Mr. Daggett walked out of the storeroom alive, and he moved his local to North Bergen. But the union’s relationship with the mafia persisted. In 1987, a federal commission reported that the ILA “has been virtually a synonym for organized crime in the labor movement.” In 1999, a federal judge found that Local 1588 in Bayonne was under control of the Genovese crime family; five years later, the same local was placed under court monitorship after investigators discovered that the union’s top officials were kicking back half of their salaries to the mob. In 2010, Nunzio Lagrasso, then vice president of the ILA’s Atlantic Coast district, was charged with extorting tribute payments after longshoremen received their Christmas bonuses.
When approached for comment, the ILA lived up to the ideal posited by Johnny Friendly’s gang in Elia Kazan’s 1954 classic, On the Waterfront, keeping it “D and D,” or deaf and dumb, declining to return emails and phone calls. In past statements, representatives have said that charges against the ILA amount to a governmental effort to take control of the union.
Whatever the truth of that claim, the whiff of organized crime emanating from the harbor didn’t prevent institutional investors from engaging in a dockside turf war of their own. Beginning in 2006, when the soon-to-be-embattled insurer AIG acquired a terminal operator with businesses in Newark, Philadelphia, Baltimore, Tampa and Miami, container terminals became hot properties. By the end of the following year, Deutsche Bank and the Ontario Teachers’ Pension Fund had also bought into the Port of New York and New Jersey, and Goldman Sachs had acquired a majority stake in SSA Marine, the biggest terminal operator in the U.S.
Of course, those were the days of the boom economy, when buying into the shipping business seemed like a smart way to get linked to inflation and take advantage of the growth in global trade. As a result, the investment funds paid great multiples on earnings for the terminal operations. When Dubai Ports World took over CSX World Terminals in 2004, it paid 14 times earnings, according to research published by Jean-Paul Rodrigue, a professor of transportation and logistics at Hofstra University. When Deutsche’s RREEF Infrastructure fund bought Maher Terminals in 2007, it paid a multiple of 25.
“Just like there was a real estate bubble, there was also a port real estate bubble,” Mr. Rodrigue told The Observer. “People bought ports at very high rates, so they had very high expectations.”
Then the financial crisis came steaming toward shore. The bottom fell out of the housing market, and workers were laid off in droves. Demand for foreign goods plunged, and container traffic slowed to a crawl. If the institutional investors that bought in at the high end of the market were going to make good on their acquisitions, they’d have to get serious about cutting costs.
“The new players in the shipping business are looking at significantly diminished earnings,” said Chris Ward, the former PANYNJ chief. “It’s gone into a nose dive due to the economy, and people are beginning to ask, ‘How are we going to recover that cost?’ The ILA contract has potential for that.”