# Appendix — Perlman v. Attorney General of New Jersey

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_1034%3A2

## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1982
- **Citation:** 459 U.S. 1081

## Text

IN THE

Supreme Court of the United States

OCTOBER TERM, 1982

>

CLIFFORD PERLMAN AND STUART PERLMAN,
Appellants,

—Vie

ATTORNEY GENERAL OF NEW JERSEY AND
NeW JERSEY CASINO CONTROL COMMISSION,
Appellees.

ON APPEAL FROM THE SUPREME COURT OF NEW JERSEY

APPENDIX TO JURISDICTIONAL STATEMENT

PETER M. FISHBEIN*

MICHAEL D. BLECHMAN

Kaye, Scholer, Fierman,
Hays & Handler

425 Park Avenue

New York, New York 10022

(212) 407-8000

Attorneys for Appellants
Clifford and Stuart Perlman

*Counsel of Record

APPENDIX

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PAGE

APPENDIX A

Opinion of the Supreme Court of New Jersey

SUPREME COURT OF NEW JERSEY
99 N.J. 361

Argued March 22, 1982 Decided July 21, 1982
—
IN THE MATTER OF

THE APPLICATION OF BOARDWALK
REGENCY CORPORATION FOR A CASINO LICENSE

=

William R. Glendon, a member oi the New York bar, argued
the cause for applicant-appellant and ci « -‘espondent Board-
walk Regency Corporation and appellants and cross-respond-
ents Caesars World, Inc. and Caesars New Jersey, Inc.
(Wilentz, Goldman & Spitzer, attorneys; William P. Glendon,
Guy C. Quinlan and Robert A. Rabbino, Jr., members of the
New York bar, and Morris Brown and Brian J. Molloy, of
counsel).

Irving Younger, a member of the New York and District of
Columbia bars, argued the cause for appellants and cross-re-
spondents Clifford S. Perlman and Stuart Z. Perlman (Pitney,
Hardin, Kipp & Szuch, attorneys; Irving Younger, Edward
Bennett Williams, Harold Unger and Robert B. Barnett, mem-
bers of the District of Columbia bar, of counsel; Clyde A.
Szuch, Murray J. Laulicht, Marc §. Klein and Stuart M.
Feinbiatt, on the briefs).

Michael R. Cole, Assistant Attorney General, argued the
cause for respondent and cross-appellant Attorney General of
New Jersey (/rwin I. Kimmelman, Attorney General of New

Jersey, attorney; Andrea M. Silkowitz, Deputy Attorney
General, on the briefs).

2a

Robert J. Genatt, General Counsel, argued the cause for
respondent and cross-appellant New Jersey Casino Control
Commission (Mr. Genatt, attorney; Robert J. Genatt, Thomas
N. Auriemma, Dennis Daly and Edward R. Hannaman, on the
briefs).

7

The opinion of the Court was delivered by
CLIFFORD, J.

Boardwalk Regency Corporation (BRC) applied for a
plenary license pursuant to the Casino Control Act, N.J.S.A.
5:12-1 to -152 (Act). After conducting investigations and
hearings on the application, tne Casino Control Commission
(Commission) found that two of the directors of BRC, Clif-
ford S. and Stuart Z. Perlman, had failed to satisfy the
standards set forth in the Act regarding ‘‘casino key employ-
ees.”’ See N.J.S.A. 5:12-84(c), -85(c) and -89(b)(2). The Com-
mission ruled that if the Perlmans were not removed from
positions of control in the extensive corporate hierarchy of
which BRC and its corporate parents, Caesars New Jersey,
Inc. (CNR) and Caesars World, Inc. (CWI), were a part,
BRC’s application would be denied. The Commission further
required BRC to choose, by November 26, 1980, either (1) to
sever the Perlmans permanently from any ownership or em-
ployment connection with BRC, any of its parent companies,
and any subsidiary of CWI in this or any other jurisdiction, or
(2) withdraw as a casino licensee from New Jersey. BRC was
also directed to submit a plan for Commission approval to
implement whichever alternative it chose. Following the Appel-
late Division’s denial of a stay of these conditions this Court
granted a stay pending appeal.

On consolidated appeals of the Perlmans and the corpora-
tions the Appellate Division affirmed the Commission’s deci-
sion as to the non-qualification of the Perlmans, but reversed
to the extent that it required the Perlmans to divest their
personal interests from non-New Jersey subsidiaries of CWI
having no ‘“‘gaming’’ activities. Jn re Boardwalk Regency
Casino License Application, 180 N.J.Super. 324 (1981). It
remanded to the Commission to recast its order consistent with

3a

the Appellate Division opinion and for ‘‘reasonable revision of
the timetable.’’ Jd. at 350. The stay imposed by this Court
remains in effect. /bid.

The Perlmans and the corporations then filed notices of
appeal to this Court, asserting ‘‘a substantial question arising
under the Constitution of the United States’’, R.2:2-1(a); and
we granted the petitions for certification of the Attorney
General and the Commission regarding the Appellate Divi-
sion’s modification of the Commission’s order, 89 N.J. 405
(1982). In addition, the Attorney General filed a notice of
cross-appeal directed to the same issue raised in his petition,
namely, the Appellate Division’s invalidation of the Commis-
sion’s requirement that the Perlmans disconnect themselves
from all non-New Jersey non-gaming activities.

Specifically, the Commission required that as one of the
conditions of BRC’s casino licensure, the Perlmans must
dispose of any interest whatsoever in subsidiaries of CWI that
are situated outside of New Jersey and are not engaged in
casino gaming activities; must be removed from any position
as an officer, director or employee of such subsidiaries; and
must not receive any remuneration in any form from such
subsidiaries. It is this condition that the court below struck
down. Today we reinstate that condition of licensure. With the
exception of that single modification, we affirm the judgment
of the Appellate Division substantially on the basis of Judge
Fritz’s comprehensive and perceptive opinion for that court.

While the Appellate Division’s discussion of the facts, 180
N.J. Super. at 331-32, 335-36, suffices for our purposes today,
several features nonetheless bear repeating. Initially, it is note-
worthy that CWI, aptly described below as ‘‘[a] creature of
humble beginnings,” id. at 331, is today a multifaceted cor-
porate giant, which, through its various nationwide subsidi-
aries, owns and operates businesses in both the gaming and
non-gaming industries. Of particular import to this case, how-
ever, is CWI’s relationship to BRC: BRC is a wholly owned
subsidiary of CNJ in which CWI owns an 85% stock interest.

4a

Moreover, since the Appellate Division decision, there have
been several developments regarding the Perlmans’ relation-
ship with CW! and its subsidiaries. By way of background,
when the matter first came before the Commission in Septem-
ber 1978, both Perlmans owned an extensive interest in CWI,
CNJ, and thereby BRC. Clifford Perlman was Chairman of
the Board of Directors and chief executive officer of CWI and
CNJ, in addition to holding a 10% stock interest in CWI, and
a 1.4% interest in CNJ. Stuart Perlman was Vice-Chairman of
the Board of Directors of CWI and CNJ. His stock ownership
in CWI, about 8%, was second only to that of Clifford
Perlman. He also held approximately a 1% interest in CNJ.

In contrast to the facts as they appeared when the case was
before the Commission and the Appellate Division, the
Perimans’ relationship to BRC through their extensive interest
in CWI and CNJ has since changed. On October 30, 1981,
CWI and the Perlmans entered into an agreement that pro-
vided that (1) the Perlmans would sell, and CWI would
purchase, the Perlmans’ shares of CWI and CNJ stock; (2) the
Perlmans would acquire promissory notes for part of the
purchase price of their CWI and CNJ stock; and (3) the
Perlmans would resign from all of their positions as officers
and directors of CWI and its subsidiaries, save for the fact that
Clifford Perlman would enter into an agreement to continue as
Chairman of the Board and chief executive of Desert Palace,
Inc., a CWI subsidiary responsible for operating CWI’s
Nevada based casino-hotels.' On December 15, 1981, the Com-
mission, upon application by CWI, approved of the arrange-
ment except for Clifford Perlman’s continued relationship with
Desert Palace, Inc. A shareholder’s suit challenging the ar-
rangement was settled before we heard argument on the case.

As a threshold matter we must decide whether the agree-
ments entered into between CWI and the Perlmans render this
controversy moot, and whether the parties thereto have stand-
ing to raise the issues projected by this appeal. In our approach

1 The agreement further provided that should the decisions below
remain intact after this appeal, CWI has the option under the agreement to
terminate Clifford Perlman from his positions with Desert Palace, Inc.

Sa

to these threshold questions, we are not limited to the ‘‘case or
controversy’’ requirement imposed on the federal courts by
way of Article Ill of the Federal Constitution, U.S.Const. art.
Ill § 2. See Crescent Park Tenants Ass’n v. Realty Equity
Corp. of N.J., 58 N.J. 98, 107 (1971). Rather, in this jurisdic-
tion a controversy is justiciable when ‘‘the litigants’ concern
with the subject matter evidence[s] a sufficient stake and real
adverseness.’’ Jd. Moreover, where the parties lack a legally
cognizable interest because the issues presented are technically
moot, they may nonetheless obtain judicial review when the
matter involves an area of particular concern to the public
interest. See, e.g., John F. Kennedy Memorial Hospital v.
Heston, 58 N.J. 576, 579 (1971); Doe v. Bridgeton Hospital
Ass’n, Inc., 71 N.J. 478, 482 n.1 (1976).

It is apparent that both Clifford and Stuart Pcsiman have
standing and that the issues are not moot. As to Clifford
Perlman, his interest in the outcome of this appeal assuredly
remains live by the very terms of the agreement itself, which
provides that if he is directed by this Court to divest his interest
in CWI’s gaming subsidiaries, his position at Desert Palace will
be in jeopardy. See supra (At 367 n.1).

As to Stuart Perlman as well there remains a legally cogniza-
ble interest in the outcome of this appeal. Notwit standing his
agreement with CWI, there exists at least the possibility of his
future involvement with CWI or one of its subsidiaries, given
the extensive influence available to him within the CWI cor-
porate structure. Moreover, we will not fetter a litigant with
technical notions of justiciability when the only question as to
whether his claim is amenable to judicial review arises from his
compliance with a lower court or agency decision.

Finally, as to both Clifford and Stuart Perlman, it is beyond
question that the final adjudication of the issues is a matter of
considerable importance to the casino industry as well as the
general public. Accordingly, the Perlmans’ claims are ripe for
judicial review.

6a

We turn to the merits of the case. Judge Fritz’s exhaustive
opinion below rejected a vigorous attack mounted by the
Perlmans and the corporations regarding the Commission’s
determination that neither Clifford nor Stuart Perlman had
met the statutory requirement of demonstrating by clear and
convincing evidence their good character, honesty and integ-
rity. That attack has been renewed before this Court. The
Appellate Division initially rejected the argument that the
Commission failed to discuss adequately the relevant evidence
in reaching its ultimate conclusions and that its conclusions
were not based on sufficient credible evidence in the record.
180 N.J.Super. at 335-39. The Appellate Division also found
**ingenious’’ but ‘‘unpersuasive’’ the contentions of the
Perlmans and the corporations that the Act requires only a
demonstration of the putative casino key emplcyee’s reputa-
tion for good character. /d. at 343. In this regard the court
below found that the Act requires a demonstration of good
character in fact, given the Legislature’s explicit statements of
public policy and of the ‘‘evils’’ it sought to address through
the imposition of exacting and rigorous licensing procedures.
Id. at 343-44.

The Appellate Division also considered a barrage of consti-
tutional challenges to the statutory ‘‘good character’ criterion.
It rejected the contention that this criterion violated the
Perlmans’ due process rights, because it was unduly vague,
stating thai ‘‘the potential key employee is reasonably apprised
by the statute, as a matter of common knowledge, in light of
ordinary human experience, as to the kind of conduct neces-
sary to satisfy the statute.’’ Jd. at 347. Similarly lacking in
merit, in the court’s view, was the contention that the good
character criterion ‘‘allow[{ed] the Commission to rely on guilt
by association.’’ Jd. at 348.

We have reviewed the legal principles that underlie each of
these arguments and the record developed below upon which
the Commission based its findings. As to the arguments raised
by the Perlmans and the corporations, set forth above, we
repeat our endorsement of Judge Fritz’s painstaking analysis

7a

and of the conclusions achieved in his opinion for the Appel-
late Division.

IV

There remains one further area of discussion. As a final
point of contention the Perlmans and the corporations main-
tain that the Commission’s Order unconstitutionally condi-
tions BRC’s licensure on the Perlmans’ divestiture of their
interests in non-New Jersey subsidiaries of CWI. Their chal-
ienge in this regard is mounted on the basis of the Commerce
Clause, U.S.Const. art. 1, § 8, and the Due Process Clause,
U.S.Const. amend. XIV.

As matters stand today, with this Court’s stay in effect (see
supra at 365), BRC is operating a New Jersey casino and
Clifford Perlman is acting as chairman of the board of CW''’s
subsidiary Desert Palace, Inc., operator of CWI’s Nevada
gambling casino, Caesars Palace. Caesars Palace’s position in
the scheme of things is only partially illustrated by the fact that
it is CWI’s principal and most profitable asset, having gener-
ated for the year ending April 30, 1980 about 43% of CWI’s
total gross revenues. In addition, it is the model after which
CWI’s hotel casino facilities, including BRC, are patterned,
and it provides BRC with consultant services and management
counselling. BRC and Caesars Palace share some directors in
common. In his current position as Desert Palace’s chairman
Clifford Perlman has a direct relationship with Caesars Pa-
lace’s management, and BRC has a direct relationship with the
Nevada casino. The circumstances of Clifford Perlman’s abil-
ity to influence BRC policy, too apparent to require further
belabored explication, prompt our agreement with the Appel-
late Division’s disposition of the Commerce Clause argument:

The fallacy in this argument is that the order is said to
purport ‘‘to regulate the management of substantial non-
New Jersey operations * * * and to limit the Perlmans’
business activities outside of New Jersey,’’ when in fact it
does no such thing. It neither regulates CWI nor any of its
subsidiaries except BRC or the Perlmans, nor tells them
what they must do. It only tells BRC, in terms completely

8a

in line with the statute and its purposes, the condition
which must exist in view of its corporate connections,
before it can enjoy the privilege of a casino license. No
one will argue that New Jersey does not have a legitimate
local public interest in determining who shall be thus
licensed in New Jersey and under what conditions. We are
satisfied this issue has no merit and warrants no further
discussion. [180 N.J.Super. at 349.]

See Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct.
844, 847, 25 L.Ed.2d 174, 178 (1970); Exxon Corp. v. Gov-
ernor of Maryland, 437 U.S. 117, 124-127, 98 S.Ct. 2207,
2213-2215, 57 L.Ed.2d 91, 99-101 (1972).

With the same dispatch, and on the same basis, can we
address the Due Process argument, it being manifest that the
Commission’s divestiture order bears a rational relationship to
a legitimate state interest. Insofar as the Due Process Clause is
concerned, since no fundamental right is affected by the
Commission’s order, that ends the matter. See Ballou v. State
Department of Civil Service, 75 N.J. 365, 370-71 (1978); State
v. Krol, 68 N.J. 236, 248 (1975).

The Commission’s order also required the disassociation of
the Perlmans’ personal interest in the non-New Jersey subsidi-
aries of CWI that had and have no connection with the gaming
industry. As to this aspect of the Order, the Appellate Division
was not convinced that traditional notions of due process had
been satisfied. Essentially, the court seemed uncertain that
requiring divestiture to this extent would serve any ‘‘legitimate
state intevest.’’ 180 N.J.Super. at 349. We harbor no doubts on
the issue, and we fail to see why, in the context of this case,
any distinction should be made between gaming and non-gam-
ing subsidiaries. The question remains, in either instance,
whether the presence of either Perlman in the CWI corporate
structure carries with it the opportunity for them to exert their
personal influence in the operation of BRC. In the non-gaming
as well as the gaming setting that question must be answered in
the affirmative.

The record demonstrates that for many years the Perlmans
have wielded enormous power and influence throughout CWI,

9a

which, it should be recalled, is simply a holding company with
operating subsidiaries. Permitting the Perlmans to remain in or
assume a structured, formal relationship of ownership, em-
ployment or management in one of those subsidiaries, albeit a
non-gaming enterprise, would encourage—or at the very least
allow—the exertion of power and influence within the cor-
porate structure. Indeed, the court below appears to have
recognized this possibility by its reservation unto the Commis-
sion of the right to act should a ‘“‘Perlman effect’’ become
**manifest’’, citing N.J.S.A. 5:12-129. 180 N.J.Super. at 349.

What the Commission sought to do was prevent the
Perlmans from influencing gaming policy, rather than react to
that influence after it has been exerted. This is a reasonable
aim, particularly inasmuch as the evidence demonstrated a
substantial likelihood that the Perlmans would leave their
mark on BRC policy were they to obtain or continue to occupy
official positions within the corporate family. This perception
of the Perlmans’ presence within the corporate structure is
borne out by the corporation’s assertion that ‘‘the loss of the
Perlmans’ services has been, and continues to be, a substantial
detriment’”’ to CWI. Moreover, the corporations call attention
to the ‘‘substantial and uncontradicted’’ evidence as to the
importance of the Perlmans’ functions in CWI and as to ‘“‘the
harm which has resulted to the company since the Perlmans
have been isolated from its affairs.’’ Given the degree of
importance that the corporations themselves attach to Clifford
and Stuart Perlman, we cannot say that the Commission’s
apprehension of their influence on CWI and BRC, even from a
non-gaming subsidiary position, is ill-founded; nor can we
conclude that there is insufficient evidence to support the
conclusion that divestiture of the Perlmans’ interests in CWI’s
non-gaming subsidiaries bears a rational relationship to the
state’s legitimate interest in preventing them from exercising
corporate power and influence over BRC.

10a

Vv

Except as modified herein the judgment below is affirmed.
All provisions of the Commission’s order are reinstated, and
the Commission is directed to establish a new timetable for
submission of BRC’s plans. The stay heretofore entered is
vacated, effective ten days after release of this opinion.

>

PASHMAN, J., concurring in part and dissenting in part.

I concur with the majority opinion except insofar as it
affirms the Casino Control Commission’s order that the
Perlmans separate themselves from non-New Jersey subsidi-
aries of Caesars World International (CWI). | would remand
the case to the Commission for a factual finding on the
Perlmans’ ability to control Boardwalk Regency Corporation
from positions in any other CWI subsidiaries.

The Casino Control Act provides that no corporation shall
be eligible for a casino license unless its key employees or
controlling persons are individually qualified for licenses.
N.J.S.A. 5:12-85(c) provides in part:

No corporation shall be eligible to hold a casino license
unless each officer; each director; each person who
directly or indirectly holds any beneficial interest or
ownership of the securities issued by the corporation; any
person who in the opinion of the commission has the
ability to control the corporation . . . or other person
whom the commission may consider appropriate for ap-
proval or qualification would, but for residence, individu-
ally be qualified for approval as a casino key employee
pursuant to the provisions of the act.

When Boardwalk Regency applied for a license, Clifford
Perlman was chairman of the boards of directors of CWI and
Caesars New Jersey (CNJ), the two parent corporations of
Boardwalk Regency. Stuart Perlman was vice chairman of the
boards of the two parent companies and a large stockholder in
both. There was no question that they were key employees and
controlling persons as defined in the statute.

However, it is no longer clear that the Perlmans fit within
any of the categories of persons that must be individually
qualified for Boardwalk Regency to retain its license under
N.J.S.A. 5:12-86(c). They have sold all their stock in Caesars
World and Caesars New Jersey and have resigned from their
positions as officers in those corporations. Their sole remain-
ing connection with the corporate family is Clifford Perlman’s
position as chairman of the board of directors and chief
executive officer of the subsidiary of Caesars World that
operates its Nevada hotel and casino.

Since the Perlmans are no longer directors, officers, employ-
ees or owners of any of the parent companies of Boardwalk
Regency, the only remaining statutory category possibly appli-
cable to them is that of a ‘“‘person who in the opinion of the
commission has the ability to control’’ Boardwalk Regency.
N.J.S.A. 5:12-85(c). The Commission has never specifically
determined whether the Perlmans would be able to control
Boardwalk Regency solely from positions in other subsidiaries
of Caesar’s World. There is no evidence in the record on the
Perlmans’ ability to control the New Jersey licensee without
control of and stock ownership in its parent corporations.
Unless they are able to exercise such control, they need not be
individually qualified for Boardwalk Regency to retain its
license.

I am not convinced that the evidence cited by the majority,
ante at 370-371, 372, is sufficient to conclude that the
Perlmans can in fact control Boardwalk Regency from out-of-
state CWI subsidiaries. The mere fact that the various corpora-
tions praise the Perlmans and want them back in the New
Jersey licensee is not sufficient proof that the Perlmans can
control the licensee solely from positions in other CWI subsidi-
aries. The evidence that the Nevada subsidiary offers counsel-
ing services to Boardwalk Regency is more to the point, but it
is insufficiently developed in the record. Moreover, there is no
evidence at all that the Perlmans can control Boardwalk
Regency from non-gaming subsidiaries. As I see it, the factual
situation has changed substantially since the Commission’s
determination. Any order we make should be based on the
current situation.

12a

I would remand the case to the Commission for a hearing on
the Perlmans’ continued ability to control the New Jersey
licensee from positions in other CWI subsidiaries. This factual
determination is a prerequisite to holding that either Perlman
remains 2 controlling person within the meaning of N.J.S.A.
5:12-85(c). Without such a finding, there is no basis for
requiring Clifford Perlman to withdraw from the Nevada
subsidiary as a prerequisite to licensing Boardwalk Regency.
There is also no factual basis for ordering the Perlmans to
refrain from any future connections with other CWI subsidi-
aries. Because the majority upholds the Commission order that
the Perlmans separate themselves from all CWI subsidiaries
without such a factual determination, I dissent.

For affirmance and modification—Justices CLIFFORD,
SCHREIBER, HANDLER, POLLOCK and O’HERN—S.

Concurring and dissenting in part—Justice PASHMAN—1.

l3a

APPENDIX B

Opinion of the Superior Court of New Jersey

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION

180 N.J.Super. 324
Argued Jan. 20, 1981 Decided July 21, 1981

a

In the Matter of the Application of

BOARDWALK REGENCY CORPORATION
For A CASINO LICENSE.

o>

WILLIAM R. GLENDON, New York City, for applicant-appel-
lant Boardwalk Regency Corp. and appellants Caesars World,
Inc. and Caesars New Jersey, Inc. (Wilentz, Goldman &
Spitzer, Woodbridge, attorneys; Morris Brown and Brian J.
Molloy, Woodbridge, of counsel; and Rogers & Wells, New
York City, attorneys; William R. Glendon, Guy C. Quinlan,
John H. Carley and Robert A. Rabbino, Jr., New York City, of
counsel).

IRVING YOUNGER, New York City, for appellants Clifford S.
Perlman and Stuart Z. Perlman (Pitney, Hardin & Kipp,
Morristown, attorneys; Clyde A. Szuch, Murray J. Laulicht,
Marc S. Klein and Stuart M. Feinblatt, Morristown, on the
brief; and Williams & Connolly, Washington, D. C., attorneys;
Edward Bennett Williams, Harold Ungar and Robert B.
Barnett, Washington, D. C., on the brief).

MICHAEL R. COLE, Asst. Acty. Gen., for respondent Attor-
ney General (John J. Degnan, Atty. Gen., attorney; Michael R.
Cole and Andrea M. Silkowitz and Anthony J. Parrillo,
Deputy Attys. Gen., on the brief).

1

l4a

Before Judges FRITZ, POLOW and JOELSON.

—~—
The opinion of the court was delivered by
Fritz, P. J. A. D.

Following extensive investigation and formal hearings on the
application of Boardwalk Regency Corporation (BRC) for a
plenary casino license, the Casino Control Commission (Com-
mission) determined that BRC qualified except for the presence
of Stuart Z. and Clifford S. Perlman, brothers with extensive
interests in the operation. As a consequence, the grant of a
plenary license was conditioned in effect on divestiture of any
Perlman interest which had any capacity for exerting control
over BRC or any related entity. These consolidated appeals by
BRC, Caesars World, Inc. (CWI), Caesars New Jersey, Inc.
(CNJ) and Stuart and Clifford Perlman challenge that ruling
and the constitutionality of N.J.S.A. 5:12-89.

Direct and indirect Perlman interest in and influence upon
the affairs of BRC and ample cause for the insistence of the
Commission that it be persuaded of the qualification of each
of the brothers as a “casino key employee” (N.J.S.A. 5:12-85 c
and d) appear indisputably from the genesis of the corporation
and are in fact not disputed.' BRC is a wholly-owned subsidi-
ary of CNJ, 86% of the stock of which is in turn owned by
CWI. A creature of humble beginnings, CWI was launched in
1956 when Stuart and Clifford Perlman purchased a “Lum’s”
restaurant, a small fast-food eating establishment that special-
ized in hot dogs steamed in beer. The purchase price was
$25,000, “half down and the balance over three years.” About
1965 the Perlmans started franchising the Lum’s stores. Ulti-
mately there were almost 400 of these restaurants in 30 or more

1 One of the expressed concerns of all the appellants is that the
Perlmans are such a prime force in the corporate structure and interstructure
that their departure would seriously impair the capacity of the corporations
to borrow money and otherwise intrude upon the financial operations of the
corporations to their detriment.

1Sa

states. Lum’s was listed on the New York stock exchange in
1969.

1969 was also the year the Perlmans negotiated the purchase
of Caesars Palace for 60 million dollars. In 1971 the recession
in the restaurant business and the need of the growing Caesars
Palace for money produced the sale of the restaurants and the
change of the corporate name to Caesars World.

Today CWI is listed on the New York and Pacific Coast
stock exchanges. Its 26,100,000 shares of outstanding stock are
owned by 70,000 shareholders. Consolidated revenues approx-
imate a half billion dollars annually. Clifford Perlman, chair-
man of the board and chief executive officer of CWI, owns
approximately 10% of the outstanding stock. His brother
Stuart owns about 8% of the stock of CWI and holds the
position of vice-chairman of the board of directors.

At the conclusion of the hearings the Commission noted,
with respect to one of the individuals in the corporate structure
who was found to be qui ‘fied: “As in all areas of human
endeavor, there is in the regulatory process never a situation
absent some scintilla, some particle of doubt.” Nevertheless, it
found qualified for a license the corporation and all the
persons required to qualify by N.J.S.A. 5:12-85 c and d, except
Clifford and Stuart Perlman. Upon clearly articulated findings
and for reasons expressed at length, it announced that it was
unable “to find by clear and convincing evidence that Clifford
Perlman possesses the good character, honesty and integrity
demanded by the Casino Control Act,” and that “BRC has
failed to meet the affirmative responsibility of establishing the
good character, honesty and integrity of Stuart Perlman.” The
suustance of the consequent order was that the application of
BRC for a license would be granted but only upon the
conditions that

. . . both Clifford and Stuart Perlman. . . dispose of
any interest whatsoever which either of them may hold in
Caesars World, Inc., Caesars New Jersey, Inc. or in any
and all subsidiary companies of Caesars World, Inc. in
this or any other jurisdiction; . . . both Clifford and
Stuart Perlman be removed from any position as an
officer, director or employee of Caesars World, Inc.,

16a

Caesars New Jersey, Inc., Boardwalk Regency Corpora-
tion and any and all subsidiary companies of Caesars
World, Inc. in this or any other jurisdiction; . . . [and
that] neither Clifford or Stuart Perlman shall receive any
remuneration in any form, whether for services rendered
or otherwise, from Caesars World, Inc., Caesars New
Jersey, Inc., Boardwalk Regency Corporation, or from
any other subsidiary company of Caesars World, Inc., in
this or any other jurisdiction.

The order further provided for the submission of ‘‘a detailed

plan and timetable for accomplishing the divestiture of all such

securities and removal from all such positions.”’

The Supreme Court “‘suspended”’ “‘the conditions imposed
on the issuance of a license’’ pending ‘“‘disposition of the
pending appeals’’ here being considered.

At the outset we observe that all parties agree, as do we, that
with respect to the factfinding by the agency our obligation is
set and our privilege of independence is limited by Mayflower
Securities v. Bureau of Securities, 64 N.J. 85, 312 A.2d 497
(1973). Basically we search to discover whether the findings of
fact could reasonably have been reached on sufficient credible
evidence present in the record, considering the proofs as a
whole, with due regard for the opportunity of the Commis-
sioners who heard the witnesses to judge of their credibility.
Where expertise is a pertinent fact, we must accord due regard
in that respect as well. We agree with a number of appellants’
contentions in respect to these standards and others governing
our review. First, this search does not require deference to the
Commission respecting factual findings in any area in which
those findings rest upon a determination as to worth, plausibil-
ity, consistency or other tangible considerations apparent from
the face of the record, as to which the Commission is no more
particularly situated to decide them than are we. See Dolson v.
Anastasia, 55 N.J. 2, 7, 258 A.2d 706 (1969). Second, it is
beyond cavil that in the review function the whole record must
be considered. As is expressly pointed out in Mayflower,
supra:

17a

. . « The appellate application of this standard [i.e.,
that of Close v. Kordulak Bros., 44 N.J. 589, 599 [210
A.2d 753] (1965)] requires far more than a perfunctory
review; it calls for careful and principled consideration of
the agency record and findings in the manner outlined in
State v. Johnson, 42 N.J. 146, 161-162 [199 A.2d 809]
(1964). [64 N.J. at 93, 712 A.2d 497]

We also concur that we are “‘in no way bound’’ by the
agency’s interpretation of a statute or its determination of any
strictly legal issue. Mayflower, supra, at 93, 312 A.2d 497.
Finally, the requirement that we defer to the expertise of the
agency is only as compelling as is the expertise of the agency,
and this generally only in technical matters which lie within its
special competence. N.J. Bell Tel. Co. v. State, 162 N.J.Super.
60, 77, 392 A.2d 216 (App.Div.1978). Where, as is apparently
the case here, expertise has not yet developed by experience or
special training, no particular deference need be accorded the
agency’s findings of fact unless there are ‘‘demeanor credibil-
ity’’ factors. We do not suggest by this latter comment that
special expertise exists in the determination of many non-tech-
nical qualities or properties, such as good character, honesty
and integrity. More times than not this type assay calls for the
application of common sense and judgment, after credibiliiy
problems have been solved.

A careful review of the record in testing the findings is vital
to the proper management of a government of laws, for a
determination predicated on unsupported findings is the es-
sence of arbitrary and capricious action. See Thomas v. Morris
Tp. Bd. of Ed., 89 N.J.Super. 327, 215 A.2d 35 (App.Div.
1965), aff'd o. b. 46 N.J. 581 (1966); Morgan v. Saslaff, 123
N.J.Super. 35, 38, 301 A.2d 456 (App.Div.1973). If we are
satisfied after an application of the standards set out above
that the findings of fact do not pass muster, we will not
hesitate to reverse or remand, N.J.S.A. 5:12-110 c(3), or,
inasmuch as the appeal is “‘in accordance with the Rules of
Court,”’ N.J.S.A. 5:12-110 a, make our own findings and
draw our own conclusions. R. 2:10-5; State v. Johnson, 42
N.J. 146, 162, 199 A.2d 809 (1964).

On the other hand, if it appears that the findings might
reasonably have been reached from sufficient credible evi-
dence, we will not disturb them even in cases in which, had we
been doing it, we would have done it differently. Proper
respect for the obligation of the agency to accomplish its
statutory obligations and consideration for implementation of
the legislative intent in the manner designed by the Legislature
causes us to proceed with especial restraint in agency matters.
See New Jersey Guild of Hearing Aid Dispensers v. Long, 75
N.J., 544, 562-563, 384 A.2d 795 (1978). Our original factfind-
ing authority must be exercised only with great frugality and in
none but a clear case free of doubt. See Greenfield v. Dus-
seault, 60 N.J.Super. 436, 444, 159 A.2d 433 (App.Div.1960),
aff'd on majority opinion 33 N.J. 78, 161 A.2d 475 (1960). A
difference of opinion concerning evidential persuasiveness of
relevant testimony certainly does not justify judicial inter-
ference. In re Howard Savings Bk., 143 N.J.Super. 1, 10, 362
A.2d 592 (App.Div.1976). Factual findings of an administra-
tive agency are generally sustained if they are supported by
substantial evidence on the whole record. Atkinson v. Parse-
kian, 37 N.J. 143, 149, 179 A.2d 732 (1962).

We have gone to these lengths in explication of legal issues
probably not the subject of any substantial disagreement be-
tween the adverse factions, in order that the parties might be
expressly advised, at the outset, of the criteria we have em-
ployed in measuring appellants’ challenges. Although we are
tempted to begin with attention to the statute and appellants’
broadside attacks on it, we are satisfied that exploration of the
findings as a first effort, and of appellants’ challenges with
respect to these, will make more meaningful a later consider-
ation of the legislative mandate.

As noted above, the conclusionary finding’ of the Commis-
sion respecting both Perlmans was that it had not been per-
suaded by clear and convincing evidence that either of them
possessed the good character, honesty and integrity required by
the Casino Control Act to qualify for a license. The basic or

2 See the excellent dissertation by the Hon. Milton B. Conford on
“Findings of Facts and Conclusions of Law,”’ 92 N.J.L.J. 225 (1969).

19a

evidentiary facts upon which this conclusion was founded
included among others: Clifford Periman’s ‘‘repeated and
enduring’’ relationship with one Alvin i. Malnik, ‘‘a person of
unsuitable character and unsuitable reputation .. . [who]
associated with persons engaged in organized criminal activi-
ties, and . . . [who had] himself participated in transactions
that were clearly illegitimate and illegal,’’ at times subsequent
to the media identification of an alleged business connection
between Malnik and Meyer Lansky, a reputed organized crime
figure. It was stipulated that the CWI directors were told as
early as July 1971 that although Malnik, once indicted for tax
fraud, had never been convicted of a crime, the ‘‘Federal law
enforcement agencies apparently believed Malnik was involved
in organized crime.’’ The Commission found that the Malnik-
Perlman association persisted long after Clifford Perlman’s
attention was called to the allegations of unsavoriness respect-
ing Malnik’s other friends. Indeed, it found that it persisted
even after Philip Hannifan, chairman of the Nevada Gaming
Control Board, had ‘‘voiced his concerns over Mr. Perlman’s
association with an individual of Mr. Malnik’s reputation,”’
and had received a commitment from Perlman ‘‘to extricate
himself from the Cricket Club fone of the Perlman-Malnik
associations] if Mr. Malnik would not institute a libel suit
against Hank Messick, the author of Lansky.”’

Appellants’ response is impassioned and zealous. They point
to evidence that “[iJn 1972, when Clifford Perlman entered
into the Cricket Club transaction, he had no reason to believe
that there was any obstacle to his doing so. . . . [MJany other
reputable individuais and financial institutions saw no problem
at this time in associating with Malnik.” They explain the
continuance of the Cricket Club relationship by saying that
“Perlman tried repeatedly to sever his connections with the
venture, and subsequently did terminate his ties with the
Cricket Club, after great difficulty and heavy personal finan-
cial sacrifice.” They direct our attention to the fact that “In its
eagerness to make its point, the Commission suppresses the
testimony of Hannafin that he never took Perlman’s expres-
sion of intent to get out of the deal as a commitment.” Both
briefs emphasize that Hannafin, no longer a Nevada official,
testified he was satisfied with Perlman’s efforts.

20a

The foregoing is only one area of several which troubled the
Commission. It is typical of the others. As is most certainly to
be anticipated, a large portion of the testimony was susceptib!s
not only of varying inferences but of varying ccnciusions. In
like fashion, appellants point to substantial areas of testimony
which are highly complimentary and praiseful of the Perlman
brothers, most of it from business and banking.

Appellants claim the Commission distorted the evidence.
Whether by unintentional hyperbole or as a result of faithful
(but we believe misplaced) conviction, they assert that the
findings are “completely unsupported by the record.” These
things are just not so. The Commission chose between conflicts
in evidence, conflicts in available reasonable inferences and
conflicts in conclusions which might be «vn. This was not
only their right, it was their duty. A careful review of the
record convinces us that regardless of evidence to the contrary,
the findings they reached were reasonably available on the
whole record and we will not disturb those findings. Mayflow-
er, supra.

With respect to the contention of Stuart Perlman that his
disqualification, at least, resulted from “administrative after-
thought” on a record where there is “virtually no evidence. . .
directed specifically against him,” we say only that we are in
hearty agreement with the conclusion of the Commission:
“Stuart and Clifford Perlman are more than just brothers.” We
are persuaded, as was the Commission, that the affairs of the
brothers are inextricably entwined. Parenthetically, we observe
that judicious administrative afterthought may well be a salu-
tary purpose of the administrative hearing. What one perceives
to be “afterthought,” another might regard as “careful consid-
eration.”

Appellants Perlman also complain of that which they
characterize as a “procedural inadequacy” respecting the find-
ings of fact. They claim that in marshalling its findings the
Commission ignored (or at least was unconcerned with) “over-
whelming evidence” of distinguished business careers and
model corporate existence of praiseworthy propriety. Citing the
concurring opinion of Justice Handler in Jn re Kessler Mem.
Hosp. Reimbursement, 78 N.J. 564, 573, 578-579, 397 A.2d

2la

656 (1979), they charge that the agency has failed to identify
the evidence it found insufficient.

The Commission did not ignore the favorable testimony.
Quantitating the supportive factual presentation in terms of “a
great deal of evidence,” it said:

In an effort to meet its statutorily imposed burden,
BRC produced a great deal of evidence in support of both
the good reputation of Clifford Perlman and the good
character, honesty and integrity of Clifford Perlman.
Several witnesses testified as to Clifford Perlman’s good
reputation in the financial community, in the casino hotel
industry and in the communities where he lives and
works. Most of these witnesses also testified as to his
good character, honesty and integrity. Suffice it to say
that the Commission has very carefully examined, consid-
ered and weighed ail of this evidence.

It also spoke of the evidence produced “in support of the
qualification of Stuart Perlman all of which has been carefully
examined, considered and weighed.” The distinction between
findings of proof and findings of nonproof or inadequate
proof or proofs which are not creditable, and the consequent
obligations of a reviewing court, are discussed in Kaplowitz v.
K & R Appliances, Inc., 108 N.J.Super. 54, 61-62, 259 A.2d
922 (App.Div.1969), certif. den. 55 N.J. 452, 262 A.2d 706
(1970).

We have no doubt at all respecting “the grounds upon which
the administrative agency has acted, its reasoning, and the
manner in which the evidence of rcord has been transmuted
into ultimate conclusions.” Jn re Kessler Mem. Hosp. Reim-
bursement, supra, Handler, J., concurring, 78 N.J. at 578-579,
397 A.2d 656. We are satisfied that these have been “clearly
disclosed and carefully explained.” /bid. Indeed, it is the clarity
of that explanation that convinces us the Commission as-
suredly heard what was being said by the financial community,
the personal community and the indusiry favorable to the
Perlmans. Despite this, the Commissioners believed the short-
comings to be in fatally critical areas. This is exemplified by a
question posed in their opinion:

22a

Once again, in the absence of any credible explanation
presented in this record, we are left with a serious ques-
tion. Why did Clifford Perlman, in late 1974, lead his
company into its second (and his third) business entangle-
ment with Alvin Malnik, especially in light of his Novem-
ber 1972 discussion with the Chairman of the Nevada
Gaming Control Board?

In the conclusion implicit in this inquiry, and after an
extraordinarily careful review of the record in view of the
importance and novelty of the questions before us, we will not
substitute our judgment for that of the agency. New Jersey
Guild of Hearing Aid Dispensers v. Long, supra.

Although the statute is discussed in greater detail below, we
pause to note that the appellants Perlman at one point in their
brief contend simply that the “Commission’s findings do not
support a bad character conclusion.” Such a conclusion is
unnecessary. The statutory burden to demonstrate affirma-
tively the qualifying attributes, whatever they might be, has
been expressly and clearly placed on the applicant by the
Legislature and is subject to the canon of clear and convincing
evidence. N.J.S.A. 5:12-84, 5:12-89. It is not necessary to
disqualification that the applicant or any personnel required to
be qualified be of demonstrably bad character. Disqualification
is justified by their failure to prove themselves qualified by
clear and convincing evidence. Such evidence is that which
“produce[s] in the mind of the trier of fact a firm belief or
conviction as to the truth of the allegations sought to be
established,” evidence “so clear, direct and weighty and con-
vincing as to enable (the factfinder] to come to a clear convic-
tion, without hesitancy, of the truth of the precise facts in
issue.” Aiello v. Knoll Golf Club, 64 N.J.Super. 156, 162, 165
A.2d 531 (App.Div.1960). Particularly in this sensitive field,
N.J.S.A. 5:12-1 (9); Bally Mfg. Corp. v. N.J. Casino Control
Comm’n, 85 N.J. 325, 331, 426 A.2d 1000 (1981), to doubt is
most certainly to deny.

We turn our attention to the statute. The attack of appellants
ranges wide. The brief filed by the corporate appellants, citing
N.J.S.A. 5:12-1(b)(7) and the 1977 State Commission of Inves-

23a

tigation Report and Recommendations on Casino Gambling,
charges that “the statute’s purpose is clear: it seeks to guard
against any danger of infiltration by organized crime, and at
the same time to protect applicants against being penalized for
innocent associations.” It then argues that the Commission
decided the disqualification solely—although the brief does not
use the word “solely,” it is inescapably implied—“because of
innocent associations wholly unrelated to the statutory pur-
pose,” thus having “misread, and impermissibly broadened,
the statute.”

The argument is subtle, but unpersuasive. We agree entirely
that the statute was intended to guard against any danger of
infiltration by organized crime. This premise is too obvious to
require further elaboration. It is probable as well that reason-
able persons, including legislators, desire to shield corporations
and individuals from penalty where the only offense is “inno-
cent associations.” But it is equally obvious to us that protec-
tion against criminal! elements is not at all the only regulatory
purpose of the statute. The second subsection after that cited
by appellants reads:

Since casino operations are especially sensitive and in
need of public control and supervision, and since it is vital
to the interests of the State fo prevent entry, directly or
indirectly, into such operations or the ancillary industries
regulated by this act of persons who have pursued
economic gains in an occupational manner or context
which are in violation of the criminal or civil public
policies of this State, the regulatory and investigatory
powers and duties shall be exercised to the fullest extent
consistent with law to avoid entry of such persons into the
casino operations or the ancillary industries regulated by
this act.

[N.J.S.A. 5:12-1 b(9); emphasis supplied]

Clearly the Legislature did not intend to limit the power of
disqualification only to situations presenting a danger of in-
filtration by organized crime, or as a matter of fact any other
kind of crime. See N.J.S.A. 5:12-86.

24a

As suggested above, we are not critical of a proposition
denouncing guilt adjudication predicated solely on “unknow-
ing or otherwise innocent association” and are sensitive to the
difficulties defending against such a premise. Again we differ,
however, with appellants’ thesis that such a finding was the
sole cause for disqualification of the Perlmans. For this pur-
pose only, we will assume the impugned associations were
either unknowing or innocent. Nonetheless, it is apparent from
the clear findings of the Commission that it was obviously
disturbed by such things as the then and later apparent insen-
sitivity of the brothers to the potential impact of those associa-
tions upon the industry, those who regulate it, those who
manage it, those who patronize it and the public in general.
This sensitivity on the part of the Commission respecting the
insensitivity on the part of the Perlmans resides safely within
the four corners of the statute where strict regulation is
expressly mandated. The purpose for strict regulation is also
expressly stated: “An integral and essential element of the
regulation and control of such casino facilities by the State
rests in the public confidence and trust in the credibility and
integrity of the regulatory process and of casino operations.”
N.J.S.A. 5:12-1 b(6).

There is nothing inherently wrong with sensitive, strict regu-
lation. It has for many years been exercised in this State in
certain industries. Liquor, with “its inherent evils,” has been
dealt with as “a subject apart.” Grand Union Co. v. Sills, 43
N.J. 390, 398, 204 A.2d 853 (1964). The legislative power to
regulate such a “nonessential and inherently dangerous com-
modity,” as a wholly constitutional expression of concern for
public health, safety, morals or general welfare, has been said
to be almost without limit. /d. at 403-404, 204 A.2d 853. Horse
racing, with attendant legalized gambling, “strongly affected
by a public interest,” has been held to be a “highly appropri-
ate” subject for close regulatory supervision, Jersey Downs,
Inc. v. N. J. Racing Comm’n, 102 N.J.Super. 451, 457, 246
A.2d 146 (App.Div.1968), a condition recognized as desirable
for many years, Niglio v. N. J. Racing Comm’n, 158
N.J.Super. 182, 188, 385 A.2d 925 (App.Div.1978). We see
every reason, including those expressed in N.J.S.A. 5:12-1 b,

25a

for legalized casino gaming to take its deserved place among
those industries. See Bally Mfg. Corp. v. N. J. Casino Control
Comm’n, supra, 85 N.J. at 351, 426 A.2d 1000. Twenty years
before New Jersey enacted the Casino Control Act, Nevada,
the home port of legalized gambling in the United States,
pointed out at least one good reason for strict regulation. In
Nevada Tax Comm’n v. Hicks, 73 Nev. 115, 310 P2d 852
(Sup.Ct.1957), the court declared:

For gambling to take its place as a lawful enterprise in
Nevada it is not enough that this state has named it
lawful. We have but offered it the opportunity for lawful
existence. The offer is a risky one, not only for the people
of this state, but for the entire nation. Organized crime
must not be given refuge here through the legitimatizing
of one of its principal sources of income. Nevada gam-
bling, if it is to succeed as a lawful enterprise, must be
free from the criminal and corruptive taint acquired by
gambling beyond our borders. If this is to be accom-
plished not only must the operation of gambling be
carefully controlled, but the character and background of
those who would engage in gambling in this state must be
carefully scrutinized. [310 P2d at 854]

For the reason there declared and for the several other
reasons set forth in our statute, New Jersey, inspired by
legislative fiat and common sense, must be as careful in the
scrutiny of the character and background of those who would
engage in gambling in this State as is Nevada there.

As Justice Handler recently observed in Knight v. Margate,
86 N.J. 374, 431 A.2d 833 (1981):

At the very heart of the public policy embraced by the
new law is “the public confidence and trust in the credibil-
ity and integrity of the regulatory process and of casino
operations.” N.J.S.A. 5:12-1(b)(6). Related directly to
this purpose, the Legislature stated that “the regulatory
provisions . . . are designed to extend strict State regula-
tion to all persons . . . practices and associations related
to” casinos and that “comprehensive law-enforcement

26a

supervision . . . is further designed to contribute to the
public confidence and trust in the efficacy and integrity of
the regulatory process.” Jd. Because of the need for
integrity, public confidence and trust, it was stressed that
not only persons with criminal backgrounds and associa-
tions but also persons “deficient in business probity”
should be excluded from casino gaming operations.
N.J.S.A. 5:12-1(b)(7). In this vein, because casino opera-
tions “are especially sensitive and in need of public
control and supervision,” the statute dictates that “the
regulatory and investigatory powers and duties shall be
exercised to the fullest extent consistent with law to avoid
the entry” into casino operations, directly or indirectly, of
persons whose economic or occupational pursuits are
violative of the “criminal or civil public policies of this
State.” N.J.S.A. 5:12-1(b)(9). These public policy objec-
tives were augmented by later amendments which declared
that even though “[cjontinuity and stability in casino
gaming opertions” were important, these could not be
achieved by allowing persons with “unacceptable back-
grounds and records of behavior” to control casinos.
N.J.S.A. 5:12-1(b)(15); L. 1978, c. 7, § 1. fat 381-82, 431
A.2d 833}

For these reasons, we disagree with the argument that the
Commission “misread, and impermissibly broadened, the stat-
ute.” We find no overreaching.

The Perlman brief challenges the statute and its application
in two principal respects.’ First, they insist that from the

3 The Attorney General contends that since “[ajt the hearing below
applicants repeatedly referred to the pivotal issue in the case being an
evaluation of the totality of the Perlmans’ character” they ought now to be
deemed to have waived any other “theory now sought to be raised.” The
Perlmans reply that since they are appellants here but were not parties below
they cannct be charged with waiver from the lips of CWI's counsel. This
response has technical merit. Its persuasiveness is impaired by the undeniable
affinity between the Perlmans anc “WI. No matter. In this significant case
of apparent first impression we wil! decide the issues on their merits or lack
thereof.

27a

finding of the Commission, couched as it is in terms of the
failure of the applicant to prove by clear and convincing
evidence the “good character, honesty and integrity” of the
Perlmans, it is apparent that body has gone beyond the
authority delegated and has disqualified the Perlmans on a
ground not permitted by the statute, i. e., the failure to
demonstrate the fact of their good character, honesty and
integrity. The delegation, the Perlmans argue, is limited to an
ascertainment of the reputation for good character, honesty
and integrity. This argument is posited on a theory that the
disqualifying factors set forth in N.J.S.A. 5:12-86 are so
expressly inclusive otherwise that subsection “a” requires
nothing more than literal compliance with N.J.S.A. 5:12-89.

Again we find the argument ingenious, for the latter statute
does indeed refer to the “reputation for good character,
honesty and integrity.” However, we find it unpersuasive be-
cause it ignores the prime objective of statutory construction:
the search for legislative intent. Safeway Trails, Inc. v. Fur-
man, 41 N.J. 467, 477, 197 A.2d 366 (1964), cert. den. 379
U.S. 14, 85 S.Ct. 144, 13 L.Ed.2d 84 (1964). In such pursuit
the intent is to be perceived from the whole statute, and all
parts of the statute must be read so that they are in alignment
with the intent of the entire act. Seatrain Lines, Inc. v.
Medina, 39 N.J. 222, 226-227, 188 A.2d 169 (1963). The
statute must be read mindful of the evil which it is designed to
eliminate and of the proposed remedy. Brewer v. Porch, 53
N.J. 167, 174 (1969). Broad latitude is to be accorded the
probable intent of the Legislature in this regard toward the end
of best serving these beneficent purposes. Continental Cas. Co.
v. Knuckles, 142 N.J.Super. 162, 167, 361 A.2d 44 (App.
Div.1976). Nor will we permit the intent of the Legislature to
be subverted by language which, read literally, appears to
contravene that which the Legislature actually intended. As we
said in Continental Cas. Co. v. Knuckles:

First attention should go to the purpose of the legisla-
tion. “Where a literal rendering will lead to a result not in
accord with the essential purpose and design of the act,

28a

the spirit of the law will control the letter.” N.J. Builders,
etc., Ass’n v. Blair, 60 N.J. 330, 338 [288 A.2d 855]
(1972). It cannot be better put than as by Justice Heher in
San-Lan Builders, Inc. v. Baxendale, 28 N.J. 148, 155
{145 A.2d 457] (1958), “Reason is the soul of law.” [at
167, 361 A.2d 44]

Thus viewed, the Casino Control Act is obviously intended
to disqualify those who cannot demonstrate the fact of good
character, honesty and integrity. As we observed above, the
preambulary declaration of policy establishes the objective of
excluding those who as a matter of fact “have pursued
economic gains in an occupational manner or context. . . in
violation of the ... civil public policies of this State.”
N.J.S.A. 5:12-1 b(9). No suggestion appears in this declaration
that the facts supporting qualities inimical to the general and
salutary purposes of the statute, once found, need be
augmented by a further finding of a reputation for those
qualities.

We acknowledge our responsibility not to ignore the words
used by the Legislature, Hackensack Bd. of Ed. v. Hacken-
sack, 63 N.J.Super. 560, 569, 165 A.2d 33 (App.Div.1960),
and, if possible, to harmonize the meaning of the statute so
that no words or phrases are deemed inoperative, superfluous
or meaningless. Abbotts Dairies v. Armstrong, 14 N.J. 319,
327-328, 102 A.2d 372 (1954). In this case no problem arises
because we do not think the phrase in general and the word
“reputation” in particular were unintended or inadvertent. But
attentive as well to our obligation to make particular words
responsive to the essential principle of the statute, Wollen v.
Fort Lee, 27 N.J. 408, 418, 142 A.2d 881 (1958), we are
persuaded they were employed for a purpose consistent with
the design of the statute other than that suggested by appel-
lants. Obviously, a key employee would be unable to satisfy the
heavy burden of the applicant simply by appearing before the
Commission and assuring its members that he was honest and
diligent and had never held up a bank or even been the victim
of a parking ticket. His avenue is really limited to producing

29a

others who will vouch for his integrity and noncriminality. The
“reputation” language was provided to afford him an opportu-
nity to demonstrate his wares. We are convinced it was not
designed as an incontestable escape valve for one who without
it may have little chance. This is the meaning appellants
attribute to the language. In their brief they insist that once the
Commission found that several witnesses testified as to Clif-
ford Perlman’s good reputation, its “task was properly over at
that point.”

From this it would follow that a parade of friendly witnesses
could override proven disqualifying character facts. We are
certain the Legislature never intended this. We will not in-
terpret a statute so as to produce an unreasonable or absurd
result. State v. Gill, 47 N.J. 441, 444, 221 A.2d 521 (1966).

We are convinced that the authority delegated was to enable
the Commission to determine what the key employee is, rather
than what he is thought to be. If what he is thought to be
satisfies them as to what he is, so be it. That is the true purpose
of the statute and the reason the word “reputation” appears.

Second, the Perlmans complain of the purportedly unconsti-
tutional “vagueness” of the “good character” criterion.

A statute is unconstitutional if it is couched in terms “so
vague that nen of common intelligence must necessarily guess
at its meaning and differ as to its application.” Séate v.
Lashinsky, 81 N.J. 1, 17-18, 404 A.2d 1121 (1979). Neverthe-
less, the fact that certain statutory phrases are not “impeccable
specimens of draftsmanship does not impugn their legality,” as
long as procedural and judicial safeguards are available. Jn
Review of Health Care Admin. Bd. v. Finley, 168 N.J.Super.
152, 167, 402 A.2d 246 (App.Div.1979), aff'd sub nom. New
Jersey Ass’n of Health Care Facilities v. Finley, 83 N.J. 67, 415
A.2d 1147 (1980), app. dism. sub nom. Wayne Haven Nursing
Home v. Finley, 449 U.S. 944, 101 S.Ct. 342, 66 L.Ed.2d 208
(1980).

Furthermore, the words of a statute must not be considered
to exist in a vacuum, without reference to relevant policy
considerations as they are expressed in the whole act, or

30a

without regard for the words of balance of the statute. See
Matawan v. Monmouth Ciy. Tax Bd., 51 N.J. 291, 299, 240
A.2d 8 (1968). It is not too much for the law to expect “men of
common intelligence” to realize this.

We are satisfied that thus viewed, the words “good charac-
ter” in the context of the Casino Control Act leave to men of
common intelligence little doubt about their meaning.

As was said in Jn re DeMarco Suspension, 83 N.J. 25, 414
A.2d 1339 (1980), in connection with a statute regulating
physicians:

The question ultimately is one of fairness, given the
statute and its provisions, and given the situation of the
defendant. Should he have understood that his conduct
was proscribed, should he have understood that the
penalty about to be imposed was the sanction intended by
the Legislature? The test is whether the statute gives a
person of ordinary intelligence fair notice that his conduct
is forbidden and punishable by certain penalties. That
test, however, does not consist of a linguistic analysis
conducted in a vacuum. It includes not simply the lan-
guage of the provision itself, but related provisions as
well, and especially the reality to which the provision is to
be applied. The test here is whether a physician of
ordinary intelligence would have understood, and would
have been given fair notice by virtue of these provisions,
that his conduct rendered him liable to a $200 penalty as
to each patient. [at 37, 414 A.2d 1339]

New Jersey courts have rejected vagueness arguments attack-
ing criteria no more definite than the one at issue. In Jn re
Com’r of Bank v. Parkwood Co., 98 N.J.Super. 263, 273, 237
A.2d 265 (App.Div.1967), the court found that the terms

“incompetency” and “unworthiness” were adequate for judg-
ing the conduct of insurance agents and brokers. In Moyant v.
Paramus, 30 N.J. 528, 552-553, 154 A.2d 9 (1959), a licensing
standard requiring a finding of such “business and moral
character” as deemed “necessary for the protection of the

3la

public good” was held to be sufficiently definite. And see State
v. Rosenthal, 559 P.2d 830, 835 (Nev.Sup.Ct. 1977), app. dism.
434 U.S. 803, 98 S.Ct. 32, 54 L.Ed.2d 61 (1977), in which the
Supreme Court of Nevada, reversing a lower court which had
overturned a gaming commission ruling, held that if the
statutory standards were “inadequate legislative expressions,”
implementing regulations “would serve to cure the defect.”

Over 20 years ago our Supreme Court acknowledged consti-
tutional readjustment whereby

. . . [Im recent days we have attached greater signifi-
cance to the presence of procedural and judicial safe-
guards against unreasonable and unwarranted agency
action than we have to the presence of details in the
statutory standards. See Burton et al. v. Sills, 53 N.J. 86,
91 [248 A.2d 521] (1968), appeal dismissed, 394 U.S. 812,
89 S.Ct. 1486, 22 L.Ed.2d 748 (1969); State v. Owens-
Corning Fiberglass Corp., supra {100 N.J.Super. 366, 242
A.2d 21 (App.Div.1968), aff'd o.b. 53 N.J. 248, 250 A.2d
11 (1969)}, 100 N.J.Super. at 385 [242 A.2d 21]; Esso
Standard Oil Co. v. Holderman, 75 N.J.Super. 455, 474
[183 A.2d 454] (App.Div.1962), aff'd, 39 N.J. 355 [188
A.2d 599] appeal dismissed, 375 U.S. 43, 84 S.Ct. 148, 11
L.Ed.2d 107 (1963). [Motyka v. McCorkle, 58 N.J. 165,
178, 276 A.2d 129 (1971)]

The matter comes down to a response to the dispositive
inquiry posed in State v. Lashinsky, supra:

. . . The decisive question for purposes of this vague-
ness argument is whether the defendant was reasonably
apprised, as a matter of common intelligence, in light of
ordinary human experience, that his particular conduct
was unlawful.‘ [81 N.J. at 18, 404 A.2d 1121]

4 Of course, the Perlmans are not defendants in the criminal sense as
was Lashinsky, and no one suggests that their conduct was unlawful. The
principle is no different.

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We are wholly persuaded that the potential key employee is
reasonably apprised by the statute, as a matter of common
knowledge, in the light of ordinary human experience, as to the
kind of conduct necessary to satisfy the statute (or put another
way, the kind of conduct which is likely to result in disqualifi-
cation). He is reasonably apprised as well of precisely what will
happen if he does not pass muster.

This being so we are content that there was no lack of
fairness with respect to the Perlmans, whose sophisticated
knowledge of the casino gaming industry and long-time experi-
ence with its standards and regulations was far from ‘‘or-
dinary.’’ In fact, their plaint in this respect loses much of its
thrust in view of the fact that whatever else it did or did not
do, the Nevada Gaming Commission advised them of its
decidedly negative reaction to the conduct which the New
Jersey Casino Control Commission found offensive eight years
later.

Coupled with this vagueness issue the Perlmans also urge
that a ‘‘good character’’ criterion ‘‘allows [the Commission] to
rely upon guilt by association.’’ The brief for the corporations
iterates this arguinent, in effect, and claims a due process
violation, citing Schware v. Board of Bar Examiners, 353 U.S.
232, 77 S.Ct. 752, 1 L.Ed.2d 796 (1957). As we have indicated
above, it is abundantly clear to us from the opinion of the
Commission that the Perlmans were not rejected because of
any ‘“‘guilt’’ on their part in the criminal or quasi-criminal
sense or because of their association with persons, some of
whom, if not guilty, were almost universally thought to be.
Rather, they were rejected, among other things, because, as we
said above, of their apparent continuing insensitivity to the
potential impact of those associations in this sensitive industry.
The present protestations of the fact that those transactions
were, at the time ‘awful and ethical’’ (emphasis is the
Perlmans’) demonstrate that the sensitivity has not increased.
The question was not then, and is not now, whether those
transactions were lawful, or how lawful, or ethical, or how
ethical. The question which the Perlmans failed to see then
and, perhaps understandably, do not now acknowledge, is:

33a

what of the impact of those transactions and associations upon
the policies intended to be served by casino gaming regulation
under legislative imprimatur? Schware reports that in that
matter ‘‘[t}here is nothing in the record which suggests that
Schware has engaged in any conduct during the past 15 years
which reflects adversely on his character.’’ 353 U.S. at 239, 77
S.Ct. at 756. That statement cannot be made for the Perlmans,
if good character in the sense here appropriate is deemed to
refer to conduct not potentially detrimental to the industry. In
the context of the statutes, no other definition is reasonable.
Knight v. Margate, supra. Schware and others like it are
distinguishable.

Both appellants’ briefs also argue that since the order of the
Commission requires a termination of the Perlman relationship
with CWI and its subsidiaries ‘‘in this or any other jurisdic-
tion,’’ as a condition of BRC licensing, it offends the Com-
merce Clause, U.S.Const., Art. I, § 8, by imposing an
unreasonable burden on interstate commerce. The fallacy in
this argument is that the order is said to purport ‘“‘to regulate
the management of substantial non-New Jersey operations

. . and to limit the Perlmans’ business activities outside of
New Jersey,’’ when in fact it does no such thing. It neither
regulates CWI or any of its subsidiaries except BRC or the
Perlmans, nor tells them what they must do. It only tells BRC,
in terms completely in line with the statute and its purposes,
the condition which must exist in view of its corporate connec-
tions, before it can enjoy the privilege of a casino license. No
one will argue that New Jersey does not have a legitimate local
public interest in determining who shall be thus licensed in New
Jersey and under what conditions. We are satisfied this issue
has no merit and warrants no further discussion.

We are agreed, however, that the legitimate state interests
otherwise being served do not require or reasonably permit the
requirement of disassociation of the Perlmans’ personal in-
terests from non-New Jersey subsidiaries of CWI which have
no gaming activities. The State advances a so-called ‘‘percolat-
ing up’’ concern, theorizing that Perlman influence may work
its way up the interstructure and manifest itself in CWI (and

34a

thereafter BRC) affairs, despite the disassociation there. Such
a result is not at all inconceivable. Nevertheless, we believe the
effect thus projected would be sufficiently attenuated that its
force would not exceed the influence the Perlmans might
continue to exert as old and experienced friends, even after
divestiture. We are satisfied that neither of these is susceptible
to New Jersey regulation consistent with due process. It is not
insignificant that the Commission continues to retain jurisdic-
tion over its licensees. If a ‘‘Perlman effect’’ becomes mani-
fest, the Commission is not powerless. N.J.S.A. 5:12-129.

Finally, the corporations argue that the evidence supporting
the Commission’s finding that Malnik was a person of unsuit-
able character was ‘‘irrelevant, inadmissibic and legally insuffi-
cient.’’ The argument is entirely frivolous. The protesting brief
points out the relevance of ‘‘what the Perlmans knew about
Malnik between 1971 and 1975.’’ N.J.S.A. 5:12-107 a(6) takes
care of the balance. See also, N.J.A.C. 19:42-2.6. In re Toth,
175 N.J.Super. 254, 418 A.2d 272 (App.Div.1980), cited by
appellants, is of no avail to them. In the matter before us there
was an ample residuum of legal and competent evidence to
sustain the administrative decision. Weston v. State, 60 N.J.
36, 51, 286 A.2d 43 (1972).

Except respecting the requirement of divestiture as it applies
to non-New Jersey nongaming subsidiaries of CWI, we affirm
the administrative determination. We remand to the Casino
Control Commission for recasting of the order consistent with
the foregoing and for reasonable revision of the timetable. The
stay imposed by the Supreme Court shall remain in effect
pending the recasting of the order of the Commission and
thereafter until further order of this court or the Supreme
Court on motion. Other than with respect to the stay as noted,
we do not retain jurisdiction.

35a

APPENDIX C
Opinion of the New Jersey Casino Control Commission

STATE OF NEW JERSEY
CASINO CONTROL COMMISSION
Docket No. 80-CL-1

November 13, 1980

>
In the Matter of

THE APPLICATIONS OF BOARDWALK REGENCY CORPORATION
AND THE JEMM COMPANY FOR CASINO LICENSES.

>

NEW JERSEY CASINO CONTROL COMMISSION

Joseph P. Lordi, Chairman

Martin B. Danziger, Vice-Chairman
Don M. Thomas, Commissioner

Carl Zeitz, Commissioner

Madeline H. McWhinney, Commissioner

APPEARANCES:

For Boardwalk Regency Corporation:

William R. Glendon, Esq.
Rogers and Wells, Esqs., New York, New York

Morris Brown, Esq.

Wilentz, Goldman & Spitzer, Esqs., Woodbridge,
New Jersey

Richard H. Sheehan, Esq., Vice President-Law
Caesars World, Inc., Los Angeles, California

For the Jemm Company:

James L. Cooper, Esq.
Cooper, Perskie, Katzman, April, Niedelman &
Wagenheim, Esqs., Atlantic City, New Jersey

36a

For the Division of Gaming Enforcement:

Michael R. Cole, Assistant Attorney General
Joan Robinson Gross, Deputy Attorney General
Anthony J. Parillo, Deputy Attorney General

For the Casino Control Commission:

R. Benjamin Cohen, General Counsel
Joseph A. Fusco, Special Counsel for Licensing

I.
INTRODUCTION

On * sxember 1, 1978, Boardwalk Regency Corporation
(“BRC”) applied to the Casino Control Commission for a
casino license. In accordance with the Casino Control Axt
(“the Act”), the Commission requested the Division of Gamiag
Enforcement (“Division”) to conduct a comprehensive investi-
gation into BRC’s qualifications. While the investigation was
in progress, BRC proceeded with its reconstruction and expan-
sion of the former Howard Johnson’s Regency Hotel. On
April 30, 1979, with completion of its facility approaching,
BRC formally requested issuance of a temporary casino permit
which the Commission is authorized to grant upon the filing of
certain corporate information, the institution of an appropri-
ate voting trust agreement and the establishment of the suita-
bility of the proposed casino hotel facilities. See N.J.S.A.
5:12-95.1. After conducting a hearing on this request, the
Commission found that, subject to certain conditions, BRC
met the requirements for a temporary casino permit. The
Commission then issued such a permit which became effective
on June 26, 1979. That permit expired at midnight on October
26, 1980. As noted, the statutory requirements for a temporary
casino permit were limited to areas which did not concern the
suitability of the applicant or other persons required to be
qualified for a casino license.

As the landlord and lessor of the casino hotel facility, the
Jemm Company (“Jemm”) is required by Section 82 of the Act

37a

to apply for and obtain a casino license. N.J.S.A. 5:12-
82(c)(2). Jemm did apply for such license on or about February
26, 1979. In the usual course, the matter was referred to the
Division for investigation.

On January 23, 1980, the Division filed its “Report to the
Casino Control Commission with Reference to the Casino
Li noc Application of Boardwalk Regency Corporation” (the
“BRC Report”). Along with the BRC Report, the Division
filed a “Statement of Issues” emphasizing several matters
which the Division deemed significant. On February 1, 1980,
the Division filed its “Report to the Casino Control Commis-
sion with Reference to the Casino License Application of
Jemm Company, a Partnership.” These documents were sub-
mitted by the Division pursuant to its statutory responsibility
to investigate the qualifications of each applicant and to
provide all necessary information to the Commission.
N.J.S.A. 5:12-76. Although they assist the Commission in
focusing its inquiry into the qualifications of the applicants,
these documents are not evidence of the matters stated therein.
Nor did the Report and Statement of Issues initiate the present
hearing. The Casino Control Act requires a hearing on every
casino license application and each applicant must meet the
Statutory criteria regardless of ihe tenor of the Division’s
report. See N.J.S.A. 5:!?-S0(a) and -87(a).

In order to expedite the proceedings and to fairly permit the
parties to prepare for the hearing, six (6) pre-hearing con-
ferences were conducted. Those conferences resulted in six (6)
pre-hearing conference orders delineating the factual matters
which were to be the primary subjects of the hearing. Essen-
tially, those subjects concern the areas described in the Divi-
sion’s reports. Further, the applicants and the Division have
entered into extensive stipulations of fact relevant to those
areas. These stipulations have been accepted by the Commis-
sion. As to any other factual matters not placed in issue nor
actually litigated during the hearing, it must be assumed that
such matters pose no cause for concern. In this regard, the
Commission took notice of the fact that the applicants have to

38a

date filed numerous documents which pertain to uncontested
matters and which were not introduced at the hearing.
Sections 84 and 89(b) of the Act set forth the criteria which a
casino license applicant and other persons required to be
qualified as a condition of such licensure must affirmatively
establish by clear and convincing evidence. N.J.S.A. 5:12-84
and 89(b). The clear and convincing evidence requirement falls
between the ordinary civil standard of “preponderance of the
evidence” and the criminal standard of “beyond a reasonable
doubt.” The preponderance standard means simply that when
the record is considered as a whole the credible evidence
renders the existence of the fact in question more likely than
not. In contrast, the familiar criminal standard means that the
trier of fact must not have a reasonable doubt, that is, one
based on the evidence or the lack of evidence. A reasonable
doubt is one which has some justification rather than an
imaginary or possible doubt. The clear and convincing stan-
dard is much higher than the preponderance standard but
somewhat less than the reasonable doubt requirement. Clear
and convincing evidence should produce in the mind of the
Commissioner a firm belief or conviction as to the truth of the
matters sought to be established. In order to sustain its burden,
the applicant was obliged to present clear and convincing proof
of the facts upon which the Commission may reach a reason-
able conclusion as to suitability. Further, the Act requires that
four of the five Commission members must concur in any
necessary finding for casino licensure. N.J.S.A. 5:12-73(d).
As noted, a casino license applicant must establish by clear
and convincing evidence that it meets the criteria of Section 84
and that the persons who must be qualified meet the criteria of
Section 89(b) for casino key employees. For BRC, a corporate
applicant, the persons required to so qualify are described in
Sections 85(c) and 85(d) of the Act. Under Section 85(c), the
following persons connected with BRC must qualify:

(a) each officer;
(b) each director;

39a

(c) each person holding any beneficial interest, direct or
indirect, in the securities of the applicant corpora-
tion;

(d) any person who in the opinion of the Commission
has the ability to control the corporation or elect a
majority of the board of directors of the corpora-
tion, other than a bank or other licensed lending
institution which holds a mortgage or other lien
acquired in the ordinary course of business; and

(e) any lender, underwriter, agent or employee of the
applicant corporation or other person whom the
Commission considers appropriate for qualification.

Under Section 85(d) the officers, directors, lenders, under-
writers, agents, employees and securities holders of Caesars,
New Jersey, Inc. (the intermediary company) and Caesar’s
World, Inc. (the holding company) must qualify to the stand-
ards under Section 89, except residency. However, since both
the intermediary company (“CNJ”) and the holding company
(“CWI”) are publicly traded corporations, the Commission
and the Director of the Division may agree to waive such
qualification requirements as to any person who is not signifi-
cantly involved in the activities of BRC and who does not have
the ability to control the holding company or the intermediary
company or to elect one or more directors thereof.

As to Jemm, the partnership which leases the casino hotel
facility to BRC, Section 85(e) of the Act requires the following
persons to be qualified to the standards for casino key employ-
ees, except for residency:

(a) each person who directly or indirectly holds any
beneficial interest or ownership in the partnership
applicant;

(b) any person who in the opinion of the Commission
has the ability to control the partnership applicant;
and

(c) any person whom the Commission considers appro-
priate for qualification.

40a

During the pre-hearing conferences, the Division submitted a
list of persons whom the Division deemed required to be
qualified for both BRC and Jemm. The Division also indicated
those individuals to whom it interposed an objection and the
grounds for such objection. These materials were provided to
the Commissioners and the parties. The Commission found
that there are thirty persons who must be qualified as part of
the BRC application and eight persons who must be qualified
as part of the Jemm application. At the conclusion of the
hearing, the Division objected to four of the BRC “qualifiers,”
namely, Clifford S. Perlman, Stuart Z. Perlman, Jay E.
Leshaw and William H. McElnea, Jr. No objection was inter-
posed regarding any of the Jemm qualifiers.’

As to the licensure standards themselves, Sections 84 and
89(b)(2) establish essentially the same qualification criteria
which must be established by clear and convincing evidence for
the applicants and the persons to be qualified. The first
affirmative qualification criterion is that of “financial stability,
integrity and responsibility.” N.J.S.A. 5:12-84(a); N.J.S.A.
5:12-89(b). The second criterion appears in Section 84(c) and
Section 89(b)(2). Although the wording varies slightly between
these sections, the thrust is the same. A casino licensee appli-
cant or person required to qualify must demonstrate its “repu-
tation for good character, honesty and integrity.” N.J.S.A.
5:12-89(b)(2). The third criterion demands that the applicant or
qualifying person possess “sufficient business ability and ca-
sino experience as to establish the likelihood” that the appli-
cant will create and maintain “a successful, efficient casino
operation” or that the qualifying person will achieve “success
and efficiency in the particular position involved.” N.J.S.A.
5:12-84(d); N.J.S.A. 5:12-89(b)(3). A fourth affirmative crite-
rion applies only to the casino license applicant which must

1 Prior to the hearing, the Division stated its opposition to Mark A.
Geller, who resigned his position as vice-president for BRC’s casino opera-
tions and who took a leave of absence from his office in CWI. Mr. Geiler’s
qualifications are the subject of a separate proceeding and will be determined
by the Commission apart from the instant matter.

4la

establish the “integrity and reputation” of all financial inves-
tors or lenders whose investments or loans are related to the
Atlantic City casino hotel project.’

As mentioned earlier, the Division filed investigative reports
as to both the BRC application and the Jemm application. In
addition, the Division submitted a “Statement of Issues” in
which it enumerated 13 areas of concern covered by the BRC
report. The Commission received evidence on these areas and
considered that evidence in determining whether BRC had met
the affirmative qualification criteria. However, certain “issues”
as developed on this record simply were not of the same force
and importance as others. The matters which truly concerned
the Commission were those which are related in the opinions
regarding the four challenged BRC qualifiers. With respect to
the otherwise unmentioned issues, the Commission found on
this record no reasons to seriously question the suitability of
the applicants or persons to be qualified. Since the real diffi-
culties with the BRC application concern the persons to be
qualified, we now consider those individuals.

Il.
PERSONS REQUIRED TO QUALIFY

A. CLIFFORD S. PERLMAN

Clifford S. Perlman who presently resides in Miami,
Florida, was born on March 30, 1926, in Philadelphia, Penn-
sylvania and was educated in the Philadelphia public schools.
After attending Temple University for a short time, he com-

2 At the hearing, the Chairman distributed to the Commissioners and
to the parties a proposed written instruction on the licensing criteria and the
decisional process. After considering the exceptions filed by the parties, the
Chairman modified the proposal in two respects. The written instruction, as
modified, was adopted by the Chairman for the guidance of the Commission
and the edification of the parties. It is not necessary to restate the instruction
here since it is part of the record. Moreover, the meaning of the pertinent
standards and their application to the contested matters in this case are
apparent from the opinions of the Commission members herein.

42a

pleted his undergraduate education at the University of Miami
and proceeded to obtain a law degree from the same institution
in 1951. He has been a member of the Bar of the State of
Florida since 1951.

Caesars World Inc. (“CWI”) was formed in 1958 as “Lum’s
Bar, Inc.” by Clifford Perlman and his brother, Stuart, to
operate a small restaurant in Miami Beach, Florida which the
brothers had purchased in 1956. By 1969, the Perlmans had
built the corporation into a publicly-held (over-the-counter)
company which operated or franchised approximately 380
fast-food restaurants. The company also acquired in the late
1960’s a Florida-based producer and distributor of processed
meats (Dirr’s Gold Seal Meats) and a chain of more than 100
retail discount stores (Dade Wholesale Products). On Septem-
ber 30, 1969, Lum’s acquired Caesars Palace in Las Vegas,
Nevada. Within the next two years, Lum’s disposed of Dirr’s
Gold Seal Meats and Dade Wholesale Products and its fast-
food restaurants. In December 1971, the name of the corpora-
tion was changed from Lum’s to Caesars World. Clifford
Perlman was the primary catalyst in changing the direction of
the company from the fast-food business to the casino hotel
business.

Caesars World Inc. is today a publicly traded corporation,
the stock of which is listed on the New York and Pacific stock
exchanges. The approximately 26,100,000 shares of the com-
pany are owned by about 70,000 shareholders. Through sub-
sidiaries, CWI presently owns and operates Caesars Palace
Hotel and Casino in Las Vegas, Nevada, Caesars Tahoe Hotel
and Casino in Stateline, Nevada, and Boardwalk Regency
Hotel and Casino in Atlantic City, New Jersey. Through other
subsidiary companies, CWI owns real estate and operates a
country club in southern Florida, operates three honeymoon
resorts in the Pocono Mountain area of Pennsylvania, and
owns a computer terminal manufacturing company based in
New York. In fiscal 1980, the gross revenues of CWI exceeded
$500,000,000.

Clifford Perlman is Chairman of the Board of Directors and
chief executive officer of both CWI and Caesars New Jersey,

43a

Inc. (“CNJ”).’ He is the largest single stockholder of CWI,
owning approximately 2.4 million shares, or about 10% of the
outstanding stock. In addition, he owns approximately 221,000
shares of CNJ, or about 1.4% of the outstanding stock of that
company. Clifford Perlman clearly is today, and has been since
the beginning, the acknowledged leader and prime mover of
CWI.

By virtue of his positions as an officer, director, major
stockholder and principal employee of CWI and CNJ, Clifford
Perlman is a person who must individually be qualified for
approval as a casino key employee (except for New Jersey
residence) in order for Boardwalk Regency Corporation
(“BRC”) to be eligible to hold a casino license. BRC therefore
has the affirmative responsibility to establish by clear and
convincing evidence Clifford Perlman’s “financial stability,
integrity and responsibility,” his “good character, honesty and
integrity,” and his “business ability and casino experience.”

With regard to Clifford Perlman, the bulk of the evidence
presented to the Commission relates to the licensure criteria of
“good character, honesty and integrity.” To determine an indi-
vidual’s “good character, honesty and integrity,” the Act re-
quires the Commission to examine, among other factors, the
individual’s “family, habits, character, criminal and arrest
record [if any], business activities, financial affairs, and busi-
ness, professional and personal associates.”

In an effort to meet its statutorily insposed burden, BRC
produced a great deal of evidence in support of both the good
reputation of Clifford Perlman and the good character,
honesty and integrity of Clifford Perlman. Several witnesses
testified as to Clifford Perlman’s good reputation in the
financial community, in the casino hotel industry and in the

3 Mr. Perlman has been on unpaid leave of absence from his position
with CWI and CNJ and has been prohibited from taking any management
position with BRC since June 26, 1979, the effective date of the BRC
temporary casino permit. Mr. Perlman agreed to this arrangement in re-
sponse to concerns raised by the Division which was then continuing its
investigation of Mr. Periman’s and CWI’s dealings with Messrs. Mainik and
Cohen.

d4a

communities where he lives and works. Most of these witnesses
also testified as to his good character, honesty and integrity.
Suffice it to say that the Commission has very carefully
examined, considered and weighed all of this evidence.

The Division of Gaming Enforcement has recommended
that this Commission find Clifford Perlman unsuitable for
qualification. In support of its recommendation the Division
has adduced evidence which it contends reflects adversely on
the good character, honesty and integrity of Clifford Perlman.
This evidence may be most conveniently considered in the
context of the four major areas which were closely examined at
the hearing.

1. ACQUISITION OF CAESARS PALACE

CWI’s (then Lum’s, Inc.) entry into the casino gaming
business was marked by the purchase of Caesars Palace in 1969
for approximately $58 million. The Caesars Palace venture was
largely the initiative of Clifford Perlman. it was Clifford
Perlman who discovered the deal for the company and who
established the purchase price at a multiple of earnings not to
exceed $60 million.

At the time of acquisition, CWI retained prior management
to run the casino operation without conducting a background
study or investigation of any of the individuals, relying instead
on their general reputation in the gaming community. One of
these individuals was Jerome Zarowitz, the Director of Casino
Operations, responsible for the day to day operations of the
casino. He was then not required by the Nevada authorities to
be licensed as a casino key employee. Although not a record
owner of the Palace, Mr. Zarowitz received $3.5 million in cash
upon the consummation of the acquisition from the former
owners and received further monies on a deferred compensa-
tion plan, which CWI was obligated to fund.

Mr. Zarowitz had a known criminal record and by the latter
part of 1969, was considered by Clifford Perlman unsuitable to
operate the casino at Caesars Place. While Mr. Zarowitz was
still in charge of the casino, Clifford Perlman was aware of

4Sa

reports concerning Mr. Zarowitz’ attendance at a so-called
“little Appalachia” meeting of reputed organized crime mem-
bers in Palm Springs in 1965. And Clifford Perlman was also
aware that the Nevada Gaming Control Board had expressed
concerns about Mr. Zarowitz’ suitability for licensure and that
his employment at Caesars Palace might have to be termi-
nated. Notwithstanding this knowledge, CWI retained Mr.
Zarowitz in his same executive capacity after the purchase
settlement on September 30, 1969, until his resignation in
April, 1970. Moreover, he was allowed to occupy an apartment
at Caesars Palace on a complimentary basis for a period of
time after his termination of employment. And, CWI replaced
him with Sanford Waterman, on Mr. Zarowitz’ own recom-
mendation.

Between May 1, 1969, shortly after CWI entered into the
agreement to purchase Caesars Palace, and September 30,
1969, when that purchase was completed, Caesars Palace
suffered a loss of $932,266 before taxes, while continuing to be
operated by the previous owners including Mr. Zarowitz.
During the same period in the prior year of 1968, Caesars
Palace had a profit before taxes of $2,230,014. Although
professing concern over this drop in casino win, CWI ac-
cepted, without any independent investigation, the explanation
tendered by Mr. Zarowitz and other personnel of the former
owners that losses during the settlement period were due to
patron win at the baccarat tables and, generally, to the fortunes
of gaming. Indeed, CWI did nothing to confirm Zarowitz’
explanation. Neither its Board of Directors nor management
raised, or even considered, the possibility of an independent,
outside audit of the records for the operation of the Caesars
Palace casino during the settlement period. To do any such
investigation, according to Clifford Perlman, would have dis-
turbed the delicate negotiations then in progress between CWI
and the previous owners over restructuring the financing as-
pects of the deal, occasioned by CWI’s inability to adhere to its
original plan of financing. In Clifford Perlman’s words, “If I
had accused them [the prior owners] of stealing, we would not
have bought the hotel.”

46a

On December 12, 1970, the Federal Bureau of Investigation,
acting under the supervision of Harold E. Campbell, Jr., then
Special Agent in Charge of the Bureau’s Nevada Regional
Division, and having cause to believe the existence of an illegal
interstate gamblii.g operation, executed search and arrest war-
rants at Caesars Palace. In the course of the search, the agents
uncovered funds in lockboxes listed to Mr. Zarowitz
($1,100,000), Elliot Price ($325,000) and Sanford Waterman
($135,000). Mr. Waterman and Mr. Price, who were casino
executives at Caesars Palace at the time, were arrested as a
result. Apparently, neither Clifford Perlman, who took per-
sonal charge of the Palace after this occurrence, 1or anyone
else on behalf of CWI confronted Mr. Zarowitz, Mr. Price or
Mr. Waterman regarding this event or made any independent
attempt to ascertain the source of these monies.

On January 27, 1971, the Securities and Exchange Commis-
sion (“SEC”) ordered an examination and investigation into
ihe possibility that CWI did not receive a substantial portion of
the results of the casino proceeds of Caesars Palace for the
summer of 1969 because the prior operators had been “skim-
ming” the casino revenues during that period. In the course of
its hearings in this matter, the SEC subpoenaed, among others,
the former principal owners of Caesars Palace and its key
casino employees, including: William Weinberger, Sr., who at
the time was President of Caesars Palace; Harry Wald, then
Secretary-Treasurer of Caesars Palace (now Executive Vice
President, Secretary and Director of Desert Palace, Inc., a
wholly-owned subsidiary of CWI), Albert Faccinto (now Sen-
ior Vice President with Desert Palace, Inc.), Jerry Gordon and
Bert Grober. All these individuals refused to testify, most
invoking their constitutional privilege against self-incrimina-
tion. This fact came to the attention of Clifford Perlman who,
once again, made no attempt to interview any of his employees
about their possible knowledge that others may have been
sharing in Caesars Palace revenues through skimming.

One of these employees, Jerry Gordon, had been indicted on
March 25, 1971, along with Samuel Cohen, Meyer Lansky,
Morris Lansburgh and others for income tax evasion arising

47a

from an alleged skimming operation at the Flamingo Hotel, a
neighboring casino. Aithough professing shock over the indict-
ment, Clifford Per!man never inquired of Gordon whether he
knew of possible skimming at Caesars Palace under its prior
ownership. Quite to the contrary, when Nevada gaming
authorities sought Gordon’s dismissal from Desert Palace,
Inc., by reason of his indictment, Clifford Perlman directed
William Weinberger (then President of Desert Palace, Inc.) to
intervene in the matter. After a series of correspondence
between Weinberger and the Nevada Gaming Control Board,
Mr. Gordon was allowed to take a temporary leave of absence.

Another employee of Caesars Palace who had pled the Fifth
Amendment before the SEC was Joel Snow. Mr. Snow had
been rehired at Caesars Palace one year after his termination
for a $1,000 shortage in the baccarat pit. He also was never
asked about the drastic drop in casino winnings during the
1969 acquisition settlement period.

From the foregoing, certain conclusions are self-evident.
Despite an awareness of Mr. Zarowitz’ criminal conviction and
his general unsuitability in the eyes of Nevada gaming officials,
CWI, through Clifford Perlman, retained him in a position of
responsibility and authority within the casino, allowed him to
live on the premises rent free after his resignation, accepted
without further inquiry his explanation for casino losses and
followed his recommendation that he be replaced by Sanford
Waterman. Unquestionably, Mr. Zarowitz’ record as well as the
sensitivities exhibited by Nevada gaming authorities should
have disabused Clifford Perlman of any such trust and re-
liance. In the face of an official SEC investigation into the
possibility of skimming at Caesars Palace under its prior
owners—a charge which strikes at the heart of the regulatory
concerns—CWI’s apparent lack of diligence in ascertaining the
truth of this allegation is disturbing, especially since individ-
uals with possible relevant knowledge remained in CWI’s
employ. Two of these employees, Joel Snow and Jerry Gordon,
in particular, should have given CWI cause for concern—in-
deed, Jerry Cordon at this time had just been indicted for an
alleged skimming operation at the nearby casino, the
Flamingo.

48a

Of course, the nature and relevance of these events must be
considered in the context in which they occurred. Clifford
Perlman and CWI were new to the casino gaming industry.
Nevertheless, at the very least, the facts outlined above relating
to the acquisition of Caesars Palace should have raised Clif-
ford Perlman’s consciousness concerning the sensitive nature
of this industry and concerning the regulatory process under
which it operates.

2. SKY LAKE NORTH

In the late spring of 1971, Alvin I. Malnik, a principal along
with Samuel E. Cohen of Comal Corp., approached CWI
President Melvyn Chasen about the possibility of CWI
purchasing property in Dade County, Florida known as Sky
Lake North. A previous overture to this effect had been
rejected by Clifford Perlman in 1970. The Sky Lake property
consisted of about 623 acres including a country club, lakes
and approximately 325 acres of developable land owned by
Comal. In the 1971 offer, the price was set by Malnik at $23
million. More specifically, CWI was to assume an existing $10
million mortgage debt to the Central States, Southeast and
Southwest Areas Pension Fund (Teamsters Pension Fund) and
undertake a $13 million purchase money mortgage to Comal.
These terms appeared attractive to Clifford Perlman.

At a July 1971 meeting at Sky Lake, Mr. Malnik along with
Samuel Cohen presented their proposal to certain representa-
tives of CWI including Clifford and Stuart Perlman, William
McElnea, Jay Leshaw, Bertin Perez and CWI’s outside coun-
sel, David Bernstein of Rogers & Wells. Aliso by this time, Mr.
Malnik was proposing to sell the stock of Comal to CWI,
rather than having CWI purchase the property outright, and
seeking as part of the transaction, to acquire rights to CWI
stock.

Sometime later in July 1971, CWI’s Board of Directors met
and considered the proposed transaction. Certain aspects of
the deal were discussed including the reputations of Mr. Malnik
and Mr. Samuel Cohen. The Board was told: that Mr. Malnik

49a

had been accused, in a book entitled Lansky by one Hank
Messick, of being a close associate of Meyer Lansky; that Mr.
Malnik denied such association; and that federal law enforce-
ment authorities apparently believed Mr. Malnik was involved
in organized crime. They were told that Mr. Malnik had once
been indicted for tax fraud, but that he had received a directed
verdict of acquittal, and that he had never been convicted of a
crime. Board members were also informed of Mr. Cohen’s
violation of the Commodity Exchange Act.

At this meeting, David Bernstein expressed his concern over
entering this transaction, given Mr. Malnik’s reputation. As
outside counsel, Mr. Bernstein recommended seeking the Jus-
tice Department’s approval before consummating the deal. The
Board rejected this advice, however, as a bad precedent, and as
a poor business move. CWI’s directors felt that the reputations
of Mr. Malnik and Mr. Cohen should not preclude the com-
pany from the undertaking at hand and consequently decided
to proceed with the transaction. Mr. Bernstein’s concerns
remained unabated but, he was eventually dissuaded by Clif-
ford Perlman from again addressing the issue before the
Board.

All of CWI’s outside directors were not made aware of every
important aspect of Mr. Cohen’s background at the time of the
Board’s July 1971 approval of the Sky Lake transaction. In
fact, Mr. Cohen had been indicted together with Meyer Lansky
and others in March 1971, for income tax evasion arising from
an alleged casino skimming operation at the Flamingo Hotel in
Las Vegas. Clifford Perlman was aware of Meyer Lansky’s
reputation. Clifford Perlman also knew of the Flamingo skim-
ming indictment involving Messrs. Cohen, Lansky and others
when it was returned in March 1971. Indeed, one of Mr.
Perlman’s employees, at Caesars Palace, Jerry Gordon, had
been charged as a co-defendant in the same indictment. Stuart
Perlman knew of the Flamingo skimming indictment at the
time of its filing, as did Jay Leshaw, since it was extensively
reported in the news media of Miami where both resided.
However, Mr. Cohen’s then pending indictment with Meyer
Lansky and Caesars Palace employee Jerry Gordon was not

50a

discussed with William McElnea and the other outside direc-
tors of CWI. Clifford Perlman testified that he did not
consider it a sensitive issue. Stuart Perlman testified that he
“assumed” all directors knew, even though the subject of Mr.
Cohen’s indictment was never raised or discussed at the same
Board meeting in which Mr. Cohen’s conviction for a com-
modities violation was disclosed. Jay Leshaw testified that at
the time of the Board meeting he focused on the architectural
and land development aspects of the deal rather than on the
character and backgrounds of those with whom his company
was entering into a business relationship.

Based on the foregoing, the following findings are inescap-
able. In 1971, CWI’s Board of Directors was faced with the
prospect of entering into a major business relationship with
two men of admittedly controversial and questionable reputa-
tions. This presented sufficient concern to certain directors
that the topic was raised and considered at a formal Board
meeting. And it was of particular concern to CWI’s counsel,
David Bernstein. Apparently, however, the Board was satisfied
with Mr. Malnik’s denial of an association with Meyer Lansky
and was unpersuaded by the nature of the allegations. On the
basis of the information disclosed at that meeting, the Board
approved the deal after weighing the various considerations
before it.

The most pertinent piece of information, however—Mr.
Cohen’s then pending indictment with Meyer Lansky in a
casino skimming scheme—was not brought to the attention of
the outside directors by Clifford Perlman, Stuart Perlman or
Jay Leshaw. Just four months earlier, Mr. Cohen had been
indicted with Meyer Lansky and others for a crime rooted in
an alleged casino skim. Its relevance to the discussion at hand
was apparent. Had this fact been disclosed at the meeting it
might well have brought the Lansky connection into sharper
focus. The media allegations concerning Mr. Malnik and Mr.
Cohen, then thought to be baseless, might not have been so
readily dismissed. Mr. Bernstein’s unheeded admonition might
not have been so lightly regarded. Indeed, William McElnea
testified that the fact of Mr. Cohen’s indictment would have

Sla

been dispositive of the issue for him if he had known about it.
It was, according to his business ethic, a fact which should
have been fully disclosed to the Board for its consideration. It
was not; and Mr. Perlman has provided no good reason why.

As the chairman of a publicly held corporation engaged in
the heavily regulated business of casino gaming, Clifford
Perlman should have approached Sky Lake with caution and
circumspection, impelled by a sense of duty to his shareholders
and to the regulatory authorities. This sense of duty both
demanded, at the very least, full disclosure to the Board of
Directors. It should have compelled further inquiry, such as a
confrontation with Mr. Cohen himself or communication with
law enforcement or regulatory agencies. But apparently none
of this was done.

3. CRICKET CLUB

In the early summer of 1972, Clifford Perlman became
personally involved in a real estate investment with Alvin
Malnik and Samuel Cohen’s two sons, Joel and Alan Cohen.
This project involved the purchase of the partially completed
Cricket Club, a high-rise condominium complex consisting of
approximately 220 units in Miami, Florida. Calvin Kovens was
chosen to be the general contractor for the completion of the
condominium project. Mr. Kovens, along with Teamsters
Union President Jimmy Hoffa, had been convicted in 1964 for
fraud and conspiracy in using $1 million in Teamsters Pension
funds to finance a real estate venture. Although aware of this
conviction, Clifford Perlman’s only objection to using Mr.
Kovens’ construction company was based on the personal
relationship between Mr. Malnik and Mr. Kovens. When the
costs of the condominium project began to exceed the financ-
ing made available for it, Samuel Cohen lent the Cricket Club
substantial sums in excess of $6 million with which to complete
the undertaking. Close to $2 million was also borrowed from
Comal Corporation. Clifford Perlman knew that Mr. Cohen
was lending money to the Cricket Club.

Clifford Perlman’s equity interest in the Cricket Club was
$10,000. Although asserting he was to be a passive investor,

52a

and this in part due to Mr. Malnik’s reputation, all decisions
involving the business or property of the corporations formed
to undertake the condominium project required the consent of
Clifford Perlman. Moreover, the four partners in this venture
were required to indemnify each other against liabilities in
excess of the percentage interest of each in the stock of the
corporation. Clifford Perlman’s interest was one-third.

Clifford Perlman soon became the guarantor of some sub-
stantial institutional loans. As a condition to a $13 million loan
from the Carner Bank of Miami Beach to the Cricket Club,
Clifford Perlman and his partners were required to guarantee
(1) completion of the project, (2) payment of all costs thereof
and (3) repayment of the construction loan. In October 1972,
Mr. Perlman, Mr. Malnik, the Cohen sons and Mr. Kovens
executed a performance bond and a labor and material pay-
ment bond, each in the amount of $6,100,000. More guaran-
tees would follow.

Sometime i> November 1972, Philip Hannifin, then Chair-
man of the Nevada Gaming Control Board (NGCB), per-
sonally approached Clifford Perlman concerning his
involvement with Alvin Malnik in the Cricket Club. At this
meeting, Mr. Hannifin voiced his concerns over Mr. Perlman’s
association with an individual of Mr. Malnik’s reputation. As a
consequence of what Mr. Hannifin had said, Mr. Perlman
committed to extricate himself from the Cricket Club if Mr.
Malnik would not institute a libel suit against Hank Messick,
the author of Lansky.

However, Clifford Perlman remained in the Cricket Club
even after Mr. Malnik informed him that he would not file a
libel suit. Citing the fact that he was still committed as a
co-guarantor on several substantial loans to the Cricket Club,
Clifford Perlman chose to continue his ir olvement in the
project, guaranteeing new loans throughout its construction
period and lending sums of money to the corporation.

The Cricket Club project represents yet another and more
direct involvement by Clifford Perlman in the business world
of Alvin Malnik. Mr. Perlman’s partnership with Mr. Malnik
and Mr. Cohen’s sons in this venture developed into one of

53a

long duration, a fact which should have been evident from the
outset. His series of guarantees on loans to the Cricket Club
bound Mr. Perlman so firmly to the arrangement that even
when he later wanted to extricate himself, he found it impossi-
ble to do so. To this day, Mr. Perlman remains obligated on
$280,000 of these guarantees after paying $386,000 to be
relieved of guarantees of $3 million, a telling indication of his
once intricate and deep involvement in the matter.

Prior to his entry into the Cricket Club, Clifford Perlman
neither consulted with Harold Campbell, CWI’s then recently
hired Director of Corporate Security, nor inquired as to Mr.
Malnik’s background nor sought confirmation of the allega-
tions made against him. He was apparently content with Mr.
Malnik’s denials. Neither did Mr. Perlman notify the Nevada
regulatory authorities as to his contemplated venture with Mr.
Malnik.

When Mr. Hannifin first approached Mr. Perlman about this
matter in November 1972, Mr. Perlman assumed the defense of
Mr. Malnik. This was indeed a curious position given Mr.
Perlman’s earlier concern that Mr. Malnik was not licensable in
Nevada, his awareness of Mr. Mainik’s reputation and his
desire to become only a passive investor in the Cricket Club
partly due to this reputation. But not only did Mr. Perlman
defend Mr. Malnik, he proposed an alternative to outright
severance which permitted him a means to remain in the
project as Mr. Malnik expressly desired. By the time this
alternative was no longer viable, Clifford Perlman found
himself inextricably tied to the financial health of the project.

Much has been argued as to whether Mr. Perlman’s conduct
in this regard was violative of an official directive to the
contrary. The issue, however, is not so easily defined. The fact
that such a violation may not have occurred does not preclude
this Commission from viewing Mr. Perlman’s conduct nega-
tively. In November 1972, Philip Hannifin, the Chairman of
the Nevada Gaming Control Board, communicated his con-
cerns to Clifford Perlman. As a result of this meeting, Mr.
Perlman understood that he had made a commitment to Mr.
Hannifin. He subsequently, in his own words, “definitely”

S4a

breached that commitment. These circumstances cause us deep
concern about Clifford Perlman’s attitude toward the regula-
tory process.

D. COVE HAVEN

According to Mr. Perlman’s testimony, he chanced to meet
Alvin Malnik on an airplane in December 1974. Mr. Malnik
inquired whether Clifford Perlman or his company could
provide an opportunity to invest a substantial sum of money.
Clifford Perlman first suggested that Mr. Malnik pay for
improvements to the Sky Lake Country Club and accordingly
increase CWI’s rent for the country club. Mr. Perlman’s
proposal would have resulted in an increased cash drain for
CWI rather than in the cash relief his company was supposedly
then seeking. When Mr. Malnik declined that offer, Mr.
Perlman suggested a sale and leaseback of CWI’s two honey-
moon resorts located in the Poconos.

Mr. Malnik offered to purchase the properties for $15
million and to lease the properties back to CWI at an annual
rental of 13% to 15% of the purchase price. Mr. Perlman, in
turn, presented the matter to the CWI Board for resolution.
There were no negotiations over the price set by Mr. Malnik.
CWI’s Board of Directors gave conceptual approval to the
plan and, because of an apparent conflict of interest occa-
sioned by Clifford Perlman’s Cricket Club involvement, as-
signed CWI President William McElnea to conclude the
transaction. His conflict of interest, however, did not har
Clifford Perlman from ultimately voting to approve the trans-
action.

On February 20, 1975, CWI entered into a sale and lease-
back of its Cove Haven and Paradise Stream resorts with Cove
Associates, a Florida partnership comprised of Alvin Malnik
and Samuel Cohen’s sons, Joel and Alan. The assets of these
properties were sold for $15 million. Prior to the consumma-
tion of the deal, CWI learned that Cove Associates, through
Mr. Malnik, was borrowing the $15 million at 9% interest from
the Teamsters Pension Fund. As part of the arrangement, CWI

5Sa

agreed to lease back the two Pocono properties for 20 years at
an annual rent of $2,130,000 (14.25% of the purchase price).
Each of the leases gave CWI certain options to renew and to
purchase, and obligated CWI to make certain improvements.

Three related aspects of the Cove Haven sale and leaseback
transaction are worthy of particular note as they reflect on the
character of Clifford Perlman. The first aspect concerns his
willingness in late 1974 to lead his company into yet another
business entanglement with Alvin Malnik and the sons of
Samuel Cohen. The second aspect concerns his willingness to
do this despite his November 1972, meeting with Philip Hanni-
fin and his commitment to Mr. Hannifin to disassociate from
Mr. Malnik and the Cricket Club. The third aspect concerns his
failure to disclose all relevant information to the full CWI
Board during its consideration of the Cove Haven transaction.
Specifically, Clifford Perlman did not advise the full CWI
Board of his November 1972, conversation with Philip Hanni-
fin prior to the Cove Haven approval. Clifford Perlman
presumed that the independent directors knew of the Hannifin
meeting even though the Perlmans and Mr. McElnea made no
disclosure and the subject was neither raised nor considered at
the Board meeting when the Cove Haven transaction was
discussed.

Also noteworthy is the fact that CWI’s Corporate Security
Chief, Harold Campbell, was not asked to review the Cove
Haven transaction as to suitability. At that time company
policy was that all significant transactions were, in the discre-
tion of the head of the subsidiary, to be submitted for security
review.

In late 1972, Harold Campbell had been asked to investigate
Mr. Malnik’s background and had reported his results to
Clifford Perlman. While Mr. Campbell refused to express an
opinion in his testimony before us as to whether Alvin Malnik
was associated with organized crime, both Clifford Perlman
and William McElnea recalled that Mr. Campbell had pre-
viously been of the opinion that Mr. Malnik was so associated.

At about the same time as his investigation of Mr. Malnik
(late 1972), Campbell also reported to Clifford Perlman on the

56a

subject of honorary memberships at the Skylake Country

Club. In response to Mr. Perlman’s inquiry, Mr. Campbell

advised:
Many of the other Teamsters officials possessing Honor-
ary Memberships have been in frequent business and
social contact with top organized crime figures through-
out the country. Whether one agrees or not, the Central
States Pension Fund has in recent years been described in
the news media as the “bankroll of the Mafia.” Rightly or
wrongly, many Mafia figures have obtained loans from
this fund and even more importantly, many top Mafia
figures have been in a position to arrange for loans from
the fund for others, sometimes on the basis of friendship
and at other times for a substantial fee.

Interestingly enough, both the source of Mr. Malnik’s funds
for the $15 million purchase price of Cove Haven—namely the
Teamsters Pension Fund—and the 9% interest rate at which
the money was borrowed were known to CWI in advance of
the sale-leaseback agreement.

Once again, in the absence of any credible explanation
presented in this record, we are left with a serious question.
Why did Clifford Perlman, in late 1974, lead his company into
its second (and his third) business entanglement with Alvin
Malnik, especially in light of his November 1972 discussion
with the Chairman of the Nevada Gaming Control Board?

CONCLUSIONS AS TO CLIFFORD FP? 8LMAN

The facts outlined above simply do not square with the
positive testimony adduced as to the good character, honesty
and integrity of Clifford Perlman. Stated bluntly, this Commis-
sion is unable to declare that Clifford Periman may be trusted
to control a company which seeks licensure to operate a casino
in this jurisdiction. This determination flows primarily from
three considerations:

(1) the associations with Alvin I. Malnik and Samuel E.
Cohen which Clifford Perlman led CWI to engage in or which
he engaged in personally;

57a

(2) the attitude of Clifford Perlman with regard to the
regulatory process; and

(3) the candor with which Clifford Perlman dealt with his
fellow Directors on the CWI Board.

Based on the substantial credible evidence in the record as a
whole, this Commission finds Samuel E. Cohen to be a person
of unsuitable character and unsuitable reputation. Following
indictment by the federal authorities together with Meyer
Lansky and others, he was convicted and incarcerated for
filing a false income tax return on facts relating to the skim-
ming of proceeds from the Flamingo casino in Las Vegas,
Nevada. Previously he had been fined for violating the Com-
modity Exchange Act. Mr. Cohen’s alleged involvement with
Meyer Lansky and others in the Flamingo skimming indict-
ment received widespread publicity in the Miami area in 1971.

Based on the substantial credible evidence in the record as a
whole, this Commission finds Alvin I. Malnik to be a person
of unsuitable character and unsuitable reputation. As to his
character, the evidence establishes that Mr. Malnik associated
with persons engaged in organized criminal activities, and that
he himself participated in transactions that were clearly illegiti-
mate and illegal. As to his reputation, he has been identified
repeatedly in the news media as a close business associate of
Meyer Lansky and other reputed organized crime figures.
Moreover, federal law enforcement authorities have long be-
lieved Mr. Malnik to be involved in organized crime.

Prior to the 1971 Sky Lake transaction, Clifford Perlman
knew of Mr. Malnik’s unsavory reputation and Mr. Cohen’s
pending indictment for casino skimming. Yet Mr. Perlman led
his company into a direct, intense, long-lasting association
with these men. He himself became personally involved in the
1972 Cricket Club transaction directly and intimately with Mr.
Mainik and Mr. Cohen’s two sons in a second ongoing associa-
tion. And, in the late 1974 Cove Haven transaction he led his
company into a direct, intensive, continuing association with
Mr. Malnik and Mr. Cohen’s sons.

Although Samuel Cohen was not a direct participant in
either the Cricket Club project or the Cove Haven agreement,

58a .

the evidence plainly indicates that he was indirectly interested
in both. Mr. Cohen lent large sums of money to the Cricket
Club and Mr. Perlman knew of those loans. Moreover, as part
of the Cove Haven transaction, CWI requested and received a
deferral of the payments due on the Sky Lake obligations.
Since Mr. Malnik and Samuel Cohen were the principals in the
Sky Lake deal, it is possible that some of the Cove Haven
proceeds were being channelled to Mr. Cohen. Thus, Mr.
Perlman exhibited no great reluctance to continuing involve-
ment, direct or indirect, with the indicted and later convicted
Mr. Cohen as well as the suspect Mr. Malnik.

Beyond Mr. Perlman’s willingness to engage in repeated and
enduring relationships with Messrs. Malnik and Cohen, no
reasonable explanation has been provided for the failure of Mr.
Perlman to provide the CWI directors with material informa-
tion regarding those relationships. Specifically, Mr. Perlman
chose not to disclose the fact of Mr. Cohen’s pending indict-
ment when the board voted on the Sky Lake proposal. Second,
Mr. Perlman made no mention of Mr. Hannifin’s disapproval
of Mr. Malnik before the board was presented with the Cove
Haven offer. These omissions contradict the characterization
of Mr. Perlman as a man of candor and forthrightness.
Further, they raise disturbing questions as to whether Mr.
Perlman was so anxious to consummate the transactions that
he refu

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_1034%3A2. Public record. Not legal advice.