Pataki's Ex–Labor Aide Charged

Former Commissioner Drove Own Sweet Deals

In 1996, when Governor George Pataki moved to lower the amount employers have to pay for workers compensation, his staunchest labor ally was James McGowan, the head of the state firefighters union. McGowan's backing was crucial, because at the time he was also a Vice President of the State AFL-CIO and chairman of the Public Employee Conference, a powerful lobby made up of state and municipal labor unions. McGowan, who lives in Yorktown Heights, was also an old friend of the governor's, having become close with Pataki when the governor served as assemblyman and state senator.

The result for workers was that New York now offers the lowest compensation rate for injured employees in the nation, and thousands of ailing workers wait months and often years for their cases to be heard.

The result for McGowan was that his pals at the state AFL-CIO promptly gave him the boot, unanimously voting him off the 50-member executive board. But whatever pain this treatment caused him was considerably lessened two years later when Pataki named McGowan his new labor commissioner.

"He knows firsthand the issues facing working men and women," said the governor in January 1998, announcing McGowan's appointment. "I know he will be a valuable asset as we continue to fight for working families in New York."

One of the issues McGowan knew firsthand was on-the-job injuries. He was a lieutenant in the New York City Fire Department when a hernia, traced by his doctors to his day job, made him eligible for retirement in 1989 with a $45,000 a year disability pension representing three-quarters of his salary, as the Daily News reported when McGowan's name surfaced as an appointee.

Those who saw him at labor gatherings and conferences said that the injury did little to dampen his spirits. He was known as a hearty partyer who liked to raise his voice in song. "He was a 'hale fellow, well met' kind of guy," one labor associate recalled.

Accordingly, McGowan celebrated his inauguration as labor commissioner by throwing himself a posh celebration at an Albany restaurant early in 1998. "It was a great party; everyone in Albany seemed to be there," said one attendee.

Last week, however, as part of a federal bribery and conspiracy indictment brought against McGowan and a close friend, federal prosecutors charged that even the party was a scam. McGowan, authorities say, paid for the event with a forged and backdated check from the Public Employee Conference. It was the first, authorities say, in a string of crimes McGowan went on to commit as state labor chief.

The indictment—the first in recent years involving a high-level Pataki aide—won little media notice. Instead, the press remained focused on allegations involving a private corrections firm which gave free rides and other perks to state legislators, a scandal that, unlike McGowan's, is far removed from the governor's cabinet.

During his two and a half years in office, according to the indictment, McGowan took thousands of dollars in bribes in regular monthly payments from a longtime friend named John Segreti, head of one of the nation's largest drivers' education firms, who was seeking state grants and business. At the labor department, McGowan made sure that drivers' ed was made a mandatory component of apprenticeship training programs for construction workers, officials charge. He repeatedly pressed his own aides to come up with ways to benefit Segreti's companies including creating new state grant programs, they said. McGowan also allegedly made sure his friend Segreti got a sneak peek at agency grant provisions before the rest of the public.

When a labor department committee recommended a grant to one organization, McGowan allegedly rejected that nominee in favor of another who had already agreed to use Segreti's companies as a subcontractor.

McGowan also allegedly used his clout as labor commissioner to browbeat officials at other state agencies, including the departments of education and motor vehicles, into making grants and decisions that benefited his friend.

In March 2000, McGowan reputedly told an official at the Department of Motor Vehicles exactly what he was up to, according to the indictment returned by a White Plains grand jury. "McGowan told a DMV employee, in substance, that he and John Segreti were trying to qualify the Segreti companies to receive grant monies before certain grant proposals and federally funded programs were implemented," the indictment charged. McGowan went on to urge the official "to expedite certain matters" that would speed state funds to Segreti's companies.

All told, McGowan is charged with five counts of conspiracy, mail fraud, bribe receiving, falsifying income tax returns, and lying on a mortgage application. Segreti is also charged with conspiracy, mail fraud, and paying the bribes.

Both men pleaded not guilty at their arraignment last week, where they embraced and clapped each other on the back. Ron Rubinstein, McGowan's attorney, said Segreti never benefited from his relationship with McGowan.

"This is a 15-year relationship. They shared Jets tickets, they golfed together, but McGowan did nothing to assist Segreti that anyone else wouldn't do, such as introducing him to people," said Rubinstein. "There are no substantive acts here. Segreti didn't make five cents from Jim McGowan."

McGowan was allowed to voluntarily resign his post in October 2000. His problem wasn't so much his constant pressure on behalf of his friend, Segreti, but that he had tried to fire a longtime labor department aide, James Dillon, who had close ties to Pataki favorite and now congressman John Sweeney, according to reports in the News and the New York Post at the time. It wasn't until federal labor investigators began probing McGowan that evidence of the payments from Segreti was found, according to sources familiar with the investigation.

Segreti's firm, National Traffic Safety Institute Corporation, is a multimillion-dollar, privately held business, based in Staten Island, with operations in 16 states. Along with an affiliated firm called Drive Safe New York, Segreti's firms handle a state-approved program whereby those who take its official courses can qualify for reduced insurance rates as well as have points taken off their licenses.

The company has ongoing programs, according to its promotional ads, with several state and city civil service unions, including organizations representing New York state police, state supreme court officers, and city firefighters.

It is not the first time questions have been raised about Segreti's operation. In a November 2000 exposé by NBC's Dateline, an undercover reporter paid $50 at one of Segreti's authorized training centers in Manhattan to get a certificate of completion of the safety course—without having to take the course. In the classroom itself, Dateline's cameras captured students snoozing while videos on driving safety ran, with no course instructor in sight.

Dateline confronted Segreti about the scam. "I don't have an explanation for you today, other than to say that we monitor these things," he said. "We look into them as well as the Department of Motor Vehicles. I know that's not something that we condone or goes on all over the country. That I know. We may have a bad apple here."

But officials from various unions said Segreti and his firm had been a constant presence for years at labor conferences, offering classes and services. Those who paid the entry fee got their certificates with little effort. "I always thought they were suspect," said one labor official.

In a statement following Segreti's indictment, National Traffic Safety Institute Corporation denied any wrongdoing.

When a reporter called the state Department of Motor Vehicles last week to ask about the agency's dealings with the drivers' education firm, a spokesman said it was the first inquiry the agency had received regarding the matter.

The Pataki aide then went into shut-down mode, refusing to discuss any aspect of their involvement with the firm, and referring all questions to the U.S. Attorney. It is the same tactic the governor's aides adopted when faced with earlier integrity issues, including a major parole scandal in 1998.

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