Starting in 1989, and through all the years of Kerik's rise, Michael Caruso was the inspector general for the Department of Correction. Beefy and pale, with a brush cut, a cop's mustache, and a slight limp, Caruso first met Kerik in 1994. After Kerik became first deputy commissioner, Caruso would go through him when he needed access to investigate one of the city's jails.

The entire mission of an inspector general is to be immune to outside influence, and city rules required Caruso to be independent of the agency he oversaw—Kerik's. But Caruso just couldn't resist Bernie. He attended Kerik's wedding. He prepped Kerik for his interview with Giuliani. He partied in Kerik's apartment when Rudy named him police commissioner. In his book, Kerik calls Caruso one of his closest friends, a man who "shared the battleground" with him.

If there was any sense between the two men that their relationship was inappropriate, they didn't work very hard to conceal it. And given how close they were, it is hard to believe that Caruso had no idea of the questionable things Kerik was doing. Indeed, as early as 1995, DOC insiders were accusing Caruso of covering up Kerik pal Serra's use of staff to pretty up his house. To this day, Sidney Schwarzbaum, the leader of the deputy warden's union, insists that Caruso "squashed" Kerik chief of staff Picciano's 1998 arrest for beating his girlfriend. "I would testify to it under oath," he says.

Michael Caruso
Michael Caruso

But it was a 1999 meeting with trade waste commissioner Raymond Casey that would come back to torment both men—and now, possibly, DOI's Hearn.

Casey, who is also Rudy Giuliani's cousin, was investigating whether a company called Interstate Industrial Corp., which was owned by brothers Frank and Peter DiTomasso, had ties to organized crime. The DiTomassos had already hired Kerik's brother, Donald, as well as the best man at his wedding, Larry Ray, so there was an atmosphere of mutual support among the men already. The DiTomassos couldn't bid for any city business without a clean bill of health from Casey, so they naturally turned to Kerik, not only a favorite of the mayor's but one of the city's top law enforcement officials, to put in a good word for them. Kerik, as it happened, was in the market for a remodeling job on his apartment that his government salary couldn't cover. He agreed to assuage Commissioner Casey's concerns in exchange for the $200,000 he needed to fix up the place.

In July 1999, Inspector General Caruso joined Kerik and Casey at Walker's Restaurant in Tribeca. With Caruso—the government watchdog—at the table, Kerik assured Casey that Interstate would cooperate fully with the investigation. Of course there was no legitimate reason for the correction commissioner to be touting some contractor, nor was there any legitimate reason for Caruso to attend such a meeting. His mere presence was unethical.

When Caruso's boss, then DOI commissioner Edward Kuriansky, found out about the meeting a few months later, he did nothing.

In 2002, Hearn was appointed by Mayor Bloomberg as DOI commissioner. A blonde Hamptons habitué whose dad was tight with Ed Koch, Hearn had most recently been a federal prosecutor working for the U.S. Attorney's office in Manhattan.

She came aboard at a time when Kerik was having the time of his life. Although he had stepped down as police commissioner at the end of Rudy's tenure, he was still basking in post–9/11 fame and holding down a cushy job at Giuliani Partners chasing lucrative federal security contracts. But it didn't take long for allegations about the Caruso-Kerik alliance to come across Hearn's desk. When some of these claims ended up in the newspaper—most of them planted by sources in the correction department—Hearn publicly defended Caruso, saying she had "full faith and confidence in him." She even personally vouched for Caruso with Mayor Bloomberg, according to a deposition by one of her aides.

Hearn may have been concerned about angering two of the most prominent figures in the post 9/11 world—a possible presidential candidate and his henchman. "They realized Bernie could mess with them, and they wanted to stay on his good side, so they stuck with Caruso," says one retired correction official.

Steier agrees with this assessment. "To the extent that an investigations commissioner is attuned to the mayor's feelings, she had to know acting against Caruso would have drawn complaints from Kerik and Giuliani," he says. "It politically may not have made sense."

A DOI official, who could not speak for attribution, disputes this characterization of Hearn's motives: "The record just doesn't support that impression. DOI investigated Serra, two top Giuliani officials, and opened the Kerik investigation."

But Hearn knew she had a problem. A year into her administration, she ordered her general counsel, Marjorie Landa, to examine all the allegations against the IG, referring to the investigation as the "Mike Caruso project." The inquiry concluded that there was no basis to any of the claims.

That conclusion seems questionable, given the abundant evidence of Caruso's involvement with Kerik. And it seems even more so given that when Bush nominated Kerik to run Homeland Security in December 2004, Caruso immediately started telling people he was leaving DOI to go to Washington with Bernie. Rather than let him go—and for reasons the documents don't explain—Hearn asked him to give her a chance to match the offer.

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