron Associates, Elm According to one of the whole Associates, Grove Associates and salers who was familiar with the Main Associates. deals, the 21 limited partnerships were managed by either Caldwell Management, Inc. or Gilcrest 46 Shown above is a piece of heavy mining equipment that was repossessed after Jefferson-Clearfield Coal Co. liqui dated its assets. Dwarfed by the mammoth machine is a 6- foot-2 man. Three contract miners were hired 9,000 Tons of There were other indications, to run the coal operations-one however, that the company had miner for the West Virginia oper Mined Coal Reburied no intention of staying in busi ation, one for Pennsylvania and The final step for the promoters ness. Former employees said the one for Kentucky. None was in a was to create and operate their firm had been healthy with new position to take the job, however, own mining company, a firm to equipment and a good cash flow lacking either sufficient time, be known as Jefferson-Clearfield when it started operations. money or equipment. The pro Coal Co., Inc. In addition to Jef moters promised them "start-up" ferson-Clearfield receiving the They told of intentional setbacks funds, but did not deliver. The standard fee per ton of coal such as cutting work shifts, turn contract miners eventually mined, the firm passed along ing down new coal leases, and defaulted on the contracts. additional "actual mining costs" ceasing payment on leased mining to the investors. The promoters equipment, thus forcing The two management companies also created a second company, repossession. then informed the investors that Bitumco Collieries, Inc., which In one case they recounted the they planned to streamline the marketed the coal their mining actual reburial of 9,000 tons of partnersh.ips' holdings, using a company mined. process they called "unitization." mined coal. As a result, potential investor J efferson-Clearfield Coal Co. In no instances, did these former profits and promoters' costs were eventually shut down, undergoing employees ever believe that Jeffer both slashed. Eventually all the "orderly liquidation." The com son-Clearfield Coal Co. had lost coal leases promised the investors pany claimed it had been pushed any money on mining jobs. ended up in a small geographical to the brink of bankruptcy by a area in thnee adjacent counties depressed coal market, problems (Cambria, Jefferson and Clear with mining permits and with field) in ,-",estern Pennsylvania. strict environmental laws. 47 In 1976, four of the ten Bitumco affiliates acquired an assignment of a lease on aI, OOO-acre tract of land located in Pennsylvania's Jefferson and Clearfield counties from Intercoast Coal Co. The property was divided into four separate parcels with mining rights being re-assigned through the four Bitumco affiliates to the limited partnerships of Alphex, Deron, Setna and Welrex. A geological survey, paid for by Jefferson-Clearfield Coal Co., estimated there were 4.1 million Shown above is a tract of Jefferson-Clearfield Coal Co. tons of recoverable metallurgical land located in Clearfield County's Sandy Township bor grade coal on the entire property. dering Jefferson County. The topsoil erosion depicted in the foreground resulted in a notice of violation being issued by This survey was based on the U.S. Office of Surface Mining. researching old government sur veys and studying outcroppings. Reported 0/0 of Undivided being assigned to a Bi.umco affil Reserves Fractional iate which in turn re-assigned the However, a later study consisting Tract in Tons Interest rights to the limited partnerships of core drillings and lab analyses of Bettex, Cameron, Elm, Grove estimated that less than 521,000 Alphex 1,380,000 33070 and Main Associates. Deron 1,205,000 29% tons of coal could be mined eco Setna 950,000 23% Again the contract miner, in this nomically. It also indicated that Welrex 600,000 15% the four tracts contained steam case P&L Coal Corp., defaulted. coal, not metallurgical coal, and Under this arrangement, the con In November of 1977, investors that the steam coal had a high tract miner would be required to sulphur content. in Bettex, Cameron, Elm and mine coal on only one parcel at a Grove were informed that their After the original contract miner time, as opposed to four parcels, four general partners intended to (Inter-American Fuels, Inc.) thus reducing current mining unitize the four tracts, a venture defaulted, the investors were told costs. Conversely, the investors in that was accomplished (again in that their four general partners the four limited partnerships apparent violation of SEC regula (persons picked by the promoters would end up with substantially tions) but which produced no to oversee the limited partnership smaller interests in smaller pieces coal. operations) had decided to of the pie. They could only hope "unitize" the interests in the four that all parcels eventually would In March of 1978 the West Vir parcels "in order to diversify the be mined. ginia investors were informed of risks of the investors and create a the prospect of acquiring interest Unitization appears to violate a in two mining ventures in Penn more manageable mining U. S. Securities and Exchange operation.' , sylvania's Jefferson and Clearfield Commission regulation dealing counties with estimated recover Under this "unitization," each with "integration" that prohibits able reserves of 2.3 million tons. limited partnership would be a single offering from being artifi given an "undivided fractional cially divided by the issuer in an Mining Ventures effort to qualify as several offer interest" in the overall operation Abandoned of the land based on a ratio equal ings that would be exempt from to that designated by the coal registration. A year later, these same invest reserves each partnership held an ors were told that rights to the interest in. For the four Pennsyl land in Clearfield County (known vania tracts it broke down this as the Carns Property) had not way: In 1976, Interstate Resources been acquired because the con Corp. (an Illinois corporation) tract miner (Jefferson Clearfield acquired the mineral rights to Coal Co.) had determined that the 3,000-acres of land in Randolph reserves were less than previously County, W. Va. The land subse believed and that the coal on the quently was divided into five Jefferson County tract (known as separate tracts with each tract the Gaffney Property) contained a 48 high sulphur and ash content. The Jefferson Land and Mineral Co. mining ventures were thus abandoned. l ~ Deed to Perry County ______There is no doubt that investors ---~ ! -... in these coal tax shelter schemes Towers Construction Heidrick Fuels E. Driggers often were lulled along by letters (1,068 acres) (1,068 acres) (1,068 acres) from the promoters (through the management companies and gen ~ ~ ~ Atlantic Energy Ltd. Atlantic Energy Atlantic Energy eral partners) promising greener Group Associates pastures ahead. There also is little doubt that these letters helped ! ~ ~ create an appearance of legit Birch Associates Spruce Associates Hickory Associates imacy, thus discouraging inquiries by law enforcement and regu latory agencies. The fifth limited partners!1ip in The remaining two deeds and the the West Virginia operation, Main seven leases acquired by Driggers Nor is there any doubt that the Associates, turned out to be an were subleased through Heidrick promoters, the general partners "insiders deal" between brokers Fuels, Inc., which, when coupled and the management companies and promoters intent on sheltering to the above transaction, gave the were closely entwined. their own money. Under such an appearance of seven leases and arrangement, investor costs are five deeds or 12 separate deals. In the majority of these 21 lim reduced significantly by eliminat This same technique was used to ited partnerships, the general part ing finders (brokers) fees as well divide the Pennsylvania properties ners, who had no experience in as expenses for offering memo from one to four tracts and the the coal industry, were actually randa, legal and tax opinions. I West Virginia properties from one brokers who were rewarded by the to five tracts. promoters for obtaining substan This provided more working tial numbers of investors. capital at risk which afforded Driggers stated that he agreed to these investors a 6-to-1 tax write act as contract miner for the 12 General partners who acted as off ratio, as opposed to the aver "Tree Deal" limited partnerships, brokers were required to invest an age 3.7 -to-1 write-off attained in doing business as Driggers Equip initial $500 or $1,000 in the lim the other eight 1976 deals. ment Co., Inc. However, he later ited partnership they controlled, defaulted, claiming that the pro according to a former general moters had broken a commitment partner who was interviewed. to provide funds to cover start-up Once a limited partnership had In 1977, Edwin T. Driggers, a costs, a contention that Bitumco been filled and formally capi coal mine operator from the Cor principals disputed. talized, the promoters returned bin, Ky., area, acquired seven the $5001$1,000 investment. The coal leases and three deeds that From this point on, the "Tree general partner then collected a Bitumco affiliates then syndicated Deals" took the same course as $10,000 "general partner's fee" through 12 limited partnerships, the earlier deals in Pennsylvania which came from the capitaliza referred to earlier as the' 'Tree and West Virginia. Proposals tion of his limited partnership. In Deals." Driggers said he was were made to the investors to give other words, it was the investors introduced to promoter Wellbrock up their interests in Kentucky and who were rewarding him for his by an individual named Marvin acquire undivided fractional inter sales acumen, not the promoters. H. Stone. Driggers was instructeLl ests (again unitization) in sup posed coal-rich land in Pennsylva With the $10,000 fee in hand, by Wellbrock to divide one of the deeds (from Jefferson Land and nia's Cambria and Clearfield the general partners immediately counties. Once again there was delegated all management respon Mineral Co. for a 3,204 acre plot of land in Perry County, Ky.) less coal in the ground than orig sibility to one of the management inally stated. Once again the min companies, which, as pointed out into three separate parcels. Drig gers stated he also was instructed ing operations collapsed with the earlier, were operated by a friend investors failing to net profits. of the promoters. by Wellbrock to create two cor porations, Heidrick Fuels, Inc. The management companies then and Towers Construction Co., charged the investors a fee of and to deed the three separate $300 a month for each limited parcels jointly in his name and in , Of the $20 million in cash put up by the 541 the names of the two companies. private investors, it is estimated that only 400/0 partnership. of it was used for working capital, while the other 60 percent was used for formation or promotion fees. 49 There also was another "insiders The Crime Commission also deal" (Sequoia Associates) in referred its findings regarding the which investors enjoyed a tax estimated $42 million in tax write write-off of 15-to-1 and which offs to the Internal Revenue appeared to run afoul of federal Service. regulations. Under U. S. Securi ties and Exchange Commission On May 18, 1982, federal grand rules, only 35 investors were per jury indictments were handed mitted in a private offering lim down in London, Ky., against ited partnership; there were 78 in Marvin H. Stone, Edwin T. Drig Sequoia Associates. There also is gers, and Roy K. Cornellius, who no indication that Sequoia Asso had provided the coal reserve esti ciates ever registered with the SEC mates for the Kentucky proper or filed for an exemption, as ties. They were charged with four required. counts each of mail fraud and conspiracy. One of the brokers who invested in the Sequoia "insiders' deal" On Nov. 3, 1982, Cornellius was told the Crime Commission that dismissed from prosecution due to he knew it was not a legitimate poor health. Driggers and Stone tax shelter. But he said he also were convicted on Nov. 24, 1982, knew that it would take the Inter in U. S. District Court. On Jan. nal Revenue Service years to dis 3, 1983, Driggers was sentenced to cover the abuse and collect the five years in prison for each of unpaid taxes. As he looked at it, the four counts and fined $4,000 the "tax profit" he had realized and Stone was fined $10,000 and (a $50,000 write-off for a $3,333 sentenced to three years investment) was simply a cheap imprisonment. way of borrowing money because the government penalty was much The prosecuting U. S. Attorney, lower than the current prime in a letter dated Jan. 20, 1983, interest rates for personal loans. thanked the Crime Commission for its assistance, stating," ... the advice rendered and materials fur nished were exceptionally valuable The Pennsylvania Crime Com in helping put the case together." mission referred its investigative findings to numerous state and federal law enforcement and regu latory agencies througholll: the United States. Included were U. S. Securities and Exchange Commission offices in Washing ton, D. C., New York, and Seat tle; the U. S. Attorney's Office in Lexington, Ky.; state Securities Commissions in Montana, Oregon, Alabama and Utah; the New Jersey Attorney General's Office; and the Montana Depart ment of Revenue. 50 Corporate Looting: Pocketing the Profits 51 I Four of West Pine's 14 stock holders had criminal records, including John McCullough, an associate of the late Philadelphia ~1'wm:%;,~ij;\):;i(c~*;;*i;:.12iiffE)\';';1 mob boss Angelo Bruno. A for mer president of Roofers Union West Pine Local 30 in Philadelphia, McCul Between 1979 and 1984 there lough was murdered gangland were at least 116 Pennsylvania style in December of 1980. coal companies that went bank rupt, some as a result of fraudu In 1975, two men, Pasquale lent schemes that funneled Quinn and Wiiliam Gaskins, corporate funds into people's incorporated West Pine Construc pockets. Others were driven deep tion Co., Inc. to strip mine coal into the red by con artists who on a leased tract of land in Shen bled off profits. andoah, Pa. Four years later they William Gaskins obtained a sublease on a tract of Coal miners and creditors land owned by the Renninger victed twice for gambling both suffered. Coal Co. in the town of Branch offenses. Conwell served as West dale, not far from where McCul Pine's assistant vice president. It was in February of 1983 that lough grew up. the Pennsylvania Crime Commis McCullough, through his sion began an investigation into a They began to mine the Branch friends, coaxed $307,400 into bankrupt strip mine coal company dale property, but neglected to West Pine over a two-year located in Pennsylvania's Schuyl post a required land reclamation period. I The firm posted its DER kill County known as West Pine bond with the state. Conse bond. From January 1979 Construction Co., Inc. quently, an inspector for the through December 1981, West Department of Environmental Re Pine mined 38,135 tons of coal The investigation was launched sources (DER) ordered them to which it sold for $878,559 to three after the Commission received cease operations until the $20,000 coal breakers-Blaschak Coal Co. information from the Philadelphia bond was obtained. of Mahanoy City, DiRenzo Coal District Attorney's Office that Co. of Minersville, and Olenick some of the stockholders had Gaskins and Quinn suddenly Brothers Coal Co. of Forestville. criminal records and links to were strapped for money. Gas organized crime; and after the kins, who had been boyhood pals In the Blaschak Coal transac Leviticus Project alerted its mem with McCullough, turned to his tions, checks totaling $195,286.86 bers to be on the lookout for old friend for help and the labor were made out to West Pine Con fraudulent bankruptcies involving boss, who by now had moved to struction Co. for coal purchased, coal companies. Philadelphia, arranged for several money that apparently wound up acquaintances to invest in the in the company's coffers. Blas As a result of its investigation, coal company. chak Coal, however, also wrote the ~ommission concluded that checks totaling $22,383.20 to an over $370,000 had been diverted, They included Joseph Crosley, a individual named David Hobbs often through middlemen, from former Philadelphia Roofers who Blaschak officials thought to West Pine Construction Co. 's Union organizer who became a be an independent supplier. corporate coffers. West Pine stockholder and later served as a company director and In fact, Hobbs worked for West Coal was sold for cash that was vice president; and Thomas Pine as a truck driver. He was not reflected as income in West "Gooney" Walsh, another Gaskin's brother-in-law. He was Pine's corporate records and thus former Philadelphia roofer who selling West Pine coal. He was shielded from federal and at one time was listed as West cashed the checks and gave state taxing authorities. Pine's treasurer. the $22,383.20 to Gaskins and/ or Quinn. While the money was being di Crosley has been convicted twice verted-most of it to two of the for assault and battery. Walsh has firm's officers-bills mounted. By been convicted of possession of lOne of the backers of West Pine was Francis December of 1981 West Pine Con Rossct.ti, who loaned the firm $50,000. Rossetti counterfeit currency and aggra was involved in credit scams at two Las Vegas struction Co. owed 58 businesses, vated robbery. Another stockhold casinos during 1976, along with such Philadel government agencies and individ er was Charles T. "Shotsie" phia organized crime figures as Victor DeLuca, uals over $1.4 million. In Carl Ippolito and Frank Monte. See the Penn Conwell, a Philadelphian who has sylvania Crime Commission's "1980 Report, February of 1982, the firm filed been arrested eight times and con- A Decade of Organized Crime," for for bankruptcy. additional detail. 52 In the DiRenzo Coal Co. deals, contractor split it with Quinn $617,983.42 worth of coal was andlor Gaskins. purchased from West Pine. Of that amount, $305,494.22 was In still another scheme to divert diverted through middlemen and funds, Quinn demanded cash pay make-believe companies to Gas ments from DiRenzo Coal for all kins, Quinn and Melvin Weir, a coal from a seam on the West subcontractor who with another Pine property known as the Mam man had struck a deal with Quinn mouth vein. Quinn offered this to mine part of the West Pine higher quality coal at the same sublease in return for half of the price that DiRenzo had been coal produced. paying for coal of a poorer quality. DiRenzo agreed to the Weir, who is McCullough's cash payments. nephew, testified at public hear ings the Crime Commission held Fictitious Firms Paul DiRenzo in Pottsville on June 28, 1984, Mask Coal Sales that he sunk his share of the Q. Whose idea was it to come From the start, Quinn had made money back into the mining oper up with these names? ations, something he said that it clear that he did not want any Quinn and Gaskins did not do. "I records kept of the cash transac A. I believe I suggested it. put it all back in," Weir stated. tions involving the Mammouth vein. To keep track of the money, Q. You suggested the names for "I was stuck with all the costs of your bookkeeping purposes? doing the strip mine operation, DiRenzo Coal Co. listed the cash plus I.he DER, and we had equip payments on its books as being made to three fictitious compa A. That is right, for my dis ment payments, we had our cred bursement records. itors which we had to pay." nies-Fallen Oaks 1, Fallen Oaks 2, and Tall Oaks. Under this ar Q. And again, that was because The $305,494.22 was siphoned rangement, Quinn received Mr. Quinn did not want these off .uur ways. $196,991.22 in cash. sales of coal to appear under the name West Pine Construction? In one instance, DiRenzo Coal Paul DiRenzo, DiRenzo Coal's simply made out a check for president, was asked about the A. That is right. $15.991.75 to Hobbs at Quinn's creation of the fictitious compa request. Hobbs cashed the check nies at the Commission's public Weir was asked during the hear and gave the cash to Quinn hearings by Leviticus Counsel ings if he had kept a record of the and/or Gaskins. Joan Weiner. This exchange coal he and his partner mined took place: from the Mammouth vein. He In another, Quinn and Gaskins replied that he had. simply requested that a $11,320.50 Q. Can you explain how payment to cover coal delivery those names appear in your Q. Did either Mr. Quinn or Mr. costs be made in cash. It was. purchase journal? Gaskins know that you were keep ing that record? In a third deal, DiRenzo Coal A. Well, during the visit of late Co. paid for West Pine coal with '78, a short time after that Mr. Weir: No. $81,190.75 in checks made out to Quinn had stopped in the office an individual named Martin and said to me that all the coal Q. Did they ever find out that Hanrahan, a friend of Weir's. coming off of the Renninger lease you were keeping that record? DiRenzo Coal officials had been will not be marketed solely under Weir: Yes. told by Quinn that there had been West Pine and that he has some a change in West Pine's corporate shipments coming in that he Q. What did they say? officers, and that all checks con wants to be paiu cash for. I was sequently were to be made out to reluctant to do this and I said I Weir: They said to keep my Hanrahan, who wasn't even a can't just go and disburse cash mouth shut about Fallen Oaks. West Pine employee much less out of the company without hav an officer. ing records for it. He says, well, Q. Did Mr. Quinn ever give you do what you want to do. I said, any other indication that he Hanrahan cashed the checks well, I will identify my cash pay wanted you to keep extremely and gave the money to Weir, ments under these names, then. quiet about the operation that was who, under his agreement as sub- That is how I did it. going on on the Mammouth vein? 53 Weir: Sometime when we were Q. Do you know why they were Company or Olenick Brothers working there he told me there made to Marty Hanrahan? Coal Company, such that they was somebody coming to the job would be paying you for those from Philadelphia or something, A. I guess they didn't want, you goods and services? to hide the machine. know, West Pine Construction Co. 's name on it. A. No I didn't. Q. He told you to hide the machine? Q. Why? Q. When you cashed these checks were you compensated for Weir: Yes. A. So nobody would know what your trouble? was going on. They wouldn't have Q. Why did he tell you to hide to enter it into the books. This A. No, not necessarily. No the machine? way they put the money into set fee or anything, no money their pockets. like that. Weir: Obviously he didn't want them to see who was there. Weir testifil;:!d at the public Q. Did you receive any occa hearings that Hanrahan was given sional payment for cashing these Q. He didn't want the people several hundred dollars for checks? from Philadelphia ... ? cashing the checks. This exchange took place: A. Well, he (Weir) would Weir: To know what was take me out to dinner once going on. Q. Now Mr. Hanrahan was bas in a while .... ically doing a favor by cashing West Pine coal valued at these checks, is that correct? Q. But on occasion would Mr. $42,906.00 was sold to Olenick Weir or someone else slip Brothers Coal Co. Included in the A. A personal favor to me. you a ten dollar bill, twenty transactions were checks totaling dollar bill . . .? $27,353.75. These were made out Q. Was he compensated for to Hanrahan who cashed them his efforts? A. No, I have owed him money and gave the money to Weir. The and he said, don't worry, forget remaining money, $15,552.25, was A. The most I know he got about it, or something like that. contained in checks payable was $200. That is about all. directly to Weir, who in both Q. Two hundred dollars. Was cases again split it with Quinn Q. The checks made out to you that $200 in total . . .? and/or Gaskins. West Pine from DiRenzo Coal Company and Olenick Brothers Coal Company Construction Co. got nothing. A. In total. totaled $95,300. You cashed all of "In effect, the company (West Q. And that would be, what, them and gave the money to Mel Pine) was being sucked of its coal $10 here, $20 there, that kind vin Weir, is that correct? profits by these two individuals," of situation? Crime Commission Special Agent A. That is true. I didn't realize Victor DiCicco testified at the A. More or less. it at the time how much it was? public hearings. Q. Who would give him this Q. This $95,300 was not your Regarding the checks made pay compensation? money, was it? able to Hanrahan, Weir testified A. No, positively not. before the Commission on Oct. 4, A. I did. 1983, as follows: Hanrahan also testified: Q. We are talking about a sub stantial amount of money, Q. You have indicated that Mr. Q. Did you receive any checks $95,300. Did you give all of that Quinn and Mr. Gaskins came to that were payable to you from money to Melvin Weir? ' you and asked if you knew some DiRenzo Coal Company? one that could cash a check? A. Yes. Patsy (Quinn) and Billy A. Yes, I did. Gaskins, or Billy, they were A. Yes. always together. Q. Did you i eceive any checks Q. Was that a West Pine Con that were payable to you from Q. They were present when you struction Co., Inc. check? Olenick Brothers Coal Company? handed the money to Melvin? A. No, it was a check issued A. I believe I did. A. Sometimes I went down and right from the breaker, right from they were on the corner. They DiRenzo Coal Co., and there were Q. Did you provide any goods would come to the car and (I) a couple from Olenick Brothers. or services to either DiRenzo Coal would just hand it to them .... 54 Wrg$tr ~~tM~ C [N1$T~GJJCrrmOfN1 C@)D~ ~~C§ (WPC) fO~VIERS~ON OF COAL RECE~PTS January 1919 Through December 1981 $22,383.20 I ! / I / P·rtolh~o'~r ofHOBDS $15,991.75 $11,320.50 ~~~----~~~---~-~-I QUINN AND/OR //f GASKINS ZERO Q. The question is, to whom did West Pine Bernstein: I attempted to .... you actually hand the money. Did Officials Take 5th First of all, we prepared a sheet you always hand to it Melvin? for the principals up there, who Gaskins and Quinn made every were basically Gaskins and A. Yes. He was always there attempt to mask West Pine's true Quinn .... That sheet was sup getting it. I wouldn't have cashed financial picture. posed to give to us information it for anybody else. Stanley J. Bernstein, a certified relative to the sale, who (the coal was) sold to, the tonnage that was Q. Did anyone at any time ever public accountant who represented sold, that which was produced, tell you why the checks were being a West Pine shareholder/investor, the payroll, number of people on made out in your name? told the Crime Commission that he had tried unsuccessfully to the payroll. We sent many hun A. No, they didn't. obtain information regarding dreds of these sheets up to them West Pine coal sales. This because we asked for it on a daily Q. Did anyone at any time ever exchange took place: basis and we never got the first tell you why they needed you to sheet back. cash these checks? Q. During your association with West Pine Construction Co., Inc., Q. Who was supposed to fill A. No, and I guess I should did you formulate a procedure those Oll t, specifically. have realized, I should have for the reporting of income to .inquired more, but I didn't. the corporation? Bernstein: Gaskins or Quinn. 55 Herbert Fisher, an attorney rep The Commonwealth of Pennsyl have been kept, can create signifi resenting Roofers Union Local 30 vania was out $13,183.07 in back cant problems for regulatory in Philadelphia and a friend of corporate and personal income agencies. He said the problems McCullough's, also had prepared taxes; the state Bureau of Em involve: (a) locating the principals forms to be filled out by Gaskins ployment Security $5,076.72. of the company; (b) receiving or Quinn in an effort to monitor notification of the bankruptcies, COmriQny transactions. Fisher, The Internal Revenue Service (c) quality of the records that may who owned five percent of West lost $46,049.53. be available, (d) gaining access to Pine's outstanding shares, testi those records. fied at a Crime Commission hear The federal Office of Surface ing on Oct. 6, 1983: Mining (O.S.M.) stood to lose Q. Did you seek access to those $14,745.42 which included a rec record$ on a voluntary basis? Q. Do you know, Mr. Fisher, lamation tax due on unreported whether or not records were being coal sales. (Under the Surface A. Yes, we do. kept as to how much coal was Mining and Reclamation Act of Q. Is there any other mechanism being produced and sold? 1977, coal companies must pay the O.S.M. a reclamation fee of available to you whereby you can, A. I don't know. I honestly $.35 for surface mined coal and in essence, compel disclosure of don't know. $.15 a ton for deep mined coal.) those records? Q. Did you ever request to see Big and small businesses also A. The only means available to any records of that nature? took it on the chin. me is by referring the matter to our counsel in Charleston, West A. I made up elaborate forms Leasing Service Corp., located in Virginia, who may attempt to for them to send back, and they Pittsburgh, was left with an out seek relief for me. But as an never did. 2 standing bill of $114,988.86, auditor, as compared to, for according to bankruptcy paners. example, IRS, I have no sub Both Quinn and Gaskin:; refused The Rockwood Insurance Co. of poena, I have no authority to to answer questions pertaining to Pottsville was out $5,292.32. issue a federal summons to gain West Pine Construction Co. at the Kramer's Arco Service Station in access to these records. Crime Commission's public hear Orwigsburg lost $1,894.31. ing in Pottsville, citing protection Q. How long would it take for from self-incrimination under the Paul DiRenzo lost $95,000. He you to gain access to someone's 5th Amendment. testified that he had advanced records if that person were not West Pine the money because it being cooperative and you had to Hobbs also invoked his 5th was experiencing financial prob go through your solicitor .... Amendment rights when asked if lems and needed fresh capital. What is a ballpark amount of he had ever cashed checks for He said the $95,000 was to be time for that? West Pine Construction Co. or if applied against future coal pur Blaschak Coal Co. owed him any chases, but that the coal was A. Well, you are talking about money. Hobbs had answered never delivered and he was stuck months. those and other questions at a with the unpaid debt. prior executive session hearing Q. And in the meantime, what is before the Commission. During the period that West Pine happening in terms of your ability was experiencing financial diffi to get these fees for the govern After West Pine Construction culties, the Commission received ment? Is everything on hold? Co. filed for bankruptcy, a Wil information that certain stock liamsport doctor, Douglas Col holders were leasing through the A. That is correct. This may be kitt, assumed control of the corporation three Lincoln Conti the case. company by obtaining all of the nentals and two Oldsmobile Q. You mentioned that you do outstanding stock. He continued sedans. The leasing company ulti not have subpoena power. May I to mine coal while the firm mately filed suit for $32,265.00 assume that if you did have such reorganized. for nonpayment. subpoena power your job would Pennsylvania Owed be a lot easLr? $13,000 in Back Taxes The debts piled up by West Pine Joseph Macaravage, an auditor affected both the private and pub with the Office of Surface Min , Bankruptcy records show that most of West lic sectors with the state and fed ing, Department of Interior, testi Pine's books and records, including all cash re fied in Pottsville that coal ceipts and ledgers, were in a construction eral governments being owed in trailer that was vandalized sometime after Feb. excess of $79,000. company bankruptcies, especially 5, 1982, by unknown persons. The bulk of the those in which shoddy records records were either destroyed or are missing. 56 $runnllHl'1rotf)frW Olf 1~S$@~ Wesi!: ~8fr8e Corrnstrl1JlctB@~ C(Q),,~ HlTIlc .. Acme Machine & Welding Co. (Punxsatawney) ...•.... , ...... , ...... •...... •...... $ 23,344.76 Air Brake & Powder Equipment Co. (Pottsville) ...... •...... ' ...... 57.91 Anthracite Development Corp. (Zerhe) ...... •...... ' ...... 76,800.00 Stanley Bernstein, CPA (Philadelphia) ... ' ...... • ...... ' ...... •...... 15,000.00 Blaschak Coal Co. (Mahanoy City) ...... •...... •...... 50,712.71 Botts Auto Parts (Minersville) ...... •...... 1,465.76 Bressi Powder Co. (Mt. Carmel) ....•...... 7,500.00 Bruno Auto Supply (Hazelton) ...... , ...... 967.41 Chowansky Electronic Service (Frackviile) ... , ...... •...... 2,329.51 Douglas Colkitt (Williamsport) ...... •...... , ...... 25,000.00 Commonwealth of Pennsylvania (corporate taxes) ...... 7,928.10 Commonwealth of Pennsylvania (personal income taxes) ...... 5,254.97 Commonwealth of Pennsylvania, Bureau of Employment Security ...... 5,076.72 Credit Aliance Corp. (Pittsburgh) ...... : ...... •.....•...... 360,991.75 Joseph Crosley (Philadelphia) ...... , ...... 70,808.00 D'Attilio's Auto Service (Minersville) ...... •...... •...... •.. 587.33 Paul DiRenzo (Pottsville) ...... 95,000.00 Fidelity Fund, Inc. (Upper Darby) ...... •...... 487.30 Herbert K. Fisher (Philadelphia) ...... " ...... 21,000.00 Frank Flannery (Philadelphia) ...... •.... ' • ...... 7,500.00 William Gaskins (Minersville) ...... 9,500.00 Gerald Gatti (Hazelton) ...... 1,842.35 Oscar Glassman (Philadelphia) ...... 184,150.00 Ben Green (Philadelphia) ...... 25,000.00 David Hammer (Pottsville) ...... 1,277.95 Henny's Auto Parts (Schuylkill Haven) ...... •...... 450.54 David Hobbs (Pottsville) ...... 7,200.00 Hubbard Coal Co. (Wilkes-Barre) ...... 4,500.00 Internal Revenue Service ...... •...... 42,381.66 Internal Revenue Service (Excise Tax Due on Unreported Coal Sales) ...... 3,667.87 Jack's Products Co., Inc. (Philadelphia) ...... 28.33 Elmer Johnson, Inc. (Pottsville) ...•...... " ...... 128.47 Kramer's Arco Service Station (Orwigsburg) ...... •...... 1,894.31 Leasing Service Corp. (Pittsburgh) ...... ••...... •...... 114,988.86 Liberty Air Compressor Co. (Philadelphia) ...... 99.93 C. L. Mack, Inc. (Tremont) ...... •...... •...... 11,000.00 Medico Industries (Wilkes-Barre) ...... •...... 6,025.76 Morgan & Halcovage (Minersville) ...... 133.00 William R. Mosolino, Esq. (Orwigsburg) ..••...... •...... " ...... 1,300.00 Penn Equipme;'\t Corp. (Port Carbon) ...... 3,501.90 Penna. Brake & Supply Co. (Hazelton) ...... 1,074.00 Pasquale Quinn (Minersville) ...... , ...... 9,500.00 Renninger's Garage (Tremont) ...... •...... •...... •..•...... 2,028.04 Renninger Coal Co. (Branchdale) ...... •...... 3,150.72 Rockwood Insurance Co. (Pottsville) ...... •...... •...... •...... 5,292.32 Rothstein Trust (PhHadelphia) ...... •...... 30,000.00 George T. Seiler Welding Supply (Minersville) ...... •...... 70.68 Robert Shewokis Fuel (New Philadelphia) ...... • ...... 2,907.94 State Equipment (Lancaster) ...... •...... 27,634.32 Swain Enterprises, Inc. (Philadelphia) ...... • ...... • ...... 26,729.35 Ray Swenson, Inc. (Philadelphia) .....•...... •. 5,536.44 Tallman Supply Co. (Tower City) ...... 954.60 U.S. Dept. of Interior, Office of Surface Mining ...... •...... 9,610.40 U.S. Dept. of Interior, Office of Surface Mining (Reclamation Tax Due on Unreported Coal Sales) ...... 5,135.02 Wagner Sales Co., Inc. (Winfield) ...... •...... • 1,299.01 Joseph Walacavage (Pottsville) ...... •...... •...... •...... 40,000.00 John Walaitis Coal Co. (Branchdale) ...... •...... •...... •.•...... 85,313.36 West End Motor Co., Inc. (Pottsville) ....•...... •...... •...... 173.01 57 A. In those cases where I was In closing remarks, Leviticus A New York investment house denied access, yes ma'am. Counsel Weiner noted: was hard hit financially. Macaravage, based in Wilkes "(West Pine) is an interesting Kittanning Coal had acquired Barre, stated that he was the only story but it is really a sad story in the assets of Kitt Coal Co., which auditor assigned by the Office of the end because what happened on Oct. 6, 1978, had been placed Surface Mining to monitor was this company went bankrupt into involuntary bankruptcy by a Pennsylvania's six-county and left somewhere in the neigh federal judge in Pittsburgh. anthracite region. borhood of 58 people, companies Also testifying were two repre holding the bag to the tune of According to a former employee: over $1.4 million. sentatives from the Pennsylvania - Kitt Coal Co. began opera Department of Environmental "I would like the record to tions in Armstrong County in Oc Resources, attorney 1 ames Morris reflect that in preparation for this tober of 1975 and for the next and Gary L. Merritt, DER's hearing I personally spoke to two years made a profit. Energy Program Coordinator. many of the creditors .... Each Merritt stated that coal-produc and everyone of those creditors in - In 1978, however, the com ing states like Pennsylvania stand discussing this hearing here today pany's two owners (John W. Ben to lose large sums of money when said, 'Ms. Weiner, we understand son 1r., the majority stockholder coal companies understate the your role and what you are sup with 60 percent of the shares and amount of coal mined because posed to do, but is there any way 10hn H. McCann III, minority federal funds earmarked for state you can get money back for us'? stockholder with 40 percent) be gan using Kitt Coal's profits to land reclamation are based on tonnage figures the states submit. "Now in some instances we are diversify into other industries and talking about fairly large compa to finance a second coal company, Merritt said that between 1979 nies that can absorb those losses, Appalachian-Pocohontas Coal and 1984 there were 186 Pennsyl but in many other instances we Co., Inc. of Beckley, W. Va. vania coal companies that for are talking about small operators, They also secured personal loans feited land reclamation bonds small businesses, individuals who against Kitt Coal profits. I worth an estimated $8 million. provided either goods or services On Feb. 1, 1979, Kittanning Of the 186 bond forfeitures, he to this company and wound up with nothing in return, and are Coal Co., Inc. executed an acqui said 116, or 62 percent, of the sition agreement wherein it agreed companies "were into bankruptcy finding it difficult to deal with the fact that they were taken. to purchase the assets of Kitt Coal in one manner or another." Co. for $1.5 million. Asked what problems are created "They want repayment, and to be honest with you, I can't give Financing was arranged through for DER when a coal company Allen & Company, Inc. a New goes into bankruptcy, Morris them any idea of whether that re payment is forthcoming or not." York-based investment banking stated that "the result for the firm, and Bally Coal Co., Inc. of Commonwealth's regulatory pro Media, Pa. The details were gram is, to put it bluntly, nothing Kittanning Coal spelled out in a stockholders short of disastrous." agreement that was entered into He went on to explain that there During the late 1970s, the F.B.I. on March 1, 1979, between Allen have been a number of "disturb and the Pennsylvania Crime Com & Company and Peter Fitzpatrick ing lower court decisions" that mission investigated a classic and 10seph C. Ripp, officers and essentially had short-circuited the "bust-out" of a coal washing and stockholders of both Bally Coal enforcement powers of regulatory processing plant located near the and Kittanning Coal. 2 agencies like DER in bankruptcy Armstrong County community of cases. He also cited cases where Adrian. , In a civil 5uit filed in March of 1982 in feder bankrupt parties have been per al court in Pittsburgh. McCann and Benson are mitted to abandon assets which Almost $.5 million was bIen accused of receiving kickbacks from the sale of from the firm, Kittanning Coal Kit! Coal to Kittanning Coal by falsifying the have been deemed worthless. list of Kilt Coal's creditors and thus artificially Co., Inc., pushing it to the brink inflating the purcha5c price. " ... if all the bankrupt has to of financial collapse. do is abandon the property to , Ripp. of Pompano Beach. Fla., has been identified as a business associate of Philadel avoid any ubligation, to comply Some of the diverted money was phia La Cosa Nostra member Raymond "Long with state police power enact spent at jewelry stores and travel John" Martorano. convicted on July 31. 1984. ments, you are facing an absolute agencies. Some was used to pay in the murder of Philadelphia union boss John "ghost" employees, men with McCullough. Fitzpatrick, whose last known ad irremedial disaster," he said. dre~s was the New York Athletic Club. was links to organized crime who han convicted in Florida in the early 1980s for dled such things as labor matters. fraudulently selling unregistered securities and sentenced to five years in prison. 58 The stockholders agreement pro vided that: 1) Allen & Company would loan Kittanning Coal the $1.5 million to enable Kittanning to purchase the assets of Kitt Coal; 2) Allen & Company would own a majority of the common stock of Kittanning; 3) Allen & Company would in vest $250,000 in securities of Kit tanning to provide Kittanning with working capital to operate the new business; Joseph C. Ripp Peter Fitzpatrick The $250,000 in working capital Co. 's board of directors, used 4) Ripp and Fitzpatrick, on be provided by Allen & Company to falsified documents to open three half of Bally Coal Co., would assist in the start-up production at bank accounts in the name of also invest $250,000 in the securi the coal washing plant was depos "Kittanning Coal Co., Inc." at ties of Kittanning for working ited in Kittanning's account at Merchants National Bank in Kit capital; PNB. The $250,000 Ripp and tanning. Between March 9 and 5) Bally Coal Co. would own a Fitzpatrick were to provide also Oct. 17, 1979, Ripp and Fitzpat minority of the common stock of was forwarded to PNB in the rick wired $463,500 from the PNB Kittanning; form of a bad check, apparently account to the Merchant National drawn on an unfunded, closed Bank accounts. 6) Bally Coal would manage the account at another coal company. daily operations of Kittanning Checks Earmarked Coal through its designees-Ripp Allen & Company officials were for Jewelry Stores and Fitzpatrick. not aware that the check, which they had been shown, had As a condition of the Kitt Coal Under the stockholders agree bounced. Nor did they have much sale, it was agreed that $200,000 ment, Fitzpatrick was designated contact with the operations at the would be held in an escrow ac as president of Kittanning Coal washing plant as Ripp and Fitz count at First Pennsylvania Bank Cu., Ripp as vice president and patrick handled the day-to-day fi to satisfy any creditors who might Robert H. Werbel, a representa nances, as outlined in the stock come forth after settlement. The tive of Allen & Company, as holders agreement. money eventually was released to secretary. a firm identified as Pennsylvania Allen & Company subsequently Refrigeration Co., Inc., a corpo The board of directors of Kittan put up an additional $200,000 in ration controlled by Ripp and ning Coal (three designees of working capital for Kittanning which shared Ripp's home Allen & Company and two desig Coal with Ripp and Fitzpatrick to address. nees of Bally) resolved that: put up $100,000. They never did, a fact that again was kept from From there it went to Andrew 1) Pittsburgh National Bank Allen & Company officials. Chalako, an ex-convict and or (PNB) would be designated as the ganized crime figure who opened depository for Kittanning's funds; Not only did Ripp and Fitzpat an account at Continental Bank in rick fail to put up any money, Philadelphia in Pennsylvania Re 2) Ripp and Fitzpatrick would they diverted for their personal frigeration Co.'s name. 3 be authorized to withdraw Kittan use and benefit most of the ning funds not exceeding $20,000 $450,000 Allen & Company put from the PNB account (with Wer up, using wire transfers and bel's signature they could with checks drawn on Kittanning Coal draw in excess of $20,000); Co. accounts. In short, they were , In 1970, Chalako was convicted of conspiracy bleeding the firm to death. to extort money from several Camden, N. J., 3) No Kittanning officer had bars in an effut to settle a ten-week-long bar authorization to obtain credit tenders strike. A t the time he was secre Eight days after the stockholders tary/treasurer of Local 170, of the Bartenders, from PNB. agreement was approved, Ripp Hotel and Restaurant Employees Union in and Fitzpatrick, once again with Camden. He received a four-year prison sen tence and a $2,000 fine. On March 25, 1980, out the knowledge of Allen & Chalako was an usher at the wake of Philadel Company or Kittanning Coal phia Mafia boss Angelo Bruno. 59 On June 26, 1979, the $200,000 paid on a weekly basis even was deposited in t~e account and though they weren't carried on the on the same day a check for official payroll. The consultant $150,000 was written to Conti said they included Chalako, Frank nental in exchange for a treas Vadino, a convicted narcotics urer's check in the same amount trafficker; and Anthony made out to Kitt Coal Co. D'Amato. An analysis of the Continental Ripp stated that he was intro Bank account covering the period duced to Vadino by Philadelphia from June 26, 1979, to June 22, LCN member Ralph Natale, like 1981, showed that a total of Chalako a former secretary/treas $219,000 (including the $200,000 urer of Local 170 of the Bar in escrow money) had been depos tenders, Hotel, and Restaurant ited. There were 56 checks written Employees Union in Camden, against the account, most appear N.J. Ralph Natale ing to pay personal bills, being made out to jewelry stores, air Ripp said it was Natale who had The suit, brought under the lines, travel agencies, and bank pressured him to "hire" Chalako. Racketeer Influenced and Corrupt installment loan accounts. One Organizations Act, sought dam Ripp also stated that Natale, check carried the notation: "For ages for violations of securities with the help of Philadelphia Lease Payment J. Ripp." laws, alleging: Roofer Union boss John McCul There were checks written to lough, was instrumental in thwart "Defendants and others devised Chalako, to John McCann, to ing an attempt by the United and implemented a scheme and Kittanning Coal Co., to West Mine Workers to unionize Kittan artifice to defraud Kittanning, 6 Allen and others through a pat Pine Construction Co., 4 and to ning Coal Co. workers. B.J.J., Inc., a corporation set up tern of racketeering activity . . . According to a former Kittan to manage a south Philadelphia by making a series of false and ning Coal employee, Chalako bar owned by a man named Wil fraudulent pretenses, representa appeared at the plant about a half liam Jones. 5 tions, promises, omissions and dozen times between March and All of the checks were signed by October of 1979, frequently on < West Pine Construction Co., located in days Kittanning was to receive Schuylkill County, was the subject of a recen' Chalako. Pennsylvania Crime Commission investigation payment for coal it had washed that revealed that close to $400,000 had been In order to conceal the diver and processed. The former worker siphoned from West Pine's corporate coffers sions and misappropriation of said Vadino and D'Amato spent into the pockets of several of the firm's officers. Details of that investigation are funds, Ripp and Fitzpatrick in more time at the plant, usually included in this report. formed Allen & Company that drinking coffee and lounging they had hired a certified public around the office. , Checks written on Kittanning Coal Co. bank accounts also were made out to either Jones' accountant named Joseph P. wife, Joyce, or B.J.J., Inc., which oversaw O'Connor to look after Kittan Investment Firm's Losses operation of the Packer Bar, located at 1531 ning Coal Co. 's books. O'Con Approach $.5 Million Packer Ave., Philadelphia. Jones told the Crime Commission the checks covered the nor, who was not a CPA and who On Oct. 17, 1979, Ripp and Fitz repayment of &everal loans totalling approx had worked with Ripp in former patrick were removed as officers imately $40,000 he had made to Ripp in 1979 deals, prepared three financial and 198C. It is interesting to note that Jones of Kittanning Coal by Allen & was the sole officer and incorporator of 211 statements that were forwarded Company, which began an exten J. J. Quince Corp. (tla the Intermission Tav to the Niew York investment sive audit of the firm's records. ern, Philadelphia) which was a subject of a firm. They were inaccurate and Crime Commission investigation involving the Allen & Company eventually esti infiltration by organized crime of legitimate misleading. mated its loss at between $400,000 businesses. Details of that investigation are included in the Commission's 1984 Report. In the late spring of 1979, a Kit and $500,000. tanning Coal Co. foreman said he • On Feb. 8, 1979, Natale. Vadino, D'Amato On March 5,1982, a civil suit and five others were arrested and later indicted discovered that coal suppliers was filed jointly by Allen & Com in Fort Lauderdale, Fla., in a conspiracy to sell were not being paid because of a pany and Kittanning Coal in $900,000 worth of cocaine and other drugs. shortage of cash. In July of that The arrest took place on the Danny Boy III, a U. S. District Court in Pittsburgh. yacht that was owned by the Bally Coal Co. year Kittanning Coal virtually Included among the defendants Vadino and Natale were convicted on July 14, shut down operations. 1980; D'Amato was acquitted. On Jan. 13, were Ripp, Fitzpatrick, McCann, 1982, Vadino was indicted by a federal grand A company consultant said he Benson, O'Connor, Pennsylvania jury in Philadelphia, along with Martorano and discovered through the foreman Refrigeration Co., Inc., Kitt Coal LCN associate John Berkery, in another major Co., Inc., and Bally Coal Co., drug case. Vadino later was convicted and sen that certain people were being tenced to a 5-year prison term. Inc. 60 The indictment stated that loans to be used as partial between March 7, 1979, and Oct. payment had been cc llateralized 17, 1979, Ripp and Fitzpatrick de with a falsified document and that frauded Allen & Co. and Kittan misleading informution had been ning Coal out of approximately provided to the sellers. Janke and $475,202.05. Molinari eventually defaulted on the loans and attempts to secure On Aug. 17, 1984, Ripp pled payment were unsuccessful. guilty to one count of mail fraud and on Nov. 13, 1984, was It was in November of 1982 that sentenced to four years the owners of U. S. Coal, imprisonment. brothers David and Victor Aiello, were approached by Janke and At the time of the indictment, Molinari, who was the principal Fitzpatrick was serving a five-year officer of R.J .M. Financial Frank Vadino prison term in Butler, Fla., after Management, 1601 Packer Ave., being convicted in Palm Beach of Philadelphia. At the time, U. S. concealments which constituted selling unregistered securities in a Coal was experiencing severe violations of federal statutes. deal involving a company in West financial difficulties. Liberty, Ky. He was sentenced to "The purpose of this scheme was the Florida prison term on Sept. On Dec. 3, 1982, Janke signed a to induce Allen to participate with 29, 1982. purchase agreement with the the defendant Bally Coal in the Aiellos. As a condition of joint acquisition of the assets of On Nov. 14, 1984, Fitzpatrick purchase, Janke was to put up the insolvent Kitt Coal Co. pled guilty to mail fraud in the $100,000 at the execution of the Inc .... through the medium of Kittanning Coal case. He received sales agreement and $200,000 on Kittanning Coal Co., Inc ... and a six-month prison term and was or before March 1, 1983. This to thereafter defraud Kittanning placed on five years probation. $300,000 was to be used to pay and Allen by obtaining operating U. S. Coal's current operating managerial control of Kittanning expenses. The total sales price was and then diverting and misappro Uo S. Coal set at $3.2 million. priating its assets to the defend The Leviticus Project has found ants' own benefit, while inducing that often times fraudulent col The $140,000 in loans (one for Allen to invest additional sums in lateral is used to obtain loans to $100,000, one for $40,000) were Kittanning for the purpose of in finance coal deals. obtained from Harvey Millier, a creasing the assets available for coal broker who operated Millier diversion and misappropriation." One popular method is to use Marketing, Inc., located in Penn coal reserves backed by phony Wynne, Montgomery County. The suit alleges the defendants analysis reports. Another is to engaged in mail fraud, wire fraud, secure credit by putting up heavy The money was primarily securities fraud, transportation of mining equipment that doesn't secured by two documents: a stolen goods and conspiracy. I L exist. purported $270,000 term deposit also contends that Ripp and Fitz drawn on the Royal Bank of patrick and others ... "destroyed In the following case, phony Canada's branch in Freeport, the books and records of Kittanning financial statements and a fraudu Bahamas, that reflected the (Coal) with the purpose and inten lent bank document, along with depositor as Janke and/or Janke's tion of concealing the diversion the assignment of a debt allegedly wife, Michele; and an assignment and misappropriation of Kittan owed by a former professional of $180,000 in commissions ning's funds." football player, were used. allegedly due Molinari from Joseph Lavender, a former The suit is still pending. In late 1982, an attempt was professional football player with made to purchase U. S. Coal Co., Ripp the Philadelphia Eagles and and. located in Ridgeway, Elk County, Washington Redskins. JFitzpatrkk Indicted Pennsylvania, by two men In May of 1984, Ripp and Fitz George A. Janke Jr. and Rocco J. patrick were indicted by a federal Molinari, a former associate of l Grasso is the nephew of the latc Angelo Philadelphia organized crime Bruno, who ran Philadelphia'~ Mafia crime grand jury in Pittsburgh on four family from 1959 until his death, gangland figure Michael Grasso. I counts of mail fraud and one style, on March 21, 1980. In 1971 Molinari and Grasso were indicted on charges of submitting count of interstate transportation An investigation conducted by false applications for mortgages to the Federal of securities obtained by fraud. the Pennsylvania Crime Commis Housing Administration. Grasso was convicted. Molinari was dismissed from prosecution on sion determined that $140,000 in grounds of mental incompetency. 61 The Crime Commission, through Reiss also stated that in another Millier said he began to correspondence with an official in financial transaction that had negotiate with Rubino and in sub the Royal Bank of Canada's main occurred several years prior to the sequent meetings with Molinari, branch in Toronto, determined spring of 1984, Janke had who was introduced as Rubino's that the bank had never carried an completely falsified a financial partner. Millier further stated that account in Janke's name, nor had statement, forging Reiss' signature meetings took place at Janke's it ever issued a term deposit with on the document. Again, the residence in Southampton, Bucks the number 0401009, the figure phony information appeared on County, and also at Millier's that appeared on the Janke Reiss' letterhead stationery, which office in Penn Wynne, as well as document. There were other Reiss said he had not provided to at several other locations in Mont indications that the term deposit Janke. gomery County. According to was fake. Millier, Janke was introduced by Signature Forged, Rubino and Molinari as the future Lavender, interviewed at his manager of U. S. Coal. home in Maryland on Nov. 17, Accountant Claims 1983, denied owing Molinari any Molinari listed his accountant as I t was through these negotiations money, stating, instead, that Harry J. Goldberg of Elkins that MillieI' agreed to advance the Molinari owed him a considerable Park, Pa. Goldberg was inter two loans totaling $140,000 to amount of cash, later estimated to viewed on April 6, 1984, at which Janke. (Molinari co-signed with be around $100,000. Lavender time he stated that he had not Janke on $40,000 of these obliga explained that he had turned his prepared the financial statement tions.) It was Millier's under Washington Redskins' paychecks submitted by Molinari to Millier. standing, through a written from the 1980 and 1981 seasons Goldberg said his signature also agreement, that the loans would over to Molinari who was to use had been forged. either be repaid, or applied as the money to liquidate out advances against future coal standing debts that Lavender had Millier, the Aiello brothers, and deliveries to MiIlier Marketing, accrued. Instead, according to two men who were operating Inc. U. S. Coal for them at the Lavender, Molinari pocketed the As previously stated, the money. time-J oseph J. Hilliard III of Ridgway, and Joseph Rubino of purchase agreement between Lavender further stated that Dauphin Township, Dauphin Janke and the Aiello brothers was Molinari had prepared his County, all believed Janke had executed on Dec. 3, 1982, with (Lavendc:r's) 1981 federal tax millions of dollars at his disposal, Janke to provide $100,000 as an return. Lavender said he never and that he intended to infuse a initial deposit for current saw or signed the return, nor did considerable sum of personal operating expenses. The Aiellos he ever see or sign a refund check money into the purchase and were not aware that the $100,000 of $10,535 that ended up in operation of U. S. Coal. was a loan. When they found out, Molinari's business account. their attorney, Joseph E. Millier, interviewed on Sept. 15, Altomare of Titusville, attempted To further establish their 1983, related that he had secured to terminate the purchase financial credibility, Molinari and a contract in the fall of 1982 with agreement, claiming there had Janke provided Millier with Pittsburgh Power & Light Co. been a deliberate misrepre financial statements allegedly (PP&L) to supply the utility with sentation of funds by Janke. prepared by their accountants. coal. He further stated that he was anxious to purchase the coal On Jan. 7, 1983, Altomare Janke listed his accountant as from U. S. Coal because the requested the issuance of a Arthur Reiss of Jenkintown, Pa. company's mine site was only a restraining order in Elk Cc:unt;,. The Crime Commission inter few miles from the PP&L plant, a seeking to bar the transfer of viewed Reiss on April 5, 1984, at factor that would greatly reduce ownership. On Jan. 12, 1983, which time he was shown a copy transportation costs. Janke filed a petition for Chapter of the financial statement that 11 bankruptcy before Pittsburgh had been presented to Millier. Millier said that initial nego Judge Joseph L. Cosetti. The Reiss confirmed that he had tiations with David Aiell.o were Aiellos then filed to have that prepared several pages of the unsuccessful because U. S. Coal petition stricken. statement, but emphatically was suffering significant financial Two days later, Judge Cosetti denied ever preparing one page problems at the time. Millier ruled in favor of the Aiello entitled, "The Analysis of Cash in stated that in November of 1982 brothers, stating that the owner Foreign Banks." Reiss said he did he was contacted by Rubino who ship of U. S. Coal had not passed not know how Janke had presented himself as U. S. Coal's on to Janke because of several obtained his letterhead stationery. new owner and president. flaws in consummating the agreement. 62 ARTHUR REISS GEORGE JANKE& JRn !&/ ( I n U. S. 0011 a r s) Swiss Francs $ 522,270.00 West German Marks 507,424.00 u.S. Dollars 274.555,00 Total §1!lQ.~ ROCCO J. ~OLINARI FINANCIAL STATEMENT ltARCH )0, 1982 T/A RoJo~o FINANCIAL ~AGEMENT ASSETS CMil )144 Ol1rnpin Placa 1982 CM!llc.u:: 1982 Cwil11filC 1982 Ch0v,r ~m~or TGPe$$ ~~@rprlD0m !nCo (S~) Qo~o S@li~ ~to Diopoaal Ar~a Xnco Brokore P~clm1 CGrpormtlon J 8 B J~lGlJnEI Rockville Xnt0rnntional Inco (duo) Accoun~ ~oo~!w&blo D@ferfed 1nco~~ ~~hlngton RadekinG Sunny Iel@ ~rln~ & ~velo~snt COo o Ince O.So Saving Bonde Jewelry Furnishings LIABILITIES 3144 Olympia Place Central Penn TOTAL .NET tlotU'H J./Q't1J J. qJJk", . ~ eJ ~ 63 Millier never did receive the coal deliveries against which the $140,000 in loans were to be applied. He subsequently filed suit against Molinari and Janke for damages. In January of 1983, the Court of Common Pleas in Phila delphia entered judgment in favor of Millier. However, as of Sep tern ber 1984, the loans remained unpaid. An analysis of the business account of (Molinari's) R.J .M. Financial Management was conducted to determine deposits and disbursements between Dec. 3, 1982, when the first loan (for $100,000) was obtained from Millier and Jan. 14, 1983, when Judge Cosetti ruled that the Aiellos were to retain ownership of U. S. Coal. On Dec. 3, 1982, the $100,000 received by Janke from Millier was deposited into R.J .M. 's The boom of a dragline juts above a mound of coal on a account. On Dec. 17, 1982, the U.S. Coal mining site in Clearfield County. The photo was $40,000 received by Janke from taken from inside the cab of another vehicle. Millier was likewise deposited. There were no other deposits into On March 16, 1984, Janke Q. Were you the one that was R.J.M.'s account between Dec. 3, testified before the Crime actually going to purchase the 1982, and Jan. 14, 1983. Commission at which time he was company, or was it, in fact, Mr. shown a copy of the $100,000 Molinari that was going to Money Used for check Millier had written to cover purchase the company and using the first loan. This exchange then you as a front? Personal Debts took place: Disbursements during the period A. That practically is what was in question totaled $137,427. Of Q. Mr. Janke, to whom was the happening. this, $99,250 was disbursed to check made payable? Q. You were being used as a U. S. Coal and $5,750 to Janke. A. George A. Janke. The remainder, $32,427, was front, is that correct? disbursed either directly to Q. And the amount is $100,000? Molinari or was used to payoff A. Correct. his personal financial obligations. A. Right. Q. Who actually took possession Hilliard, who with Rubino had Q. Why was the check made of the $100,000 check? been operating U. S. Coal for the payable to George A. Janke and A. Who was it handed to? Aiello brothers, was interviewed not Rocco J. Molinari? by the Crime Commission on Q. Yes. March 7, 1984. He stated that A. I don't know. during a conversation with A. I am not sure who he handed Q. Who was actually purchasing it to. I know that when we left Molinari regarding Janke's lack the company? of knowledge about certain there, we immediately went in and mining equipment, Molinari had A. Mr. Molinari-me, or my deposited it into Mr. Molinari's remarked, "I'm really running nominee. business account. I think it was everything, don't worry about his business account. him. I'm actually going to own Q. Who would that have been? the company." On May 26, 1983, Molinari A. That group that was going to provided a deposition to Millier's put up the real money that we attorney, Hyman Lovitz. An needed to operate it properly. excerpt follows: 64 Q. Who had to pay those bills against Todd were threatened with strong County. Coal companies in for U. S. Coal? physical harm. Armstrong and Lawrence counties were contacted and a verbal A. The corporation. Todd conducted business under agreement was made to deliver three trade names from 1976 coal. Q. U. S. Coal? through 1979-Titan Coal Co., A. Yes. Syndicated Coal and Minerals, Initial contacts in one instance and Fire Rock, Inc. were made on a referral from Q. Why would you worry about Sam Lanzino, a close associate U. S. Coal's bills? During that period the com of Gabriel "Kelly" Mannarino, panies generated $ 1,780,39) a capo in the John LaRocca A. Mr. Janke was purchasing in coal sale revenues and ran organized crime family who U. S. Coal on that day. up debts to coal producers died in 1980. of $1,490,380. Q. On what day? Producers who dealt with Todd The pattern, with slight varia in this deal were owed over A. The day that the loan was tions, consisted of Todd using $580,000. Several truckers also made. reputable people in the local coal went unpaid. industry as contacts with coal Q. So the loan was made to help producers. He then informed the One of the producers who sup Mr. Janke purchase U. S. Coal? producers that he had a contract plied coal to Titan was Blaney A. To the best of my knowl with a public utility company and Bowser from West Kittanning, edge, it was. arrangements were made to set up Pa. Bowser received partial pay escrow accounts in local banks for ment for coal shipped, then the Q. And you had made the the distribution of funds. payments stopped. arrangements for the meeting on December 3rd, is that correct? Written agreements were never Bowser said a meeting was set used. Ordinarily, Todd submitted up to discuss the matter. Those in A. That's very possible. It's very low bids to the public utility com attendance, he said, included likely. I don't remember. panies, then agreed to pay the Peter J. Mercurio Sr., who for a producers a more than equitable time served as president of Titan Molinari was subpoenaed to market price for coal of a mar Coal, Richard Wolf (Bowser's appear before the Cdme ginal quality. accountant), and four unidentified Commission, but was excused men who had accompanied Mer after his attorney, Samuel J. Initially, some producers curio to the meeting, held in a Hecht, advised in writing that received partial payment for their steak house in West Kittanning. Molinari would refuse to answer coal through the escrow accounts Todd was not present. all substantive questions, invoking and thus made additional deliv his 5th Amendment rights against eries. When the power companies Bowser said he told Mercurio he self-incrimination. complained about the inferior wanted his money and intended to quality of the coal and subse press charges. Bowser further re At the conclusion of its investi quently enforced financial lated that one of the men with gation, the Crime Commission penalties, Todd accepted the Mercurio displayed a gun on his referred its findings to the Mont revised payments, but did not pay right hip, and that Mercurio gomery County District Attor the producers. stated that he had ways of "tak ney's Office for review, with addi ing care of fellows" like Bowser. tional funding to be provided to Instead, he told them they had that office by the Leviticus delivered inferior coal in violation Bowser said he did not press Project. of the verbal agreement. At this charges or make further attempts point, business transactions with to recover his money because he Titan Coal the producers were simply ter did not want to risk physical In March of 1979, the Pennsyl minated by Todd. harm or property damage. vania Crime Commission received Titan Coal operated from allegations concerning fraudulent Another producer who supplied approximately May of 1976 until coal deals perpetrated by Robert coal to Titan was Jack Carlson, February of 1977 when the com Lee Todd, a coal broker from owner of Carlson Mining in New pany was placed in receivership. Castle, Pa. Carlson was contacted Vandergrift, Pa. Todd was During that period Todd agreed accused of failing to pay coal sup by Charles Barletto, a personal to supply coal to the West Penn friend and owner of Barletto pliers who had furnished coal to Power Co. in fulfillment of a utility companies. It also was Equipment Service, also in New contract awarded Energy Services, Castle. It was Lanzino who had alleged that coal suppliers who Inc., a coal producer in Arm- threatened to take legal action put Barletto in touch with Todd. 65 Carlson submitted a bill for Todd also testified in July of advised Cravat Coal Co. offi $19,836.61 for coal supplied, 1980 against James Gabriel and cials that Todd had been paid by which was not paid. He subse Dennis Zack in U. S. District West Penn. quently received a check for Court in Newark, N. J. The de $8,128.60 as partial payment, fendants were charged with trans In 1979 Cravat Coal filed suit and later the balance after porting stolen securities with a against Todd, trading as Syn meeting with Barletto on several face value in excess of $15 dicated Coal and Minerals; Mer occasions. Carlson stated that million. curio; Titan Coal Co.; Al Julian during those meetings Barletto and A. Julian, Inc. The complaint had phoned Todd, Lanzino Todd told a Crime Commission stated that the company had sus and Mannarino. agent that Titan Coal was formed tained damages in the amount of as a coal brokerage business with $374,504 as a result of a civil The Threat of Mercurio "to make money in any conspiracy entered into by the a Cement Overcoat fashion that we could out of the defendants. coal business . . . ." Carlson said he began to re-ship A default judgment was entered coal to Titan after receiving the He said he did not deal with against Todd. On May 18, 1982, balance due on the first shipments anybody not recommended by a verdict was entered in favor of and that he subsequently submit Mercurio, who, according to Cravat Coal for the full amount ted bills for an additional Todd, was to intimidate coal sup sought. Julian appealed the deci $115,979.25. When these bills also pliers and threaten them and their sion and on Feb. 15, 1983, a went unpaid, Carlson said he con families if they balked in financial judgment in favor of Julian and tacted other coal producers in the disputes. A. Julian, Inc., was awarded by area and asked them to halt deliv the court. eries to Titan Coal. Todd, who once boasted to a Titan Coal employee that he was Titan Coal records show that A short time later, Carlson said, "connected to the Mafia," also Mercurio's three sons and his he received phone calls at his stated that coal producers vv'ere in wife, Alice, were on the com home from Todd and Mercurio structed to write off their finan pany's payroll. Todd said the sons who warned him he would end ciallosses on their taxes. seldom did any work. up in a "cement overcoat." Julian said that Mercurio and Carlson initiated civil proceed Todd were never concerned about ings in Lawrence County in an In the fall of 1976, Todd, Mer penalties for inferior coal because attempt to seek payment from curio and Al Julian, a truck they had no intention of paying Titan Coal. The suit is pending. driver involved in transporting the producers. coal for Titan, contacted Donald Todd formed Titan Coal Co. on As stated earlier, Titan Coal Co. Pripstein, manager of fuels for Aug. 28, 1975, while an inmate at was placed bto receivership in Allegheny Power Services, Corp., the State Correctional Institute at February of 1977. Two months a firm which handled contrac Greensburg where he was serving later, Syndicated Coal and Min tual arrangements for several a term for passing a worthless erals was registered in Westmore public utilities, including West check. land County with Todd listed as Penn Power. the sole owner. Todd was not a newcomer to the Pripstein gave this account: coal industry or to coal scams. Shortly thereafter, the secretary Under a grant of immunity, he The three men wanted to enter treasurer of Syndicated Coal and had testified in Allegheny County bids to supply coal to West Penn Minerals, Valerie Smith, person Court against a former business Power Co. 's Hatfield Power Sta ally obtained checks totaling some associate in a case involving a tion. The bids were to be under $42,000 from West Penn Power coal sample-switching scheme. the names of Titan Coal, Syn Co. for coal shipments and, at dicated Coal and Minerals, and Todd's instructions, placed them As a result of that testimony, A. Julian, Inc. Todd was to repre in her personal checking account. which helped convict four men sent all three. She then wrote checks on that (Steven Levitt, Vincent Pecora, account to pay Todd's personal Raymond Shaw Sr., and 1 7 The bids were accepted with the debts. None of the money was _ ••m.), Todd said he made contract calling for delivery from used to pay creditors. Mercurio president of Titan Coal November 1976 to March 1977. to provide protection in case of Pripstein later learned that one of retaliation by the four defendants. the companies supplying coal, Cravat Coal Co. of Ohio, had not been paid by Todd. Pripstein 66 Todd planned the formation of During the summer of 1978, Fire Rock's records also reflect Fire Rock, Inc., while incarcer Todd, operating Fire Rock, did payments to vendors not involved ated in the Allegheny County Jail business with coal producers in in the coal industry. For instance, where he was serving a sentence southeastern Ohio who were led $ 17,000 was paid to a service sta for violating the work release pro to believe that the firm had a tion in New Kensington. Accord gram at the State Correctional In three-year contract with the ing to Todd, this bill was for stitute at Greensburg. The actual Tennessee Valley Authority. In repairs on the Mercurio family's incorporation was carried out by reality, Fire Rock had several spot automobiles. Gary Knotts, who at the time was contracts, each for a four-week a supervisor at the jail with the duration. Other records reflected payments rank of sergeant, and who re to the Great Gatsby Bar in Har counted how Todd often had The coal producers delivered marville as well as payments to a spoken about the millions of "un-speced" coal to a dock in company which delivered carpet dollars to be made in th~ coal East Liverpool, Ohio. As usual, to the establishment. industry. an escrow account was set up at a local bank-this time the New Fire Rock paid for a room at the Knotts decided to go into busi Waterford Bank in Columbiana, Holiday Inn in Harmarville for ness with Todd after Todd took Ohio. Mercurio, described by Todd as a him to the Cratty-Gour-High consultant to Fire Rock. Duke Mine in Suttersville, Pa., Shortly after Fire Rock began and stated that a contract could the shipments, 26 barges of coal In general, it appeared from the be obtained from West Penn were refused by the TVA because company's financial records that Power Co. to purchase the coal. of inferior quality. Eventually, the the principals of Fire Rock had coal was re-routed to the Dairy no intention of operating an on When released from jail, Todd land Power Cooperative in going, profitable business. acted as the agent for Fire Rock LaCrosse, Wisc., and sold for and obtained a contract from $322,074-a sum substantially Money Used West Penn for the Cratty coal below the price agreed upon 'by to Refurbish Bar shipment. An escrow account was the TVA. established at the Pittsburgh Na In April of 1977, Todd regis tional Bank with funds to be with Some of the producers received tered Syndicated Coal and Min drawn only by signature of all partial payment; others received erals, Co. in Westmoreland Coun parties. no payment at all. ty, listing its address as P.O. Box 494, New Kensington, Pa. The West Penn later cancelled the A financial analysis of Fire corresponding street address was contract with Fire Rock because Rock, Inc.'s records indicated that 865 Fifth Ave., New Kensington, of poor quality coal. The utility approximately $1,382,000 depos the location of St. Anthony's, a company's records show that in ited in the firm's checking account private club that had been oper December of 1977 a check for was traceable to companies that ated by Mercurio until September $32,424 for the Cratty coal was had contracted for coal. The anal of 1975 when its liquor license deposited in the Fire Rock ac ysis also indicated that Fire Rock was revoked. count in violation of the escrow owed $534,937 to coal producers. agreement. In December of 1978, after the Expenditures reflected payments $56,000 check from Dairyland Cratty Mine officials stated that to Mercurio of $38,600 (a figure Power Cooperative was deposited Todd had contracted with the coal Todd disputes) and payments to in the Fire Rock account, Todd firm to deliver 3,123 tons of coal Todd of $51,100. Also, Kathleen began renovation of the Fifth valued at $65,599.07. Fire Rock Price (now Todd's wife), who was Avenue property, which in early made two payments totalling listed as a secretary, received 1980 became the site of the Alum some $20,000, according to Cratty $11,134. inum City Club. Mine records. No other payments There were other persons who were received by the coal Records which were submitted to worked for and received payment company. the Pennsylvania Liquor Control from Fire Rock. However, there Board (L.C.B.) by the Aluminum According to Knotts, it soon be is no record of any employment City Club indicated that came apparent that Todd only taxes being paid to any govern $57,688.46 in renovation costs wanted him as a front. Knotts ment agency. were paid by Fire Rock. The doc stated that he had no control over uments also indicated that Fire the business transactions and re Rock had charged the club a ten signed from Fire Rock after Todd percent finance charge amounting attempted to withdraw Knotts' to $5,768.84. The total bill thus signature authority from checks. was $63,457.30. 67 CREDITS & DEBITS Monies Owed Gross Income Coal Producers Titan Coal ______$580,937.97 Syndicated c~ $398,216.75~- and Minerals ------... $374,504.60 Fire Rock, Inc. $1,382,179.05 $534,937.67 Total $1,780,395.80 $1,490,380.24 Aluminum City Club records A. Well, $65,000 to $70,000 On July 25, 1984, Mercurio ap and interviews with its officers on construction and equipment, peared at a private hearing before indicated that this money was and another $15,000 to $20,000 the Pennsylvania Crime Commis never repaid to Fire Rock. on operating-opening and sion at which time he invoked his operating expenses. 5th Amendment privilege regard L.C.B. records also reflect that ing any affiliations with Todd, in September of 1979, a Thomas Q. And those funds could have Titan Coal, Fire Rock, Syndicated Whitney, who was listed as the been earmarked to pay producers, Coal and Minerals and the club's secretary-treasurer, opened transport fees, and keep the Aluminum City Club. a checking account for the club at business afloat? the Pittsburgh National Bank us ing $3,500 of his own money A. They-or they could have as the initial deposit. The club represented profits to the coal became operational in Jan- company. uary of 1980. Whitney denied any involvement Todd, in a taped interview, was by Mercurio in the club. Since asked about Fire Rock's role in opening, the Aluminum City Club the club. Excerpts from that inter has received citations for after view follow: hours activity. Two of its former officers have been arrested on Q. How much money went into narcotics charges. One was ar the (Aluminum City) club? rested with Gary Golden, an asso ciate and cousin of Thomas "Son A. All right. $65,000, approx ny" Ciancutti, like Mannarino a imately between $65,000 and member of Pittsburgh's LaRocca $70,000 went into the club and organized crime family. another $15,000 to $20,000 went to Pete (Mercurio Sr.). In June of 1983, a civil suit was filed against the Aluminum City Q. Cash? Club, naming Mercurio as the op erator. The attorney who filed the A. Cash. suit, on behalf of a professional Q. For operating expenses? football player who was severely beaten while on the premises, ad A. Yeah. Set up and operating. vised that it was common knowl No, a portion of that might be in edge in New Kensington that Mer that $51,000 of mine, but I h:;ve curio was the club's operator. The to go through it and figure it out. lawyer described the Aluminum City Club as merely an extension Q. And his name obviously did of the old St. Anthony's Club. not appear on the liquor license, and someone was designated to run the club for him as a straw party or a front? A. Tom Whitney. Q. Were a lot of funds diverted to the club? 68 The/too From Backhoes to Banks 69 Florida and other ports for ship-· and was sentenced to an I8-month ment overseas. to three-year prison term. He and Braham later were released to Virginia authorities. Heavy Equipment On Sept. 16, 1982, the Leviticus Melton, Slaughter and Chastaine Project announced the arrest of also pled guilty to a variety of theft Theft five men charged in the theft of charges. Melton and Slaughter Heavy equipment used in surface heavy strip mining and construc were fined and sentenced to mining is quite expensive with tion equipment in Virginia, Ken prison terms; Chastaine received a some vehicles like bulldozers tucky, Indiana and Pennsylvania. four-year suspended sentence. costing hundreds of thousands of dollars. It is estimated that heavy The arrests stemmed from an 18- Bank Theft equipment theft losses for owners month-long investigation in which five other people already had been and dealers run around $1 billion On Nov. 17,1982, Leviticus' a year. charged and almost $700,000 worth of stolen heavy equipment chairman, Manhattan District At torney Robert M. Morgenthau, It also has been estimated that and parts had been recovered. announced the indictment of the recovery rate for stolen heavy seven men accused of stealing equipment runs between 5 percent Arrested were: Reed C. Melton, $4.1 million from Chase Manhat and 10 percent, compared to a 37, Jeffersonville, Ind.; William tan Bank. Included were two 70 percent recovery rate for Slaughter, 46, Louisville, Ky.; former bank vice presidents and stolen automobiles. Wayne Chastaine, 45, also of Louisville; William F. Braham, two Pennsylvania businessmen. The effects on the owners and 36, Independence, W. Va.; and The bank officials also were operators of stolen equipment - Ralph E. Starr, 50, Clarksburg, charged with misappropriating an including the cost of replacement, W. Va. additional $2.7 million in bank the cost of job delays, down time, funds. higher insurance premiums, and Melton and Slaughter were the risk of cancellation of in charged with the theft of two Indicted were Herbert S. Can non, 51, Pompano Beach, Fla., surance policies or borrowing backhoes valued at $65,000. They an investment banker; Robert power - can be devastating. also were charged, along with Chastaine, with the theft of a Duran, 51, Sunbury, Pa.; James Investigations conducted by the drilling truck valued at $60,000. J. Durkin Sr., Dallas, Pa.; former Leviticus Project have uncovered The thefts occurred in Clarksville, bank executives Michael Calan certain distinct patterns in heavy Ind., between July 1981 and dra, 53, Miami, Fla., and Jon equipment theft. For one, the September 1982. Levine, 41, Commack, Long thieves frequently are members of Island, N. Y.; Irvin Freedman, small criminal clans that cross Braham and Starr, who were ar 47, a real estate developer from state lines and have established rested in Washington, Pa., were West Lake, Calif.; and Marvin systems of communication that charged with receiving stolen Roseman, 53, a businessman from allow for rapid transactions and property and conspiracy, relating Floral Park, N. Y. deliveries. These small conspira to the possession and sale of a cies appear to be linked together stolen bulldozer and a stolen Calandra, Levine, Freedman and in a loose-knit organizational transport truck, valued together at Roseman previously were indicted structure that provides contacts $40,000. They also were charged in May of 1982 on charges of throughout the country for pro with violating Pennsylvania's Cor stealing more than $18 million curing specific equipment rupt Organiz:.tions Act, a seldom from the bank during an 18- and prospective buyers. used law that mirrors the federal month period in 1979-1980. Racketeer Influenced and Corrupt The equipment often is pre-or Orgamzations (RICO) Act. According to Morgenthau, the dered and then stolen outright. It seven defendants stole $4.1 mil is taken directly to a private or in This charge is based on addi lion from the bank by means of dustrial site and sold at a substan tional sales of stolen heavy equip illegal loans granted by Calandra tial savings to willing buyers, in ment, valued in excess of $50,000, and Levine to American Coal and cluding "legitimate businessmen" over an 18-month period. Virginia Energy, an apparent paper corpo who don't allow their suspicions authorities also charged Braham ration controlled by Duran, Dur to get in the.ray of a good deal. and Starr with the theft of a bull kin and Freedman which lacked Some of the stolen equipment is dozer valued at $44,000. property, equipment or mineral delivered directly to docks in leases. Starr pled guilty to the Penn sylvania charges on Feb. 9, 1983, 70 The purpose of these loans was to guarantee repayment of a series of corrupt loans the bank officers had previously made to Cannon and to businesses he controlled, the indictment alleged. The seven defendants were for mally charged with three counts of grand larceny in the second de gree and two counts of misappro priation of bank funds. In addi tion, Calandra and Levine were charged with 19 counts of falsi fying business records and 19 counts of misappropriation of bank funds in connection with the Cannon loans. As of Sept. 7, 1984, a trial date hud not been set. Durkin was convicted in Decem ber of 1978 of fraudulently receiv ing almost $1,900 in unemploy ment checks while running an in surance business. He has had numerous dealings with Pennsylvania coal com panies, controlling firms that at one time owned vast coal producing areas in the commonwealth. According to the Pennsylvania Crime Commission's "A Decade of Organized Crime," issued in 1980, Durkin was a partner in Great American Coal Co. with Hyman Green, an acquaintance of Jimmy Hoffa, the missing former Teamsters' boss. He also has had ties to organized crime figures, including a relation ship going back 30 years with James Tedesco Sr., a convicted price fixer who has associated with former heads of the Russell Bufalino crime family. 71 Leviticus Brochure The Leviticus Project has available a brochure highlighting guidelines and warnings for poten tial investors in deferred delivery coal contracts and coal related tax shelters. This brochure may be obtained from the Penn- sylvania Crime Commission or by writing: The Leviticus Project New York District Attorney's Office One Hogan Place New York, N.Y., 10013 Leviticus' toll free number is: 800-221-4424. In New York call 212-553-1376 72 Hoffa. Jimmy, 71 Sehlton, Gilbert, 46 Index Hooton. James, 7, 31 .. Horwith. Frank, 16, 17 Silver, Marvin, 44 Ippolito. Carl, 52 Sincak, Michael. 38 Aiello, David, 61,62,64 JankeJr., George A .• 61. 62. 63. 64 Slaughter, William, 70 Aiello, Victor, 61,62,64 Janke, Michele, 61,65 Smith, Valerie, 61) Altomare, Joseph E., 62 .lones, Joyce. 60 Starr. Ralph E., 70 Andre, August A., 34, 35, 37, 38, 39, 40, 41,42 Jones, William, 60 Stone, Marvin H., 49, 50 Barletto, Charles, 65, 66 Joseph. William, 20. 21,23.26,28 Tedesco Sr., James, 71 Barrett Jr., Thomas Paul, 13,24,31.32 Julian, AI, 66 Thomas, Nathan, 41,42 Benson Jr., John W., 58, 60 Kim, Helen, 16 Todd, Robert Lee, 65, 66. 67. 68 Berkery, John, 60 Kim. Hyun Sik, 24, 26, 28 Trumka, Richard L., 7, 42, 45 Bernstein, Stanley J., 55, 57 Kim, Seung Kyu, 24, 26, 28 Vadino, Frank. 60 Bloom, Norman, 43, 44 Kim, Shin f1, 11 Walacavag.e, Joseph, 57 Bone Jr., George W., II Kim, Yong Gun, 23, 24, 28 Walsh, Thomas "Gooney," 52 Bowser, Blaney, 65 Kim, Young Nam, 12,16,18,19 Weir, tvlelvin, 53, 54 Braham, William F .• 70 Kirk, Brian, 39, 40, 42, 44 Wellbrock, Richard D., 46,49 Bruno, Angelo, 52, 59, 61 Knotts. Gary, 67 Werbel. Robert H., 59 Bufalino, Russell, 71 Kowalczyk, Barbara, 15, 16 Whitaker. Delores, 25. 26 Calandra, Michael, 70, 71 LaRocca, John, 65 Whitaker, Matthcw, 24, 25, 26, 29 Calantoni, Placido "Pat," 35. 37, 39, 40,41,42 Landsman, Mark. 44 Whitney, Thomas. 68 Camanzo, IvlichaeI. 26 Lanier, Robert Fulton, 14, 15, 16,28,30,31 Williams, Jay, 31 Cannon, HerbertS., 70, 71 Lanz.ino, Sam, 65, 66 Wolf, Joseph, 41. 42 Carlson, Jack, 65, 66 Lauer, Mahlon H .• 19. 20, 21, 23. 24, 25,26, 28. Wolf, Richard. 65 Chalako, Andrew, 59, 60 29,31 Yoo. Kyung Bin, 12 Chan off, Jack, 44 Lavender, Joseph. 61, 62 Yoo, YungSoo. 12. I::, 16, 17, 18.31 Chastaine, Wayne, 70 Lawrence, Frank, 44 Za~k, Dennis. 66 Choi,CheYung, 10, 11, 12, 13, 17.1S Lee, Young Tae, 24, 28 Zarko 1I1, Zigmund, 23. 24 Ciancutti, Thomas "Sonny". 68 Levine. Jon, 70, 71 Cobert. Allen. 44 Levitt, Steven, 66 Businesses and Cohen. :-'1ark N .• 43 Lovitz, Hyman, 64 Coh~n, Paul, 44 Organizations Lupus, Anthony, 42 Colkitt, Douglas. 56, j7 :-'Iacaravage. Joseph 56.58 A.. Julian, In~., 66 Conrad, Walter. 21. 26, 28 :-'Iannarino. Gabriel "Kelly", 65, 66, 68 Acme !vlachine and Welding Co., 57 Conwell, Charles T. "Shotste." 52 Martorano, Raymond "Long J )hn," 58. 60 Air Brake and Powder Equipment Co., 57 Cornellius, Roy K.• 50 :>lcCann III, John H., 58, 60 Alabama Department of Public Safety, 7 Coselli, Joseph L.. 62, 64 :-'IcCullough, John, 52, 53, 56. 58, 60 Alabama Securities Commission, 7, 50 Cro,>ley, Joseph, 52. 57 McGinty Jr.. Michael J" 34 Allegheny County Jail. 67 D'Amato, Anthony, 60 ;-,IcKenm!, William L., 46 Allegheny Power Services, Corp., 66 DeLuca, Victor, 52 :-'1e1ton. Reed C., 70 Allen & Company, Inc., 58, 59, 60, 61 Dennis. Edward S. G., 18 :-'lercurio Sr., Peter J., 65. 66. 67, 68 Alphex Associates, 46, 48 DiRenzo, Paul, 53, 56, 57 Mercurio, Alice, 66 Aluminum City Club. 67. 68 Driggers, Edwin T., 49, 50 Merritt, (jary L., 58 American Bank & Trust Co., 29 Duran, Robert, 13, 17, 18, 70 1I·!i\lier, Harvey, 61. 62, 64 American Coal and Energy, 13,70 DurkinSr., JamesJ., 13,70.71 Molinari, Rocco J., 61,62,63,64,65 Anthra Trans, Inc., 11 Ercole, J. Anthony, 45 Monte, Frank, 52 Anthracite Development Corp., 57 Fisher, (Sen.) D. Michael, 31,57 Montgomery, Daniel, 21 Appalachian-Pocohontas Coal Co., Inc., 58 Fisher, Herbert, 56 ivlorgenthau, Robert M., 70 Aspen Associates, 46 Fitzpatrick, Peter, 58, 59, 60, 61 Morris, James, 58 Atlantic Energy Associates, 46, 49 Flannery, Frank, 57 Mo';olino. William R., 57 Atlantic Energy Group, 46, 49 Fletcher, Roderick, 37, 38,42 Mrowka, Casimir "Casey," 37 Atlantic Energy Ltd., 46, 49 Freedman, Irvin, 70 Mullins, Joseph, 19,21 B.J.1., Inc., 60 Gabriel, James, 66 Natale, Ralph, 60 Bally Coal Co., Inc., 58, 59, 60, 61 Gaskins, William, 52, 53, 54, 55, 56. 57 Nelson, Kevin, 19,20,21,23,24,31 Banque de Paris et des Pays-Bas, 17 Gatti, Gerald, 57 O'Connor, Joseph P., 60 Barletto Equipment Service, 65 Glantz, Murray, 39, 41, 42, 43 Oh, Kwang Nam, 24 Bartenders, Hotel and Restaurant Employees Glassman, Oscar, 57 Paik, H. c., 24 Union (Local 170), 59, 60 Goldberg, Harry J., 62, 63 Pecora, Vincent, 66 Beaver Creek Coal Co., Ltd., 38.44 Golden, Gary, 68 Poggel, Gcorge, 46 Beckett Street Terminal, 16 Gangloff, Thomas, 13 Price, Kathleen, 67 Better Busiw'ss Bureau, 45 Gordon, Larry, 39, 40, 41,42 Pripstein, Donald, 66 Bettex Associates, 46, 48 Grasso, Michael. 61 Queen, David Dart, 43 Birch Associates, 46, 49 Green, Ben, 57 Quinn, Pasquale, 52, 53, 54, 55, 56, 57 Birmingham, Ala., Police Department, 7 Green, Hyman, 71 Reiss, Ar'.ilUr, 62,63 Bitumco Associates, 46 Grosz, David M., 12 Reitz, harry, 18 Bitumco Collieries, Inc., 47 Hammer, David, 57 Reitz, Joseph, 18 Bitumco Properties, Inc., 46 Hanrahan, Martin, 53, 54, 55 Ripp, Joseph C., 58, 59, 60, 61 Blaschak Coal Co., 52, 55, 56, 57 Harmelin, Andrew, II Roseman, Marvin, 70 Botts Auto Parts, 57 Hecht, Samuel J" 65 Rossetti, Francis, 52 Bressi Powder Co., 57 Heitmeyer, Richard A., 46 Rubino, Joseph, 62, 64 Brokers Financial Corp" 63 Hellenic, Edward, 38 Sanden, Brian H., 35, 37, 38, 42 Bruno Auto Supply, 57 Hilliard 111, Joseph J., 62, 64 Shaw Sr., Raymond, 66 Brush Coal Program, 44 Hobbs, David, 52, 53, 55,56,57 73 Butex Mining Co., Ltd., 38, 44 Hawk Mining Co., Ltd., 44 Olenick Brothers Coal Co., 52, 54, 55 C. L. Mack, Inc., 57 Heidrick Fuels, Inc., 49 Oregon Securities Commission, 50 Caldwell Management, Inc., 46 Hemlock Associates, 46 P&L Coal Corp., 48 Cameron Associates, 46, 48 Henny's Auto Parts, 57 Packer Bar, 60 Canon Coal Porgram, 44 Hickory Associates, 46, 49 Palmco Corporation, 18 Carbo Coal Program, 44 Horwith Trucks, Inc., 16, 17, 18 Penn Equipment Corp., 57 Carlson Mining, 65 Hubbard Coal Co., 57 Pennco Associates, 46 Casper Coal Co., 37 Huron Coal Program, 44 Pennsylvania Brake & Supply Co., 57 Chase Manhattan Bank, 13,70 Hyo Sung, 17 Pennsylvania Bureau of Employment Security, Cho-Heung Bank, Ltd., 24, 25, 26, 29 Indiana Securities Commission, 7 56,57 Chowansky Electronic Service, 57 Indiana State Police, 7 Pennsylvania Department of Revenue, 25 Churchill Coal Corp., 34, 35, 37, 38, 39, 40, 41, Inspectorate, 10, II Pennsylvania Department of Environmental Re- 42,43 Inter-American Fuels, Inc., 48 sources, 45,52,58 Coal Pool Management Corp., 44 Intercoast Coal Co., 48 Pennsylvania General Assembly, 7 Commerzbank A. G., 17 Intermission Tavern, 60 Pennsylvania Liquor Control Board, 67,68 Commodity Futures Trading Commission, 45 Internal Revenue Service, 6, 34, 35, 43, 50, 56, 57 Pennsylvania Refrigeration Co., Inc., 59, 60 Conenco Associates, 46 Interstate Resources Corp., 48 Pennsylvania Securities Commission, 7,43 Continental Bank, 59, 60 J & B Jewelers, 63 Pennsylvania Senate Environmental Resources Continental Coal Co., 13 Jack's Products Co., Inc., 57 and Energy Committee, 7, 31 Cratty-Gour-High Duke Mine, 67 Jackson Mining Management Corp., 38, 39, 40, Pennsylvania State Police, 19 Cravat Coal Co., 66 42,44 Philadelphia Eagles, 61 Credit Aliance Corp., 57 James Martin Coal Co., 12, 13, 15, 16, 17, 18, Pittco Associates, 46 Croftshaw Coal Corp., 40, 44 24,31 Pittsburgh National Bank, 59, 67, 68 Cyprus Associates, 46 James Martin and Co., Inc., 12 Pittsburgh Power & Light Co., 62 D'Attilio's Auto Service, 57 Jefferson Land and Mineral Co., 49 Popple Brothers, II Dae Woo International (American) Corp., 29 Jefferson-Clearfield Coal Co., Inc., 47, 48 Port Newark, 16, 23, 25, 26 Dai Han Coal Corp., 10, 11, 13,32 John Walaitis Coal Co., 57 Port of Camden, 13, 16, 18 Dairyland Power Cooperative, 67 Kearney's Inc., II Q. T. Solid Waste Disposal Area, Inc., 63 Delta Energy Corp., 38, 39,43,44 Kentucky Attorney General's Office, 7 Ray Swenson, Inc., 57 Deron Associates, 46, 48 Kentucky Division of Securities, 7 Redwood Associates, 46 DiRenzo Coal Co., 52, 53, 54, 55 Kentucky State Police, 7 Renninger Coal Co., 52, 53, 57 Driggers Equipment Co., Inc., 49 Kinwai Trading, 17 Renninger's Garage, 57 Dun and Bradstreet, 39 Kitt Coal Co., 58, 59, 60, 61 River Coal Program, 44 E.M.E. Associates International, Inc., 29 Kittanning Coal Co., Inc., 58, 59, 60, 61 R.J.M. Financial Management, 61, 64 Eastern Associated Coal Corp., 34, 35, 38, 40, Korea Tacoma Marine Industries, Ltd., 24 Robert Shewokis Fuel, 57 43,44 Korean Exchange Bank, 10, 11, 19,20,21,24, Rockville International, Inc., 63 Elk Run Coal and Clay, 41,42 25,29 Rockwood Insurance Co., 56, 57 Elm Associates, 46, 48 Kramer's Arco Service Station, 56, 57 Roofers Union (Local 30), 52, 56, 60 Elmer Johnson, Inc., 57 Larch Associates, 46 Rothstein Trust, 57 Energy Mining Corp., 35, 38, 40, 41, 42, 43 LaRocca Organized Crime Family, 68 Royal Bank of Canada, 61,62 Energy Services, Inc., 65 Lauer Investment Co., Inc., 19, 20, 21, 24, 25, SamSung H. K. Ltd., 21 Esanu, Katsky and Korins, 35, 42 28,29 Samick Lines, 17, 18 F.B.I., 43, 58 Laurel National Bank, 40 Savitiski Brothers Coal Co., 29 Fallen Oaks I, 53, 55 Lavino Shipping, 17 Sejung M. M. (USA), Inc., 24, 27, 29, 30 Fallen Oaks II, 53, 55 Leasing Service Corp., 56, 57 Sejung M. M. Company, Ltd., 19,24 Federal Housing Administration, 61 Leviticus Project Association, 6, 7, 8, 34, 46, 52, Sequoia Associates, 46, 50 Fidelity Fund, Inc., 57 61,65,70 Setna Associates, 46. 48 Fir Cone Associates, 46 Liberty Air Compressor Co., 57 Shaco Incorporated, .. 6 Fire Rock, Inc., 65, 67,68 M. J. Rudolph Stevedoring, 17, 18 Shamrock Coal Co., 19,21,23,24 First Chicago International Banking Corp., 10 M. R. Clemente, Inc., 29 Skelly and Loy, 37 First National Bank, 17 Main Associates, 46, 48, 49 South Jersey Port Corp., 17 Fi:st Pennsylvania Bank, 59 Maple Associates, 46 Spruce Associates, 46, 49 Fries Cadillac Co., 26 Mason Coal Pro!lram, 43, 44 St. Anthony's Club, 67, 68 Fuel Engineering Co., 13, 14, 18,23,24,25,26, Medico Industries, 57 Starford Coal Corp., 34, 35, 38, 39, 40, 41, 42, 27,31 Merchants National Bank, 59 43,45 George T. Seiler Welding Supply, 57 Millier Marketing, Inc., 61,62 State Correctional Institute at Greensburg, 66, Georgia Bureau of Investigation, 7 Montana Department of Revenue, 50 67 Georgia Organized Crime Prevention Council, 7 Montana Securities Commission, 50 State Equipment, 57 Georgia Secretary of State's Office, 7 Montgomery County District Attorney's Office, Sunny Isle Marina & Development Co., Inc., 63 Gilcrest Management, Inc., 46 65 Swain Enterprises, Inc., 57 Giordano Heavy Equipment, 17 Morgan & Halcovage, 57 Swanee Coal Co., 44 Girard Bank, 12, 13, 14, 15, 16, 17, 18 Mountain Creek Properties, 44 Syndicated Coal and Minerals, 65, 66, 67, 68 Goodman&Co., 17 New Jersey Attorney General's Office, 50 T.B.S. Enterprises, Inc., 63 Great American Coal Co., 71 New Waterford Bank, 67 Tabor Mining Co., Ltd., 38, 44 Great Gatsby Bar, 67 New York County District Attorney's Office, 7 Tall Oaks, 53, 55 Grove Associates, 46, 48 North American World Trade Group, 19,21 Tallman Supply Co., 57 Hampton Roads Testing Laboratoriess, Inc., 13, Northampton County District Attorney's Office, Teamsters Union, 71 14,15,16,20,23,25,27,28,30,31,32 30 Tennessee Valley Authority, 67 Hanil Bank, 12, 17, 18 Nugget Coal Sales, Inc., 24, 25,26,29 The Printing Place, 21,27 Harriman Coal Co., 17 Oak Associates, 46 Titan Coal Co., 65, 66, 68 Hartshorn Mining Co., Ltd., 38,43,44 Office of Supply, Republic of Korea (OSROK), Towers Construction Co., 49 Hawk Coal Program, 38, 43 10, II, 12, 13, 18,21,23,24,29 Trevorton North Properties, 44 74 Trevorton South Properties, 44 211 J. J. Quince Corp., 60 U. S. Attonley's Office, 18,43,50 U. S. Coal Co., 61, 62, 64, 65 U. S. Department of Justice, 7 U. S. Geological Survey, 37 U. S. Office of Surface Mining, 48, 56, 57, 58 U. S. Securities and Exchange Commission, 6, 34,45,48,50 U. S. State Department, 10,23 United Mine Workers of Amf'rica, 7,42,45, 60 United young Co., 10, 11, 12, 13, 18 Utah Securities Commission, 50 Valley Coal Co., 44 Virginia Attorney General's Office, 7 Virginia State Police, 7 W. E. Repro, 20 Wagner Sales Co., Inc., 57 Washington Redskins, 61, 62, 63 Welrex Associates, 46, 48 West End Motor Co., Inc., 57 West Penn Power Co., 65, 66, 67 West Pine Construction Co., Inc., 52, 53, 54, 55, 56,57,58,60 Won Jin International, 17 75 Pennsylvania Crime COlnmission Published Reports 1969-1984 Task Force Report: Goals for Justice Conflict of Interest and Self Dealing by (1969) Local Public Officials and Employ Task Force Report: Assessment of Crime ees: Pocono Township, Monroe Coun and Criminal Justice in Pennsylvania ty and Marple Township, Delaware (1969) County (1977) Task Force Report: Corrections in Penn The Administration of the Criminal Jus sylvania (1969) tice System-Liberty Borough and 1 ask Force Report: Alcohol and the VI'est Mifflin Borough (1977) Criminal Justice System (1969) Gambling and Its Effect Upon the Crimi A Report on the Inquiry into Gang Vio nal Justice System-Patterns of Sen lence in Philadelphia (1969) tencing in Allegheny County Gambling Criminal Justice Planning and Action in Ca,es (1977) Pennsylvania (l969) Absentee Voting Irregularities in Dela Comprehensive Plan for the Improvement ware County (1977) of Criminal Justice in Pennsylvania Fraudulent 'Cents-Off' Coupon Redemp (1969) tion Schemes (1977) Report on Organized Crime (1970) Abuses and Criminality in the Bail Bond Report on the Conditions of Organized Business in Pennsylvania (1977) Gambling and the Administration of A Chester City Racketeer: Hidden Inter Criminal Justice in Johnstown, Penn ests Revealed (1978) sylvania: 1970-1971 (1971) Interstate Shipment of Gambling Para Report on the Investigation in Delaware phernalia and its Distribution and Sale County, Pennsylvania, with Particular Within the Commonwealth (1978) Reference to Abuses in Bail Bond Racketeering in the Casualty Insurance ing: 1970-1971 (1971) Industry (1978) Criminal Infiltration of Legitimate Busi Macing and Extortion in the Pennsylvania ness in the Philadelphia Area (1971) Department of Transportation (1978) Report on Pn "essional Crime in Pennsyl Voting Irregularitit:s in Philaddphia vania (l972) (1978) Report on an Investigation of Liquor and The Penn State Group: A Study in White Penal Code Violations and Enforce Collar Crime (1978) ment Policies in the Locust Street Racketeering in the Commercial Loan "Strip" Section of Philadelphia (1972) Br0kerage Industry (1980) Report on an Investigation into the Al A Report of the Study of Organized leged Fixing of Certain Harness Races Crime's Infiltration of the Pizza and of Pocono Downs Track in 1971 Cheese Industry (1980) (1972) A Decade of Organized Crime (1980) Gambling and Corruption in Phoenixville Annual Report (1981) (1973) Health Care Fraud: A Rising Threat Corruption in the Philadelphia Police De (1981 ) partment (1973) 1982 Report A Case Study of the Second Class Town 1983 Report ship Code-Chartiers Township (1973) 1984 Report Investigations in Delaware County-Mac·· ing and Corruption (1973) Corruption in the York Police Depart ment (1974) A Case Study of the Pennsylvania Election Code (1974) Migration of Organized Crime Figures from New Jersey into Pennsylvania; A Case Study of Syndicated Gambling in Bucks County (1976) 76