IPSN

Serpico testomony before Presidential Crime Commisssion

Testimony of John Serpico before Presidential Organized Crime Commission in 1985. Not for republication on the internet without the written permission of Illinois Police and Sheriff’s News and /or Laborers for JUSTICE.� 2000 All Rights reserved

(witness excused.)

ACTING CHAIRMAN SKINNER: Mr. Ryan.
(Discussion had off-the record.)
ACTING CHAIRMAN SKINNER: Call your next witness.
MR. RYAN: The Commission calls Mr. John Serpico.
I would say that Mr. Serpico is attended by excellent counsel, Mr. Sherman Carmell.

MR. CARMELL: I can’t argue with that.

MR. RYAN. I didn’t think you would. Sir, would you stand and be sworn?

JOHN SERPICO
was called as a witness and, having been first duly sworn, was examined and testified as follows:
MR. RYAN: Mr. Serpico, would you state your name for the record, please?
MR. SERPICO: John Serpico.
MR. RYAN: Mr. Serpico, where do you live?
MR. SERPICO: In Lincolnwood.
MR. RYAN: Could you give me the address, Please?
MR. SERPICO: 6539 North Longmeadow
MR. RYAN: Mr. Serpico, to get to the heart

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of things very quickly, in the years 1954 through ’67 is it correct that you were a truck driver in the City of Chicago working for the City of Chicago?

MR. SERPICO: Correct. 

MR. RYAN: And in 1967 you went to the union business?

MR. SERPICO: I was hired as an organizer.
MR. RYAN: Yes. You entered the union business?

MR. SERPICO: Right. I wouldn’t say it was a business. I would just say I was given a job as an organizer.
MR. RYAN: Could you tell me what union you began work for at that time?

MR. SERPICO: It was — I believe at that time the name of it was the Chicago Joint Board, which I think the same year changed its name to the Central States Joint Board.

MR. RYAN: In any case, it’s the organization depicted on the chart with those unions and affiliates up there?

MR. SERPICO: And by the way, it’s an AFL-CIO union and not a Teamster union.

MR. RYAN: Let’s be quite clear about that.

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The Central States Joint Board has no affiliation with the Central States Pension Fund, is that correct?

MR. SERPICO: That’s correct.

MR. RYAN: Those are two entirely separate organizations?

MR. SERPICO: Right.

MR. RYAN: and you had one and, in the case of the Central States Pension Fund, Mr. George Lehr will be testifying this afternoon on a completely separate operation. Is it correct that in 1969 or thereabouts you became the president of one of the locals in the Central States Joint Board, particularly the Allied Production and Novelty Workers Union?

MR. SERPICO. Yes.
MR. Ryan: And ultimately you became secretary-treasurer of that International Union and maintained your post as president of that local?,

MR. SERPICO: That’s right:
MR. RYAN: Are you still president of that local?

MR. SERPICO: Yes, I am.
MR. RYAN: are you also president of Laborers’ Local 8?

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MR. SERPICO: Yes, I am.

MR. RYAN:- Laborers’ Local 8 is one of the unions in the Central States Joint Board?.

MR. SERPICO: That’s right. 

MR. RYAN: In 1973 you became the president of Laborers’ Local 8 and of the joint Board?

MR. SERPICO: I believe so. Around that.

MR. RYAN: At some point about that time?

MR. SERPICO: In that time period.
MR. RYAN: Is it also true you are now an International vice-president of the Laborers’ International Union of North America?

MR. SERPICO: Yes, I an. But I don’t hold all of these posts. I resigned my post as secretary-treasurer of the Allied Novelty and Production Workers International Union.

MR. RYAN: And that was part of the agreement you had with Mr. Fosco when you took the post as International vice-president to the Laborers?

MR. SERPICO: It was not an agreement. It was a discussion between him and I, and I was the one that told him I would like to keep both posts.

MR. RYAN: Do you receive a salary from the Central States Joint Board?

MR. SERPICO: Yes, I do.

MR. RYAN: Do you-receive a salary from the Laborers’ International Union for your work as an International vice-president?
MR. SERPICO: Yes, I do.
MR. RYAN: Do you also, receive a salary as the Chairman of the Chicago Regional District?
MR. SERPICO: Yes.
MR. RYAN: Sir, is your union influenced or dominated by organized crime?
MR. SERPICO: No, it’s not.
MR. RYAN: Is there any organized crime influence in your union?
MR. SERPICO: No, there is not.
MR. RYAN: You know of that because you, as a union officer, are vigilant in making sure that there is no influence of organized crime?

MR. SERPICO: I don’t know what you mean by “vigilant,” but the fact that there is no — nothing to do with organized crime is a fact.
MR. RYAN: What does the word “vigilant” mean to you, Mr. Serpico?
MR. SERPICO: I think it’s more important about what it means to you and how you are putting it to me. 

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MR. RYAN: You are answering the questions; I’m asking them. You can answer it in any way you want.
ACTING CHAIRMAN SKINNER: Why don’t you try to use another word that maybe both of you can agree on.

MR. RYAN: Would you agree with, Mr. Serpico, that organized crime, if it was going to try and influence and dominate a union, wouldn’t announce itself: it wouldn’t come to the door and say: We are organized crime and we are here?

MR. SERPICO: Would you repeat that?

MR. RYAN: I certainly will, and it will come out a little different, but the idea will be the same. If organized crime was going to take over a local union or an international union, for that matter, they wouldn’t knock on the door and say: We are organized crime and we are going to take over and influence your union?

MR. SERPICO: That’s right.

MR. RYAN: What would you do to look for the signs that organized crime was involved in a union, Mr. Serpico?

MR. SERPICO: I would look at –if somebody was trying to approach me because being a head of the organization.

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MR. RYAN: Well , would .you look to the associations of the persons who were the offices and employees of that Laborer local?

MR. SERPICO: Not necessarily, because it doesn’t mean that the associations have anything to do with the person that is in charge and they don’t have any control over him.


MR. RYAN: So that the associations of the persons who are involved in the union has no bearing on whether organized crime can influence or dominate that union?

MR. SERPICO: No.

MR. RYAN: Not at all?

MR. SERPIC0: In my opinion.

MR. RYAN: In your opinion.

MR. SERPICO: That’s correct.

MR. RYAN: For example, do you know Mr. Vincent Solano?

MR. SERPICO: Yes.

MR. RYAN: Who is Vincent Solano?
MR. SERPICO: He is one of the officers of a labor local.

MR. RYAN: Laborers’ Local 1, not a labor

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local, but Laborers’ Local 1?
MR. SERPICO: I don’t know the number, but it’s one of the locals.
MR. RYAN: It’s the same international union to which you are now an International vice-president?

MR. SERPICO: That’s right.

MR. RYAN: Did you know that on Monday we heard testimony in this room from persons sitting in that seat that said that Mr. Solano was the chief of the rackets on the North Side of Chicago?

MR. SERPICO: I read something in the paper about it.

MR. RYAN: Does that concern you as a Laborers’ officer?
MR. SERPICO: I would only be concerned if there was a trial and a conviction, yes.

MR. RYAN: So that the evidence of Mr. Eto that Mr. Vincent Solano had ordered him shot in the head three times, that would not influence your judgment, that it would be necessary to obtain a conviction so that you would believe that organized crime had influenced or dominated that local?
MR. SERPICO: Why should I believe that anyone just — just them saying something and that I don’t know

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  to be a fact?

MR. RYAN: But it doesn’t affect-you as an International vice-president of the Laborers’ Union that a person who spends thirty years in organized crime indicated that Vincent Solano was the chief of the rackets on the North Side of Chicago?

MR. SERPICO: I told you, unless I can find out as fact. There are a ,lot of people going around .saying a lot of things about me, too, that are not true. And as long as I don’t know them as facts myself, no.

MR. RYAN: Let’s talk about Mr. DeMonte. You also know Mr. Frank “Babe” DeMonte, don’t you?

MR. SERPICO: Yes.

MR. RYAN: Mr. DeMonte is also associated with Laborers’ Local 1, isn’t he?

MR. SERPICO: I believe so.

MR. RYAN: Have you had business dealings with Mr. DeMonte and Mr. Solano in the course of your affairs as a Laborers’ officer?

MR. SERPICO: Yes, as a Laborers’ officer, yes.

MR. RYAN: Does it trouble you that on Monday, this Commission received testimony that Mr. DeMonte is also a member of La Cosa Nostra and in particular the

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 organization here in Chicago known as the Outfit?

MR. SERPICO: It’s the same answer. The same as I answered in respect to what you asked about Mr. Solano. I would say the same thing about Mr. DeMonte.
MR. RYAN: Does it concern-you at all that in the case of United States vs. Accardo, Mr. Al Pilotto, a territorial boss from the City of Chicago, and incidentally the president of Laborers’ Local 5, was convicted of racketeering charges?

MR. SERPICO: Yes, it does concern me.

MR. RYAN: You know Mr. Pilotto?

MR. SERPICO: Yes, I do.

MR. RYAN: You knew him because of your union business?

MR. SERPICO: That’s right.

MR. RYAN: You had meetings with Mr. Pilotto?
MR. SERPICO: I have attended meetings with Mr. Pilotto, as far as the union goes.
MR. RYAN: Had you-ever heard that he was a territorial boss in La Cosa Nostra?

MR. SERPICO: No.

MR. RYAN: And what — have you investigated further the situation in Local S today to ensure that, Mr. Pilotto wasn’t the only representative of organized crime in that union?

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MR. SERPICO: It’s not my-jurisdiction to investigate any local in the union only if the president assigns a different project to each of the vice-presidents as they come up. There is no jurisdiction that any one vice-president controls.

MR. RYAN: Have you ever suggested that an investigation be brought concerning these allegations of organized crime?

MR. SERPICO: No, I never did.

MR. RYAN: Are you aware that Mr. :Fosco was here earlier this week and refused to answer any questions?

MR. SERPICO: I am aware of it.

MR. RYAN: Let’s talk about your particular union, sir. Do you know John Fecarotta?

MR. SERPICO: Yes, I do.

MR. RYAN: Tell me how you know Mr. Fecarotta.

MR. SERPICO: ’74 or ’75, I don’t know exactly my-organizing director, who at the time was Henry Harrison, came and recommended him for an organizing position.

MR. RYAN: And did you look at his qualifications?

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MR. SERPICO: None of the people I hire have any qualifications. They come from shops, they come; from — and we teach them.

MR. RYAN: Did Mr. Fecarotta to submit a resume?

MR. SERPICO: No, he didn’t.;


MR. RYAN: What would have beer on Mr. Fecarotta’s resume if he had submitted it?

MR. CARMELL: Mr., Chairman, it’s not my province,- but asking him what he would have done if something had been submitted to him is rather unfair to the Witness.

ACTING CHAIRMAN SKINNER: Well, let me suggest Mr. Carmell, that first of all i agree he is well represented. Number two, we certainly want to make sure we have a complete record; that we don’t require the witness to answer anything he is not comfortable answering. I would suggest the way probably to proceed is that in such a question as tendered to your witness, I wouldn’t hesitate to lean over, as I have noticed you have done before, and advise him that — or have him lean over to you, I guess, would be the proper way. If there is any question he is uncomfortable with, he should hesitate — he should not be intimidated anymore

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than he has to by this surrounding and he should feel comfortable taking all of the, time he needs to give a proper response. And if he thinks the question calls for a conclusion or an opinion which he is not qualified  to answer, he should consult with you and then advise us and we will try to stick to as specific instances of fact as possible.

MR. CARMELL: Thank you very much.


ACTING CHAIRMAN SKINNER: Mr. Ryan, in that light, I think you are asking him to speculate on what would have been on the resume. You might ask him what qualifications or what past work experience that individual had that he was aware of at the time he hired him; that might be the way to do it.

MR. RYAN: Thank you, Mr. Chairman.
Did you know or did you find out subsequent to Mr. Fecarotta being hired what he had done prior to the time he came to the union?

MR. SERPICO: No, I didn’t. .Hr. Harrison just told me that he thought he would have been a good man to hire.
MR. RYAN: what were Mr. Fecarotta’s union duties?

MR. SERPICO: It was to go out and find jobs

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that were not organized and turn them into Mr. Harrison who then would assign an organizing team to conclude, an organization campaign.

MR. RYAN: 1974 was when he was hired?

MR. SERPICO: -I believe so.
MR. RYAN: He may well have been a business agent or an organizer of —
MR. SERPICO: I don’t know exactly. It was around that time.
MR. RYAN: At the time that these photographs were taken?

MR. SERPICO: I truly couldn’t tell you. 

MR. RYAN: What companies were organized as a result of Mr. Fecarotta’s efforts on behalf of the Central States Joint Board?


MR. SERPICO: I didn’t have those records and I — he never reported to me. He reported to the organizing director. And Mr. Harrison would be the one that would be able to tell you that.

MR. RYAN: But you can’t remember sitting there today, any single tip or company that Mr. Fecarotta was involved in organizing?

MR. SERPICO: NO.

MR. RYAN: Did Mr. Fecarotta receive a union

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car and compensation for his work?

MR. SERPICO: Mr. Harrison came to me and told me what a good job he was doing; that he brought in two tips that resulted in members and that he thought that we should give him a car. And we had an extra car which was about two years old that we gave Mr. Fecarotta.


MR. RYAN: What were the two shops that were organized as a result of the tips from Mr. Fecarotta?

MR. SERPICO: I just told you I don’t know.


MR. RYAN: Do you recall any other specific contribution of John Fecarotta in the six or seven-odd years that he was a union business agent and organizer? Other than those two tips, can you recall anything that he did for you?


MR. SERPICO: You would have to ask the people that he was — that were in charge of it.

MR. RYAN: You ran the union, did you not, sir?


MR. SERPICO: I do. I run it with department heads. I do not — the union is too big for me to be

involved in every phase of the organization. And I have department heads that run each department.


MR. RYAN: Sir, do the surveillance photographs, particularly Photographs 2, 3 and 4, cause you any concern that there might have been an infiltration

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of organized crime that you were not aware of at the time?
MR. SERPICO: Sir, what photographs are you talking about? 


MR. RYAN: Mould you look at the photographs, Mr. Cantazaro entering the Kleen–Aire Sanitation Company, Mr. Aiuppa and Mr. Fecarotta, and the picture of Mr.Torello and Mr. Fecarotta, and the testimony of the Chicago Police Department officer a minute ago. Does this create any new concern for whether organized crime was trying to influence or dominate your union at this time?

MR. SERPICO: No.
MR. RYAN: It certainly indicates that Mr. Fecarotta and Mr. Cantazaro were friends or, at a minimum, acquaintances?

MR. SERPICO: I don’t know.
MR. RYAN: You heard the testimony they went to the Kleen-Aire Sanitation Company and were inside for awhile together?

MR. SERPICO: Yes.
MR. RYAN: So they knew one another at that time?

MR. SERPICO: I don’t know.

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MR. RYAN: _ Let’s talk. about some other people you know. You know* Mr. Torello, don’t you?

MR. SERPICO: Yes, I do.

MR. RYAN: Flow do you know Mr. Torello?

MR. SERPICO: We were born on the same street a half block away from one another.

MR. RYAN: Is that an accurate depiction of Mr. Torello in that photograph over there?

MR. SERPICO: Yes, that is.

MR. RYAN: This is the same James “Turk” Torello who introduced Dr. Aiossa to Mr. Cantazaro, isn’t it?

MR. SERPICO: I don’t know.

MR. RYAN: Based on the testimony you heard here this morning, did you hear Dr. Aiossa say he was introduced to Mr. Cantazaro by James “Turk” Torello?

MR. SERPICO: Yes, I heard that.

MR. RYAN: So that this is presumably the same James Torello? 

ACTING CHAIRMAN SKINNER: I think that -before’ Mr. Carmell leans over, I will cut that off and suggest that might you ask, Mr. Ryan, what he knows about the relationship between Mr. Cantazaro, Dr. Aiossa and James “Turk” Torello, the person he knows and grew up on the same street with him.

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MR. RYAN: I would adopt the Chairman’s statement as a question.

MR. SERPICO: No, I don’t. Wait.

MR. CARMELL: Listen to the question.


MR. SERPICO: I don’t know what question you are asking me now.


ACTING CHAIRMAN SKINNER: I don’t like to interject myself. Maybe I will cut it short a little bit because I can see what is going to happen here. What,if anything, do you know about the relationship of Mr. Cantazaro, Mr. Torello and Dr. Dominic Aiossa? What do you personally know about the relationship between those three people? Is that all right, Mr. Ryan?

MR. RYAN: Yes, sir.

MR. SERPICO: Nothing.

MR. RYAN:” Is it true Mr. Torello’s son, Steve Torello, is a business agent at your local?

MR. SERPICO: Yes.

MR. RYAN: You know Mr. Joey Aiuppa yourself, don’t you, sir?

MR. SERPICO: Yes.

MR: RYAN: You have met Mr. Aiuppa on occasion?

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MR. SERPICO: Yes.

MR.  RYAN:  Now seeing these surveillance photographs, does that indicate to you any more concern that organized crime might influence or dominate your union?

MR. SERPICO: No.

MR. RYAN: Do you know Jackie Cerone?

MR. SERPICO: I don’t know him, but I have met him.

MR. RYAN: His son Jackie is the lawyer for your local, Is he not?

MR. SERPICO: That’s right.

MR. RYAN: Have you heard the testimony from Monday that Mr. Jackie Cerone the Elder is the underboss of the Chicago Family?

MR. SERPICO: I haven’t heard it, but I read it in the newspaper.

MR. RYAN: Another business agent in your union was Mr. Andy Buccieri, is that correct, is that his first name? 

MR. SERPICO: Fiore is his first name.

MR. RYAN: Excuse me. Fiore Buccieri?

MR. SERPICO: Yes.

MR. RYAN: He worked in your union for a number of years?

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MR. SERPICO: Yes.

MR. RYAN: Did you also know his father Fifi Buccieri?

MR. SERPICO: Yes.

MR. RYAN: Fifi Buccieri was alleged to be a territorial boss of La Cosa Nostra; did you ever hear those allegations?

MR. SERPICO: No.

MR. RYAN: You also know Mr. Joe Ferriola, don’t you?

MR. SERPICO: Yes.

MR. RYAN: How do you know Mr. Ferriola?

MR. SERPICO: Come from the same neighborhood.We grew up together.

MR. RYAN: Do you visit with Mr. Ferriola? 

MR. SERPICO: Yes, I do.

MR. RYAN: Have you visited with him in the last few weeks?

MR. SERPICO: Yes. 

MR. RYAN: Sir, would you say that you visit with him once or twice a month on an average?

MR. SERPICO: No, I would say — some months I would see him twice a month and sometimes I wouldn’t

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see him in two or three months.

MR. RYAN: If you didn’t see him, would you give him a call on the telephone and say hello?

MR. SERPICO: I might.

MR. RYAN: Do you show him respect?

MR. SERPICO: Show him respect?

MR. RYAN: Do you call him because he is a friend and you want to show him respect?

MR. SERPICO: I call him because he is a friend.

MR. RYAN: What business is Mr. Ferriola in?

MR. SERPICO: He is a business man.

MR. RYAN: What business?

MR. SERPICO: I don’t know.

MR. RYAN: This is your close friend, Mr. Ferriola; you don’t know what business he is in?

MR. SERPICO: No. I know a couple of businesses he was in and that he is not in anymore.

MR. RYAN: What were the businesses that he was in?

MR. SERPICO: He was in the Laundromat that I know of and he also had a discount — a discount store.

MR. RYAN: Did you ever discuss your union business with Mr. Joe Ferriola?

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MR. SERPICO: No, I didn’t.

MR. RYAN: At no time?

MR. SERPICO: No time.

MR. RYAN: Do you call him on the phone -did you call him on the phone in the last week?

MR. SERPICO: No.

MR. RYAN: Did you know that Mr. Feriola was alleged to be a territorial boss in La Cosa Nostra?

MR. SERPICO : No.

MR. RYAN: You never heard that?

MR. SERPICO: No.

MR. RYAN: What company cleans the washrooms at the Central States Joint Board?

MR. SERPICO: I believe — what is the company? 

ACTING CHAIRMAN SKINNER: Maintenance contract,do you have a maintenance contract at your headquarters? I think that is probably what he is getting at.

MR. RYAN: Yes, that’s correct. What is the name of the company?

MR. SERPICO: You know it.

MR. RYAN: The Kleen – Aire Company?

MR. SERPICO: Right. 

MR. RYAN: Do you know Mr. Dominic Cortina? 

MR. SERPICO: Yes.

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MR. RYAN: Have you ever heard that Mr. Cortina is involved in La Cosa Nostra?

MR. SERPICO: No.

MR. RYAN: Have you ever heard of Mr. Ernest Infelice?

MR. SERPICO: Yes.

MR. RYAN: Do you know him?

MR. SERPICO: Yes.

MR. RYAN: Have you ever heard that he is involved in La Cosa Nostra?

MR. SERPICO: No.

MR. RYAN: Have you ever heard of Mr. Louis Mari no?

MR. SERPICO: Yes.

MR. RYAN: Do you know him?

MR. SERPICO: Yes.

MR. RYAN: Have you ever heard allegations that he has been involved in La Cosa Nostra? 

MR. SERPICO: No.

MR. RYAN: Now let’s turn to the dental clinic if we can, Mr. Serpico. You vouched for Mr. Cantazaro didn’t you?

MR. SERPICO: I did not vouch for Mr.Cantazaro. Excuse me.

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 ACTING CHAIRMAN SKINNER:. I was just going to anticipate another lean there. Why don’t we just say what did you know of Mr. Cantazaro and his background, and did you recommend him to anyone? How is that, Mr. Carmell?

MR. CARMELL: I didn’t have a problem with the first one, but that is even better.

MR. SERPICO: All right. Mr.Cantazaro, I knew him from the neighborhood. And when I became president of the Central States Joint Board, he came to –he gave me quotes on rates for my workman’s comp, automobile insurance, errors and omissions. And they were a lot cheaper than the rates that we were paying and I — and we wrote up a policy for those — for that insurance.

MR. RYAN: I will restate a question, Mr. Carmell.You introduced Mr. Cantazaro as a dental specialist — excuse me — that is not correct — as an insurance specialist, wasn’t it?

MR. SERPICO: Yes.

MR. RYAN: And you know that because the minutes of the Central States Joint Board Health and Welfare Fund contain that phrase, don’t they?

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MR. SERPICO: That’s right.

MR. RYAN: Did you ever find out that Mr. Cantazaro had absolutely no experience as a dental care provider?

MR. SERPICO: No.

MR. RYAN: You never knew that?

MR. SERPICO: No.

MR. RYAN: You have stated before that Mr. Cantazaro delivered on every promise: he provided the most services and his proposal was the lowest cost to the Fund?

MR. CARMELL: Mr. Chairman, that came from his deposition and he did make that statement. After the recess, he asked to clarify that statement and add some more information.

ACTING CHAIRMAN SKINNER: Mr. Carmell, I suggest — I see you have the deposition there and if you want to -=if your client wants to lean over and refer to that as part of an answer and refer to the rest of the answer, that certainly, under the doctrine of completeness, would be proper.

MR. CARMELL: Thank you. Could he point out the page?

518

ACTING CHAIRMAN SKINNER: That has been our practice.

MR. RYAN: Page 158. My statement was an approximation. If  he ‘
changed it after the-recess, I didn’t recall, but I’ would be glad to hear what he had to say then and now.

MR. SERPICO: Yes, I made that statement at the deposition.

MR. RYAN: In light of what we heard this morning,and in light of what Mr. Walsh had to say, and in light of the monies that are put on that chart, do you still feel that way that Mr. Cantazaro delivered on his promise?

MR. CARMELL: Could we have a moment, Mr. Chairman, just to get to this part of the deposition?

ACTING CHAIRMAN SKINNER: Take all of the time you want, Mr. Carmell.

(Brief pause.) 

MR. SERPICO: Can you restate the —

MR. RYAN: Certainly. I think you said something to the effect Mr. Cantazaro delivered on every promise, he provided the most services, and his proposal was at the lowest cost to the Fund, is that an approximation of fair accuracy, sir?

MR. SERPICO: That’s right.

519

 MR. RYAN: Do you agree with that now, that he delivered on every promise? 

MR. SERPICO: He delivered on the promises except for opening up additional clinics.

MR. RYAN: That’s right. There was one promise he didn’t deliver on: that was opening the other dental clinics, is that correct?

ACTING CHAIRMAN SKINNER: That is the point you clarified after lunch, Mr. Carmell?

MR. CARMELL: Yes, sir, right after that. 

MR. RYAN: Other than that, did he deliver on every promise?

MR. SERPICO: Yes.

MR. RYAN: And on page 153 there is also a statement. I think you said something to the effect it was a bargain then, and looking back it’s still a bargain, is there something like that?

MR. SERPICO: Yes.

MR. RYAN: Do you agree with your statement made there and do you affirm it today?

MR. SERPICO: Yes.

MR. RYAN: I have no further questions of this witness.

ACTING CHAIRMAN SKINNER: Commissioner McBride.

520

MR. SERPICO: I’m sorry.

ACTING CHAIRMAN SKINNER: No such luck.

MR. CARMELL: But you notice I did move quickly.

COMMISSIONER MC BRIDE: Mr. Serpico, I am intrigued by that chart. You were the trustee of the Health and Welfare Fund, right?

MR. SERPICO: Right.

COMMISSIONER MC BRIDE: That shows five million in dental premiums of which about 32 percent were used for benefits and 68 percent, if you will, siphoned off for overhead profits, commissions, et cetera. And I won’t ask a question quite yet, but in my mind that is an unusual and, indeed, an unquestionable level of siphoning off of proceeds of an insurance plan. What really intrigues me is at the bottom where it shows Cantazaro, through salaries, commissions, through a variety of channels, ended up with two and a half million dollars. And my question is a very simple one. Did Mr.Cantazaro give you any money as a result of this scheme?

MR. SERPICO: No.

COMMISSIONER MC BRIDE: Do you think you were responsible in your fiduciary duties through the dues

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paying and the insurance premium paying members to allow this level of profit in a plan like this?

MR. SERPICO: Yes. Because when we were out looking for dental insurance, every premium that was ever quoted to us was quoted in the $8 to $10 range for a single plan and from $12 to $17 for a family plan. These were the rates that fitted into our program and that we could have gave that benefit to our members. Also, the fact was that we used to be insured by Blue Cross and Blue Shield. When we were insured by them, our coordination of benefit return was only $10,000 a year.

We then went to the Equitable Insurance Company, changed carriers, went to the Equitable Insurance Company. Again our return rised to $40,000.When we started to look at how the process of the insurance companies work, we then instituted to go self-insured. And when we went to self-insured, our coordination of benefits jumped from $40,000 to $500,000. And never once did anyone question Blue Cross/Blue Shield or Equitable Life Insurance. At that time we thought that we got the best kind of coverage for our members for the best price that we could have obtained.

COMMISSIONER MC BRIDE: Did you know, Mr.

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Serpico, that Cantazaro was getting those kind of profits?

MR. SERPICO: No, sir.

COMMISSIONER MC BRIDE: Why not? –

MR. SERPICO: Because every year he came and he raised the benefit of the — the benefit level of the insurance, which in effect lowered the premium.

COMMISSIONER MC BRIDE: Are you disturbed now that you see these figures and realize that 68 percent of the gross premiums were being siphoned off -for these purposes?

MR. SERPICO: No.

COMMISSIONER MC BRIDE: Do you think that is a suitable ratio?

MR. SERPICO: What I think in this case I don”t think is material because anybody could be a Monday morning quarterback and then come up with what we should have done and what we shouldn’t have done.

COMMISSIONER MC BRIDE: It’s not just Monday morning. We had from November 1977 to May 1983 that this plan was in effect.

MR. SERPICO: Yes, but we had a contract for five years. As we came to the end of the contract, and we were trying to-negotiate higher benefits, I went to

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the employer trustees and to the union’ trustees and told them of it. The union trustees told me that we were paying a premium, but we had-a contract and what he made was his business.

COMMISSIONER MC BRIDE: Have you tried to explain the deal —

MR. SERPICO: The employer trustees, I’m sorry

COMMISSIONER MC BRIDE: Have you tried to explain this level of siphoning off of profits to your members who paid the premiums?

MR. SERPICO: I didn’t know that this thing was even in existence.

COMMISSIONER MCBRIDE: I have no further questions.

COMMISSIONER ROWAN: Didn’t you get annual audits from your carrier from Willoughby, as president of the Central States Board?

MR. SERPICO: No. No insurance company, not even Blue Cross/Blue Shield nor did Equitable ever give us any audit.

COMMISSIONER ROWAN: I understand, but this is a self — you said you wanted to go self-insured. These people are under a contract to you for a period of time. They don’t report to you at any time during that 

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period of contract telling you how much you spend on premiums, how much is benefits, et cetera?

MR. SERPICO: This was a premium to an insurance company. It was not a self-insured plan.

COMMISSIONER ROWAN: Are your members voluntarily paying these health and welfare benefits or is it a checkoff kind of system?

MR. SERPICO: It’s an employer contribution.

COMMISSIONER ROWAN: The payment is not made by the members?

MR. SERPICO: For a single it’s not made by the member. And in some cases, in some cases, the family is not — the additional family premium is not paid by the member.

COMMISSIONE1 ROWAN: I don’t recall the exact language, but there was some indication that Mr. Cantazaro was an insurance expert or an insurance something.

MR. SERPICO: Insurance specialist.

COMMISSIONER ROWAN: Insurance specialist.

MR. SERPICO: Right.

COMMISSIONER ROWAN: How did you know that he was an insurance specialist and what evidence did you have that he was an insurance specialist

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MR. SERPICO: It was — it was just something to flatter him with. I didn’t have any knowledge of him being an insurance specialist. It was something I was using to flatter him with and that is how it came out.

COMMISSIONER ROWAN: What was his job before he became wealthy?

MR. SERPICO: His job was an insurance broker.

COMMISSIONER ROWAN: He was a broker?

MR. SERPICO: Right.

COMMISSIONER ROWAN: Where are your — where is your membership located primarily?

MR. SERPICO: in Chicago and the surrounding areas.

COMMISSIONER ROWAN: Is the Oak Park office, which apparently also belongs to Mr. Cantazaro, convenient for your members to travel to?

MR. SERPICO: It was the most centrally located place for the first office to be.

COMMISSIONER ROWAN: Why were there then complaints about that-office?

MR. SERPICO: Because I had-members that are in Morris, Illinois, in DeKalb, Illinois, — down on the south side, and that is where the complaints came from

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because it was too long of a distance. It was good for everybody within that ten-mile radius, but then after you got out of that radius, then it was an imposition on the people.

COMMISSIONER ROWAN: Did you know that Mr. Cantazaro owned that building at the time the dental plan went into that building?

MR. SERPICO: No.

COMMISSIONER ROWAN: I have no further questions. Thank you.

ACTING CHAIRMAN SKINNER: Commissioner McBride has one more question.

COMMISSIONER MC BRIDE: One more question, Mr. Serpico. Have you ever had any financial transactions with Mr. Cantazaro in sums of $1.000 or over?

MR. SERPICO: No.

COMMISSIONER MC BRIDE: Thank you .
ACTING CHAIRMAN SKINNER: Now the Chairman has a couple of questions. What are you doing now for health insurance for the Central States Joint Hoard — I’m sorry, dental insurance?

MR. SERPICO: We are self-insured now.

ACTING CHAIRMAN SKINNER: Do you have an organization managing those claims for you?

MR. SERPICO: No; we-do it all in-house. We do it ourselves.

ACTING CHAIRMAN SKINNER: I wonder if you  would provide to this staff at a later date the level of benefits that are being provided now, the level of benefits that were being provided when Willoughby was in charge, and the level of benefits that were provided when Equitable and Blue Cross were in charge. What I’m trying to get at is the key — two key elements are, number one, the cost for the plan: and number two, the amount of benefits that your covered employees received.

MR. SERPICO: Mr. Skinner, I think I misled you when I was talking about the Blue Cross/Blue Shield and the Equitable plan.The Blue Cross and Blue Shield were and the Equitable plans were strictly hospitalization insurance.

ACTING CHAIRMAN SKINNER: Health.

MR. SERPICO: And this dental insurance was something that, because of — because of the risk -okay.

MR. CARMELL: We’ll provide the information.

ACTING CHAIRMAN SKINNER: Mr. Carmell, I think

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we ought to let him finish the record. I think what he was probably going to say and what he was probably going to try to tell me is that -when he was referring to Equitable and Blue Cross, there was no dental insurance covered by that.

MR. SERPICO: That’s right.

ACTING CHAIRMAN SKINNER: Willoughby was the first time dental insurance was covered. And you are now providing dental coverage to your members on a self insured basis, and that is the most efficient way to do it, as I summarized your testimony. Is that what you were going to say?

MR. SERPICO: That’s right.

ACTING CHAIRMAN SKINNER: Was that all right :or him to say, Mr. Carmell?

MR. CARMELL: You can take charge any time.

ACTING CHAIRMAN SKINNER: Well, I didn’t mean to do that, but I think he wanted- to clear the record and we ought to give him that opportunity. Seeing no further questions, the witness is excused.

MR. SERPICO: Thank you.

(Witness excused.)

ACTING CHAIRMAN SKINNER: The Commission will

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now be in recess and we are going to try to keep it to thirty minutes.

  — – – —

(Whereupon, at 1:40 p.m., the hearing in the above-entitled matter was recessed until 2:10 p.m. of the same day, April 24, 1985.)

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