The FBI alleged in a 2006 request for a search warrant that Philadelphia labor leader John J. Dougherty's bank records showed a pattern of deposits and withdrawals of "substantial amounts of cash" in "what appears to be an effort to conceal financial dealings."
From 2002 to 2005, the FBI said, Dougherty deposited about $106,000 in cash that could not be traced to any known source, according to a copy of the warrant application that surfaced this week in a lawsuit.
The FBI also alleged in 2006 that it had evidence that Dougherty received about $300,000 in free renovations on his South Philadelphia home.
Dougherty's lawyer told investigators that the labor leader received $200,000 from his wife's parents to pay for much of the renovations. But federal agents subpoenaed his in-laws' bank records and found that they lived "paycheck to paycheck" and had no "large sums of cash" to give to their son-in-law, according to the warrant application.
The FBI investigation of Dougherty came to light in 2006 when federal agents searched his house on East Moyamensing Avenue in South Philadelphia. No charges were ever filed against him.
The 55-page search-warrant application, normally a sealed document, contains previously unreported allegations against Dougherty and fresh details about issues disclosed previously.
Lawyers for The Inquirer on Monday attached a copy of the application to a legal filing in which they asked a judge to throw out a defamation lawsuit Dougherty has brought against the newspaper's editorial writers and then-columnist Monica Yant Kinney.
Yant Kinney and the paper's editorial page raised questions about Dougherty in 2008 when he unsuccessfully sought the Democratic nomination for a state Senate seat vacated by Vincent J. Fumo, then under federal indictment.
The paper's lawyers argue that the search-warrant application and other documents highlighted matters that the press should be free to analyze in published accounts. Such coverage, the lawyers said, "is precisely what the First Amendment was designed to protect."
Henry Hockeimer and Richard A. Sprague, lawyers for Dougherty's union, said Tuesday that the federal probe was "long over with no charges having ever been filed against John Dougherty." Hockeimer had been assured numerous times by federal authorities that their investigation was over, a Dougherty spokesman said.
"The publication of this article is nothing but retaliation against Mr. Dougherty, who has sued The Philadelphia Inquirer," the lawyers said in a statement.
In his suit, Dougherty says he was defamed in 2008 by Yant Kinney and the editorial page when they raised questions about his fitness for public office.
On Monday, lawyers for The Inquirer asked the judge to dismiss the defamation case. Dougherty, represented by Sprague's firm, pursued his own motion Tuesday in a pretrial hearing in Common Pleas Court. Sprague argued that The Inquirer's law firm, Pepper Hamilton, should withdraw as the paper's attorney because it once represented Dougherty.
In court filings, The Inquirer's lawyers said they should remain on the case and noted they had taken steps to guarantee that the defense did not rely on anything the firm learned in representation of Dougherty.
The Inquirer's lawyers discovered the search-warrant application when preparing the defense. The document was filed publicly in 2008 in an apparent mix-up of surnames. It was filed as part of a legal motion in a federal investigation of contractor Donald J. "Gus" Dougherty Jr. by someone who failed to note that the warrant application involved John Dougherty. Donald Dougherty is a close friend of John Dougherty, but they are not related.
John Dougherty, 52, has led the 3,800-member Local 98 of the International Brotherhood of Electrical Workers for almost two decades. Previously, in addition to seeking Fumo's old seat, he unsuccessfully sought the Democratic nomination for mayor. A former treasurer of the Democratic City Committee, Dougherty presides over a union with a political action committee that is among the largest campaign donors in Pennsylvania.
In recent years, Dougherty has served as a board member for the Delaware River Port Authority, the Redevelopment Authority, and Independence Blue Cross.
In the application for the warrant, FBI special agent Kathleen O'Hanlon said she reviewed bank records and tax returns from 2002 to 2005. In those years, Dougherty earned an average of about $155,000 annually as business manager of Local 98. (His union pay last year was $205,649.)
From 2002 to 2005, Dougherty and his wife, Cecelia, deposited almost $150,000 in cash and withdrew almost $92,000 in cash. Of the deposits, O'Hanlon said, she could account for about $43,000 that the Doughertys had received, mainly in loan payments.
That left $106,543 in deposits from "an, as yet, unknown and untaxed source of income," O'Hanlon said.
In a footnote, O'Hanlon said she learned that Dougherty had made "significant withdrawals" from the union's petty cash and campaign funds "without supporting documentation."
She also said that a South Philadelphia bar, Doc's Union Pub, in which Dougherty has a financial interest, might have been involved in funneling money to him through the overpayment for functions there. The application provided no evidence to support these assertions.
In sum, the agent wrote, the FBI believed that Dougherty was "significantly underreporting his income. It is unlikely that as a W-2 wage earner, John J. Dougherty would have this large amount of cash over and above his W-2 income."
When prosecutors subpoenaed John Dougherty's pay stubs and other financial records, his lawyer declined to provide them, citing his client's Fifth Amendment privilege against self-incrimination.
The warrant application also questioned a 2003 sale in which Donald Dougherty sold a condo in North Wildwood to John Dougherty for $206,000. The sale at "below-market value" was designed to "disguise the illegal receipt of something of value by a union official," O'Hanlon said. Based on appraisal information, the sale price was $70,000 below market value, she said.
The warrant application also focused on work done on John Dougherty's home in South Philadelphia. It said Donald Dougherty supervised a project that gutted the house and renovated it, including the installation of "multiple plasma televisions" and an alarm system with 32 security zones.
Donald Dougherty operated Dougherty Electric Inc., and his workforce included Local 98 members. In all, the work by Dougherty Electric and others cost $425,000, the FBI said.
Of that amount, the FBI could document that Dougherty paid only $110,000. According to the warrant application, John Dougherty's lawyer told federal investigators that the labor leader's in-laws, Joseph and Cecelia Conroy, had given him $200,000 toward the renovation costs.
And, it says, Donald Dougherty told federal authorities that John Dougherty gave him $250,000 in cash, in four payments handed over in brown paper bags outside Doc's Union Pub. No one but the two of them were witnesses to the handovers, Donald Dougherty said.
The search-warrant application suggests that story was made up, that beyond the "bald assertion" of Donald Dougherty, there "is no corroborating evidence" to buttress the account of the cash and paper-bag payments.
O'Hanlon also said she did not believe that the in-laws had put up money. When subpoenaed to appear before a grand jury, the in-laws invoked the Fifth Amendment, according to the warrant application.
The FBI said Donald Dougherty was by far the biggest recipient of help from a union program to subsidize union contractors facing stiff competition from nonunion firms, according to the warrant application. Between 2000 and 2005, his business received $998,000 through the Job Recovery Program, as it was known. That was nearly twice as much as any other company.
The FBI also said that on numerous occasions, John Dougherty would buy Eagles tickets using money from the Job Recovery Program and give them to Donald Dougherty.
Donald Dougherty was routinely delinquent in making his required payments into employee pension benefits plans "without being sanctioned," the FBI said.
Late Tuesday, Donald Dougherty's lawyer, Thomas W. Sheridan, declined to comment for this article.
In 2008, Donald Dougherty was sentenced to two years in prison after he pleaded guilty to charges that included avoiding making $1 million in required contributions to the union's employee benefits plan.
He also pleaded guilty to providing $115,000 worth of free renovations on the home of John Dougherty. But he did not agree to be a witness against the labor leader.
After the plea, Frank Keel, John Dougherty's spokesman, said the labor leader had not been party to any free work.
"This was Gus' plan and Gus' plan alone," he said.
"John never agreed or intended," Keel said, "that he would get a deal or pay anything other than the fair market value of the job."
at 215-854-4821 or firstname.lastname@example.org.
Inquirer staff writers Mark Fazlollah
and Bob Warner contributed
to this article.