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In another big mob case, Mr. Heddell’s office helped investigate Salvatore “Hot Dogs” Battaglia. Tied to the Genovese family, Battaglia pleaded guilty in January to extortion charges in connection to his job as president of the Amalgamated Transit Union in New York City.

And James Delio, a reputed Genovese crime family soldier, was sentenced in February to nearly three years in federal prison after a corruption probe of the New York City drywall industry.

Labor Department officials say the dispute won’t curtail organized crime and racketeering investigations. In a letter last week to House Speaker Nancy Pelosi, California Democrat, on Friday, Mrs. Chao said the disagreement “has absolutely no impact on the operational effectiveness of the OIG.”

“Please be assured that the department does not question the authority of the OIG to conduct such investigations,” Mrs. Chao wrote, adding that she recently issued a departmental order telling employees to notify the inspector general about any evidence of possible organized crime or racketeering so Mr. Heddell’s office can decide whether to “assume the lead in further investigative activities. …”

However, Mrs. Chao also noted that Mr. Jacob “disagreed with the inspector general’s legal position.”

Mr. Jacob said in a memo last week to Mrs. Chao that concerns about interference in OIG investigations are unfounded.

The Inspector General Act of 1978 transferred the Labor Department’s special investigations office to the newly created inspector general - “nothing more, and nothing less,” Mr. Jacob wrote. But, he argued, that doesn’t mean the inspector general’s office now has “exclusive authority overall in matters involving organized crime and racketeering.”