Deal With the Devil: The FBI's Secret Thirty-Year Relationship With a Mafia Killer

by Peter Lance

  “Do you consider yourself as dangerous?” McClellan asked Scarpa.

  “Do you, sir?” Scarpa shot back with a smile.

  Defying the chairman of one of the most powerful subcommittees on the Hill is some indication of the kind of power Scarpa believed he had as a result of his direct pipeline to Hoover—and with good reason. Bureau agents routinely intervened to keep Scarpa out of jail so that he could continue feeding Hoover’s appetite for inside intelligence on the Mafia. But in that secret quid pro quo, Scarpa stayed on the street to steal a fortune through bank robberies, high-end jewelry heists, auto thefts, cocaine trafficking, and securities fraud. Along the way, he left a trail of dead bodies. Were the secrets he was furnishing to Hoover enough to justify this get-out-of-jail-free card? The Feds seemed to think so.

  The Olympic Airways Robberies

  By August 1968, the relationship between the streetwise Villano and Scarpa was so productive that the informant earned a $4,000 FBI bonus. The money was a reward for Scarpa’s help in solving two thefts relating to Olympic Airways, which was owned at that time by Greek shipping magnate Aristotle Onassis. The airtel memorializing the bonus sounded like the kind of citation for meritorious service handed down to a special agent who had performed above and beyond the call of duty:

  January 18, 1968: This payment is in recognition of [Scarpa’s] valuable services in connection with the theft from Interstate Shipment cases . . . of gold jewelry stolen from Olympic Airlines* in January 1968 and the armed robbery of Olympic Airlines on July 28th. It is noted that the theft of the jewelry led to the recovery of a substantial amount of jewelry stolen in other robberies elsewhere in the country.6

  Over the next five years, Scarpa regularly informed the FBI about a series of hijackings and robberies, involving stolen merchandise worth millions of dollars. At the same time, he continued to “put down scores” himself. Now the evidence uncovered in this investigation suggests that Scarpa was double-dipping—working a brilliant con in which he would steal the goods, then tip off Villano to the whereabouts of some or all of the swag so that he could collect bonuses and insurance rewards. Consider these airtels:

  September 8, 1967: Informant advised that Sally Buzzo . . . had in his garage the proceeds of a rare coin theft, which took place approximately 4 months ago at JFK airport. . . . These coins included ancient Roman coins . . . they were attempting to sell for $30,000.00.7

  September 11, 1967: Informant advised that had . . . in his physical possession at least $50,000 worth of AMERICAN EXPRESS CHECKS [stolen from] Pier 62, U.S. lines on 4/13/67. Value $620,000.8

  October 16, 1967: Informant advised that RICHARD FUSCO’S regime (crew) had become deeply involved in UNTAXED CIGARETTES. The above information was furnished to the NYCPD and they subsequently advised that they had arrested 3 persons . . . and had seized 1,500 cartons having a value of $6,000.9

  November 27, 1968: Informant advised that he had been offered a trailer load of CIGARETTES which had been hijacked [and] a trailer containing KODAK PHOTO EQUIPMENT. A resulting search disclosed an additional 550 cases of stolen CIGARETTES [making a recovery of $65,000] and KODAK EQUIPMENT with a wholesale value of $56,000.10

  July 7, 1969: Informant was able to furnish details of hangouts [that led to the discovery of] $60,000 worth of stolen MAXWELL HOUSE COFFEE, which had been traveling in interstate commerce.

  February 24, 1969: Informant was offered a load of CUTTY SARK WHISKEY in fifths . . . a 1,000 case load at $40.00 per case. As a result of information furnished by Informant . . . approximately $360,000 worth of stolen merchandise was recovered and . . . ten individuals arrested.11

  March 28, 1970: Informant advised he had heard rumors that and possibly two other Chicago hoods had been to NYC . . . seeking to purchase stolen securities to bring back to Chicago. Informant heard that a list of STOLEN MUNICIPALS valued at $550,000 was circulating in Brooklyn, NY and this list included . . . CITY OF COLUMBUS BEARER BONDS in $5,000 [denominations]; [and] CITY OF CLEVELAND BEARER BONDS in $5,000 [denominations].12

  November 9, 1970: Informant advised of an armed hijacking he knew to involve 400 cylinders of MERCURY from Mongam-Kester Transfer Corp at Staten Island. This vital information permitted Bureau Agents to initiate an extremely discreet surveillance [and effect] the recovery of 324 cylinders valued at $200,000.13

  As a result of the thefts and hijackings Scarpa reported following the Olympic Airways heists, the Bureau approved six more lump sum payments to him from 1969 to 1973 ranging in amounts from $4,000 to $5,000. Throughout the course of these bonus payments, Scarpa continually complained to Villano that he was strapped for cash and insisted that more income from the FBI would help him to improve his standing in the family and gain greater access to useful intelligence.

  In a November 16, 1970, airtel from Assistant Director J. H. Gale to William C. Sullivan, the head of the Bureau’s intelligence operation, Gale cited the mercury and Maxwell House coffee seizures and reminded Sullivan that Scarpa had informed them of the “vociferous smear campaign against the FBI represented by the Italian-American Civil Rights League picketing.” The memo also cited Scarpa’s help in busting Joseph Colombo’s gambling operation and the payoffs to the NYPD, opining that “the informant at extreme personal danger, has enabled the Bureau to penetrate top level LCN activity in New York.” Gale closed the memo with a reminder, prompted by Scarpa’s requests to Villano, that the informant was “currently in dire need of financial assistance.”

  As defense attorney Ellen Resnick observes, these airtels leave “no doubt that Gregory Scarpa Sr. had advocates at the highest levels of the FBI in Washington.”14

  Scarpa’s “Finder’s Fees”

  Villano was apparently so snookered by Scarpa’s claim of money problems that he devised an even greater source of income for him—one that made the monthly $600 COD payments and bonuses pale in comparison.

  In Brick Agent Villano writes proudly:

  I once figured that Nick Biletti [Scarpa] actually earned $65,000 over an eighteen-month period through our relationship. The Bureau salary accounted for only about twenty percent of his take. The rest came from varyingly grateful insurance companies and others whose valuables were retrieved through Nick’s help.

  Negotiations for reward money required fancy choreography. Bureau policy officially forbade agents like myself from serving as the middleman between the insurer or trucker and an informant. But no alternative was feasible. The informants could not afford to disclose their identity to the outfits willing to compensate them. The routine was for a source to tell me where a $200,000 load of imported perfume could be found.

  The informant would ask for a $20,000 “finder’s fee.” I would reach the people who were liable for the loss and tell them we had a chance to get back their stuff, but it would cost $20,000. Very often they tried to knock down the price. I’d say that I would check with my informant and see if he’d go for it. A half hour later, without even making an attempt to reach Biletti I would go back to the company and say that $15,000 was the absolute minimum. The terms would be accepted.15

  In describing Tony Villano, former FBI agent Dan Vogel notes, “you’ve got an agent who is more or less acting as Scarpa’s broker in the deal. What’s to prevent the CI from doing hijackings and then leaking back the details on some of them, knowing he’s going to get the reward money anyway? This is a classic case of an informant using an agent, versus the way it’s supposed to be.”16

  Anthony Villano from the back cover of Brick Agent

  In Brick Agent Villano writes, “I resisted the temptation of some easy cash as a kickback from my sources after they collected their rewards. I admit to having accepted a bottle of whiskey occasionally.” But Scarpa’s son later insisted that Villano’s relationship with his father amounted to more than that. In a sworn deposition in 2002, Greg Scarpa Jr. stated, “I met my father’s first handler, FBI agent Anthony Villano, when I was 16–17 years old . . . at a PAL [Police Athletic League] Cen
ter where I was training for the Golden Gloves. My father introduced Villano to me as ‘the man he reports to.’ Villano told me that I was a good fighter but that there were easier ways to make money and that I should work with my father for the FBI. I later learned that my father paid Villano for information and for insulation from prosecution for his criminal activities.”17

  As we’ll see later, in 2004 a federal judge found Greg Jr. “not credible” when he made those allegations at a hearing.18 But the younger Scarpa’s reliability was demonstrated in 1996 and 2005 when he provided the FBI with highly valuable information on two separate convicted terrorists.19 We’ll examine those details in Chapters 38 and 39. But Villano’s own admissions in Brick Agent make one element of his relationship with Greg Scarpa Sr. undeniable: He went to extraordinary lengths to insulate his Top Echelon source from prosecution.

  The Miami Kidnapping Scam

  “Protecting Nick [Scarpa] while making use of his information was a major piece of work for me,” Villano writes. He goes on to describe an incident involving Herman “Hy” Gordon, “a notorious Miami fence” famous for his links to Jack “Murph the Surf” Murphy,20 who was arrested in the 1964 Star of India robbery, the biggest jewel theft in U.S. history.21

  According to Villano, Scarpa tipped him that Gordon had arrived in New York to inspect a “load of jewelry” stolen by members of the Colombo family. Villano, who fictionalized many details in Brick Agent, writes that the score included “a very valuable and distinctive necklace.” But the airtels reveal that the “necklace” was actually a pair of “jewel encrusted cups” that were part of the Olympic Airways theft on January 12, 1968.22 After Gordon agreed to buy the stolen merchandise, Villano writes, the fence paid out $32,000 and headed back to Miami with “$100,000 worth of gems.” At that point, Villano says, he contacted Miami Special Agent Joseph Yablonsky, known in the FBI as “the King of Sting.”23 Villano writes that he convinced Yablonsky to “legally get into Gordon’s home” in an effort to look for the jewelry.

  On the pretext of interviewing Gordon regarding his flights to the Caribbean, Yablonsky then reportedly entered the house and spotted the jewel-encrusted cups in plain sight. According to Villano, that led to a search warrant and Gordon’s impending arrest by the FBI for possession of stolen gems. This airtel gives additional details:

  May 3, 1968: As a result of the . . . warrant the Miami office seized 24 pieces of jewelry contained in the Greek shipment and numerous other items of jewelry, loose diamonds and coins. As of this writing, based upon an appraisal by two gemologists, a value of $305,000 was placed on just jewelry items alone.24

  But at that point in the recovery Scarpa grew concerned. He called Villano to tell him that his past relations with Gordon “could bury him” if he was ever linked back to the case. So Villano came up with an extraordinary plan. “I rushed back to the office,” he writes, “to send a teletype to both Miami and the Bureau in Washington informing them that the higher-ups in the LCN were very fearful of Gordon’s rolling over [and] had decided to kidnap Gordon’s only child, a young daughter.” As soon as the bogus teletype was received, Villano contends, the FBI sprang into action and Gordon’s daughter was “hustled off to be placed in hiding.”

  “To help Biletti [Scarpa] retain his good standing with LCN,” writes Villano, “I created a phony charge against him.”

  If Villano was willing to go that far to protect his informant, how far would he go when Scarpa faced criminal charges? The evidence uncovered in this investigation raises compelling questions about the part Anthony Villano and other FBI officials played in keeping Greg Scarpa out of jail. In fact, a comparison of the newly released airtels against an indictment filed by the U.S. attorney in Chicago in 1971, with a superseding indictment the next year, proves that, even as senior FBI officials were rewarding Scarpa for giving up stolen securities valued at $550,000, another arm of Justice was charging him with stealing municipal bonds, which appear to have come from the same theft.25

  One hand at Justice didn’t seem to know what the other hand was doing, and in the end Greg Scarpa beat the case—with the Bureau’s help. We’ll examine that story more closely in Chapter 8. Meanwhile, the quintessential example of how Greg Scarpa used his position in the Profaci-Colombo family to please the FBI while enhancing his own rep in the borgata came from his role in the recovery of the Regina Pacis stones.

  The Crown Jewels

  One of the most famous stories in Brooklyn Mafia lore is Joseph Profaci’s involvement in the recovery of two jewel-encrusted crowns stolen from the Regina Pacis (Queen of Peace) Church in Borough Park, the home parish of the devoutly religious boss.

  The church was a lavish Renaissance edifice, funded in part by parishioners to the tune of $1 million. Construction began on the building in 1948, and over the next four years more than two thousand tons of Italian marble were used on its interior walls.26 The church featured sixteen stained-glass windows honoring the Virgin Mother, and behind the altar hung a huge painting of Mary holding the infant Jesus.

  Hundreds of parishioners donated family jewelry—including war widows, many of whose donated wedding rings were melted down to create two eighteen-karat-gold crowns, which were hung over the images of the mother and child on the painting. The crowns, decorated with six hundred diamonds, sapphires, and rubies, were valued at the time at $100,000—a sum equal to nearly $870,000 today.27

  The crowns were normally locked behind a reinforced bronze grillwork and displayed only during important functions. But in January 1952, a week after Pope Pius XII blessed the crowns in Rome, they were stolen from the shrine.28 Thieves had sawed open a section of the gated grille that protected them. The story made national headlines.29

  Then, eight days after the theft, the crowns were returned. The thieves were reportedly a pair of brothers, and after the recovery they were found dead, their bodies mutilated, reportedly strangled with rosary beads.30

  Ten years later, in an airtel to Hoover, Scarpa identified one of the thieves. He told Villano that “a good fellow by the name of BUCKY stole the crown jewels from . . . the church attended by JOSEPH PROFACI [who] had the jewels returned and then ordered BUCKY killed.” Scarpa even speculated that “the work” had been done by his mentor Charles LoCicero, because “Bucky” was running numbers for the Sidge at the time.31 In Brick Agent, Villano adds a grisly postscript to the story: In demanding the return of the crowns, he writes, Profaci had insisted on having “one ball from each of those guys” brought to him.

  But that wasn’t the end of the Regina Pacis story. Twenty-one years after the theft, on January 10, 1973, the crowns were stolen again—this time by “a pair of junkies,” as Villano notes in his book.32 He goes on to write that the thieves happened to visit a gin mill frequented by Scarpa, who overheard them trying to sell the jewels to Charlie “Moose” Panarella, a capo with close ties to Alphonse Persico. Known as “Allie Boy,” Persico, who was Carmine’s brother, would one day become family underboss. Villano suggests a marginal connection on Scarpa’s part, but the newly released airtels reveal that he was much more involved with the jewels than Villano admits.

  April 5, 1973: Informant advised that on 1/11/73 CHARLES “MOOSE” PANARELLA, a capo in the COLOMBO LCN family met with him and indicated to source that two young individuals had stolen the Regina Pacis jewels and that he [source] was to “handle the disposition of the jewels.” He said that both are hopheads [addicted to pills]. He said that he felt the thieves did not know the significance of the theft and had voluntarily surrendered the jewels to PANARELLA. On 1/14/73 PANARELLA contacted him and gave him the jewelry. PANARELLA instructed the source to determine the “breakdown” value of the jewelry since he . . . was considering turning them into cash.33

  Scarpa, the master strategist, understood that the crowns had a value far beyond anything they could bring from a fence. But there was a chance that in brokering the return of the crowns, Scarpa might jeopardize his informant status. As Villano noted in
the airtel, “Informant was in no position to ‘give up’ the jewels without appearing to be cooperating with the FBI.” He also suggested that “there was a remote chance that the informant’s trustworthiness and judgment in a delicate matter was being tested by certain elements in the PERSICO crew with whom there had been little love lost in the past.”

  According to Villano, Scarpa arranged for a meeting with Allie Boy Persico and let him know that John Malone, the FBI’s assistant director in charge of the New York Office and a “friend of the archbishop,” would be immensely grateful if the Persicos would follow Profaci’s example from two decades earlier and help recover the stones. If the gems were returned, Villano promised that they wouldn’t be dusted for prints and that no one in the Colombo hierarchy would be arrested.

  A short time later, “a gruff speaking individual” called the FBI switchboard with word that the missing jewels could be found in a locker at the East Side Airlines Terminal. After Villano and another agent recovered them, Tony writes that “John Malone went berserk with joy.” The two agents and their supervisor were nominated by Malone for “incentive awards.” Even the FBI operator who took the call got a letter of commendation.

  The headline on the story that ran on the national AP wire was “Jewelry Recovered by FBI for Church.”34 It was a stunning public relations success for the Bureau. What Villano leaves out of his book, but the airtel confirms, is that Scarpa received yet another payment of several thousand dollars for his role in the recovery. And in a commendation-like entry, Villano wrote:

  January 21, 1973: [SCARPA] demonstrated a sustained coolness and ability to follow Bureau instructions precisely, even while maintaining a difficult posture. The concomitants of this case could hardly have been greater inasmuch as (1) the Bureau received extensive favorable publicity; (2) the recovery of $350,000 of gems with great religious significance was achieved; and (3) the informant’s timely suggestions and action under pressure enhanced his position with the PERSICO faction of the COLOMBO family.35