Federal prosecutors are alleging in court papers that some of the money used to buy legitimate real estate in the massive redevelopment of the Times Square area in the 1980s wound up in the hands of one of the city's most colorful mobsters.

The claims involving the redevelopment are contained in papers filed in federal court in Brooklyn in the case against mobster Vincent Asaro on charges he helped orchestrate the 1978 Lufthansa heist at Kennedy Airport.

Asaro, 80, a reputed soldier in the Bonanno crime family, is scheduled to go to trial in the fall, and the government filings are seeking to admit evidence against Asaro beyond the Lufthansa heist.

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Allegations about the property shakedown relate to the redevelopment of Times Square -- a major beacon of tourism now with massive hotels and retail space that used to be a zone of adult book stores, peep shows, theaters and gay bathhouses.

According to papers recently filed by a team of assistant U.S. attorneys led by Nicole Argentieri, a cooperating witness claimed that Asaro and the late Matthew "Matty The Horse" Ianniello, a captain in the Genovese crime family who lived in Old Westbury, demanded up to a million dollars when seedy properties owned by gangster Michael Zaffarano were sold to legitimate real estate developers in 1985.

Zaffarano, a Bonanno crime family captain who had major sex film interests in the '70s, died of a heart attack in February 1980 as the FBI was raiding his Times Square area offices. Since he died without a will, Zaffarano's financial interests in three pieces of real estate on Broadway were handled through Nassau County Surrogate's Court. Zaffarano lived in Wantagh and was survived by his wife Rosalie and a son, John, who were to equally split his holdings, court records show.

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John Zaffarano, whom federal prosecutors in their filings have cast as a victim in the extortion and who has not been accused of any wrongdoing, didn't return numerous telephone calls and emails for comment. Ianniello died in 2012.

Zaffarano's real estate holdings were initially valued at about $1.8 million, but intense interest from developers when the city and state decided to rebuild the Times Square area pushed the value past $18 million, according to public records.

The government witness, identified by sources and published reports as Asaro's cousin Gaspare Valente, alleged that Asaro told Zaffarano's son to "do the right thing" and to give him and Ianniello $1 million each because Ianniello would be losing a peep show in one of the properties, according to court documents filed in the Lufthansa criminal case. Ultimately Zaffarano's son paid Ianniello and gave Asaro $400,000, according to federal prosecutors.

But real estate broker Robert I. Shapiro, who handled the complicated Zaffarano property deals, which involved the late real estate development William Zeckendorf Jr. and others, doubted there was any payment going to the mob.

"It didn't go to the Lufthansa guys," Shapiro asserted in a telephone interview.

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Shapiro said that money used to buy out Ianniello's leasehold of the Mardi Gras Topless Bar and Grill actually went to the office of then-Manhattan U.S. Attorney Rudy Giuliani. It turned out that Giuliani's office had taken over Ianniello's business interest, including the former Umberto's Clam House, after the mobster was indicted in 1985.

"There is value for the bar and grill and that money was paid to the U.S. attorney's office," said Shapiro in a telephone interview.

In a summary of the deals, which Shapiro wrote for a major real estate industry award in 1986 and which he shared with Newsday, he put the buyouts of the Ianniello lease at $750,000, a gay bathhouse for $292,000 and a buyout of a large pornographic bookstore of $1.3 million.

Properties purchased from the Zaffarano family included 207 West 48th St.; 1601 Broadway, which housed Ianniello's Mardi Gras bar; and 1603-7 Broadway, according to Shapiro. Millions of dollars more went to pay off back taxes and other debts, Shapiro said. Shapiro said while the old-time mobsters presided over a dying Times Square sex industry, they were astute businessman, particularly the late Michael Zaffarano.

"He had three other different angles you never thought of," remembered Shapiro. "He was a very smart guy."