A restaurant empire goes global (cont.)

By John Brodie, Fortune assistant managing editor

According to Cipriani, his troubles began when he started competing with Roland Betts, or as he puts it, "Unfortunately, the group that came in second had very good connections. And after they lost, we started getting visits from city and state officials. In one month we got 12 visits from city and state agencies." Even before Cipriani won the bid, he believes he was the subject of a two-pronged smear campaign orchestrated by the Chelsea Piers group. (Betts's rep strongly denies this.)

The first prong concerned an allegation that came out in the run-up to the U.S. attorney's prosecution of Mafia kingpin Peter Gotti, the Teflon Don's brother. In 2003 a Gambino family soldier named Michael DiLeonardo (a.k.a. Mickey Scars) pleaded guilty to murder and agreed to become a witness against his former associates.

In the course of his testimony, Mickey Scars served up a primer on labor relations New York-style when he claimed that Cipriani had paid the Gambino family $120,000 to make union problems at the Rainbow Room disappear. Or as Scars told the court, "In the spring of 1998 he was having some union problems with the Rainbow Room. He wanted to go non-union there in the restaurant." Scars said he took the money but was unable to do anything about the union situation.

When asked about the alleged bribe, Cipriani says, "I really think there has been an extensive investigation in this matter, and he [Michael DiLeonardo] is what they call a rat. ... They were not able to prove anything, and as far as I'm concerned it is all lies."

By the spring of 2006, Cipriani felt that rumors concerning a new investigation - this time by the Manhattan district attorney's office - were negatively impacting Pier 57's ability to move forward. Additionally, he was not prepared to have his capital tied up, nor was he willing to submit to a vetting process for municipal vendors that involved interviews with city and federal investigators. So he picked up the phone and called Witkoff to say he was dropping out of the project.

The investigation came to fruition last July when the Manhattan district attorney indicted Dennis Pappas, a Cipriani USA vice president, for insurance fraud. (The case has yet to go to trial.) Even though he was not named in the indictment, the glamorous restaurateur was tarred with the Mafia brush again. The indictment alleged that Pappas had lied about a prior conviction when he applied for a cabaret license at the Rainbow Room: He had checked the NO box on the application when asked if he'd ever been convicted of a crime. In fact, he had previously pleaded guilty in federal court to extortion and pension fraud in a case involving the Colombo family. Cipriani terminated Pappas as an employee the day he was indicted.

"Roland Betts and Tom Bernstein [president and co-founder of Chelsea Piers] started this whole thing by going to the department of investigation and raking up old allegations," says Arkin, Cipriani's attorney. "There is nothing in my knowledge that can ever be brought home to Giuseppe."

A spokesperson for Chelsea Piers begged to differ with Arkin's version of events: "We have no knowledge of the Cipriani organization other than what we have read in published accounts in the New York press. Any suggestion that we made overtures to or influenced law enforcement agencies that have investigated the Cipriani organization is false."

As dinner service at the amfAR event winds down, Cipriani returns upstairs from the old Bowery Bank's lobby to his apartment. He shows no signs of wear and tear from the Pier 57 saga. He is tan, just back from a few weeks at his house in Punta del Este, Uruguay. He settles into a leather sofa and pours himself a glass of Amarone - the same red wine his grandfather drank with Hemingway. He is stoic about the life lessons he learned on the docks of New York and is ready to move forward with planting the family flag in Miami and Los Angeles. "I put my heart into this pier. But you have to learn how to live," he says, before heading off to the SoHo branch of Cipriani for a late dinner with yet another banker.

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