Saranow Allegedly Sought Break for Fellow IRS Agent : He Denies Any Wrongdoing, Calls House Panel Unfair

Ronald Saranow, the Internal Revenue Service’s former investigative chief in Los Angeles, sought to reduce criminal charges against a fellow agent accused of preparing a phony tax return for a Mafia loan shark, apparently as a personal favor to a friend, congressional investigators probing the tax agency said Friday.

Bolstering earlier testimony presented during three days of hearings on the IRS’ powerful criminal division, investigators for a House Government Operations subcommittee said they have a sworn affidavit from one of Saranow’s own agents that Saranow sought to intervene in the case because of a friendship with the accused agent’s lawyer and her husband.

But Saranow, in his first response to a series of charges leveled at his activities as chief of the IRS’ criminal investigative division in Los Angeles, denied that he interfered in the case and said he had attempted only to rescue an investigation that had become mired in squabbling between the prosecutor and the defense lawyer.

“Because of the restrictions placed on me by the IRS disclosure laws, I have been silent about these allegations for the past year and a half,” Saranow said in an interview. “But when I’m at liberty to give my side of the subjects, it will be clear that the presentation by the committee has been unfair and I’ve been unjustly portrayed.”

Approached Prosecutor

Testimony about the alleged intervention was first presented Tuesday, when former Justice Department prosecutor Marvin Rudnick revealed that he had been contacted by Saranow regarding IRS revenue agent William Biaggio Arcuria, then facing possible indictment for preparing phony tax returns for the suspected loan shark.

Rudnick hoped to use the threat of serious criminal charges against Arcuria to persuade him to cooperate in the investigation of the loan shark, reputed organized crime associate Daniel Mondavano. But the former prosecutor testified that Saranow approached him in March, 1986, about allowing Arcuria to plead guilty to a misdemeanor rather than a felony.

Saranow, he said, told him that he was a friend of Arcuria’s lawyer, Patricia Wilkinson, and particularly of her husband.

“Saranow told me at that time, ‘What about a misdemeanor?’ ” Rudnick testified. “I just couldn’t believe my ears, hearing that he would want a misdemeanor on somebody this significant to the rest of our case.”

Earlier that same month, Saranow had approached one of his own agents on the case, Al Rustacci, with a similar proposal to “go easy” on Arcuria, according to a sworn affidavit from Rustacci on file with the subcommittee.

Saranow told Rustacci that he played tennis with Arcuria’s lawyer’s husband “every Saturday.”

Rustacci immediately contacted his group manager, Alan Lipkin, and was told that because no one else had witnessed the encounter, it was better to wait and see if Saranow went to Rudnick. If he did, Lipkin reportedly told Rustacci, the matter would be reported to IRS inspectors.

Disputed Account

In fact, according to Rudnick and committee investigators, Lipkin was present during Saranow’s subsequent meeting with Rudnick. But he told investigators that he decided not to report it because he did not believe that Saranow had made any “overt” demand.

Lipkin was not called to testify and could not be reached for comment Friday. But Saranow and Patricia Wilkinson, Arcuria’s lawyer, both disputed the subcommittee’s account of what took place.

Saranow said he became involved after two of the agents working on the Mondavano case said they were at an impasse because Rudnick argued with Arcuria’s lawyer.

Saranow knew Wilkinson from her days as a former federal prosecutor in addition to having been a tennis partner of her husband’s about a year previously, and he telephoned her, he said. “I explained to her that Marvin has a short temper and that he’s a yeller and a screamer, but she has to work through him, and that if she perseveres, sometimes Marvin can be reasonable,” Saranow said. “I told her that she should get in touch with Marvin, and they should work it out.”

Wilkinson said Saranow “wouldn’t give me the time of day. I remember being very angry about that. He told me guys like your guy (Arcuria) make the IRS look bad, and he’s going to plead to a felony, no matter what. That was the end of the conversation.”

A Common Practice

Saranow said he spoke with Rudnick and did suggest allowing Arcuria to plead to a misdemeanor as a way of ensuring his cooperation in what he viewed as the more important case, that of Mondavano.

Saranow said he frequently had similar conversations with prosecutors in his role as head of the criminal investigations division. “It’s common practice in government prosecution of crimes to get people to cooperate by having them plead to lesser charges, or even giving them immunity,” he said.

But Leonard Bernard, a subcommittee staff member, said Rudnick believed that he would not be able to persuade a jury to convict Mondavano of serious charges if he had allowed the IRS agent who prepared his tax returns to get off with a misdemeanor. Arcuria ultimately pleaded guilty to a felony count, and Mondavano was sentenced to 5 1/2 years in prison following his own conviction.