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Credit Union, With Mob Ties In Its History, Closed This Week

It Was Mob's 'Piggy Bank'; Wiretap Put Credit Union On FBI Radar

By EDMUND H. MAHONY

April 10, 2010

When the South End Mutual Benefit Association was shuttered this week by banking regulators, so went a once questionable Hartford banking tradition — one known principally among gangsters and FBI agents.

Two decades ago, when the mafia in Connecticut was at its peak and legal casino gambling was just a dream, the mob made the credit union a "piggy bank" of sorts, using it to underwrite a multimillion-dollar, illegal gambling business.

Mobsters who ran illegal casino games at social clubs in Meriden, New Britain and Hartford had access to stacks of pre-approved credit union loan applications and used them to extend instant money to tapped out players. It meant reliable cash in south Hartford, where gangsters and would-be gangsters whispered importantly in the bakeries and Italian restaurants along Franklin Avenue.

The relationship between the credit union, referred to in the neighborhood as "the Oxy," and the mafia was never publicly explored in court, but it is the subject of FBI affidavits and interview reports. It was twice the subject of grand jury subpoenas, first in 1984, and more significantly in 1990 during a federal criminal investigation that led to a landmark Hartford mafia trial in 1991.

When FBI agents raided a mob game at the Meriden Independent Club in June 1988, they seized $42,000 in cash, gambling records, gambling paraphernalia and, according to an FBI affidavit, "numerous loan applications for the South End Mutual Benefit Association (a state chartered and federally insured credit union)."

The club attracted gamblers from across southern New England and allegedly was run by Salvatore "Butch" D'Aquila, who federal prosecutors said oversaw the Patriarca crime family's gambling operations in Connecticut in the 1980s. Many of the loan applications seized were blank "with the exception of the loan guarantor sections which had been pre-signed with the name Salvatore D'Aquila," the affidavit says.

The affidavit continues: "Your affiant would note that subsequent investigation has established that the majority of loans made by the South End Mutual Benefit Association in the last several years were made to people with prior gambling records or known associations with gambling establishments."

One oxy beneficiary was Hartford gangster John F. "Sonny" Castagna, a figure known for existing in a state of incipient financial collapse. Castagna was intercepted on a wiretap in 1988, at about the time he was searching energetically for stolen diamonds thought once to have been in the possession of William "The Hot Dog" Grant. Grant had vanished under circumstances that remain a mystery.

Castagna, who later disappeared into the federal witness protection program, never found diamonds. But he stumbled across an account book that recorded $50 weekly payments he was making to Grant.

"All this [expletive] money, all these fifties," Castagna growled to a pal over the phone. "'Cause a hundred dollars a week I was paying. Fifty dollars went to him. Fifty dollars went to the oxy."

The Meriden discovery and the Castagna conversation put the credit union on the FBI's radar, according to Frank Rudewicz, a former chief of intelligence for the Hartford Police Department who worked with the bureau on organized crime matters in the 1980s and '90s. Rudewicz said he and an FBI agent brought the credit union's lending practices to the attention of the state Department of Banking.

But he said the FBI and a variety of police agencies lost track of the credit union, which had become a bit player in a larger investigation that led to the convictions in August 1991 of the leaders of the Patriarca family's Connecticut and western Massachusetts organizations. A highlight of the trial came when prosecutors, for the first time, played a secretly made recording of a mafia initiation ceremony.

State Banking Commissioner Howard Pitkin said Friday that he had no knowledge of any organized crime investigation connected to the credit union. A representative of the credit union could not be reached.

Others familiar with the institution said it was organized 65 years ago to serve an immigrant and ethnic Hartford population that typically was unable to obtain credit from commercial banks. These sources said the credit union's involvement with the mob was likely the work of one or two renegade officers.

Pitkin has said the tiny credit union was closed after it became a victim of soaring loan defaults and weakened earnings. He said banking examiners had found problems with underwriting that were compounded by a larger economic collapse that cost borrowers their jobs and caused them to fall behind on payments.