(FORTUNE Magazine) – WILLIAM Ruckelshaus was lunching with a group of editors and reporters at the New York Times in Manhattan when the question was popped. It was 1992, and the chairman of Browning-Ferris Industries, America's second-largest trash hauler, was preparing to seek a foothold in a city that never sweeps. "Hey, who picks up our garbage?" asked one Times man. "The Mob," blurted a second journalist, triggering a gaggle of giggles around the table. "You think it's funny," responded Ruckelshaus, whose company is based in Houston. "Here you are, in the financial center of the Free World, with an essential service delivered by a cartel, and you guys are all amused."

A year and a half later a Times editorial lauded BFI's entry into a marketplace it called a "well-documented disgrace" and a haven for "gougers and racketeers." Even so, FORTUNE has discovered, the newspaper's own rubbish at headquarters is still hauled away by Vigliotti & Sons, one of 23 companies indicted last summer by Manhattan's district attorney for alleged participation in a Mafia-dominated cartel. The judge in the case, citing a "substantial probability" of convictions, has appointed monitors to oversee Vigliotti and its so-called competitors, whose assets ($269 million) could ultimately be forfeited. Every defendant has pleaded innocent.

Welcome to the roughest trade in the roughest town around--an entrenched underworld of smelly, leaky loading docks where rats not only live in compactors but own them; where the price gouging takes place at 3 a.m. while chief financial officers snore safely in the suburbs; where tuff-tawking goons teach each other lessons with baseball bats; where bids are rigged and trucks are torched and skulls are split and courage is uncommon.

The New York City region has long distinguished itself as America's only Mob-entrenched commercial garbage market and a place where no public company dared to operate. Law enforcement experts believe it is now the Mob's most lucrative "legitimate" business (the illegitimate ones being loansharking, gambling, and dope). In New York City--a $1.5 billion rubbish market in which 300 trash haulers serve 250,000 businesses--a customer-allocation scheme has resulted in overcharging by more than 40%, or $600 million annually. The Mafia's rake-off: at least 10%, or $60 million a year; prosecutors say it could be twice that.

Enter Ruckelshaus, 63, a tall, quiet, fifth-generation Hoosier who is at least exceptionally brave and could end up looking canny. Sensing a golden opportunity in a market that was ready for change, in 1993 he dispatched a team of salesmen to start roaming the sidewalks of New York in search of fearless customers. Backing him up was Robert Morgenthau, Manhattan's indefatigable 76-year-old district attorney, who for the past two years has given BFI (1995 revenues: $5.8 billion) a leading role--and a feeling of considerable safety--in his massive probe that led to the indictments of BFI's biggest rivals. On this playing field, of course, when somebody shouts, "Kill the ump," the crowds usually run for cover. Even so, this rare alliance between a prosecutor and a chief executive is beginning to yield home runs for BFI and New York City businesses.

The changes are overdue by about four decades. The city began requiring all commercial enterprises to have their garbage picked up privately in 1956. The bad guys wasted little time: Within months there was evidence that a "property rights" scheme was in place, and nearly 20 investigations throughout the entire New York metropolitan region have failed to crack it. A paucity of prosecutions has given carters the confidence to believe "that they could exploit customers in perpetuity," concluded a 1987 study by the Rand Corp. The scheme works like this: Carters own customers' locations, known as "stops." Carters who "steal" stops (i.e., compete) are known as "outlaws." If you're an outlaw, you get four choices: Return the customer, keep the customer and pay a one-time multiple of 30 to 60 times monthly revenues to the previous carter, swap the customer for another, or do nothing and get your face batted in.

One former trash kingpin, Harold Kaufman, put it bluntly in testimony before the state's Senate Select Committee on Crime in 1984: "Property rights means that if I do the garbage, [I] get the first month's fee. It could be a little vegetable stand. All of a sudden IBM wants to put a plant where that vegetable stand was. I get IBM."

VIRTUALLY every business in New York has a trash tale worth whispering about. D.A. Morgenthau lunched recently with an executive who explained how, ten years ago, he wrote to various carters soliciting bids. That prompted a phone call to his home one night. "The caller said, 'You will have your head split open if you continue,' " says Morgenthau. "One of his stores was then burned to the ground." Similarly, a restaurant owner found a bunch of pig farmers in New Jersey who were willing to lug away his leftovers for free. That lasted about two weeks, until his former carter showed up to insist that he quash the arrangement or he'd never see the pig farmers again. "He told the carter to go to hell," says Morgenthau. "He never saw the pig farmers again, and the old carter said, 'It will now cost you double, to teach you a lesson.' "

A young construction contractor in Manhattan named Wayne Bellet was incensed at his garbage costs in the late 1970s. "I called and told the carter that if the price was not lowered he'd leave me no alternative but to hit the pavement and try and get it for less," recalls Bellet today. "He chuckled and said, 'Listen, son, I'm going to come back to you like a bad penny.' " Bellet never found another carter willing to service him--and every Christmas "three or four big, ugly garbage men would ring the bell, put their hands out, and extort their holiday gifts."

HOW have these carters been able to rule like this for so long? The many family ties among the firms clearly help foster cooperation. What's more, the government virtually condones bad behavior with a toothless and antiquated regulatory system. Garbage luggers are required to list their customers with New York City's Department of Consumer Affairs. That's fine with the carters: Most of them buy and sell customers among themselves for big bucks without any written contract binding customer to carter. Thus the city, through its customer filing system, has placed itself in the bizarre position of running a property-rights registry for the cartel. "The city, in a sense, legitimizes, oversees, and puts its imprimatur on a scheme that has been established by the organized-crime families," says U.S. Congressman Maurice Hinchey, an expert on the trash trade.

The DCA has set the maximum rate a garbage man can charge a customer today at $14.40 per cubic yard, vs., say, $9 in Los Angeles, $5 in Chicago, and $4.25 in Philadelphia. Corrupt carters, sounding big-hearted, insist they never charge their customers the maximum rate. They don't need to: The gouging occurs by overestimating the amount of material they cart away, an activity that takes place in the wee hours when nobody is watching. Not surprisingly, few people bother to complain. For the month of October, for instance, just nine companies--0.004% of the total--called the city to wail about an overcharge. That's practically six-sigma quality.

Who could blame the national waste conglomerates for ignoring New York City like a rotten apple? "New York has always been an imposing, looming, foreboding presence for us," explains BFI official Philip Angell, who oversees the company's New York foray. "It's that part of the woods you stay away from, since nobody's ever given you a road map. Who wanted to go into that heart of darkness if you didn't have to?"

But Ruckelshaus felt he had to. New York City produces 5% of America's commercial waste; no denser market exists. With so many Mafia bosses in jail, he figured the cartel might be vulnerable. Moreover, a new city recycling law meant that corporations might begin to pay more attention to what they're tossing away. Ruckelshaus began to view New York as a last frontier waiting to be conquered.

He had another reason for charging in. "I think institutions like ours need challenges in order to get better," he explains over lunch at Cite, a Manhattan media-district restaurant that was being charged for 309 cubic yards of garbage a month by its carter when a BFI audit claimed the true haul was around 170. "People in corporations like to be proud of what they do," he adds. "The public may not think that hauling is the highest calling of mankind, but when a company takes a step with broader public interest, that is a tremendous energizer for an organization."

Some BFI managers were skeptical about taking on the New York City cartel, but Ruckelshaus turned them around. "The longer you're involved with an organization, the harder it is to see that change is possible," he says. "Sometimes it takes someone from the outside to see the possibilities." Ruckelshaus was just the man for the task. He served as the first director of the Environmental Protection Agency in the early 1970s and earned a reputation for standing up to polluters. In 1983 he returned to restore public trust to the agency, which had become mired in corruption ("I can't say no to a President unless I have an extraordinarily good reason why"); the media crowned him "Mr. Clean." Between his EPA stints Ruckelshaus displayed unshakable integrity when he resigned as Nixon's Deputy Attorney General rather than execute an order to fire Watergate special prosecutor Archibald Cox.

BFI's board hired Ruckelshaus in 1989 to clean up the company, which had an odious reputation with regulators and the media. Through acquisitions, BFI had grown into a confederacy of autonomous family-run firms. Controls were lax, and the company was entangled in a bunch of price-fixing and pollution cases from Louisiana to Niagara Falls. A New York State congressional report concluded in 1986 that BFI had "used many of the same tactics associated with the organized-crime carters." By the time Ruckelshaus emptied the company's garbage, more than $45 million had been paid in fines, settlements, and one jury award. "All it takes is one guy to do something dumb," says Ruckelshaus. "I know of no case of wrongdoing that stemmed back to senior management in Houston."

EMPLOYEE safety was the main worry when BFI executives engaged in vigorous debate about how to roll into New York. "One camp felt we should go into a startup mode without waving a flag or creating a great deal of notoriety," recalls Bruce Ranck, then the company's president and, as of October, BFI's new CEO. "Another camp felt we should be extremely visible and make sure that everyone knew we were there." The splashy plan won. BFI arrived in late 1992 and began generating lots of attention--but precious few customers. Then, in early 1993, BFI received a grisly reminder of what it was doing: the freshly severed head of a large German shepherd, laid like a wreath on the suburban lawn of one of the company's top local executives. A piece of string tied the dog's mouth around a note that read, "Welcome to New York."

The note and string were flown to an FBI crime lab in Washington, while BFI's Ruckelshaus, Ranck, and Angell raced to New York to comfort frightened employees. The company's Manhattan office was still four months from opening its doors, so the men holed up in a suite at the Waldorf-Astoria Hotel to reassess strategy. Was this an isolated event from a low-level, Godfather-mimicking thug? Or was it a real signal? BFI decided to increase security and surveillance at its New York operations and stay the course. No perpetrator was ever caught.

In the months to follow, BFI salesmen received threatening, anonymous calls. Worse, many customers the trash giant was signing up, at savings of 30% to 60%--Cite restaurant, for example--were calling to cancel before service had begun. "Previously dated contracts with their old carters would suddenly appear," says BFI's Angell. "In other cases their old carters would pay them an intimidating visit." Cite's snubbed carter (who is unindicted) produced a previously signed contract as well as a letter agreeing to lower the restaurant's future trash bill by nearly 25%.

BFI will now sue customers who break their contracts; this enables the company to take depositions from rival carters, which could prove useful to the D.A.'s investigation.

Ruckelshaus was having particular trouble signing up major accounts. Take Tishman Speyer, one of the city's big names in commercial real estate. Managing director Charles Mahoney agreed to sit down with BFI but opened the meeting with a story about how his former boss, real estate billionaire Harry Helmsley, once decided to save money by buying his own trucks to tote trash for himself and his friends. But Helmsley quickly changed his mind when, on the day he was set to begin, one of the trucks was set on fire. "Now," said Mahoney, turning toward the BFI salesman, "what is it you wanted to talk about concerning trash in New York?"

BFI proposed to drop Citicorp's carting costs 40%. But during a meeting at the bank's Park Avenue headquarters, Ira Rimerman, a senior vice president of Citicorp, reluctantly turned down the offer. "He said he knew that the business was controlled by organized crime, and he was concerned that the bank's retail ATM network could be sabotaged or vandalized," recalls BFI's Angell. A second Citicorp executive, Howard Schusterman, told BFI that he had sought the advice of a friend who worked in the organized-crime unit of the city's police department. "He said his friend advised him not to switch carters," says Angell. Citicorp's hauler, Philip Barretti, who is pleading innocent to arson and antitrust charges, has been identified by law enforcement sources as an associate of the Gambino crime family, a link he denies. "They own these stops," insists District Attorney Morgenthau. "Citibank belongs to Barretti."

A vice president at another major bank served by indicted hauler Angelo Ponte told two BFI salesmen that his philosophy was, "If it ain't broke, don't fix it." When told that BFI could save him several hundred thousand dollars a year, he replied, "That ain't broke." (For the record, the trash of Time Inc., FORTUNE's parent, is hauled by an unindicted New York carter called Waste Management, unrelated to the giant national firm of that name.)

TO GAIN intelligence on the industry, BFI retained Kroll & Associates, corporate America's leading gumshoes. Kroll's Robert McGuire, a former New York City police commissioner, suggested a visit to the district attorney. By late 1993, Ruckelshaus was seated in Morgenthau's office, complaining that his low bids were being ignored. "We know," said Morgenthau. "We've been tracking your movements through our own undercover investigation." The two men, while not friends, had respected each other when they worked together in the Justice Department two decades earlier. Morgenthau knew he could be frank. "You have two choices," he said. "Either come in and cooperate with our investigation or stay out of the market."

BFI typically entered markets through acquisitions. But do that in a wasteland like New York, warned Morgenthau, and you may just find yourself indicted along with everyone else. BFI made that mistake in New Jersey in the early 1980s, leading to the firm's indictment (along with 23 other haulers) on charges of fixing prices and dividing up customers. Although BFI was acquitted after two trials, Ruckelshaus was not eager to repeat history. The only way to win in New York was to wipe out the cartel, a goal that required the chairman and the prosecutor to work together.

Entering a Mobbed-up market was one thing, but adopting a secret role in a government investigation was a tougher decision for BFI. The small circle of executives involved in the matter had many heated discussions. Fearing retaliation, regional head Jim Cosman was an initial voice of dissent. "I'd be riding on an airplane and wondering if it was the right thing to do," he recalls. "Will somebody get hurt? Why would a corporation do this?"

But Morgenthau sat down with Cosman and his colleagues and showed them examples of other major companies that had worked on cases with law enforcement agencies. Ruckelshaus's history in the Justice Department also gave them comfort. "People have so little trust these days in our government institutions," says Ruckelshaus. "That really bothers me. I trust Morgenthau implicitly. You don't have to talk to him long to see what a determined man he is to root out crime in New York City in his 70s. That is not a normal fella. Besides, we would have been flying blind without him. Our main concern was employee safety, and a prosecutor is in the best position to warn us about problems."

Morgenthau's first lucky break in the case was what we'll call XYZ Co., a legitimate "outlaw" carter that had come to him to complain about the cartel. For 15 years Morgenthau had tried unsuccessfully to persuade similar companies to let him plant an undercover agent in their ranks. XYZ was willing, and now Ruckelshaus was the second key ingredient he needed. Neither man will go into details about BFI's role in this secret alliance, but Ruckelshaus calls it "pretty deep." He waited a year before telling BFI's outside directors he was cooperating. In the meantime he kept Morgenthau apprised of everything--bidding contests, efforts by rivals to keep BFI out of the marketplace, even offers by two-faced haulers to cut secret deals with BFI in case the cartel crumbled. As for Morgenthau, "he was very open with what he was telling me," says Ruckelshaus, "as if we were still in the Justice Department." Says Morgenthau about his temporary partner: "He's a guy with some guts."

In terms of resources, the Morgenthau garbage probe is the biggest investigation he has ever conducted in his 21 years in office--ten assistant D.A.s on the case, raids by 500 cops on 26 locations, more than 3,000 hours of electronic surveillance, even a videotape showing physical threats made to a driver for a rival carter who was beaten within a hair of his life with planks and baseball bats. Says Daniel Castleman, Morgenthau's investigations chief: "Some of the defendants are guilty of having big mouths. They spoke to the agent about how organized crime runs the business, and he recorded the conversations."

The indictments paint a portrait of the city's trash industry as a mixed family affair. In the driver's seat is 57-year-old Joseph Francolino (Duffy Waste), a reputed protege of John Gotti who is believed to be the new godfather of garbage for the Gambino crime family. He replaced James "Jimmy Brown" Failla, 76, who has a thing for brown clothes, walks with crutches, and allegedly ran the show for three decades until his imprisonment for conspiring to commit murder (he pleaded guilty in 1994). Hauler Angelo Ponte (V. Ponte & Sons) is allegedly the "wastepaper" point man for the Genovese crime family. The main vehicle of control for the Mob in Manhattan: the Association of Trade Waste Removers of Greater New York (and its sister, the Waste Paper Association), where disputes are mediated, payments negotiated, and carters satiated by X-rated porno films.

UNDER Morgenthau's direction, XYZ Co. allegedly doled out $790,000 in dues and extortion money to the carters, casting a wide net over trash haulers that are part of the fabric of New York City. One carter with reputed ties to the Genovese family, Vincent "Jimmy" Vigliotti (ABC Recycling; Ava Carting; Vigliotti & Sons), is accused of taking $126,000. Three months before his indictment, he was honored at the Bronx Chamber of Commerce's 100th anniversary luncheon. The keynote speaker was the governor's new economic development czar. Vigliotti, like several other indicted carters (such as Ponte and Barretti), has benefited greatly from tax-exempt industrial development bonds, an area now under investigation by law enforcement. FORTUNE has learned that Vigliotti's customers include the popular Royalton Hotel and the legendary Palace Theatre.

Next on the extortion list is Patrick Pecoraro (Delmar Recycling; V. Marangi Carting), who is allegedly linked to the Gambino family and who is accused of pocketing $110,000 from XYZ. His customers include Starbucks coffeehouses, Yankee Stadium, the New York Athletic Club, and the Essex House Hotel.

Sizing up the two largest indicted carters--Barretti and Ponte--is kind of like comparing Al Pacino's Scarface to Marlon Brando's Godfather. Barretti is charged with arson for torching one of XYZ's garbage trucks. Ponte was named an "honorary" sanitation commissioner under former mayor Abe Beame in the 1970s. Barretti was arrested in October for allegedly assaulting his longtime mistress, smashing her furniture and ripping the telephone out of the wall as she tried to call 911--all because she supposedly wanted to date other men. (The woman declined to press charges.) Ponte is a prominent member of Archbishop John O'Connor's Committee of the Laity, which raises funds for Catholic charities, a post he got just four months before being named as a "made member" of organized crime in testimony before a state senate committee in 1984. Ponte vehemently denies any Mob link.

Barretti was once indicted (and later acquitted) for bribing an inspector to allow illegal dumping. Ponte is a founder of Cop Shot, an organization that rewards people who rat on cop killers. Barretti was a player in a strange stock deal involving principals of a penny-stock boiler room that settled SEC charges last year. When Gulf war heroes returned to a victory parade in New York in 1991, guess who picked up the trash for free?

Ponte teamed last year with Dale Carnegie & Associates to pay for a statue of the founder of the city's marathon. He also gave $100,000 for a library exhibit on the history and politics of garbage that, needless to say, included no mention of the Mafia. Barretti's son punched an environmental protester in the head outside his father's smelly paper plant. Junior got five days of community service, while Dad's plant was shut down by the state for operating without a permit. And Ponte? His paper mill was partially financed by a HUD grant with the help of New Jersey Senator Bill Bradley.

"Barretti scares me--he always did," says Tishman Speyer's Charles Mahoney. "But Angelo is a perfect gentleman." Tishman Speyer has a five-year contract with Ponte that can be broken at any time on 30 days' notice, but "I'm sticking with him," says Mahoney, who is active on the charity circuit with Ponte. "You wouldn't want to meet a nicer man. It's hard to believe that somebody with a heart like he has is guilty of some serious crime."

The sentiment is shared by Vincent "Jim" Peters, former CEO of Cushman & Wakefield, the giant property manager. "I've known this man for 38 years, and I will stand behind him anytime," he gushes. "He is my friend, and he will never be anything but that. And I think a lot of people in this town would tell you the same thing about Angelo Ponte. I don't know about these Mobs. All I know is the man. I wish all of my friends were as loyal and as good as this guy, and I've met a lot of people in my lifetime." Peters doesn't believe that Ponte's customers are stuck with him. "Angelo is the kind of guy who, if you wanted to cancel [the contract], you could cancel it," he says. "That I promise you. He would never stand in anybody's way if they felt uncomfortable."

That kind of thinking flabbergasts Morgenthau, who calls Ponte a bid rigger and the Genovese family's "representative" in the wastepaper business. The prosecutor, as part of a larger investigation into the city's real estate industry, has subpoenaed the trash-hauling records of many commercial property managers. "The question is, are there payoffs being made?" wonders Michael Cherkasky, the D.A.'s former investigations chief, who helped launch the trash probe five years ago. "I would suggest that the probability is that substantial payoffs are being made to individuals in those firms who are negotiating those deals." (The real estate sources interviewed for this story deny knowledge of any such payoffs.)

MORGENTHAU is mystified as to why more big corporations aren't overcoming their fears and dumping their indicted carters. "It's a damn good question," he says. "I'm surprised. If I were in their shoes, I wouldn't want to be doing business with a company that has been charged with criminal conduct, price fixing, and enforcing it with strong-arm tactics. I also think that from a business standpoint, it's shortsighted. If the cartel remains in charge, prices will go up higher. This is a golden opportunity now to break loose, and I don't know why they're not." When asked about Ponte's distinguished charitable service to New York, a faint smile appears on Morgenthau's lips. "That could be a consideration on sentencing," he says.

Lewis Rudin, a centimillionaire and the founder of the Association for a Better New York, is very happy with Ponte. That's because Ponte agreed to service one of his 14 New York City office buildings for free for five years. "He did it in the hopes that when the five-year agreement was up, in 1993, he'd get all our buildings on a bid basis," explains Saul Shey, operations chief at Rudin Management. "But Ponte was never guaranteed the buildings." Then why do it for free? "Good faith, whatever you want to call it--a gamble on his part," says Shey. Sure enough, Ponte won the bid and now enjoys a five-year contract that Rudin cannot break except in the case of default--a highly unusual deal in the trash business.

When questioned about the arrangement, the 68-year-old Rudin blows his stack. "We go out for bids every year for insurance coverage, okay?" he says. "These are all responsible companies--Aetna, Travelers--and all of a sudden the prices are about the same. Why doesn't the district attorney fucking investigate that? I think they're making a mountain out of a molehill with these guys [the indicted carters]."

During a recent swing through the city, Ruckelshaus stopped for a brief meeting at One Battery Park, headquarters of the New York City Partnership, a prestigious club of CEOs who meet regularly to try to solve the city's problems. Ruckelshaus hopes that by joining the group he can drum up more garbage business. But a prominent member of the partnership (and its chairman until last year) is Jerry Speyer, of Tishman Speyer fame. Rudin, too, is a popular member. In fact, he owns the building that houses the partnership. A sneak into the loading dock confirms that Ponte picks up the litter.

In a recent visit with FORTUNE, the 70-year-old Ponte was gracious and good-humored. "Have you never eaten at my restaurant?" he asked. "Shame on you. Shame on you." Prosecutors say Ponte's Manhattan dining room, F.Illi Ponte, was the scene of extortion negotiations between various carters, including the undercover agent working for XYZ. Ponte disputes it. "Nobody ever gave me a nickel," he says. "This company grew from hard work--and nothing else." His eyes glistening, he recalls how his father, Vincent, launched the business with a horse and wagon in 1919 and how he (Angelo) had to drop out of school to help him. Today the family has 50 trucks, six times that many employees, and more than 40 buildings in lower Manhattan. "BFI is the best competitor on the street," concedes Ponte. "But let's see how well they do now that the price of paper is coming down."

Ponte contends that BFI's low bids are due mostly to the company's growing ability to sell recyclables. In early 1992, for example, mills wouldn't pay a nickel for "mixed" office paper. But by last June the mills were paying $120 a ton. Now the price has plunged to $2.50. BFI's Angell calls the argument nonsense. Says he: "We were cutting waste bills by 30% to 60% even before the paper market spiked upwards--and we were still making money. Besides, for most businesses, recyclables are a small part of the garbage. Guys like Ponte weren't even lowering their prices until we came into the market." In response, Ponte maintains that he has a "history of always giving price reductions."

Until the indictments, BFI's successes came slow. The Village Voice, that bastion of liberal muckraking, was allowing its journalists' crumpled first drafts to be hauled out the door by Barretti until last summer, when it switched to BFI. The Parker Meridien Hotel cut its carting costs 50% by switching to BFI. But it did so only after phoning the Hotel Intercontinental, another BFI client, to make sure it hadn't suffered any retaliation. The Intercontinental had switched only after a similar conversation with United Parcel Service, another BFI customer. Call it the "I'm okay, you're okay" chain letter. BFI's Angell says he respects the fear factor and understands that it's a major hurdle for some corporations to clear. "The longer we're here and the more they see their peers and competitors sign up, the better it will be," he says.

In some cases BFI has to race to pick up the trash of new clients because the old carter simply refuses to stop hauling the trash. One night four police cars had to keep the peace between two BFI trucks and a rival carter who were arguing outside a midtown Manhattan deli. Traffic was gridlocked for blocks as bemused cops wondered what on earth they were doing adjudicating a dispute over who got to drag off leaking bags of rancid food. A Chinese counterman finally came to the rescue. In broken English he announced, "BFI pickup! BFI pickup!" Only in New York. Says Ruckelshaus: "These people have operated for so long under their own rules that they see us as the rule breakers. They really believe that what we are doing is unethical."

Spurned carters try other tactics as well. The D.A. accuses Mongelli Carting of blocking the entrances to a former customer's plant so that trucks couldn't enter, as well as fracturing the skull of an outlaw driver (attempted murder). Mongelli once hauled the waste of Columbia Presbyterian, the city's largest hospital, until officials there noticed they were being charged for five hauls a week when its containers were full only half that time. BFI landed the account, cutting the hospital's bill 60%. Louis and Paul Mongelli, a father and son team, visited the hospital in 1994 to try to win back the account. "They tried a subtle strong-arm tactic," recalls Richard Parillo, a hospital official. "They kind of intimated that 'If we can't have it, nobody will have it.' I essentially told them, 'You know, those days are over. And my name ends in a vowel too.' "

Those who work with BFI also face risks. Rob Donno runs Suffolk Waste, a Long Island hauler that handled BFI's pickups in New York City on a subcontract until last March. He was on the frontlines every day. Early on his secretary received the following phone message: "Tell those guys to stay out of the city, and tell Robby we're going to hurt him too." Donno bricked up the windows on his garages or used wire mesh to prevent objects from being tossed inside. Armed guards sometimes followed his garbage trucks into the city. His containers were stolen, his drivers were yelled at, and one of his rolloffs was taken for a joy ride.

SO WHY did Donno persist? "When you drive down Fifth Avenue and you see some guy hanging off the side of the building washing windows, maybe you've done your part to save his job because you've helped reduce the cost of doing business in New York," says Donno, who founded a charity that brings 80 poor children into the U.S. each year for heart surgery. "It's kind of like, in 100 years we'll all be dead, and what we make here, what we do here, isn't going to come with us. It's the spirit with which we live our lives that's going to count for something. You have to try and do what's right. Sometimes that takes courage."

Not everyone has it. A major entertainment complex, fearful of retaliation, has warned BFI that if its name appears in this article it will cancel its new contract with the hauler. (Hint: It's in Midtown.) And what about other legitimate carters, notably WMX Technologies (formerly Waste Management), America's largest garbage hauler, with sales of $10 billion? At a recent trash symposium sponsored by Goldman Sachs, every company present, including WMX, disclaimed any intention of entering New York. But WMX has aided the cartel by operating a waste transfer station that many of the indicted carters used. "We need them here picking up the garbage," says Ruckelshaus. "If we can attract legitimate companies, the market will open up."

After three years in New York, BFI has just 390 customers, representing less than 1% of the market's revenue. Yet plenty of signs are encouraging. Only 10% of the 200 customers that have climbed aboard since the indictments have changed their minds. There's the McDonald's franchisee in Harlem who decided she'd had enough intimidation and threw some thugs from her old carting company out of her restaurant. There's the deli owner in the Wall Street area who switched to BFI and then held his ground while two "torpedoes"--how cops describe goons who are thus shaped--stood in his shop for five straight days just eyeballing him. Perhaps sensing that times are changing, Ponte and other haulers even met with investment bankers a year ago to explore the possibility of going public--an attempt to cash out at the top.

BFI's entry has clearly been bringing prices down. The World Trade Center, for example, has seen its trash bill plunge from $2.7 million a year to $667,000--savings that fall straight to the bottom line. "In 1991 bids were running at about 20 cents per square foot of real estate," says Richard Fuller, president of Great Forest, the city's largest recycling consultants. "Now bids are running around 2 cents or less." Says BFI's Angell: "Many of the carters are now making a concerted, orchestrated effort to lowball us out of town."

In October, BFI started servicing British Airways at Kennedy airport. The airline's executives, fearful of possible retaliation to their planes or facilities, were locked in intense debate on the subject. "A lot of people in the organization were not interested in taking the risk," says Ken Deming, a British Airways executive. "But we were being charged an exorbitant rate by the previous carter. The waste removal industry has put a hidden tax on businesses. It's just another issue that makes companies want to leave New York."

Until recently Barretti carried off most of the bones and guts at New York's Fulton Fish Market, the world's largest seafood bazaar. But Mayor Rudolph Giuliani, in his continuing effort to boot the Mob from the market, helped BFI land the business. The city is also hoping to establish "character" checks for carters, who would then be allowed to bid for the right to pick up all the trash in designated "zones." The scheme would cut down on noise and traffic--some buildings with many tenants are serviced by half a dozen different carters--but it might just create minicartels unless enough honest companies join the bidding.

Ponte's attorneys, Frederick Hafetz and Susan Necheles, believe that an unholy alliance has been formed by BFI and the district attorney's office. The two Manhattan defense lawyers complain that Morgenthau has been encouraging CEOs to switch carters. "Morgenthau virtually invited BFI to get a foothold in the city," says Hafetz, who coordinates the defense strategy for all the indicted carters. "If the D.A. has a case, his job is to indict and be quiet, not to mount a public campaign designed to injure defendants. You pollute the public image of these companies by what they are doing. It's an abuse of power." D.A. investigations chief Castleman throws a counterpunch. Says he: "We are not shilling for BFI, but we should be helpful to people who come in and cooperate. We want BFI to succeed--to a point. They did the right thing and should reap some rewards." British Airways' Deming says he met and consulted with Morgenthau in his office before switching to BFI, but recalls that the prosecutor "took great pains to distance himself and not promote BFI."

Not long after the indictments were announced, a Ponte truck allegedly tailed a BFI truck into New Jersey, while its goony occupants yelled at the BFI driver. Judge Leslie Crocker Snyder warned Ponte that if it happened again, he'd be locked up in jail without bail. "This is your one chance to put out the word to your people," she said, glowering at the carter in her courtroom. "If a Ponte truck goes near a BFI truck, you're in." Ponte says the chase incident never took place.

BFI enjoyed record profits of $385 million in 1995, up from $279 million in 1994. Ruckelshaus's $300 million capital investment in recycling, once sneered at by analysts, is also beginning to pay off. Today the company has more recycling centers than landfills. BFI employees seem proud of their company's inroads against the Mob, and many walked over to share their feelings with Ruckelshaus at the company's rodeo extravaganza in Houston in October. That's an annual event--unique to this industry--in which BFI's most skilled employees compete in contests such as navigating their garbage trucks around cones and gently breaking eggs with bulldozers. Ruckelshaus has let it be known that New York is a frontier town for the company, where careers and fortunes can be made. In that gold rush spirit, salespeople who come to New York City get free housing for a year.

But BFI still has a long way to go before it can declare its New York City mission a success. Not one large bank or real estate company is a major customer. Moreover, many customers, afraid to change, are instead using BFI's bids to get their current haulers to lower their bills. "I think this market is broken, and we're seeing early signs of the cartel's deterioration," says Ruckelshaus. "It'll just take a while for the people of New York to believe it."

FORTUNE recently joined BFI for some cold-call sales canvassing on the streets of lower Manhattan--an arduous way to build a business. At the Showtime Delicatessen & Restaurant, just blocks from the D.A.'s office, a BFI salesman made his pitch about how his company is the only publicly held player in the market and how he could lower the restaurant's trash bill. Owner Jimmy Poulos listened carefully. He said he'd love to save some money. But then he handed back the salesman's card. Making the sign of a gun with two fingers and pointing it at his own head, he explained, "If I change companies, I'm finished."

Reporter Associate Rajiv Rao