Rudy Guiliani: The Friend Within

Giuliani's '89 campaign was rife with dirty tricks only an insider could pull


The Friend Within
October 12, 1993

The 1989 mayoral race was one of the dirtiest in New York history. What ap­peared in print was bad enough — age-old tax matters, race- and red-baiting — but the gossip floating around political circles was far worse: speculation about Ed Koch’s sex life, rumors that a stack of love letters to David Dinkins was sitting on the desk of former Post owner Peter Kalikow, whispers about a Dinkins affair and how it compro­mised the then Manhattan borough president.

None other than Giuliani’s former, and current, campaign manager Peter Powers was involved in peddling the purloined Dinkins love letters to the press, the Voice has learned. Yet Powers was not the only Giuliani supporter to engage in CREEP­-style tactics on behalf of the Republican candidate. A Voice examination of the ’89 bloodbath has revealed that some of this mudslinging can be traced to a close asso­ciate of Rudolph Giuliani’s, an IRS agent named Anthony J. Lombardi, who sources said worked in the shadows of the mayoral campaign.

Giuliani has declined to be interviewed about Lombardi and other aspects of the ’89 campaign. In fact, there is no proof that Giuliani himself was aware of his asso­ciate’s efforts. But Lombardi, while claim­ing that all his investigations were geared toward legitimate criminal prosecutions, told the Voice that both Giuliani and his top assistants in the U.S. Attorney’s office were aware of his activities. “There was nothing I did there that they didn’t know about. I followed their direction on everything. There is not one thing I did, one report that I wrote, that they didn’t know about. One way or another, they would know about it.”

Lombardi was assigned to the political corruption unit inside the Manhattan U.S. Attorney’s office in early 1986, and remained there until his retirement last year at age 50. His departure coincided with the latter stages of a lengthy IRS investigation, a probe that, according to a federal prose­cutor, turned up evidence that Lombardi had engaged in “improper conduct” and was “providing inside information” to the target of an IRS criminal probe. That inves­tigation resulted in the felony convictions this year of two longtime Lombardi associates.

One law enforcement source said that the office of Newark U.S. Attorney Michael Chertoff, which prosecuted the two men, judged a possible indictment of Lombardi as a “close case,” and eventually declined a prosecution. Chertoff, himself a former Giuliani assistant, declined to comment on the case.

The IRS investigation of Lombardi com­menced in mid 1987, and roughly covered the same period during which the ex­-agent’s suspect political practices occurred. Those activities included:

  • Lombardi participated in interviews with at least three men during which the subject of Ed Koch’s sex life was broached. One witness was summoned by Lombardi from California, but declined to provide in­formation about his personal relationship with Koch. Another purported “government witness,” writer and gay activist Larry Kra­mer — who at the time had begun a cam­paign to “out” Koch — was contacted by Lombardi and gladly agreed to an interview. During that meeting, Kramer provided a graphic description of what he claimed were details of the former mayor’s private life.
  • Weeks before the ’89 general election, Lombardi peddled the rap sheet of Dinkins adviser and union leader Jim Bell, who had been arrested in 1971 for slugging a cop who called him “nigger.” The story about Bell’s minor criminal record broke on TV and was attributed to “law enforcement sources.” The report included a denuncia­tion from Giuliani, who questioned “the kinds of people” Dinkins “surrounds him­self with.”
  • The former IRS agent once bragged that, on occasion, he had tailed Dinkins campaign manager Bill Lynch home at night. Asked only whether he recalled any strange occurrences during the last mayoral race — and not specifically about being tailed — Lynch said in an interview that on four or five occasions, he was followed by car after leaving Dinkins’s Manhattan cam­paign headquarters late at night.

In addition to the surveillance, the Voice has learned that, during the ’89 election, an inquiry was begun into the tax status of Lynch, Dinkins’s chief political adviser. Ac­cording to a well-placed IRS source, there was an allegation that Lynch “had not filed his tax returns.” The source recalled that a request was made for copies of Lynch’s tax returns, but the source could not remember where the request emanated from. “I re­member saying, ‘This is pretty hot shit,’ ” the source said, because of the ongoing mayoral campaign.

Though the bulk of the IRS’s internal probe of Lombardi focused on his involve­ment in the case handled by Newark federal prosecutors, there apparently was one polit­ical facet to the agency’s inquiry.

According to the notes of one Voice source who examined IRS documents relat­ing to the agency’s Lombardi probe, investigators determined that the ex-agent “did engage in prohibited political fundraising activities on behalf of former New York City mayoral candidate Rudolph Giuliani” in 1989. A federal law enforcement source, who is familiar with the IRS inquiry, could not confirm that the agency had reached such a conclusion. Lombardi denied last week that he engaged in any fundraising activities — which would be a violation of the agency’s conduct codes — but did say that he attended Giuliani’s election night “victory party” in November and that a close friend of his organized a “Democrats for Giuliani” fundraiser in 1989, which he did not attend.

Last week, the Voice asked for an inter­view with Giuliani to discuss aspects of the the ’89 mayoral race, but the request was flatly turned down by campaign spokesman Richard Bryers in a telephone conversation Thursday morning. “We’re declining to talk with you” was all Bryers would say. Earlier in the week, at an Al D’Amato fundraiser, Giuliani approached another Voice reporter and indicated that he wanted to talk about matters he heard the newspaper was exam­ining. During a short conversation, Giu­liani denied that while he was U.S. Attor­ney inquiries were conducted into anyone’s sex life. He also said that he was unaware that Lombardi had been accused of wrong­doing in connection with the New Jersey IRS investigation, saying that he had not spoken with the former agent in more than a year. According to two sources, Giuliani has cut off contact with Lombardi because he believes the ex-agent “was going with a Finkelstein agenda,” a reference to busi­nessman Jerry Finkelstein, a Lombardi friend and the father of Andrew Stein, him­self a mayoral candidate until last May.

By his own account, Tony Lombardi be­lieves he was “in the forefront of law en­forcement,” a “high-powered guy.”

As a young Treasury agent, he was de­tailed in 1968 to assist the U.S. Secret Ser­vice in its protection of then presidential candidate Richard Nixon. Lombardi even­tually landed in the agency’s Criminal In­vestigation Division (CID), where he became a supervisor and worked cases involving organized crime figures, white collar criminals, and corrupt politicians.

Lombardi helped nail mobsters and mu­nicipal crooks like former Bronx Democrat­ic boss Pat Cunningham, but he is probably best known as the agent who helped trans­form Sukhreet Gabel — the ditsy diva of the Koch-era corruption scandals — into a pros­ecution witness against her own mother, 76 years old and nearly blind.

Lombardi’s career intersected with Giu­liani’s in 1986, when the agent began work­ing for the prosecutor as a special investigator attached to the U.S. Attorney’s office. Lombardi had previously been assigned to the President’s Commission on Organized Crime and, directly preceding his assign­ment with Giuliani, worked for a short time as chief investigator for the Martin Commission, which was charged with ex­amining aspects of the city scandal then enveloping the Koch administration.

Working with public corruption prosecu­tors, Lombardi helped build a successful case against sewer contractor Andy Capasso that eventually segued into a probe of Ca­passo’s then girlfriend, Bess Myerson. At the same time, Lombardi was also involved in the early stages of Giuliani’s probe into the Parking Violations Bureau and late Queens borough president Donald Manes’s corrupt dealings. It was during the PVB preliminaries that Lombardi’s investigative style first raised concerns among some Giu­liani assistants.

One former prosecutor recalled that Lombardi had to be “constantly admon­ished” to refrain from contacting a prime target of the PVB investigation in an effort to “flip” him, or secure his cooperation. Lombardi had visited the target at home over the weekend, a practice that stopped only when the target’s attorney lodged a complaint with prosecutors. From that point, according to the source, “as well as other things that people saw, there were a number of assistants in the U.S. Attorney’s office who had a real unease about him.”

“He was a big, bluff, gruff, big-mouth agent,” another former prosecutor recalled. “Guys like that can be the most effective or the most dangerous type of agent. He lived in the Southern District, worked like a dog and was extremely trusted.” A third ex­prosecutor, who worked directly with Lom­bardi, said the agent “had access to the throne while Rudy was there,” a recognition of both Lombardi’s work on high-pro­file cases as well as his close relationship with Giuliani. Another prosecutor familiar with Lombardi said that it was “common knowledge” that Lombardi was one of the people Giuliani relied on to handle “things that the boss wants done.”

In a series of lengthy interviews with the Voice, Lombardi said that because of the “sensitive nature” of many of his investigations, he “worked closely with” Giuliani and his top advisers, including Deputy U.S. Attorney Dennison Young. Lombardi con­firmed that he sometimes chauffeured Giu­liani and regularly attended end-of-the­-workday sessions in Giuliani’s private office during which cases and strategy were discussed. “I really held a position of im­portance,” Lombardi recalled. “My posi­tion was to do big cases.”

“Tony had free access to anyone” in Giu­liani’s office, one former IRS agent said, noting that the agent was close to now FBI director Louis Freeh, who had prosecuted the Pizza Connection heroin case and who served as head of the office’s organized crime unit from 1987 to 1990. Another former IRS investigator noted that Lom­bardi rarely appeared at the IRS’s Manhat­tan office, but when he did, it was clear that “he was some type of big shot. People jumped when he spoke. He got anything he wanted.”

Kevin Ford, a prosecutor who worked with Lombardi and said the investigator was “one of the best people I’ve ever worked with,” recalled that “Tony had a strange and difficult job to do. He was the point man for the IRS in dealing with a lot of very wealthy people who were in a posi­tion to provide … very valuable informa­tion, often about one another, that the gov­ernment was able to capitalize on in making civil and criminal cases.” Lombar­di’s vast array of contacts — he said 163 individuals had served as informants for him during his career — made the agent a well-known source of information for fel­low investigators, prosecutors, and journal­ists alike.

Ford, in fact, believes that Giuliani him­self benefited from Lombardi’s network. “It was my perception, for what it’s worth, that Rudy took advantage, to be quite frank, of some of Tony’s contacts. Because Tony was, and is, friends with a lot of powerful people … ” Ford noted that because of Lombardi’s close relationship with former U.S. Attorney Andrew Maloney, Giuliani’s Brooklyn counterpart, Giuliani employed him as “sort of a mediator” in disputes between the two offices, using the IRS agent to take “messages back from one to the other, since they wouldn’t speak to one another.”

In addition to Maloney and Jerry Finkel­stein, Lombardi is close friends with insur­ance executive Neil Walsh — a former Roy Cohn crony — who has regularly accompa­nied Lombardi to prizefights, Yankee games, and entertained the former IRS agent in his luxury box at Giants Stadium. Walsh, one of the more shadowy members of the city’s Permanent Government, has been described by Department of Justice officials as having a “business relationship with the FBI. Disclosure of the nature and details of this relationship could cause seri­ous damage to the national security.”

Lombardi, Ford, and ex-prosecutor Da­vid Lawrence worked together on the Myer­son investigation, though it was Lombardi who played the central role in helping to orchestrate one of Giuliani’s major fiascos.

Lombardi’s “wacky relationship” with Sukhreet — who would testify at the Myer­son trial that she “adored” Lombardi­ — worried many prosecutors in Giuliani’s of­fice, according to an ex-Giuliani assistant. “First of all, she was another one who was represented by counsel … he [Lombardi] came in and said, ‘You know, she wants to talk to us, she wants to rat out her mother. She’s disgusted by this, she feels used and abused and betrayed.’ ” The ex-prosecutor added that “there were a lot of assistants in the office who were very much afraid that Tony was approaching her and preying upon her psychological imbalances. And that this [Gabel’s story] wasn’t coming from her, that this was coming from him. Now this is obviously very serious stuff to (a) be talking to somebody who is repre­sented by counsel, but (b) to be talking, trying to talk a daughter into flipping against her mother.”

The Myerson case, with Gabel as the star witness, became “a disaster from the get­-go,” according to one former prosecutor who viewed Lombardi as a “zealot” who could not understand “why people would have reservations” about a witness taking the stand and mugging her mother for nine days.

What could have been the final piece in Giuliani’s anticorruption crusade — an ef­fort that helped cripple Ed Koch politically and set the stage for Giuliani’s mayoral bid — became an embarrassment. Instead of leaving office in January 1989 with the freshly mounted head of yet another Koch crony tucked under his arm, Giuliani de­parted Bess-less.

While he was still working on the Myer­son case, during 1987-88, Lombardi told the Voice he conducted a number of other municipal-corruption investigations, though he declined to discuss the nature of these probes, which did not result in the development of criminal cases. It was during the time of these inquiries that three men were queried about their knowledge of details of Ed Koch’s love life.

Playwright and AIDS activist Larry Kra­mer told the Voice that he was first contact­ed by Lombardi in 1987 and asked to come into the U.S. Attorney’s office for an inter­view, which took place on September 25.

At the time Lombardi contacted him, Kramer was in the midst of trying to “out” Koch and was focusing on the politician’s late-’70s relationship with a health care consultant named Richard Nathan. The thrust of Kramer’s story was that Nathan had admitted to him and others that he had once been Koch’s lover. Kramer’s agitating, he said, was to call attention to what he believed was Koch’s delay in dealing with the epidemic.

Kramer said last week that he was also aware, at the time, that after Nathan had moved to Los Angeles in 1978, he had received a small city contract — totaling less than $13,000 — from the Health and Hospi­tals Corporation. Aware that his informa­tion consisted entirely of hearsay accounts of Koch’s private life, Kramer said he met Lombardi anyway because he believed it was “very much two guys trying to help each other.”

Asked why he called in Kramer, Lombardi said it was not he who contacted the writer, but did assert that Kramer was a “witness” in a confidential investigation that the ex-agent could not discuss. When Lombardi was told that Kramer recalled speaking extensively about Koch’s love life, he responded, “that’s absolute bullshit. No­body called Larry Kramer in to provide any information about his love life or any of that crap. He was an important witness.”

Ford, though, also attended the Kramer interview and contradicts Lombardi, saying the activist described “in gross detail” what he claimed to be first- and second-hand accounts of “Ed Koch’s sex life.” Ford said that it had been his belief that Kramer had approached the U.S. Attorney’s office and requested the meeting. Kramer, however, was adamant that Lombardi initiated the contact and said he was never a witness in any investigation, as Lombardi claimed.

Nathan told the Voice that he, too, was contacted by Lombardi at his home in Los Angeles. Asked last week if Nathan — and his paltry HHC contract — were ever the subject of a criminal investigation, Lom­bardi said, “No, never.” As with Kramer, Lombardi said that Nathan was also a gov­ernment witness, but “I don’t believe I worked on the investigation.” Nathan has a markedly different recollection.

Contacted last week, he said that Lom­bardi telephoned him, apparently in late 1987, and “invited” him to come in for an interview. Nathan, who traveled to New York occasionally, readily agreed to meet with Lombardi when he was in town next, believing that otherwise he would be sub­poenaed to appear.

Nathan said that his meeting with Lom­bardi had a “two-part agenda: there were the [HHC] contracts, which is the above­-the-ground agenda, and the private life, which is the below-the-ground agenda.” He added, “It was an open secret what he was chasing. You don’t get summoned to New York to discuss your love life. They don’t put that on a subpoena.”

Lombardi, said Nathan, was “a hired gun looking for dirt” and that “I never recall it being suggested that I violated anything. It was, rather, gathering information.” Na­than added that Lombardi “really wanted to probe into things that I told him were of a personal nature. My private life is pri­vate.” Nathan, who said he has not been in contact with Koch for years, said that he did not know “whether Koch was aware of Lombardi particularly, but he sure as hell must have been aware that people were out looking over his bedtime activities.”

Though he initially denied working on the “investigation” in which Nathan sup­posedly was a “witness,” Lombardi claimed that the consultant was the one who wanted to talk about sex. “The guy wanted to get on a soapbox. We had to restrain this guy. [He] talked about Mr. A, B, C, D, and E.”

The third person queried about Koch’s private life was former mayoral aide Herb Rickman, who was a government witness during the Myerson trial. In preparation for his testimony in that trial, according to sources, Rickman was questioned on five or six occasions, with lead prosecutor David Lawrence conducting the interview. Infor­mation about Koch’s sex life came up dur­ing these meetings, sources said, but always in the context of preparing Rickman for any possible cross-examination.

Lombardi attended the Rickman sessions, but said he did not recall anything about Koch’s per­sonal life being discussed, though Ford remem­bered the subject being brought up by the may­or’s former ally. Other source says Rickman was ‘bothered’ by how often open ended questions about Koch’s personal life were raised.

Lombardi said that in the course of his corrup­tion investigations, “We called in a number of people … and we would do the best not even to talk about it. Who the hell cares what their sexu­al persuasion was?” However, one ex-prosecutor who worked with the farmer IRS agent said, “Tony is such a gossip. He used to tell stories about Koch and gay liaisons,” complete with details of “Westhampton trysts.”

A federal criminal trial in Trenton, New Jersey, just this summer offers another in­sight into Lombardi’s focus on Koch’s sex life — as well as his newfound disdain for the very people and institutions that were hallmarks of his career.

In the Trenton trial, Manhattan attorney Michael Pollack was accused of devising a scheme to help a client, businessman Arnold Herman, avoid paying federal income taxes. Both Pollack and Herman were the targets of a three-year IRS investigation, which was driven by the cooperation of a third man who secretly recorded meetings and telephone calls for investigators.

Presented with evidence of his role in the scheme, Herman pleaded guilty and agreed to cooperate in the government’s case against Pollack, who was eventually con­victed on two felony counts. Herman, a friend of Lombardi’s for almost 20 years, was caught talking about his pal in a secret­ly recorded conversation on November 30, 1988.

Discussing Lombardi’s work on the Myerson case, which was then under way, Herman said, “There’s more to it than Bess Myerson. They’re trying to nail Koch.” Lat­er in the conversation, in an apparent refer­ence to Lombardi, Herman said, “So now they’re saying, ‘Well, he’s gay, he’s got a lover.’ Oh, so what? Who gives a shit?” Then, Herman added, “I say this very hon­estly, I say, ‘Lombardi, what’s the big deal?’ But 0n the other-hand, you kn0w he looks at it like, this is his job.” Herman conclud­ed by saying that “If they don’t want to let him [Koch] alone and go to work, they want to hock him to death so that they will find out that he was in the sack with some guy.”

In his initial Voice interview, Lombardi described Herman, 63, as “an incredible guy” who worked for years as an informant. “He never was paid, he never got anything of any consequence, he was never in trou­ble. This was a rare example of a guy who did it because I think there was a thrill involved.” However, in subsequent inter­views, as Lombardi learned that Herman’s testimony — and his tape-recorded com­ments — implicated Lombardi in the tax-­avoidance scheme, he excoriated his former friend — who he earlier said provided him with “pretty solid information” — as a “rat,” “squealer,” “liar,” “greedy felon,” “scuzzbag,” “shithead,” “scum,” and as­serted that his former associate “should have been crucified.” As he raged against Herman, Lombardi also revealed specific details of what he said was Herman’s coop­eration in investigations against two orga­nized crime figures and one New York­-based billionaire.

Lombardi also had some choice words for the prosecutor in the Trenton case, Mark Rufolo, who blasted Lombardi’s conduct, charging that his, behavior was clearly “improper … probably a lot more than im­proper.” Rufolo, Lombardi said, was a “piece of shit” who “should be hung.” He added that one IRS agent who participated in the agency’s internal probe of him was a “drunk” who “doesn’t remember one day from another.”

Lombardi claimed that the IRS investiga­tion did not turn up “a goddamned shred of evidence” against him, claiming that the probe was “an attempt, for some reason, to defame me, to hurt me and my family, to hurt my earning capacity.” He added, “If I did something that was illegal, they would have indicted me.”

Stung by having a prosecutor point the finger at him, Lombardi, who spent 25 years building cases with just such attor­neys, said, “You know how prosecutors are. They will do whatever they have to do in order to solidify their case.” Reminded that this was a U.S. Attorney who had accused him, not a “scuzzbag” informant, Lom­bardi answered, “And what does that mean? That everything he says … is factual?”

Like most astute followers of mayoral politics, Tony Lombardi’s focus on Ed Koch ended the night David Dinkins was elected mayor. In interviews, Lombardi denied investi­gating Dinkins campaign officials, and claimed the only Dinkins-related matter he was ever involved in “was given to me to handle in a very, very, delicate way.” That probe of the new mayor, not surprisingly, involved an alleged “love liaison,” as Lom­bardi phrased it. In a new twist, this one involved a woman.

Lombardi’s memory was less clear about one figure involved with the ’89 Dinkins operation, Jim Bell, a late union official who was at Dinkins’s side throughout the campaign. The Voice asked Lombardi if he remembered Bell. “Never heard of him,” Lombardi said, apparently forgetting that he tried to smear Bell, Dinkins’s police liai­son, with the story about his 1971 arrest for slugging a cop.

Armed with Bell’s rap sheet, Lombardi peddled a nice, neat political hit. Because of the nature and dates of Bell’s arrests, a check of the National Crime Information Center (NCIC) computer — or New York State’s equivalent — would be the only way, according to knowledgeable law enforce­ment sources, to generate a comprehensive criminal history, as it were, on Bell.

WNBC-TV crime reporter John Miller broke the Bell story, citing law enforcement sources in his exclusive, which ran 10 days before the November 2 general election. The following morning’s New York News­day carried a similar story and cited “criminal records” as the source for its story. Lombardi said that he knows Miller, but denied a hand in leaking the Bell story.

Bell, who died last year, also figured in another intrigue that Lombardi took credit for. Lynch told the Voice that on several occasions before the November election he and Bell believed they were being followed as they left the Dinkins campaign head­quarters on West 43rd Street.

“We’d leave anywhere from midnight to 2 a.m. and pick the car up in a parking lot on 44th Street,” Lynch recalled. “We had the same routine: drive up Eighth Avenue then over to Broadway and 72nd Street,” where the pair would buy newspapers and hot dogs at Gray’s Papaya. “We’d go north on Central Park West or Amsterdam Ave­nue. At some point, we both were sure that we were being tailed by the same car each night. I didn’t really think about it that much until it happens for like the fourth or fifth time. So, we pulled over one night at 105th Street and jumped out of the car and ran back towards the guy behind us. That’s when he backed up and cut out.” Lynch said the tails ended that evening.

One Voice source said that Lombardi matter-of-factly mentioned the Lynch tails to him. Lombardi denied the surveillance, saying, “I don’t recall anybody ever coming to me to say that Bill Lynch has done any­thing wrong. I heard a story about his son. I heard some matters that I would think he would be pained about as a father.” Lombardi added, “I only knew of what little rumors that one might want to have floated about the guy …” Lombardi also denied knowing about whether officials in the U.S. Attorney’s office ever discussed Lynch’s tax history.

The Voice has learned, however, that at least one top official in the U.S. Attorney’s office — which was then headed by Benito Romano — was aware of the Lynch inquiry and believed the mayor’s political operative had “a problem.” Lynch, who was subject­ed to a detailed Department of Investiga­tion background check following his ap­pointment as a deputy mayor, told the Voice that he had always filed his taxes and “if I hadn’t, I would’ve gotten it between the eyes from someone.”

Lynch told the Voice, though, that in August 1989, he was contacted by the IRS with regard to his 1985 tax return — which Lynch said he had filed on time more than three years earlier — and that he eventually underwent a two-day audit in early 1990. Lynch said that when he received notice of the examination — which he said resulted in no additional tax or penalties — he believed that his “number had just come up” for a routine audit.

Informed of the timing of Lynch’s audit, a retired IRS agent told the Voice that, if Lynch had submitted his ’85 tax return in a “timely fashion,” it would be “absolutely out of the ordinary” that an examination of the return would take place more than three years later. Lynch said that he filed his returns on time, which the Voice has confirmed.

Even without Lombardi’s help, the Giu­liani campaign was capable of slinging its own mud. In what was perhaps the sleaziest dirty trick of all, the campaign brass fever­ishly tried in the final days of the ’89 cam­paign — unsuccessfully as it turned out  — to convince the Post to run a story about pur­ported “love letters” that had supposedly been sent to Dinkins by women other than his wife.

The Giuliani team, according to sources in both campaigns, had obtained the letters from a disgruntled former employee of the Manhattan borough president’s office who, Dinkins aides said, walked off with the correspondence as well as the politician’s Rolodex after her demand for a promotion and raise was denied. The ex-employee, whose relative worked for the Giuliani campaign, served on Dinkins’s staff while he was Manhattan borough president and also worked for him when he was the city clerk.

The “love letters” wound up in the hands of Post political reporter Fred Dicker, who confronted Lynch with the correspondence. Lynch tried to dismiss the matter, but the Post parry triggered a series of high-level negotiations, with then Dinkins adviser An­drew Cuomo playing a critical role in help­ing to snuff the smear.

Since most of the Giuliani campaign’s upper echelon were lawyers — and many were ex-prosecutors — they must have known that they were in the possession of what appeared to be stolen property. Peter Powers, Giuliani’s close friend and cam­paign manager, was in the middle of the “love letters” operation. according to one well-placed Giuliani campaign source.

At one point, Powers tried to justify the attempted smear, the source said, by com­plaining that the Dinkins forces were working to plant stories about the annulment of Giuliani’s first marriage.

As the Republican team attempted to detonate its last-minute bomb — while ex­pecting the story of Giuliani’s marriage to a cousin to explode as well — Powers offered a telling analogy, according to one source: “This is like the Cuban Missile Crisis.”

The Giuliani “love letters” operation was the denouement of the tawdry ’89 mayoral race. Like most of the sleaziest intrigues of that campaign, the letters materialized in the shadow of Election Day. As Dinkins­-Giuliani II enters its final weeks — with combat veteran Powers heading the Giu­liani brigade — history indicates that New York may be in store for a number of October surprises. ♦