As Giuliani listened to the mayor’s inaugural address that day, his eyes roamed across the stage and focused on two of the guests who sat on the dais in seats reserved for the city’s most powerful politicians—Queens borough president Donald Manes and Bronx Democratic leader Stanley Friedman.
Giuliani recently had received reports from the FBI office in Chicago about an undercover operation probing payoffs to officials of that city from collection agencies seeking contracts to collect overdue parking ticket fines. The Chicago investigation had turned up information that collection agency owners and public officials were engaged in a similar scheme in New York.
From his folding chair, Giuliani remembered, he wondered “whether it was all true or not,” as the FBI reports from Chicago and his own preliminary inquiry suggested, that Friedman and Manes were among the politicians shaking down collection agencies in New York.
Giuliani once said he felt that with the exception of murder, selling away a public office was the worst possible crime. In the three years since he had arrived in New York from the U.S. Justice Department in Washington, Giuliani had developed a reputation for having an unyielding view of what was right and what was wrong.
An only child of Italian working-class parents—his father, whom he idolized, ran a tavern—Giuliani grew up in Brooklyn and Long Island. A devout Catholic, he had considered becoming a priest until he decided at twenty that he did not want to take the vow of celibacy. Instead his vocation would become the law.
The first member of his family to attend college, Giuliani went on to graduate from New York University Law School. He clerked for two years for a federal judge in Manhattan and then joined the U.S. attorney’s office in Manhattan in 1975, where he rose to head the anticorruption unit. Giuliani’s courtroom reputation for relentless and effective prosecution was sealed after former Brooklyn congressman Bert Podell folded under two days of Giuliani’s fierce cross-examination and suddenly pleaded guilty on the stand to the corruption charges he had denied.
In 1975 former federal judge Harold R. Tyler, Jr., a prominent New York attorney, invited Giuliani to go with him to the U.S. Department of Justice in Washington. Tyler had just been appointed deputy attorney general by President Gerald Ford, and he needed an assistant. Giuliani, a lifelong Democrat who had worked on Robert Kennedy’s senatorial campaign and had voted for George McGovern in 1972, changed his registration to the Republican party and joined the Ford administration.
He remained in Washington for two years and then followed Tyler back to New York to join Tyler’s law firm as a partner. But despite the big salary of private practice, he found the work unsatisfying and returned to government in 1981, soon after Ronald Reagan was elected president. He took the number three job in the Department of Justice under U.S. attorney general William French Smith. Two years later he opted to return to New York to become U.S. attorney for the southern district of New York, a post widely regarded as the best local prosecutor’s job in the country.
Back in his hometown, Giuliani announced that his top priorities would be narcotics, organized and white-collar crime, and public corruption. By January of 1986, having already indicted many of the leaders of the city’s powerful organized crime families, Giuliani was turning his attention to public corruption.
At first Giuliani believed there was little high-level corruption in the Koch administration, especially when compared to other big cities around the country. But the reports from the FBI’s Chicago office implicated some New York politicians as well and caused him to reconsider his views. He began to mobilize his office’s considerable investigative powers to focus on some of the city’s top elected and political figures.
In his inaugural address Koch spoke that day of “public service as the noblest of professions if it is done honestly and well” and praised his guests on the dais for performing “superbly as public servants.”
Though Giuliani had grown suspicious of some of Koch’s friends and political allies seated with him on the dais that day, he had no idea that the Chicago probe would soon spawn at least a dozen investigations in New York. Those probes would dramatically change the power structure of the city, fundamentally alter the way city government did business, and provoke an intense debate over ethics in government and the definition of right and wrong.
Eight days after the mayor’s inauguration, in the early morning hours of Friday, January 10, a bizarre incident involving Donald Manes provided the first hint of scandal to come.
At 1:50 A.M. two city police officers pulled over Manes’s city-owned, 1984 Ford LTD after noticing the vehicle weaving erratically on the Grand Central Parkway in Queens. They found Manes, speaking incoherently and near death, with a two-inch-long Y-shaped wound on his left wrist and a two-inch cut on the inside of his left ankle, near the top of his shoe. He had lost nearly one-third of his blood. A bloody kitchen knife with a stainless-steel four-inch blade was found on the floor in the front of the car.
Concerned that Manes might bleed to death while waiting for an ambulance, the police officers covered him with a blanket, put him into their patrol car, and rushed him to nearby Booth Memorial Medical Center. Slipping in and out of consciousness, Manes muttered something about being “cut” near Queens Borough Hall, which was a few miles away.
At the hospital, as surgeons worked until dawn to repair his wounds, Manes’s family, closest friends, and aides arrived. Mayor Koch got there at around 3:15 A.M. after a close aide, Victor Botnik, who screened emergency calls for the mayor, awoke him with the news.
By 4:00 A.M. reporters from the daily newspapers and television stations had gathered outside the emergency room. Sometime around dawn Andy Capasso slipped into the hospital by a back entrance to try to see his old friend. Stanley Friedman arrived there, too.
The mysterious slashing of the powerful borough president dominated news coverage the following day. According to Manes, two men hiding in the backseat of his car had kidnapped him and slashed him. However, some reporters and police investigators suspected a suicide attempt, noting that a Y-shaped wound was more likely to be self-inflicted than the result of an attack. But no one could explain why Donald Manes, who had just won another term as Queens borough president and who talked about running for mayor in 1989, would attempt to take his own life.
Finally, on January 21, after the New York Police Department’s chief of detectives announced that his investigators did not believe the kidnapping story, Manes read a five-paragraph statement from his hospital bed admitting that he had tried to take his own life. “There were no assailants, and no one but me is to blame,” he said.
He refused to explain why he had been driving around or why he had attempted to kill himself. But two days later, on January 23, newspaper columnist Jimmy Breslin provided the explanation in a story that began on the front page of the New York Daily News under the headline “Manes Accused of Extortion”:
Michael Dowd, a Queens Blvd. attorney, last night told the United States attorney’s office in Manhattan that Donald Manes, the Queens Borough President, extorted money from him for a period of 18 months.…
This revelation causes the city’s Parking Violations Bureau scandal to detonate.…
It now appears that New York, under Mayor Koch, has the largest political scandal since Jimmy Walker was on the nightclub floor and his people were out stealing even the street lights.…
Breslin’s column and subsequent reporting stunned many of the city’s elected officials, including the mayor, who had trusted Manes as an able and honest politician.
The Manes revelations set off a media firestorm, creating new skepticism among law enforcement officials and the press about the way business was being done in New York. Within days Koch appointed a special commission to investigate any allegations of corruption in city government. And over the next few months law enforcement agencies throughout the city opened probes into allegations of corruption in the awarding of cable television franchises and city towing contracts, th
e operation of the Taxi and Limousine Commission, and the granting of a no-bid contract to a private developer to build a public parking garage in Queens.
The downfall of Manes, widely considered the city’s second most powerful politician after Koch, also changed the way many of the city’s newspaper and television reporters covered City Hall. Editors assigned additional reporters to probe city government contracts and possible conflicts of interest between elected officials and contractors. Public corruption became the ongoing story on television and in the city’s newspapers.
With the cooperation of Dowd and others involved in the extortion scheme at the city’s Parking Violations Bureau, Giuliani’s investigation was also turning up information implicating Stanley Friedman, the popular Bronx County Democratic leader, who was also a close friend of Andy Capasso’s.
Manes, meanwhile, was plunging deeper and deeper into depression. Under the care of a psychiatrist and taking antidepressant medication, Manes spent his days at his Jamaica Estates homes dressed in only a bathrobe. He saw only a few close friends during the weeks following his suicide attempt. Among those permitted to visit with him was Andy.
By the middle of March Manes was so despondent that he began to talk about suicide. His family tried unsuccessfully to persuade him to enter a psychiatric hospital for treatment. On March 13, in the kitchen of his home, Manes stabbed himself in the chest with a carving knife. He died minutes later on his kitchen floor.
Some members of the Koch administration had expected Manes’s shocking death to bring an end to the Parking Violations Bureau probe, but Giuliani told reporters at the time that “nothing from this tragic incident creates an impediment to our investigation.” The scandal had taken on a life of its own and had extended beyond Manes.
Since Breslin’s January 23 column many of the city’s reporters had been asking questions about the relationships between politicians and city contracts that had rarely been posed before. They scanned campaign contribution lists, looking for the names of city contractors who had donated heavily.
After two months the pressure on the press and other prosecutors to uncover wrongdoing was still intense. Now five prosecutors, four commissions, and several city and state agencies were all probing allegations of corruption that ranged from contracts for hospital supplies to ferry permits. So many investigations were undertaken by so many different law enforcement agencies that New York Newsday frequently ran a chart for readers called the “city scandal rap sheet.”
It was only a matter of time before Giuliani’s prosecutors would begin taking a closer look at Friedman’s and Manes’s other friends who held city contracts. By March they were looking at Andy Capasso, who had received $125 million in city contracts since 1981.
After reading about the federal investigation of Donald Manes and Stanley Friedman in the newspapers that spring, divorce lawyer Herman Tarnow called a friend in the U.S. attorney’s office and suggested that he consider taking a close look at sewer contractor Andy Capasso and how he had won his lucrative city contracts.
Tarnow had known Assistant U.S. Attorney David Lawrence, a tall, slim, bearded former lawyer, since they had worked out together at a gym two years earlier. Tarnow thought that Lawrence might be interested in what he had learned while representing Andy’s ex-wife, Nancy, during her bitter divorce: that Andy was a close friend of both Manes and Friedman and was also romantically involved with the mayor’s longtime friend Bess Myerson.
Tarnow also told Lawrence about tape recordings that Nancy Capasso had made of telephone conversations with her estranged husband during their futile divorce negotiations in 1984 and 1985. In the telephone conversations, Tarnow told Lawrence, Andy expressed concern about having committed a crime and going to jail for it.
Lawrence was intrigued by Tarnow’s call, and he decided to subpoena the entire sealed Capasso v. Capasso divorce record, which contained detailed financial records about Andy’s company, Nanco, as well as hundreds of pages of depositions documenting the destruction of the marriage.
After reading the record, Lawrence met with Giuliani and suggested they probe Andy’s city contracts to see what role, if any, his relationship with Bess, Stanley Friedman, and Donald Manes might have played in the $125 million in city contracts awarded to Nanco since 1981. Lawrence was also interested in trying to find out why Capasso had donated huge amounts of money to political campaigns, including tens of thousands of dollars to city comptroller Harrison J. Goldin, whose office was responsible for settling city claims against contractors.
Giuliani was interested in more than Andy’s connections to powerful politicians. At the time, Giuliani was also prosecuting leaders of the city’s organized crime families, and he wanted to know more about Andy’s relationships with crime syndicate figures. Andy’s name had come up in a conversation among reputed mobsters on a secret tape recording made by the FBI in 1984 at the Palma Boy Social Club in East Harlem.
According to federal authorities, the reputed mobsters were discussing handing out projects in the concrete and construction industries. On the tape Louis DiNapoli, a reputed Genovese family member, can be heard telling Anthony (“Fat Tony”) Salerno, the head of the Genovese family, about a talk he had had with Gambino captain Robert (“D.B.”) DiBernardo.
“See, he talks smooth,” DiNapoli said, describing Andy. “I don’t know how to talk smooth.… He says that he was going to give us that job anyway. Who the fuck is Andy Capasso? Who the fuck is he to give you a job? I was shocked. D.B. told me that Andy Capasso told him, ‘You know, even though they told me to give you the job on this … I was gonna give it to you anyway.’ He wants to make himself the hero.” DiNapoli laughed.
“Yeah, but Andy’s looking to build a fucking cement plant,” Salerno replied.
Giuliani also knew that Matthew (“Matty the Horse”) Ianniello, a reputed captain in the Genovese family, was Andy’s friend and former next-door neighbor. So he gave Lawrence the go-ahead to look into Andy’s contracts with the city and his relationships with politicians and reputed mobsters.
Tony Lombardi, a former federal agent who had recently joined the U.S. attorney’s office as an investigator, was assigned to the case. He had been gathering information about Andy on his own in his previous job as chief investigator for Mayor Koch’s short-lived mayoral commission created that January to look into allegations of corruption. The commission had been disbanded because so many different law enforcement agencies were working in the same areas.
One of the first things Lawrence did was gather copies of all of Andy’s city contracts with the city’s Department of Environmental Protection. He discovered then that Kevin Ford, a lawyer with the city’s Department of Investigation, had already been looking at Andy’s contracts for several months. Ford was brought over to the U.S. attorney’s office and made a special assistant U.S. attorney so that he and Lawrence could work together on the case.
In the middle of March Lawrence sent a subpoena to Nancy Capasso asking her to come to the U.S. attorney’s office to talk with him.
Andy heard about her subpoena and offered to provide her with an attorney. But she did not trust her ex-husband and politely refused. She went alone and answered Lawrence’s questions. She did not, however, volunteer to turn over the tape recordings or the photocopies of the canceled checks for the phony insurance claims that she had discovered during the divorce case. She suspected that Andy would be in deep trouble if anyone heard his comments on the tape or looked at the canceled checks. As she had told Andy, she had no interest in seeing the father of two of her children go to jail.
On March 31, however, Lawrence did not give her any choice. He sent Nancy another subpoena, this time requiring that she turn over to him the tapes, along with any and all documents, canceled checks, computer disks, electronic wire transfers, invoices, contracts, and financial records pertaining to Andy and his business.
Since she had not even used the tape recordings against Andy at her own divorce trial, she said sh
e complied reluctantly with the subpoena.
After listening to the tapes and examining the photocopies of the canceled checks, Lawrence, Ford, and Lombardi believed that at the very least they could put together a strong case of federal income tax evasion against Andy.
In April Lawrence sent out more subpoenas, to present and former employees at Nanco who he thought might know something about Andy’s bookkeeping practices.
Andy retained lawyers for everyone—from officers to clerical and support staff—who had been approached by law enforcement officials. Virtually all who were subpoenaed before the grand jury invoked the Fifth Amendment, refusing to testify even after being told they were not targets of the investigation.
One former employee, an accountant who had quit his job at Nanco after discovering what he believed were questionable bookkeeping methods, declined Andy’s offer of a lawyer and retained his own. The day after he was interviewed by government investigators he got what appeared to be a warning to keep his mouth shut.
At 1:30 A.M. he was sitting alone in the living room of his modest red brick home in Queens, having fallen asleep in front of the television set, when he was suddenly awakened by a popping noise. Someone had fired two gunshots into his living room. The .22-caliber bullets pierced the picture window in his living room, traveled only a few feet above his head, and lodged in a wall that separated the living room from the bedroom where his infant daughter lay sleeping.
At dawn that morning police also found a dead bird, with a piece of cloth shoved in its mouth, lying on the front walk. “Now tell me this is not an organized crime case,” Tony Lombardi said to Lawrence at the time.
Lombardi had seen a dead bird used as a “message” before in cases that he had investigated for the President’s Commission on Organized Crime. But Andy’s lawyer, Jay Goldberg, complained that the government’s effort to link his client to the dead bird was a “low blow.”
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