Have you ever wondered what happened to the Colombo Gas Tax Scheme? I do too, and unfortunately, Michael Franzese doesn’t provide a satisfying answer. In his books and videos, he claims it fell apart shortly after he pled guilty in 1986. Without the Yuppie Don at the helm, the Colombo’s were unable to maintain their relationship with his Russian partners and the rest was history as they say. Well, history does say something, and that is the Colombo’s maintained the scheme well into 1993. Ironically despite Franzese trying his hardest to box out Vic Orena from the gas business, it was his son that became the Colombo’s new point-man in the renewed gas venture. Thus, I want to keep this piece rather short and focus mainly on Orena’s gasoline scheme.
A name you never hear Michael Franzese mention yet was a close associate of his in the petroleum business was Frank “the bug” Sciortino. Although just an associate at the time, he had the responsibility of shaking down any independent Russian bootlegger that didn’t fall under the Franzese-Iorizzo-Markowitz-Levine Cartel that dominated non-branded gasoline distribution in the Tri-State area. Frankie and a Gambino soldier would go around town threatening to assault businessmen with a ball-peen hammer if they didn’t pony up $25,000 in cash per gas station. This series of extortions yielded a cool half a million to an operation that was already netting millions of untaxable dollars per week according to Ray Jermyn, former assistant district attorney for Suffolk County. Marat Balagua wasn’t as open-minded to this arrangement, and he sought the protection of the Lucchese Crime Family. He would play an important role in things to come.
Frank “the bug” Sciortino
With Iorizzo singing in court, Franzese behind bars, Michael Markowitz and Sheldon Levine under indictment, the old Cartel was falling apart, and Russian bootleggers sought the protection of new Italian gangsters. That’s how the racket went from being a mostly Colombo endeavor to encompassing four of the five families by 1988. Franzese’s imprisonment gave room for other Mafioso’s to maneuver and Joseph Galizia, a Genovese soldier, used this opportunity to kill Markowitz. They already had bad blood even during Michael’s era (which I will elaborate on in the future) but the added news of his informant status gave Galizia a green light to order the Romanian’s murder. Thus, in May of 1989, Michael Markowitz was shot in his exquisite Rolls-Royce. The murder was sanctioned by Orena, according to Anthony Casso, and most likely carried out by Frankie Sciortino and some Russian-Israeli associates. Carmine Sessa, the former Colombo Consigliere, also fingered “the bug” in the Markowitz killing. None of these accusations however stuck as charges against Frank were dropped. As such, basically, all of Michael’s old Russian associates in the gas business were gone and in that way, the gasoline operation Orena Jr. conducted was indeed different from his.
Michael Markowitz looking like the “IT” Clown
In the post-Franzese world, Vic Orena Jr. and Frankie “the bug” were appointed as the Colombo representatives to a Mafia gas panel in charge of overseeing and coordinating this racket between the four families (sorry Bonanno). With Markowitz dead and David Bogatin hanging out in Poland, the Colombo’s hooked up with new gasoline bootlegger associates who will be central to our story, chief among them being Michael Varzar, Joseph Reisch, and Martin “Marty” Nociforo. If some of these names look familiar, it is because they were also part of a separate but related gasoline indictment featuring Marat Balagula and one which will be elaborated on in the future as well.
The whole operation was anchored on Ampetrol Inc., owned by Marty Nociforo which possessed a coveted IRS form 637. This meant it had the license to buy and sell gasoline tax-free from one wholesaler to another and pass on the tax liability. Thus, it bought gasoline tax-free from legitimate wholesalers and was able to store this gas in Inwood Oil Terminal facilities owned by Joseph Reisch. This was crucial because while Ampetrol would show the IRS numerous sham transactions that recorded the sale and movement of gasoline between other wholesalers, the fuel would never leave the terminal. In reality, Ampetrol would distribute its bootleg gasoline to many unlicensed companies owned by Michael Varzar. These unlicensed companies would then sell the gasoline to retail chains and pocketed the motor fuel taxes, while the IRS was out on a wild goose chase trying to locate and determine who to collect the tax liability from. By the time they figured it out, the burnout companies no longer existed, and their records would disappear. The Colombo’s allowed the Russians to operate their scheme in return for a tribute of the proceeds, with 1 ½ to 3 cents per gallon sold being kicked up to the Family. In return, the Colombo’s protected the Russian operation from other criminals and intimidated legitimate distributors to cooperate with the bootleggers. The Russians would make cash payments to Colombo soldiers Frankie “the bug” and Joseph “Chubby” Audino as well as Colombo associate Frank Campione. These bags of cash were delivered to Colombo captain Vic Orena Jr. who oversaw the whole scheme on behalf of his father, Acting Boss “Little Vic” Orena. According to FBI estimates, Orena earned as much as $4.5 million over four years with Joseph Reisch alone. This tax theft brought untold millions into the coffers of the Colombo Family. Laura Revetti, a former Federal prosecutor noted that the Colombo Family alone netted at least $80 million a year in the mid-1980s from gasoline tax frauds.
Dennis J. Pappas may have not been a wartime Consigliere, but he sure was a good financial one. The accountant oversaw the laundering of Orena’s illegal income from loansharking, gambling and gasoline tax theft. It took years for the government to untangle the 11 companies and 165 bank accounts he used to funnel at least five million back into the legitimate economy and prosecutors admit he laundered millions more. While he got massive kickbacks for undertaking this risk, his employees faced a different kind of risk. Reportedly, one accountant started taking issue with all the questionable practices Pappas undertook with the various ledgers. He was soon silenced when a dead fish wrapped in newspaper was delivered to him, warning the accountant against cooperating with law enforcement. This will not be the last death threat in this saga either.
Dennis Pappas, Orena’s financial Consigliere
Now in order to fight the gasoline bootleggers, the FBI orchestrated a massive undercover operation to do business and infiltrate this criminal enterprise. This was conducted in unison with the “Red Daisy” operation mentioned in the Anthony Morelli article. While the Genovese and Gambino operations focused on New Jersey and Pennsylvania, the Colombo operation ran by Orena centered around fuel stations in Long Island. The operation would last three years and to target the mobsters, the FBI and IRS set up three undercover businesses with a cooperating legitimate wholesaler to start competing with mob ran enterprises. Two front companies, Rossi Associates and Independent Petroleum Brokers, operated out of the same office in Grand Avenue, Baldwin. The government also created a fictitious video production company next door to serve as cover when recording the goings-on in the other office. In January of 1991, the FBI was officially in business and started to aggressively undercut mob-controlled prices. After six months of competition, they started handling over 10 million gallons of fuel per month, taking a 25% market share of the normally protected amount by the mob. This means Vic Orena Jr.’s operation normally oversaw 40 million gallons per month in Suffolk and Nassau County. Just as a comparison, at the height of his operation, Michael Franzese claimed to move anywhere between 300-500 million gallons of gasoline per month. Regardless, the boldness of the FBI’s business tactics attracted the attention of the Colombo Crime Family. Soon enough, two men arrived at Rossi Associate’s office carrying flowers and a telegram. They also banged on the door loudly and shouted, “If you don’t get out of the fucking gas business, you’re fucking dead.” A couple of days later, another man arrived holding a large funeral wreath with the accompanying card reading, “In Loving Memory, Rest in Peace. From all your good friends in N.Y. City.” If these threats weren’t blatant enough, about two weeks later FBI surveillance spotted a suspected Colombo hitman near the home of the collaborating wholesaler. The poor wholesaler had enough and reached out to the daughter of a Colombo captain who in in-turn contacted Colombo soldier Joseph Audino. In the spirit of business, Audino suggested that the wholesaler join their operation and have a sit-down with one of its masterminds, Joseph Reisch. Reisch told the undercover agents that he wanted to use their companies as the final stop in his daisy chain scheme and to cut back their operations at the Inwood Terminal. The agents enthusiastically joined the Colombo/Russian operation and for their troubles were paid $120,000 a month.
Joseph “Chubby” Audino, Colombo Soldier
Of course, transactions between Ampetrol and Rossi were completely bogus and in fact, there was never a contract in place for the purchase or sale of gasoline between the two firms. The fake invoices solely existed to create a paper trail to disguise the tax liability for Ampetrol as it sold fuel to unregistered parties. Just to give you some perspective, Rossi ran up a $2.4 million accounts receivable account with Ampetrol. All this helped create valuable evidence against the mobsters and it was soon time to pull the legal trigger finger. The sting operation ended in November of 1992 (in conjunction with the one in New Jersey) and the government executed over 200 warrants and seizures (more on that in the future). In all agents seized $1.7 million from safety deposit boxes, $1.2 million from bank accounts, $1 million in stored gasoline and Michael Varzar’s yacht valued at half a million.
On May 27th, 1993, 18 people were arrested in a scheme to defraud the U.S. Government of $34 million in gasoline taxes. The indicted were each charged with 12 counts of tax evasion and conspiracy. These charges carried a maximum sentence of 60 years and a fine of $250,000. The ringleader was Colombo captain Victor M. Orena, son of the imprisoned Acting Boss. This was bad news for Orena Jr. because he was hit simultaneously with another indictment charging him and his brother with running a $600,000 loansharking racket in Long Island. Also indicted were Colombo soldiers Joseph Audino and Frank Sciortino, Colombo associate Frank Campione as well as Lucchese associate Frederick “Buddy” Adrion. While this was mostly a Colombo operation, the Lucchese did have some involvement because some of the Russian defendants were involved in Marat Balagula’s operation who was under Lucchese protection. Some of the Russian associates were also involved in the Gambino New Jersey operation. This gets messy and I hope to clear it up in the future. Now alongside the Italian gangsters, such notables like Jacob Dobrer, Paul Sharp, Martin Nociforo and Michael Varzar, among others were also arrested. Three defendants, Joseph Reisch, Rami Segal and Yehuda Shaked fled to Israel before the indictments were handed down. In Israel, Joseph Reisch would soon face murder charges for the 1989 gangland slaying of Michael Markowitz. He would beat those charges and remain out of the Justice Department’s clutches for some time. He was recaptured 16 years later in Germany pleading guilty to just three counts of tax evasion and one count of conspiracy.
Seeing the severe punishment doled out after defendants lost their trials in similar cases, all fifteen perpetrators decided to plead guilty a month before their own scheduled appearance in court. Vic “The Little Guy” Orena would get 51 months in prison. “The Bug” received the harshest sentence and got five years in prison. The rest got less than 3 years. Paul Sharp also had to plead guilty in a RICO conspiracy charge stemming from his participation in a related gasoline scheme out of Georgia and Varzar pled guilty to another case stemming from his involvement with the New York Fuel Terminal Corporation and Marat Balagula. Thus, it seems that the Colombo’s influence in the oil & gas industry ceased to exist by 1994.