Appendix — Gerace v. New Jersey Casino Control Commission

—_—_——

85-1308 Zi | at |

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Pen, ay a

NO.

s9OSEF , c > 4 ANMIOL, Jt.

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IN THE

0 ee ae ?

Supreme Court of the Hnited States

OCTOBER TERM, 1986

FRANK GERACE and FRANK MATERIO,

Petitioners,

Ve.

STATE OF NEW JERSEY CASINO CONTROL COMMISSION

and

STATE OF NEW JERSEY, DEPARTMENT OF

LAW AND PUBLIC SAFETY, DIVISION OF

GAMING ENFORCEMENT,

Respondents.

APPENDIX ACCOMPANYING

PETITION FOR A WRIT OF CERTIORARI TO

THE NEW JERSEY SUPREME COURT

; RONALD F. KIDD (Counsel of Record)

STEVEN M. JANOVE

DUANE, MORRIS & HECKSCHER

1500 One Franklin Plaza

Philadelphia, PA 19102

(215) 854-6300

Zi

HARRY A. HORWITZ

DAVIS, REBERKENNY & ABRAMOWITZ

499 Cooper Landing Road

. Cherry Hill, NJ 08002

(609) 667-6000

Attorneys for Petitioners

y

January 30, 1986 /

APPENDIX TABLE OF CONTENTS

Page

Order of the Supreme Court of New Jersey

Order Denying Petition for Certi-

fication, November 1, 1985..... iveevenne oe

Opinion of the Superior Court of New

Jersey, Appellate Division

Opinion Affirming Decision of

Casino Control Commission,

JULY EL, TOSS. cecsevecsevrvesee TEeTrrir res + 28

Opinion of the New Jersey Casino Control

Commission

Opinion Disqualifying Frank Gerace

and Frank Materio, September 28,

berry Tere ra rere rec rs ve ree ee tee Te 113a

Order of the New Jersey Casino Control

Commission

Order Disqualifying Frank Gerace

And Frank Materio, September 28,

Pe» Pee ee ceevuss er oer as ert ere eh ea 259a

Order of the New Jersey Casino Control

Commission

Order Sanctioning Frank Gerace

And Frank Materio, September 12,

oP eeePeeE Tire CELLET CT eT o« eOa8

-la-

SUPREME COURT OF NEW JERSEY

C-217 SEPTEMBER TERM 1985

24,441

IN THE MATTER OF THE

REGISTRATION OF HOTEL AND:

RESTAURANT EMPLOYEES

INTERNATIONAL UNION

LOCAL 54

ON PETITION

FOR

CERTIFICATION

(Frank Gerace, Frank

Materio & Karlos LaSane)

Petitioners.

To the Appellate Division, Superior Court:

A petition for certification of the

judgment in A-993-82T3 A-317/525/880-84TS

having been submitted to this Court, and

the Court having considered the same;

It 1S ORDERED that the petition for

certification is denied with costs; and it

is further

ORDERED that the appeal filed in the

within matter is dismissed pursuant to R.

2:12-9.

-2a-

WITNESS, the Honorable Robert N.

Wilentz, Chief Justice, at Trenton, this

29th day of October, 1985.

FILED s/Stephen W. Townsend

Supreme Court,

November 1, 1985 CLERK OF THE SUPREME

COURT

-3a-

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE COMMITTEE ON OPINIONS

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

A-993-82T5

A-317-84TS5

A-525-84T5

A-880-84TS5

IN THE MATTER OF THE HOTEL

AND RESTAURANT EMPLOYEES AND

BARTENDERS INTERNATIONAL UNION

LOCAL 54

Argued February 21, 1985 - Decided

Before Judges Matthews, Furman and

Havey.

On appeal from an Order of the New

Jersey Casino Control Commission.

Michael N. Katz argued the cause for

Hotel and Restaurant Employees and

Bartenders International Union Local

54 (Meranze and Katz, attorneys;

Bernard N. Katz, of counsel).

Ronald F. Kidd, admitted pro hac vice,

argued the cause for appellants

Gerace, Materio and LaSane (Duane,

Morris & Heckscher, attorneys; Steven

——————

-4a-

M. Janove, and Harry Horwitz of Davis,

Reberkenny & Abramowitz, of counsel).

John R. Zimmerman, Senior Assistant

Counsel, argued the cause for

respondent New Jersey Casino Control

Commission (Thomas N. Auriemma, Deputy

Director/Legal Division, and Leonard

J. DiGiacomo, Assistant Counsel, on

the brief).

Eugene M. Schwartz, Deputy Attorney

General, argued the cause for the

respondent State of New Jersey,

Division of Gaming Enforcement

(Anthony J. Parrillo, Assistant

Attorney General, of counsel; Gary A.

Ehrlich, Deputy Attorney General, of

counsel and on the brief with Mr.

Schwartz).

The opinion of the court was delivered

by MATTHEWS, P.J.A.D.

From June to September 1982, the

Casino Control Commission conducted

hearings to determine whether certain

officials of the Hotel and Restaurant

Employees and Bartenders International

Union Local 54 were disqualified under

Section 86 of the Casino Control Act,

N.J.S.A. 5:12-1 to N.J.S.A.,. 5:12-152 (the

act). Pursuant to Section 93(a) of that

-Sa-

act, Local 54 had filed an annual

registration statement with the

Commission. N.J.S.A. 5:12-93(a). The

Division of Gaming Enforcement was then

requested to review the credentials of the

Union and its personnel as mandated by

N.J.S.A. 5:12-94(a).

On May 11, 1982, the Division

submitted a letter report to the

Commission in which it urged that Section

93 sanctions be imposed against several

union members. Among the individuals said

to be disqualified by the act were the

President, Frank Gerace, and Business

Manager, Frank Materio. On April 30,

1982, the Division filed another report in

which it cited two additional union

employees, Eli Kirkland? and Karlos

LaSane, as disqualified under the act.

The Commission refused to impose

Section 93 sanctions against Eli

Kirkland.

:

|

:

-6a-

On September 28, 1982, the Commission

issued a determination in which it found

Gerace and Materio disqualified under

Section 86(f), and LaSane disqualified

under Section 86(c). The Commission

applied Section 93(b) which prohibits the

Union from receiving dues from its

employees or from administering pension or

welfare funds if any of its officers,

agents or principal employees is

disqualified by Section 86 of the act.

N.J.S.A.5:12-93(b).? Frank Gerace, Frank

Materio, Karlos LaSane and the union have

appealed the adverse decision.

Lecal 54 represents approximately

14,000 hotel workers, 10,000 of whom are

employed in casino hotels in Atlantic

City. The Local's members are employed in

The Commission chose not to apply

those Section 93 sanctions which would

have prohibited the Union from

administering pension and welfare

funds.

-7a-

non-gaming positions including waiters,

kitchen workers, bartenders, and porters.

In 1979 Frank Gerace was elected as

President of Local 54, and was re-elected

to that position in June 1982. As chief

executive officer, Gerace was authorized

to hire and discharge business agents,

oversee daily union activities, and engage

in collective bargaining on behalf of the

Local's members. Frank Materio became an

employee of Local 54 in mid-1978. On June

30, 1978, pursuant to a motion made by

Gerace, Materio was accepted by Local 54's

Executive Board as a union organizer.

Materio was appointed to the Executive

Board as trustee on January 16, 1979.

Karlos LaSane was employed by Local 54 on

May 4, 1981 to represent union members at

grievance hearings. LaSane also was

designated by Gerace as Local 54's

affirmative action officer.

-8a-

Section 86, of the act, N.J.S.A.

5:12-86, sets out the criteria under which

an applicant will be denied a license.

Among those criteria pertinent here are

subsections c- and f. N.J.S.A. 5:12-86(c)

mandates the disqualification of any

applicant who has been convicted of

certain enumerated crimes under New Jersey

law. N.J.S.A. 5:12-86(f) disqualifies any

applicant identified as a “career offender

Or a member of a career offender cartel"

or one who is “an associate of a career

offender or a career offender cartel in

such a manner which creates reasonable

belief that the association is of such a

nature as to be inimical to the policy of

this act...." (emphasis provided. )

N.J.S.A. 5:12-86(f). However Section

93(b) also permits the Commission, at its

discretion, to waive the disqualifying

Criteria. N.J.S.A. 5:12-93(b).

-Sa-

In its letter of May 11, 1982, the

Division alleged that Gerace and Materio

were disqualified under Section 86(f) by

reason of their association with certain

career offenders or career offender cartel

members. LaSane was claimed to be

disqualified under Section 86(c) by reason

of a prior criminal convection. Two

issues were directed to the Commission

with respect to Gerace and Materio:

first, whether Gerace and Materio were

associated with members of a career

offender cartel, and second, whether that

association was of such a nature so as to

create a reasonable belief that it was

inimical to the policy of the act and to

gaming operations. The issues directed to

the Commission with respect to LaSane were

whether he was an officer, agent or

principal employee of Local 54 within the

meaning of the act, and whether the

Commission should waive his

-10a-

disqualification as permitted by N.J.S.A.

§:12-93(b).

The Division presented extensive

evidence to suggest a relationship between

Gerace and Materio and career offenders,

especial one Nicodemo Scarfo. Testimony

at the 1982 hearings concerned Scarfo, the

Bruno crime family, and all possible

implications between Scarfo and Local 54

members. At the conclusion of the

testimony, the Commission made detailed

findings of fact regarding the possibility

of a relationship between the Union

officials and Scarfo, and its extent.

The Commission found that Nicodemo

Scarfo has led the Bruno organized crime

family since March 1981. The "Bruno

family," which operates in the

Philadelphia metropolitan area and

southern New Jersey, including Atlantic

City, was named after its former head,

Angelo Bruno. Bruno was murdered in March

-lla-

1960. Philip Testa assumed control of the

"family" following Brumo's death, until he

was murdered in March 1981.

The Commission also found that Scarfo

had a lengthy history of criminal

involvement, beginning in March 1950 when

he was convicted of setting up an illegal

lottery. He entered a plea of guilty to

involuntary manslaughter in 1964, and most

recently, was convicted of possession of a

firearm by a convicted felon in 1981. The

Commission concluded that Scarfo is a

career offender and am active member of a

career offender cartel.?

The Commission evaluated the evidence

concerning the relationship between Gerace

and Materio and Scarfo. It found six

areas in which an association between

Appellants now concede that Scarfo is

a career offender.

-l2a-

Scarfo and Local 54's officers is

evidenced.

The Division first submitted a

telephone list as indicative of Scarfo's

association with Gerace and Materio. The

telephone list was seized from Scarfo in

December 1979 following his arrest for the

murder of Vincent Falcone. Some of the

names on the list were aliases and many of

the numbers were encoded. After

deciphering the code, the law enforcement

officers determined that several encoded

names and numbers related to associates of

Scarfo who have been linked to organized

criminal winnie: Other names and

numbers listed in the book were not

encoded, such as dentists and attorneys.

The Commission determined that five

employees of Local 54 were listed in

Scarfo's phone book under aliases. Frank

Gerace was listed under the name "Percy,"

and his number was in code. Gerace's

-l3a-

mother was listed as "Percy Mom,” and

Susan Holland, Branch Manager of William

L. Meyers, Inc., Administrator of Local

54's Health and Welfare Fund, was listed

as "Percy Girl." Both women were listed

with coded numbers. Materio's number was

also on Scarfo's phone list. However,

Materio was listed by his proper name and

his numbers were uncoded. In addition,

Robert Lumio, Secretary-Treasurer of Local

54 from September 1979 to June 1981, and

Frank Lentino, Business Agent for Local 54

since 1981, were listed under aliases.

In December 1979, the police found

another piece of evidence indicative of

Scarfo's interest in Local 54. During

their investigation of the Falcone murder,

the police seized a piece of paper from

Scarfo's dresser drawer containing the

words:

KIS-POTS-GON ALL OUT BACK TO

54 ST. BEFORE FEB.

-l4a-

The Commission found that the note

referred to Thomas Kissick, Ernest Potts,

and Thomas "Goony" Walsh, and their

removal as union officials when Local 491

merged with Local 54 in September 1980.

The Commission held that the paper

evidenced both Scarfo's interest in the

unions, and his advance notice of the

union's activities.

The third basis of which the

Commission disqualified Gerace and Materio

involved the events leading to Scarfo's

arrest for the Falcone murder. Shortly

after their arrest, Scarfo and his two

associates, Leonetti and Merlino, were

released on $92,000 cash bail. Twenty

thousand dollars of that amount was

provided by Gerace's mother. At the

hearing, the Division presented

documentary evidence that half of Lillian

Gerace's contribution was supplied by

appellant Frank Gerace.

-15a-

In addition, after their release,

Materio put up his house as property bail

for Leonetti and Merlino, so that part of

the cash bail could be released. Despite

this, Materio testified that he did not

know Leonetti and Merlino personally and

that he agreed to use his home for bail as

a favor to Scarfo's mother, a personal

friend. Materio further testified that he

had known Scarfo for 25 years, although he

had only seen him 6 to 7 times in the

prior 5 years.

The Commission next relied on the

immunized testimony of Joseph Salerno.

Salerno is the principal witness against

Scarfo, Leonetti and Merlino in their

trial for the murder of Vincent Falcone.

Salerno was a plumber in New Jersey. In

1978, when he encountered financial

problems, Salerno approached Leonetti for

a loan. In June 1979, Salerno had marital

problems and Leonetti allowed him to stay

-l6a-

at his premises. From September 1979 to

December 1979, Salerno resided at 26-28

North Georgia Avenue, in Atlantic City.

During that time, Salerno had frequent

contact with Scarfo, Leonetti, Merlino,

and Lumio, who was then the Secretary-

Treasurer of Local 54.

On several occasions Salerno

overheard Scarfo indicate that he

controlled the unions. Salerno testified,

for example, that on one occasion Scarfo

told Lumio that: "I got you your job and

I got that other big fat j-o his job and

don't you forget it." Salerno also

reetifies that during his stay at 26-28

North Georgia Avenue, he saw Gerace in

Scarfo's company 11 or 12 times. Salerno

stated that three to four meetings were

held at Scarf, Inc., a company owned and

operated by Scarfo. Meetings between

Gerace and Scarfo were also held at

Scarfo's apartment and outside the

“i 7a=-

premises of 26-28 North Georgia Avenue.

Salerno stated, however, that he never

overheard Gerace and Scarfo's conversation

and never heard them say anything to each

other regarding Local 54 and union

business.

The Commission also heard evidence

about Local 54's dealings with Scarfo

associates and cited Robert Lumio, Albert

Daidone, Joseph Erace, and Frank Lentino,

in addition to Gerace and Materio, as

present or former employees of Local 54

who are connected to Scarfo.

Robert Lumio was appointed by Gerace

to fill the office of Secretary-Treasurer

in August 1979. As previously mentioned,

Salerno testified with respect to Lumio's

ties to Scarfo. In addition, State agents

testified they saw Lumio in the company of

Scarfo and Leonetti on several occasions.

Albert Daidone became Local 54's business

agent for the Camden office in December

DL Le a ee

-18a-

1980. Less than four months later, Gerace

appointed Daidone to the Executive Board

of Local 54. In June 1981, Daidone was

appointed Vice President of Local 54

following thé death of Robert Lumio.

Daidone was an admitted friend of Natale

and Angelo Bruno. Natale was described by

FBI agents as "a major distributor of

illegal drugs" and "a very close associate

of Angelo Bruno.”

The Commission found that Joseph

Erace was the third member of Local 54

with connections to Scarfo. On December

14, 1981, Gerace appointed Erace to the

Executive Board of Local 54. Donna

Savarese, lounge manager at the Tropicana

Casino Hotel, testified to the Commission

that on February 6, 1982, Erace approached

her and stated that he wanted to introduce

her to a friend named Nick Scarfo.

Frank Lentino is the last Local 54

employee with alleged ties to Nick Scarfo.

-19a-

On June §, 1981, Gerace appointed Lentino

as Camden County Office Manager. Lentino

appears on the Scarfo telephone list,

previously described, under the name Frank

Gray, with a coded number. Lentino is

also a proposed alibi witness for Scarfo

in connection with the Falcone murder.

Thus, the Commission found that there are

six present or former employees of Local

54, Gerace, Materio, Lumio, Daidone,

Lentino, and Erace who are ccnnected to

Scarfo or other members of the Bruno crime

family.

The Commission also found

connections between Local 54's business

dealings and persons or firms tied to

Scarfo. The Division first presented

evidence that a company hired by Local 54

to perform union headquarters renovation

work was connected with Scarfo. In

January 1979, Local 54's Executive Board

approved a renovation of the union

BL

-20a-

headquarters and authorized the officers

to seek the best union contractors for the

job. Toro Construction Company became the

general contractor for the renovations.

Tore is a legitimate company and was one

of four or five contractors recommended to

Gerace by John Rich, business agent for

Local 33. Although there is no evidence

of any irregularity in the way Toro

obtained contracts or performed work for

Local 54, Toro had contributed $44,000 in

cash to the bail for Scarfo, Leonetti and

Merlino following their arrest for the

Falcone murder. In addition, Rick Casale,

roofing contractor who did the roofing

work on the renovation of Local 54

headquarters, is a "very close associate

of Scarfto.*

In 1979 Local 54 sold its

headquarters building for $175,000. Part

of the real estate commission was earned

by one Vincent Sausto, an insurance broker

-2la-

and real estate agent who handles

insurance policies for Scarfo and his

relatives, and who has been seen on the

premises of Scarf, Inc.

The Division also produced evidence

concerning business dealings between

Affiliated Leasing Systems, Inc. and Local

54. In march 1979, Affiliated Leasing

Systems, Inc. leased a car to Philip

Leonetti. On December 18, 1979, Robert

Wayne, an account executive with

Affiliated, had occasion to go to the

offices of Scarf, Inc. to deliver a

vehicle. While at Scarf, Inc.

headquarters, Scarfo suggested to Wayne

that he contact Local 54 with regard to

the possible leasing of other vehicles.

As a result, Affiliated leased two

vehicles to Local 54.

Testimony also was presented on

behalf of Gerace and Materio. Sixteen

witnesses, including Joseph Menardy,

Mi rrrrrrneetenmsinreeceenniiiliieiinsiataanatta tit itll

-22a-

Business Manager of Local 334, Charles

Marciante, President of the New Jersey

AFL-CIO, and William G. Rosenthal, Esq. of

Shaw & Rosenthal, testified that Gerace

was a dedicated and responsible union

leader. The Commission found that the

testimony on behalf of Local was

uncontradicted.

The Commission found, however,

viewing the record as a whole, that the

association of Gerace and Materio with

Nicodemo Scarfo was inimical to the policy

of the act and to gaming operations. The

Commission further held that once the

influence of a career criminal such as

Scarfo has been shown, the State need not

wait for its detrimental effect on the

union to become manifest. Materio and

Gerace were, thus, disqualified under

Section 86(f) of the act.

The Division also presented evidence

for the disqualification of Karlos LaSane.

-23a-

LaSane has been employed with Local 54

since May 4, 1981. LaSane represents

union members employed at Bally's Park

Place and Caesar's Boardwalk Regency at

grievance hearings. LaSane testified that

he attends grievance hearings, speaks on

behalf of union members and attempts to

resolve whatever problems exist between

the employees and management. LaSane has

also been designated as Local 54's

affirmative action officer. The

Commission found that LaSane is an "agent

within the meaning of N.J.S.A.

AerSi-Fe.25—

The Division sought to disqualify

LaSane on the basis of his prior criminal

record. LaSane was convicted in the

United States District Court for the

District of New Jersey on May 21, 1973, of

interference with commerce, aiding and

abetting and conspiracy in violation of 18

U.S.C.A. §1951. From May 21, 1968, until

-24a-

the time of his indictment, LaSane was, as

a Commissioner of the City of Atlantic

City, Director of Parks and Public

Property. According to the indictment,

LaSane obstructed and delayed the

construction of public projects, purchases

of goods, and the licensing of firms which

sought to do business with the City of

Atlantic City. The offense for which

LaSane was convicted is equivalent to a

violation of N.J.S.A. 2C:20-5(d). This

offense is listed as a disqualifying

offense in Section 86(c)(1l) of the Casino

Control Act. N.J.S.A. 5:12-86(c)(1). The

Commission found that LaSane was acting in

his official capacity as Commissioner of

the City of Atlantic City when he

committed the acts which constituted the

federal crime. The Commission chose to

disqualify LaSane based on his prior

conviction, pursuant to N.J.S.A.

5:12-86(c).

-25a-

As

Appellants do not dispute that

Scarfo is a career offender or that Gerace

had a social relationship with Scarfo at

one time. They contend, however, that the

circumstantial evidence before the

Commission did not support a finding of

influence “inimical” to the policies of

the act within the meaning of N.J.S.A.

5:12-86(f). The State? contends the

evidence amply supports the Commission's

finding that Gerace and Materio operate

Local 54 under Scarfo's influence and that

the inimical criterion is therefore

satisfied.

The standard of reviewing

Commission's factual findings was

established in In re Boardwalk Regency

All references to "the State” refer to

both respondents, The Division of

Gaming Enforcement and the Casino

Control Commission, unless otherwise

specified.

-26a-

Casino License Application, 180 N.J.

Super. 324 (App. Div. 1981), aff'd as

mod., 90 N.J. 361 (1982), app. dism. sub

nom., Perlman v. Attorney General, 459

U.S. 1981, 103 S.Ct. 562, 74 L.Ed.2d 927

(1982). We held that an appellant court

is obligated to determine 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

Commissioners who heard the

witnesses to judge of their

credibility.

[180.N.J. Super. at 333].

The appellate review calls for a careful

and principled consideration of the

agency's record and findings resting upon

a determination of the worth, plausibility

and consistency of that record. Mayflower

Securities Co. v. Bureau of Securities, 64

N.J. 85 (1973). As we stated in Boardwalk

Regency, if it appears that the

-278-

Commission's findings might reasonably

have been reached from sufficient credible

evidence,

[W]e 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 implement-

ation of the legislative

intent in the manner designed

by the Legislature causes us

to proceed with especial re-

straint in agency matters.

[180 N.J. Super. at 334]

The essential question before the

Commission was whether the association

between Scarfo and members of Local 54 was

"inimical" within the meaning of Section

86(f), N.J.S.A. 5:12-86(f). Webster's

)

Third New International Dictionary defines

inimical as “harmful or adverse.”

Webster's Third New International

Dictionary, G.&C. Merriam Co., (1971).

Thus, if the Commission had "reasonable

belief" that the association between

-28a-

appellants and Scarfo was adverse to the

policy of the act and gaming operations,

it was obligated to disqualify the labor

Organization under Section 93. N.J.S.A.

9:12-86(f); N.J.S.A. 5:12-93(b).

The public policy of the State as

expressed in the act, necessitates a

Strong state regulatory interest in all

aspects of casino activities. N.J.S.A.

59:12-1(b)(6). The State's interest

extends to those labor organizations which

represent state-licensed or registered

Casino hotel workers. N.J.S.A. 5:12-93.

Of paramount concern to the Legislature

was the exclusion from participation in

the gaming industry of all persons with

known criminal records, habits or

associations. N.J.S.A. 5:12-1(b)(7).

Because labor organizations have the power

to involve themselves materially in the

operation of casino hotels, regulatory

Supervision of such organizations was

-29a-

deemed critical. The State Commission of

Investigation, in advocating the adoption

of what is now Section 93, noted that

there were:

few better vehicles utilized

by organized crime to gain a

stranglehold on an entire

industry than labor

racketeering.

[Report and Recommendations on

Casino Gambling by the New

Jersey State Commission of

Investigation (April 1977) at

1-14]

The Legislature intended by enacting

Section 93, to enable the Commission to

regulate labor organizations and, thus,

prevent members of organized crime from

affecting the casino industry through

labor unions. See Brown v. Hotel and

Restaurant Employees and Bartenders

International Union Local 54, 468 U.S.

, 166 8.Ct. 3179, 3182-3284, 82 L.Ed. 2d

373, 379-380 (1984).

In view of the legislative

background, a properly supported finding

-30a-

of influence by Scarfo over Gerace and

Materio would be sufficient to disqualify

the two union members under N.J.S.A.

9:12-86(f). Appellants concede a showing

of actual influence would disqualify them.

They contend however, that the

Commission's conclusions are not supported

by sufficient evidence that either Gerace

Or Materio were subject to the influence

of Scarfo.

The evidence cited by the Commission

to support its conclusion that Scarfo

influenced Gerace and Materio includes:

(1) Scarfo's phone list; (2) the fact that

appellants helped Scarfo obtain his

release on bail in 1979; (3) the testimony

of Joseph Salerno; (4) union appointments

with alleged ties to Scarfo; and (5)

business dealings between Local 54 and

Scarfo associates. Appellants contend

this evidence does not support the

Commission's findings that Scarfo exerted

-3la-

actual influence over them. With respect

to the telephone list, the Commission

concluded:

It can be inferred that the

persons on the list are those

who Scarfo had occasion to

speak with or anticipated that

he might have an occasion to

speak with on the telephone.

In view of the constant

attention he receives from the

police, it can further be

inferred that he kept certain

numbers in code because he did

not want evidence of his

association with those persons

to fall into the hands of the

authorities. The appearance

of five Local 54 employees on

the list is evidence of

Scarfo's interest in the Union

and access to its leaders

Appellants argue that the phone list

demonstrated nothing more than Scarfo's

interest in Local 54 and should be

disregarded. The State admits that the

phone list, by itself, is not conclusive

as to Scarfo's influence over Gerace and

Materio, however, the State contends that

it is not without value.

-32a-

Similarly, appellants aliees the.

coded message confiscated from Scarfo in

1979 is not indicative of Scarfo's

influence over Gerace and Materio. The

message did not refer to either appellant

Gerace or Materio. Appellants, however,

do not challenge the Commission's

conclusion that the message evidenced

Scarfo's interest in the union.

The Commission secondly points to

bail money posted by Gerace and Materio

for the release of Scarfo, Leonetti and

Merlino after their arrest for the murder

. Of Vincent Falcone. Gerace contends he

supplied Scarfo with $10,000 at his

mother's request. Gerace further contends

the Commission found that the transaction

was open and legitimate. The Commission

concluded, however, that Gerace would not

risk a major portion of his savings for an

Organized crime figure unless "motivated

-33a-

by some strong sense of obligation or

loyalty."

Materio also claimed that he put up

his house as property bail for Leonetti

and Merlino as a favor to Scarfo's mother.

Materio testified that he knew Scarfo

casually, Leonetti only by sight, and that

he did not know Merlino at all. The

Commission found Materio's explanation

unconvincing. The Commission concluded:

We cannot believe that

[Materio] would put up his

house, over the objection of

his wife, as bail for people

he barely knew. Even if he

thought he was putting up bail

for Scarfo, or as a favor to

Catherine Scarfo, we cannot

believe he would do so if his

relationship with these people

was as Casual as he claims.

The Commission also relied on the

testimony of Joseph Salerno as evidence of

Scarfo's influence over Gerace and

Materio. Salerno had frequent contact

with Scarfo, Leonetti, Merlino and Lumio.

-34a-

Salerno testified that Scarfo indicated he

owned the unions and that he placed Lumio

and Gerace in their jobs. Salerno also

testified that Gerace was a frequent

visitor of Scarf, Inc. and that Scarfo and

Gerace had many private conversations.

The Commission found Salerno to be a

credible witness and, therefore, took his

testimony into consideration.

Appellants argue that Salerno, a

confessed "gangster," is not a credible

witness. They point out that Salerno

perjured himself in téstimony before the

United States Senate Subcommittee on

Investigation reeerdiag Gerace's meetings

with Scarfo. Salerno testified before the

Senate Subcommittee that he overheard

Gerace and Scarfo discuss affairs of Local

94. (It was not until he was

cross-examined by Gerace's counsel that

Salerno admitted he never overheard any

conversation between Gerace and Scarfo and

EEE

-35a-

had merely assumed they discussed union

business. Appellants urge this court to

discredit Salerno's testimony on the basis

of his prior perjured testimony.

The State argues that Salerno's

credibility could only be judged by the

Commissioners who were present during the

proceedings, and who found Salerno's

assumption that Gerace and Scarfo

discussed union business understandable in

light of the frequency of their

conversations, and Scarfo's prior

statements about controlling the unions.

The Commission also listed

appointments to union offices of persons

tied to Scarfo and business dealings of

Local 54 with persons or firms tied to

Scarfo, as indicative of an influence

"inimical" to the policies of the act.

The Commission first noted that Gerace and

Materio were responsible for appointing to

union offices several associates of

-36a-

Scarfo, including: Robert Lumino, Albert

Daidone, Joseph Erace and Frank Lentino.

Appellants contend that all individuals

appointed to union positions were

qualified for the job. In fact, the

Commission conceded that none of the

disputed appointees acted illegally or

improperly in the conduct of union

affairs. Materio also argues that his

participation simply consisted of his

making a formal motion that the

individuals be accepted. His

disqualification, he claims, is based on

"guilt by association."

Actually, it is irrelevant that

appellants’ appointments involved

qualified individuals. Permitting the

infiltration into the union's official

positions by friends of organized crime is

intrinsically wrong. Furthermore,

Materio's participation, was not as

5

innocent as he indicates. For example,

——— Ne

-3ta~

the Commission heard testimony regarding a

scheme whereby Salerno would contract for

the plumbing work for the renovation of

Local 54 headquarters at an inflated rate

and would then split the profit with Lumio

and Leonetti. Although present when this

scheme was proposed, Materio did not

attempt to intercede. The plan never

materialized due to Salerno's other

business commitments.

The Commission finally listed a

series of Local 54's business dealings

with ties to Scarfo associates and

concluded:

[T]he appointments and

business associations, when

viewed in the light of the

Appellants include in their argument

the results of a polygraph examination

taken by Materio after the 1982

hearings. The test results, however,

were never before the Commission and,

thus, not a part of the record. This

court denied respondent's motion to

strike portions of appellants’ brief

and appendix that were not part of the

record below.

-38a-

evidence concerning Scarfo's

interest in the union and

access to its leaders,

renders it impossible to

ascribe them to coincidence or

to anything other than

Scarfo's influence over Gerace

and Materio.

As with the union appointments,

appellants attempted to refute the

Commission's findings by evidence that

there were no irregularities evidenced in

any of these business dealings. The

relevant point is not whether the

challenged business associations are

themselves improper, but whether they

constitute evidence of an external

influence on Local 54.

In conclusion, the Commission had a

record replete with circumstantial

evidence of Scarfo's influence over Gerace

and Materio. The evidence manifests

itself in the union officials’ personal

relationship with Scarfo as well as in

their business relationships with Scarfo

-39a-

associates. The sheer number of ties to

Scarfo renders incredible an innocent

explanation. The Commission considered

the legislative intent, as expressed in

N.J.S.A. 5:12-1, of preventing organized

crime members from affecting the casino

industry through labor unions, and found:

[O]nce the influence of a

Career Criminal such as Scarfo

has been shown, we need not

wait for its inevitable

detrimental effect on the

Union and ultimately on the

casino industry to become

manifest before we can act.

The fact of influence by a

person such as Scarfo is

inimical to the policy of the

Act and gaming operations.

Considering the record as a whole, we

conclude that the findings of fact are

supported by sufficient credible evidence.

i or

Appellants argue that the freedom of

association embodied in the First

Amendment protects Gerace'’s and Materio's

relationship with Scarfo, and because it

-40a-

does, such a relationship cannot be

restricted based on the State's interest

in preventing corruption in the gaming

industry. In its decision to disqualify

Gerace and Materio, the Commission found

that these individuals were operating

Local 54 under the influence of Scarfo in

a manner that is inimical to the policies

of the Casino Control Act. Gerace and

Materio argue that because the Commission

found no evidence of impropriety or

misconduct, they were being disqualified

solely because of their "social

association" with Scarfo. The State

argues that the constitutional question is

restricted to whether the First Amendment

protects a relationship in which union

officials are influenced by members of

Organized crime. We are asked to

determine the bounds of the freedom of

association and whether appellants’

activity is protected by the First

-4la-

Amendment guarantees. We also must

determine whether the State has a

"compelling interest” in prohibiting

appellants’ association with Scarfo, and

whether the means chosen were "closely

drawn" to the purpose of the act.

A.

The right of association, which is

not specifically mentioned in the First

Amendment, has been recognized as incident

to the rights of free speech and assembly.

It was first acknowledged as a necessary

means to promote effective advocacy and

the "advancement of beliefs." N.A.A.C.P.

v. Alabama, 357 U.S. 449, 460-462, 78

S.Ct. 1163, 2 L.Ed.2d 1488 (1958), reh.

den., 361 U.S. 856, 80 S.Ct. 43, 4 L.Ed.2d

96 (1959). In recent decisions, courts

have expanded the right to include

associations with no overtly political

purpose.

-42a-

In Roberts v. United States Jaycees,

468 U.S. , 104 S.Ct. 3244, 82 L.Ed. 2d

462 (1984), the Supreme Court determined

that the constitutionally protected right

to association has developed in two areas.

104 S.Ct. at 3249, 82 L.Ed.2d at 471. In

analyzing prior cases, the Supreme Court

concluded that:

In one line of decisions ...

choices to enter and maintain

certain intimate human

relationships must be secured

against undue intrusion by the

State .... In another set of

decisions, the Court has

recognized a right to

associate for the purpose of

those activities protected by

the First Amendment -- speech,

assembly, petition for the

redress of grievances, and the

exercise of religion. [82

L.Ed.2d at 471)

Appellants concede their past associations

with Scarfo did not involve the

advancement of political or religious

matters. Instead, they allege that their

First Amendment right is protected by the

-43a-

first line of court decisions,

protect certain "intimate human

relationships.”

those which

In Roberts, however, the Court

recognized that the right to associate is

not absolute:

Determining the limits of

state authority over an

individual's freedom to enter

into a particular association

therefore unavoidably

entails

a careful assessment of where

that relationship's objective

characteristics locate

spectrum from the most

intimate to the most

attenuated attachments

it ona

We

need not mark the potentially

Significant points on

this

terrain with any precision.

We note only that factors that

may be relevant include size,

purpose, policies,

selectivity, congeniality, and

other characteristics

L.Ed.2d at 473]

[82

Lower courts have reinforced an

individual's right to freedom of

association as defined in Roberts. For

example, in Wilson v. Taylor, 733 F.2d

1539 (ll Cir. 1984), the Court

held that

-44a-

it was improper to discharge a police

officer based solely on his dating

relationship with the daughter of a

convicted felon and reputed organized

Crime figure. 733 F.2d at 1540. The

Court found the officer's relationship

protected by the First Amendment. The

Court of Appeals had expressly noted,

however, in a prior decision in the same

case, that Wilson had not contested the

lower court's finding that association

with the father, a known felon and reputed

leader of organized crime, was not a

constitutionally protected right. 658

F.2d 1621, 1027 (S$ Cir. 2981).

Similarly, in Bruns v. Pomerleau,

319 F.Supp. 58 (D.Md. 1970), the district

court ruled that the police department's

refusal to hire an otherwise qualified

individual, solely because he belonged to

an organization of nudists, violated the

First Amendment. The court, nevertheless,

-45a-

recognized the Department's interest in

the behavior of its officers off-duty as

well as on. 319 F.Supp. at 67. The

officer's activities, the court held,

could be limited only by such associations

as were “inimical to the Department." 319

F.Supp. at 67.

Several other courts have extended

the freedom of association. Sawyer v.

Sandstrom, 615 F.2d 311 (5 Cir. 1980),

involved an overly broad loitering

ordinance which punished an individual for

his act of being in a public place and

associating with individuals whom he knew

were unlawfully possessing or using drugs.

615 F.2d at 316. The court held that this

was an impermissible infringement on his

freedom of association. 615 F.2d 3ll.

The Second Circuit also held that an

individual's associational right is

protected by the First Amendment. McKenna

v. Peekskill Housing Authority, 497

-46a-

F.Supp. 1217 (S.D.N.Y. 1980), mod. on

other grounds 647 F.2d 332 (2d Cir. 1981).

McKenna involved the invalidation of a

public housing authority regulation which

required the registration in advance of

guests wishing to visit tenants. 647 F.2d

at 332. In Fisher v. Snyder, 346 F.Supp

396 (D.Neb. 1972), aff'd, 476 F.2d 375 (8

Cir. 1973), a female public school teacher

was terminated because she had male

overnight guests. The court held that the

teacher's right to associate was violated.

346 F. Supp. at 399. In Scales v. United

States, 367 U.S. 203, 81 S.Ct. 1469, 6

L.Ed.2d 782 (1961), reh. den. 366 U.S.

978, 81 S.Ct. 1469, 6 L.Ed.2d 782 (1961),

the Supreme Court invalidated portions of

the Smith Act, 18 U.S.C. §2385, which

prohibited membership in any organization

advocating the overthrow of the government

by force. The Court held that the statute

was unconstitutional to the extent that it

-47a-

prevented the mere membership in an

organization. 367 U.S. at 228.

The State argues that although these

cases expand the protected right of

association, they do not address the facts

as found by the Commission in the present

case. Lewitus v. Colwell, 479 F.Supp. 439

(D.Md. 1979) is the most significant

federal decision regarding the legitimacy

of state regulations of interactions with

Criminals by persons involved in gaming

operations. In Lewitus, an applicant for

a Maryland racehorse owner's license was

denied licensure because of his

association, partially social and

partially business-related, with an

individual who had been involved in

illegal racetrack practices. The Court

held that the State had a valid interest

in maintaining the integrity, as well as

the appearance of integrity, of the gaming

industry. 479 F.Supp. at 448. The court

Leen ee

-48a-

concluded that the applicant's association

was not protected by the First Amendment.

Id. Although the Lewitus court's

rationale reflected a more narrow reading

of the scope of protected association than

that advocated more recently in Roberts v.

United States Jaycees, it cannot be

dismissed as suggested by Gerace and

Materio. In light of the finding by the

court of an inference of illegal

influence, the Lewistus decision still

would be valid under the broader view of

the First Amendment right as taken in more

recent cases. [See e.g., Wilson v.

Taylor, 658 F.2d 1021, 1027 (Sth Cir.

1981)].

The most relevant New Jersey case

suggests the same result. Niglio v. New

Jersey Racing Commission, 158 N.J. Super.

182 (App. Div. 1978). In Niglio, the

Racing Commission barred the spouse of a

disqualified person, not solely on grounds

-49a-

of the marital relationsnip, wet because

of the spouse's dependence on and

influence by the disqualified individual.

This court found no associational rights

implicated by the Commission's decision.

There are other New Jersey cases

which have denied licenses or other

governmental privileges to applicants

under the influence of a disqualified

individual, without the suggestion that

the denial implicated First Amendment

rights. See, e.g., In re Disciplinar

Hearings Against Schmidt, 79 N.J. 344,

352-353 (1979); Trap Rock Industries, Inc.

v. Kohl, 59 N.J. 471, 481-482 (1971),

cert. den., 405 U.S. 1065 92 S.Ct. 1500,

31 L.Ed.2d 796 (1972); Florence Methodist

Church v. Florence Twp. Comm., 38 N.J.

Super. 85, 88-9C (App. Div. 1955).

Appellants contend, however, that

their association with Scarfo is within

the ambit of the First Amendment freedom.

_eeEOoOo |

-50a-

They claim that their association was

purely a social relationship, one that

developed through their mothers. Gerace

contends it is because of his mother's

friendship with Kathryn Scarfo, and

Lillian Gerace'’s maternal pressure, that

he helped Scarfo make bail in 1979.

Similarly, Materio claims he helped

Scarfo, whom he knew for 25 years. It is

also for this reason, the union officials

argue, that their phone numbers can be

found on Scarfo's telephone list.

Assuming a purely social

relationship existed between Scarfo and

the union officials, the State maintains

it is still unprotected by the First

Amendment. Although Roberts has expanded

the right of association to encompass both

"expressional associations” and "certain

intimate human relationships,” that case

has not raised to the level of First

Amendment protection every social

-Sla-

relationship which may exist in a society.

Roberts, supra, 82 L.Ed.2d at 471. The

types of relationships which fall under

the protected category include those that,

"attend the creation and sustenance of a

family, ... the raising and education of

children ... and cohabitation with one's

relatives ...--" G2 4.86.26 at $72.

B.

Assuming, arguendo, that the

relationship of Gerace and Materio with

Scarfo is constitutionally protected, any

"infringement resulting from their

disqualification under Section 86 of the

act may still be justified as a compelling

State interest. As noted in Roberts, the

First Amendment right of association is

not absolute. "Infringement on that right

may be justified by regulations adopted to

serve compelling State interests unrelated

to the suppression of ideas, that cannot

be achieved through means significantly

-52a-

less restrictive of associational

freedoms." 82 L.Ed. at 474.

Appellants concede that the State

has a compelling interest in "keeping

organized crime out of unions representing

casino employees." The United States

Supreme Court also recognized this

interest in Brown v. Hotel and Restaurant

Employees and Bartenders International

Union Local 54, 468 U.S. , £04 S205

3279, 3262, 82 L.Ed.26 373, 379 (2987,

Furthermore, it is the express policy of

the Casino Control Act to protect the

industry from the influence of organized

Crime through labor unions. Report and

Recommendation of Casino Gambling by the

New Jersey State Commission of

Investigation (April 1977) at 1-14;

N.J.S.A. 5:12-1(b) (6).

Appellants argue, however, that the

Commission found no evidence of influence

by Scarfo. They contend Section 86

-53a-

sanctions should be applied only when the

State demonstrates actual influence and

impropriety, and not to prevent the

possibility of influence at some future

date.

In Boardwalk Regency, supra, this

court reviewed the Commission's findings

that Clifford and Stewart Perlman were

unsuitable for licensure based, in part,

upon their association with organized

Crime figures. 180 N.J. Super. 324 (App.

Div. 1981). The Perlmans argued that they

were disqualified for their "innocent

associations” unrelated to the casino

imGgustry. 200 @.e. super. at 339. In

affirming their disqualifications, we

stated:

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: what of the

impact of those transactions

-54a-

and associations upon the

policies intended to be served

by casino gaming regulation

under legislative imprimatur?

(180 N.J. super. at 348].

The policies “intended to be served,”

include, the public confidence and trust

in the credibility and integrity of the

regulatory process and of casino

operations, as expressed in N.J.S.A.

§:12-1(b)(6), and the exclusion from

participation in the casino industry of

persons with known criminal records,

habits, or associations, as found in

N.J.S.A. 5:12-1(b)(7). Boardwalk Regency

also held that there is nothing inherently

wrong with sensitive and strict

regulations which enable the Commission to

control the industry better. 180 N.J

Super. at 341.

Here, the disqualifying conduct of

Gerace and Materio closely parallels that

engaged in by the Perlmans in Boardwalk

Regency. Gerace and Materio personally

-55a-

associated themselves with an organized

crime figure, Nicodemo Scarfo. The

Commission found they were responsible for

the manifestations of Scarfo's influence

in the union's business affairs. As in

Boardwalk Regency, the operative question

is not whether the association between

Gerace, Materio and Scarfo are lawful or

ethical, but rather what impact such

associations have on the policies intended

to be served by casino gaming regulation.

See 180 N.J. Super. at 340, 348. The

State's interest in maintaining the

integrity of casino operations supersedes

appellants' right to freedom of

association. It should also be noted,

that the United States Supreme Court

dismissed the Perlmans' constitutional

arguments "for want of a substantial

federal question." Perlman v. Attorney

General, €595 U.S, 1961, 103 $.¢t. S62, 74

L.Ed.2d 927 (1982). The Commission has

-56a-

demonstrated the compelling State interest

of protecting the casino industry. That

interest justifies any associational

infringement resulting from the

disqualification of Gerace and Materio.

eee

Appellants contend that Section 86

of the Casino Control Act is

unconstitutionally vague on its face and

as applied to them. Specifically,

appellants contend that the term

"inimical" is impermissibly vague on its

face, and that the statute 1s vague as

applied because they were not given

adequate notice that Scarfo was a "Career

offender” until the Commission's hearing

in 1982.

A statute is void for vagueness if

it 1s couched in terms "so vague that men

of common intelligence must necessarily

guess at its meaning and differ as to its

application." State v. Lashinsky, 81 N.J.

-~3/a~-

1, 17-18 (1979). As long as procedural

and judicial safeguards are available,

however, the fact that certain statutory

phrases are not “impeccable specimens of

draftsmanship" does not impugn their

legality. In In re Boardwalk Regency

Casino License Application, 180 N.J.

Super. 324, 345 (App. Div. 1981), quoting

In Review Health Care Adm. Bd. V. Finley,

bee wea, super, 152, 167 (app. Div. 1979),

aff'd sub nom. New Jersey Ass'n of Health

Care Facilities v. Finley, 83 N.J. 67

(1980), app. dism. sub nom. Wayne Haven

Nursing Home v. Finley, 449 U.S. 104 92

Seue, e208, 23 G.80.20 222 (1972), the

Court reviewed the values that are

offended by vague laws and determined a

twofold purpose in requiring specific

legislation. The Court first insisted the

drafters provide notice as to the conduct

prescribed. Secondly, the Court mandated

_explicit standards for those who apply the

-58a-

Statutes in order to avoid arbitrary ard

discriminatory enforcement. 408 U.S. at

108. |

The degree of specificity, however,

depends on the nature of the legislative

provision in question. The most stringent

judicial review has been reserved for

those cases involving criminal statutes or

penalties, or situations in which a law

threatens to inhibit the exercise of

constitutionally protected rights. See

Lanzetta v. New Jersey, 306 U.S. 451, 453,

59 $.Ct. 618, 619, 83 L.Ed. 888, 890

(1939); Papachristou v. City of

Jacksonville, €65 U.S. 156, i62, 32 8.Ct.

B29, 843, 3 £88. 26 336, 125 (292i.

Regulation of economic activity, by

contrast, is subject to a less strict

vagueness test. Village of Hoffman

Estates v. Flipside, Hoffman Estates,

inc., $35 U.S. 489, 496-499, i092 $.ct.

2023, 72 L.Ed.2d 476 (1982). The United

-59a-

States District Court recognized in Hotel

and Restaurant Employees and Bartenders

International Union Local 54 v. Danzinger,

356 F.Supp. 317, 337 (D.N.J. 1982) that

"the alleged vague portions of §86 are

aimed primarily at economic activity."

In addition, because Section 86(f)

does not infringe on constitutionally

protected freedoms, a facial vagueness

attack can succeed only if it is shown

that the statute is "invalid in toto--and

therefore incapable of any valid

application." Steffel v. Thompson, 415

u.8. 432, 476, °94 S.48. b200. 2e08 2

L.Ed.2d 505, 523 (1974). Unless the

statute is impermissibly vague in all of

its applications, it must be upheld

against a facial vagueness attack.

Hoffman Estates v. Flipside, Hoffman

Estates, Inc., 455 U.S. at 494-495. A

plaintiff who engages in some conduct that

is clearly proscribed by the statute

-60a-

Cannot complain of the vagueness of the

law as applied to the conduct of others.

We must examine the vagueness argument

against Section 86(f) of the act in light

of the facts of the case at hand. United

States v. Mazurie, 419 U.S. 544, 551, 95

S.Ct. 710, 715, $2 U.8a.26 706, 7is

(2975).

Appellants contend the term

"inimical" does not give a person of

ordinary intelligence adequate notice of

what conduct is prohibited by the act.

Appellants allege that since not all

associations with career offenders are

prohibited by the act, persons involved in

the casino industry are required to

speculate as to which associations are

"inimical."

In considering the challenge to the

"inimical" criterion, this court must view

Section 86 as part of the overall casino

regulatory scheme. As we stated Boardwalk

-6la-

Regency "the words of a statute must

be considered to exist in a vacuum,

without reference to relevant policy

considerations as they are expressed

the whole act, or without regard for

words of balance of the statute.” 18

N.J. Super. at 346.

N.J.S.A. 5:12-86(f) reads as

follows:

The identification of the

applicant or any person who

required to be qualified und

this act as a condition of a

casino license as a career

offender or a member of a

career offender cartel or an

associate of a career offend

or a career offender cartel

such a manner which creates

reasonable belief that the

association is of such a

nature as to be inimical to

the policy of this act and t

gaming operations. For

purposes of this section,

career offender shall be

Gefined as any person whose

behavior is pursued in an

not

in

the

0

is

er

er

in

a

12)

occupational manner or context

for the purpose of economic

gain, utilizing such methods

as are deemed criminal

violations of the public

policy of this State. A

career offender cartel shall

-62a-

be defined as any group of

persons who operate together

as career offenders.

The word "inimical" is not defined. As

appellants note, on December 15, 1976,

during the public hearings on the

Commission Control Act, Atlantic City

Commissioner Edmund Colanzi questioned the

use of the word "inimical" in the context

of the act's disqualification provisions.

Colanzi's criticisms were rejected. The

State points out that the term "inimical"

was interpreted by the Commission as early

as 1979, in In Re Application of Resorts

International Hotel, Inc., for a casino

license, Docket No. 79-Cl-1 (Casino

Control Commission 1979). There the

Commission stated, in part:

{I ]n considering an

alleged association with a

Career offender, the

Commission is concerned with

more than the reflection, if

any, which the association has

on the character of the

Applicant, or other person

required to be qualified.

-63a-

Even assuming the good

character of such a person, a

continuing association with

career offenders or other

unsuitable persons might well

be inimical to the Act or to

legalized gaming where the

nature and quality of the

association would justly call

into question the integrity of

the regulatory process and of

casino operations. Such a

question would arise where the

nature and quality of the

relationship create a risk

that the career offender might

exercise some degree of

influence or control over the

association with regard to

gaming operations or other

business incidental to such

operations. The danger of

such indirect participation by

career offenders or other

unsuitable individuals cannot

be tolerated. [Resorts at

17-19].

Courts have repeatedly upheld, as

against vagueness challenges, criterion

less definite than that challenged here.

Our Supreme Court upheld the standards of

"good moral character" and "professional

or occupational misconduct" against

challenges of unconstitutional vagueness.

In re Polk License Revocation, 90 N.J. 550

—_————

-64a-

(1982). In Boyce Motor Lines, Inc. v.

Gaited: States, 3642. 0.5. 337, 3205 ta 8, Ct.

329, 330, 96 L.Ed. 367, 370 (1952), the

Court upheld a regulation which directed

motor vehicle drivers transporting

explosives or inflammable material to

"avoid, so far as practicable, ... driving

into or through congested

thoroughfares...."

In addition, the Supreme Court

upheld a statute making it a crime to sell

goods at "unreasonably low prices for the

purposes of destroying competition or

eliminating a competitor." United States

v. National Dairy Products Corp., 372 U.S.

29, 83 $.Ct. $94, 9 L.Ea@.2@ 12 (1963).

Finally, this court has upheld against a

vagueness challenge, the "good character"

Criterion of the casino control act. In

re Broadwalk Regency Casino Application,

supra, 180 N.J. Super. at 345-347. The

disqualification standard of N.J.S.A.

-65a-

5:12-86(f), as interpreted and refined by

the Commission, is at least as definite

and validly applicable to certain types of

conduct as was the "good character”

standard approved of in Boardwalk Regency

and, accordingly, appellants' facial

vagueness claim must fail.®

A statute is also unconstitutionally

vague if the discretion of those who must

enforce it is not limited by explicit

legislative standards. Grayned v. City of

Rockford, supra, 33 L.Ed.2d 222.

Appellants argue the "inimical" standard

encourages an arbitrary application

6 The vagueness challenge to the term

"inimical" was rejected by the United

States District Court in Hotel and

Restaurant Employees and Bartenders

International Union Local 54 v.

Danzinger, 536 F.Supp. 317 (1982).

Judge Brotman found that the alleged

vague portions of Section 86 of the

act were aimed primarily at economic

activities, and that the penalties

which the act imposes are civil rather

(Footnote continued)

-66a-

dependent solely on the "whim" of the

Commission.

In Sunshine Anthracite Coal Co. v.

Atkins, 310 U.§. 301,-60 $.€t. 3G7,. 96

L.Ed. 1263 (1940) the Court noted that in

many cases a statute's application may be

difficult to describe. In rejecting a

vagueness challenge it stated: |

The difficulty or impossi-

bility of drawing a statutory

line is one of the reasons for

supplying merely a statutory

guide ... that guide is

sufficiently precise for an

intelligent determination of

the ultimate questions of

facts by experts .... [310

U.S. at 399-400].

Appellants also argue that Section

86 of the act is unconstitutionally vague

6 (continued)

than criminal. He also found that

Section 86(f) does not address all

associations with career offenders,

but only those which would defeat the

statutory purposes of the act. 536

F.Supp. at 337. In addition, he found

that the “reasonable belief"

restriction on the Commission's

ability to disqualify applicants

(Footnote continued)

“6 /a~-

to them. Gerace and Materio contend they

should have been apprised that Scarfo was

a "career offender” prior to their

disqualification. It was nct until the

hearings before the Commission in 1982,

they contend, that they had actual notice

Scarfo would be considered a "career

offender." They claim that because they

were not notified by the Commission of

Scarfo's status, they had no way of

knowing that their conduct was "inimical"

to the policies of the gaming industry.

During 1982, the Commission

conducted extensive hearings which

resulted in the disqualification of Gerace

and Materio on the basis of their

association with Scarfo. It is self-

6 (continued)

established an objective standard for

judging an individual's action, and

concluded that appellants herein were

not likely to succeed on the merits of

their vagueness claim. 536 F.Supp. at

337-338.

-68a-

evident from the facts adduced that the

union officials had close contact with

Scarfo. Minimally, they had constructive

knowledge of Scarfo's illegal activities.

The press, furthermore, should have put

appellants on notice that Scarfo was not a

highly reputable citizen. In 1979,

appellants contributed money to a bail

fund for the release of Scarfo and his

associates, following their arrest for a

widely publicized homicide. Although

Scarfo was never convicted of that crime,

the incident should have warned appellants

of Scarfo's possible exclusion from the

gaming industry.

Appellants contend, however, they

must have actual notice of Scarfo's

classification as "a career offender"

before they can be disqualified, relying

on Broadwalk Regency, supra, for this

proposition. In that case, the Perlmans

were found to be disqualified due to their

-69a-

repeated relationship with a person of

unsuitable character who associated with

persons engaged in organized criminal

activities. In concluding that the act

was not vague as applied to the Perlmans,

this court referred to the fact that the

Perlmans had received notice from the

Nevada Gaming Commission that their

associations would be considered

unacceptable. 180 N.J. Super. at 347. We

also stated however, that the potential

key employee was reasonably apprised by

this statute, "as a matter of common

knowledge, in light of ordinary human

experience, as to the kind of conduct

necessary to satisfy this statute (or put

another way, the kind of conduct which is

likely to result in disqualification)."

180 N.J. Super. at 347. In that light,

Boardwalk Regency cannot be cited for the

proposition that appellants must receive

actual notice from the Commission of

-70a-

Scarfo's status as a "career offender”

before they can be disqualified. See In

Re Boardwalk Regency License Application,

180 N.J. at 345-347.

Appellants also rely on the

Commission's "black-listing" provision,

N.J.S.A. 5:12-71, for the proposition that

they should have been given notice.

Section 71 provides that the Commission

shall establish a list of persons who are

to be excluded from licensed casinos

because, in the opinion of the Commission,

their presence would be inimical to the

interest of the act. The list consists

primarily of persons convicted of cheating

at casino games and of notorious organized

Crime figures. Scarfo was placed on the

list in 1983, after Gerace and Materio

were found disqualified by the Commission.

However, the Commission contends that the

"exclusion list" is not comprehensive, and

is not designed to notify the general

“7.,0"

public of the identity of career

offenders. The incorporation of Section

71 into Section 86(f) is not warranted by

the policy of the act and is not required

by constitutional law. In addition,

Gerace and Materio cannot seriously

contend that they were aware that Scarfo

was a career offender until he was placed

on the "exclusion list."

We conclude that Gerace and Materio

were not entitled to be given formal

notice that Scarfo was considered a

"career offender" prior to the

disqualification, and that Section 86(f)

of the act is not vague on its face nor as

applied to appellants.

es

Gerace claims that the Casino

Control Commission denied him due process

of law by failing to grant him either

immunity or a stay of the proceedings.

During the 1982 hearings before the

-T2a-

Commission, the Division called Gerace as

a witness. Gerace declined to testify on

the ground that his answers might

incriminate him. Gerace requested that

the Commission grant him immunity or a

stay of the proceedings until resolution

of a pending Grand Jury investigation.

The Commission refused both requests.

Gerace now argues that the Commission

violated his constitutional right to due

process.

On May 25, 1982, the Division

petitioned the Commission to grant Gerace

immunity for the deposition testimony

pursuant to N.J.S.A. 5:12-67. However,

the Division imposed two restrictions on

the grant of immunity. First, the record

would be sealed and remain so until

further order by the Commission. Second,

all parties and their counsel would be

prohibited from disclosing the contents of

the deposition. The Division claimed that

i

-73a-

sealing the transcript was necessary to

protect other law enforcement agencies in

their ongoing investigations. On May 26,

1982, the Commission granted the Attorney

General's petition and incorporated the

protective measures. Gerace was deposed

by the Division on May 28, June l, 2, and

3, 1982.

The Commission hearings began in

June 1982. On July 14, 1982, the Division

requested that the Commission partially

unseal the deposition transcripts in order

to review, in camera, portions of Gerace's

testimony. Gerace's counsel never took a

position on the Division's request. The

Commission denied the request, stating

that it would only accept testimony

presented publicly, in compliance with the

Open Public Meetings Act, N.J.S.A. 10:4-6

et seq., N.J.S.A. 5:12-73(b). For the

Same reason, the Commission denied the

-74a-

Division's petition to have Gerace provide

live testimony in camera.

On July 27, 1982, Frank Gerace was

called as a witness and invoked his Fifth

Amendment privilege in response to all

substantive questions. The Division

refused to request immunity for Gerace's

testimony before the Commission, again due

to the ongoing criminal investigations.

Counsel for Gerace then requested a stay

of all Commission proceedings until the

Grand Jury investigations were concluded.

The authority of the Casino Control

Commission to confer testimonial immunity

upon a witness is established by N.J.S.A.

5:12-67, which provides in part:

If, in the course of any

investigation or hearing

conducted under this act, a

person refuses to answer a

question or produce evidence

on the ground that he will be

exposed to criminal

prosecution thereby, then in

addition to any other remedies

Or sanctions provided for by

this act, the commission may,

by resolution of four of its

-73a-

members and after the written

approval of the Attorney

General, issue an order to

answer or to produce evidence

with immunity. (emphasis

provided).

Determinations with regard to the grant

of immunity, have been delegated to the

sole discretion of the Attorney

General. In re Tuso, 73 N.J. 575, 579

(1977).

Gerace first claims that the

Division acted with “unclean hands" by

seeking immunity for him in order to

obtain his deposition. He claims that by

refusing to seek immunity at the

Commission's public hearings, the Division

effectively prevented him from rebutting

their testimony. Thus, the Division

received the benefits of his testimony,

without the disadvantage of enabling him

to defend himself at the Commissicn's

disqualification hearings.

-76a-

The Division denies receiving any

benefit from Gerace's deposition

testimony. In United States v. Serace,

976 F.Supp. 1185 (D.N.J. 1983), upon

defendant Gerace's motion to dismiss the

pending indictment’, the federal court

held that the government overcame its

heavy burden of establishing that the

investigation and upcoming trial of Gerace

was in no way tainted, directly or

indirectly, by his previous testimony

Given under a grant of immunity. The

judge found that the proposed evidence was

derived from legitimate sources

independent of the immunized testimony.

The Division contends that it was to

The indictment alleged Gerace

embezzled money in connection with the

renovation work done by Toro

Construction Company on Local 54's

headquarters. Counsel had stipulated

that defendant's previous immunized

deposition testimony covered matters

which were the subject of this

prosecution.

-7la-

protect the grand jury investigations that

it sealed the deposition testimony.

Although federal prosecution of Gerace

would have been possible even after a

public release of the immunized testimony,

it would have placed a heavy burden on the

prosecutor to show the investigation was

not tainted. See United States v. Smith,

580 F.Supp. 1418, 1425 (D.N.J. 1984).

Gerace's accusation that the Division was

only concerned with the future federal

prosecution, therefore, must fail. We

also note that Gerace never supported the

Division's petition that the deposition be

reviewed by the Commission in camera.

Gerace also argues that the lack of

immunity rendered the Commission's

proceedings one-sided. The record

indicates, however, that 16 witnesses

testified on behalf of Local 54 and its

officers. Warren Borrish, for example,

testified that Gerace's relationship with

~76a-

Scarfo was strictly social. Other

witnesses testified that Gerace was an

effective and honest labor representative.

Gerace was thus able to introduce evidence

on his behalf without personally

testifying.

Gerace next argues that his failure

to testify deprived the Commission of

Crucial evidence. Gerace claims that

because there was no direct evidence of

influence by Scarfo, the Commission was

obligated to grant Gerace immunity in

order to have a complete factual record.

Gerace, however, ignores the mass of

circumstantial evidence presented against

him.

Neither state nor federal courts

have recognized a due process right to

immunity. In Ryan v. State of Montana,

580 F.2d 988 (9 Cir. 1978) cert. den., 440

U.S. 977, 99 S.Ct. 1548, 59 L.Ed.2d 796

(1979), for example, the Ninth Circuit

-79a-

determined the State was not required to

grant a probationer immunity from use of

testimony given at a combined probation-

revocation and deferred sentencing hearing

at a time when he was under criminal

indictment for the same act. Ryan moved

for a continuance of the revocation-

sentencing proceeding until after his

trial on the criminal charge. His motion

was denied. Ryan subsequently argued on

appeal that he had been denied due process

by being forced to elect to remain silent

at the sentencing hearing and risk

revocation of his probation, or to speak

in his own defense and risk incriminating

himself on the criminal charge. 580 F.12d

at 990. The Ninth Circuit observed that

Ryan's decision whether or not to testify

was a strategic choice. 580 F.2d at 990.

The court refused to find a constitutional

right to immunity.

-80a-

The right to remain silent cannot be

infringed through any penalty for

asserting that right. Garriiy v. New

Jersey, 385 U.S. 493, 87 S.Ct. 616, 1?

L.Ed.2d 562 (1967). The infringement,

however, must be a direct consequence of

that assertion. Thus, a police officer

may not be discharged from office for

refusing to testify before a Grand Jury

about the performance of his duties.

Gardner v. Broderick, 392 U.S. 273, 88

§$.Ct. 1913, 20 L.Ed.2d 1082 (1968). That

is not the situation in this case. Gerace

was disqualified solely on the evidence

presented against him. Although the

Commission could have drawn adverse

inferences from Gerace’s failure to

testify without infringing upon his

constitutional rights, it chose not to.

Only a penalty directly drawn from the

invocation of the right to remain silent

is prohibited. See Duratron Corp. v.

-8la-

Republic Stuyvesant Corp. et al, 95 N.J.

404 (1967).

| Similarly, Gerace had no

constitutional right to a stay. Gerace

requested a stay on July 27, 1982, after

15 days of testimony had been completed.

In addition, the term of one of the

Commissioners was due to expire on August

4, 1982. The Commission inquired as to

when the Grand Jury investigation would

end. Counsel for Gerace could not give a

definite response.

Gerace's request for a stay was

premised on the Grand Jury criminal

investigation previously discussed.

Gerace's request, however, was tenuous in

that he stated he would testify without

immunity, only if the Grand Jury did not

return an indictment against him. The

Commission held that it could not stay the

hearings in light of the uncertainty as to

the length of the Grand Jury proceedings,

-82a-

its results and the impending change in

its composition.

The Commission's decision was

supported by New Jersey and federal cases.

In National Freight, Inc. v. Ostroff, 133

N.J. Super. 554 (Law Div. 1975), the

Superior Court denied defendant's motion

for stay. Ostroff faced both criminal

charges and a civil complaint based on the

same factual scenario. In denying

Ostroff's motion for stay of the civil

Suit until resolution of the criminal

charges, the Law Division judge stated:

To say that the civil suit

must remain in statu quo

indefinitely 1s to import to

the courts an impotency

unworthy of them. To compel

other parties to sit supinely

by while their rights or

possibility of recovery are

eroded is to invite contempt

for the law as well as to

permit any guilty party to

secrete or dissipate the

fruits of his wrongdoing. [133

N.J. Super. at 559]

-83a-

Similarly, in DeVita v. Sills, 422 F.2d

1172 (3 Cir. 1970), the Third Circuit

would not stay defendant's civil

proceedings until resolution of his

Criminal charges. In DeVita, a New

Jersey attorney and suspended County

District Court judge, sought to

restrain proceedings for disbarment and

removal from judicial office because of

@ pending indictment arising out of the

Same alleged misconduct. The Court of

Appeals held that, while plaintiff

could not be deprived of his right to

practice law as a direct consequence of

an invocation of his right to remain

Silent, his alleged right to have the

Criminal charges resolved before the

civil proceedings was without

constitutional basis. 422 F. 2d at

1177-1180.

Gerace's contention that he was

deprived of due process is without merit.

-84a-

Appellant was merely forced to elect

whether to defend himself against the

bivieiea’s allegations or to remain

Silent. The Division was not consti-

tutionally obligated to seek immunity.

Furthermore, the Commission was not

obligated to grant a stay pending the

resolution of the Grand Jury

investigation. Gerace was merely put to

the constitutionally acceptable choice of

whether to testify or to remain silent.

:

On August 6, 1984, the Division

petitioned the Commission for a

supplemental order which would directly

prohibit Gerace, Materio and LaSane from

acting as officers, agents, or principal

employees of Local 54. In response to the

petition, both Local 54, and Gerace,

Materio and LaSane, as individuals, raised

issues concerning the appropriateness of

additional sanctions. Appellants alleged

oats «=

-85a-

that new evidence, not previously heard by

the Commission, was now available which

nina establish that the Commission's

original disqualification order of

September 1982 was erroneous. Appellants

further alleged that the new evidence, by

way of testimony of Gerace and Materio,

would establish that the Commission's

findings of disqualification under Section

86(£) of the act were stale and moot. In

addition, appellants contended that the

Commission should reconsider the

disqualification cf LaSane.

On September 12, 1984, the

Commission heard oral argument on the

Division's petition for direct removal of

Gerace, Materio and LaSane. At that time,

appellants renewed their requests for a

reopening of the record. The Commission

denied appellants’ request, ruling that

the rehearing applications were not in

compliance with the act. On September 24,

-86a-

1984, Local 54, Gerace, Materio and LaSane

filed new petitions with the Commission

eankiin a rehearing of its decision and

supplemental order of September 12, 1984.

The Commission denied appellants’ requests

on September 26, 1984. Appellants now

challenge that decision. They allege the

Commission abused its discretion by

refusing to reopen the disqualification

hearings.

Administrative agencies have the

inherent power to reconsider and

redetermine prior decisions in appropriate

Circumstances. In re Trantino Parole

Application, 89 N.J. 347 (1982). Absent

legislative restrictions, the agency's

power to reopen and modify prior decisions

is limited by considerations of fairness

and reasonableness. 89 N.J. at 364.

N.J.S.A. 5:12-107(d) governs

rehearings by the Commission. Section

107(d) provides, in pertinent part:

~G7a-

The commission may, upon a

motion therefor made within

ten days after the service of

the decision and order, order

a rehearing before the

commission upon such terms and

conditions as may be just and

proper. Such motion shall be

granted only upon a finding

that there is additional

evidence which is material and

necessary and which would be

reasonably likely to change

the decision of the

commission, and that

sufficient reason existed for

failure to present such

evidence at the hearing of the

commission.

Thus, the Commission may, at its

discretion, reopen the hearings once

several procedural requirements have

been met.

The first restriction in bringing a

motion for rehearing is a ten day time

limitation embodied within the act.

Section 107(d) precludes the Commission

from granting rehearings on motions not

filed within ten days after the service of

its order. N.J.S.A. 5:12-107(d). The

-88a-

policy behind a time limitation was best

explained by the United States Supreme

Court in Vermont Yankee Nuclear Power

Corp. v. Natural Resources Defense

Council. tnc., $33 Ui8; 3139, Fe SiGe,

1197, 55 L.Ed.2d 460 (1978). The Court,

recognizing that a time gap exists between

the closing of an administrative hearing

and the rendering of a final decision (or

judicial review), stated:

..If upon the coming down of

the order litigants might

demand rehearing as a matter

of law because some new

Circumstance has arisen, some

new trend has been observed,

Or some new fact discovered,

there would be little hope

that the administrative

process could ever be

consummated in an order that

would not be subject to

reopening. [435 U.S. at

554-555, quoting, ICC v.

Jersey City, 322 u.5., 503,

514, 66 &,.ct. 1225, 2 1134, 88

L.Ed. 1420, 1428 (1944)]

The issue is whether appellants

timely filed their motion for

-89a-

reconsideration. Appellants argue they

are seeking a rehearing of the

Spe ee order of September 12, 1984.

The State, on the other hand, contends it

is the Commission's 1982 decision which

disqualified appellants in the first

instance, that they seek to reopen.

Gerace, Materio and LaSane contend

that the Commission's 1982

disqualification order and its 1984

Sanction order are interrelated. To

conduct a rehearing of the 1984 order, the

Commission must, by necessity, address the

merits of the 1982 disqualification. In

addition, they argue, the Commission's

1982 order directed sanctions against the

Union. It was not until 1984 that the

individual appellants were directly

impacted. If appellants’ argument is

accepted, their motion for reconsideration

was timely in that it was filed on

September 24, within ten days of service

-90a-

of the Commission's September 12, 1984

order.

The State claims that the

Commission's order of September 1984

merely imposed new sanctions to enforce

the disqualifications adjudicated in 1982.

Appellants’ motion, in that case, was

filed two years late and was properly

denied by the Commission. The State also

argues that the statutory bar is not

unjust in that appellants may seek early

relief from their disqualifications

pursuant to the Commission's reapplication

regulations, N.J.A.C. 19:41-8.8.

We need not determine which order

appellants are addressing in their motion

for reconsideration. The pertinent issue

here is whether the Commission abused its

discretion in denying appellants' motion.

The Commission denied the motion for

rehearing by finding appellants failed to

-9Sla-

comply with all the requirements

delineated in N.J.S.A. 5:12-107(d).

That section establishes four

requirements for bringing a motion for

rehearing. The moving party must show

that: (1) there is additional evidence;

(2) the evidence is material and

necessary; (3) it would be reasonably

likely to change the Commission's

decision, and (4) there was su ficient

reason for failing to present the evidence

at the hearing. N.J.S.A. 5:12-107(d).

The Commissicn has the discretion to grant

a rehearing only upon a showing of the

factors delineated above.

Gerace contends he satisfied all

necessary statutory requirements for a

rehearing. His rehearing petition was

based entirely on his present willingness

to testify before the Commission. He

contends that he was unable to testify in

1982 because he was the subject of a grand

-92a-

jury investigation; also that this

testimony is material and necessary and

erastate new evidence that would change

the Commission's decision.

Gerace sought to open the record to

testify before the Commission on the

following matters: (1) his association

with Scarfo since 1982; (2) his alleged

business dealing with Scarfo's associates;

(3) his appointment to union posts of

persons allegedly tied to Scarfo, and (4)

Scarfo's alleged influence on Local 54.

Gerace claims his testimony presents new

evidence because he did not have the

opportunity to testify before the

Commission. He also claims that the

evidence is material and necessary because

it directly rebuts the Division's

allegations that he was influenced by

Scarfo in his business dealings. Gerace

reminded the Commission that the Division

elicited four days of deposition testimony

-93a-

from him, a further indication of the

importance of his testimony. He also

errs that his testimony would change

the outcome of the disqualification

hearings. Since three Commissioners have

joined the Commission since the 1982

hearings, his testimony would enable them

to judge his credibility for themselves.

Gerace claims that his testimony would

also demonstrate to the Commission that

the feared “inevitable detrimental effect”

has not materialized in the two years

since the 1982 proceedings.

The Commission had determined at its

September 26, 1984 hearing, that Gerace's

representations were "vague and

conclusory” and failed to demonstrate the

materiality or necessity of his testimony.

The Division noted that sixteen witnesses

were produced on behalf of Local 54.

Those witnesses testified that Scarfo's

and Gerace's relationship was strictly a

-94a-

social one, and that Scarfo exercised no

influence over Local 54. To the extent

that Gerace's testimony would relate to

pre-1982 events, it is merely cumulative

Or impeaching.

Any testimony relating to events

after the 1982 hearing is irrelevant in

addressing the Commission's original

disqualification decision. Evidence

relating to events which occurred between

1982 and 1984 is relevant in the context

of a.petition for reapplication pursuant

to N.J.A.C. 19:41-8.8. That regulation

a

precludes any natural person found

disqualified from reapplying for licensure

for five years from the date of the

Commission's ruling. However, subpart (g)

also provides, that any person barred for

the five year period, may petition the

Commission to permit reapplication at any

time. N.J.S.A. 19:41-8.8(g). Once the

procedural criteria have been met, the

-95a-

Commission may grant early reapplication

at its discretion. Appellants argue that

sina a the Commission's unfettered

discretion, reapplication provides them

with no effective remedy. The eet.

however, provides explicit guidelines

regarding the timing and nature of

rehearing applications. In the instance

of Gerace's testimony concerning events

which occurred after the disqualification

hearings, the statutory guidelines have

not been met.

The Commission also challenges

Gerace's contention that the change in

their composition warrants 42 rehearing.

The Casino Control Commission is a

continuing body. Gerace's contention that

a rehearing is necessary SO that the three

new members can express their positions is

without merit. To the contrary, the

substantial change in the Commission's

composition renders 4a rehearing

BEST AVAILABLE COPY

-96a-

inappropriate. If a rehearing is granted,

only two Commissioners would be able to

weigh the new evidence against the

testimony taken at the 1982 hearings.

Finally, Gerace's explanation for

his inability to testify before the

Commission in 1982 does not meet the

statutory requirement of "sufficient

reason." N.J.S.AN 5:12-107(d). Gerace

was the subject of a federal grand jury

investigation at the time of the 1982

proceedings. His decision not to testify

was a tactical choice. The Commission is

not obligated to relieve him of the

consequences of that choice because of a

change of mind two years later. The

Commission did not abuse its discretion in

refusing to reopen the record to elicit

Gerace's testimony.

The argument on behalf of Materio

for a rehearing is more tenuous. Materio

testified before the Commission during the

Fra

1982 disqualification hearings and,

therefore, Gerace's fairness argument is

‘nhoetieeble as to him. However, Materio

now wishes to testify that: (1) he no

longer performs work that is related to

the Casino industry; and (2) he no longer

associates with Scarfo in a manner that is

"inimical" to the policies of the act.

Materio claims that his testimony

would dispel the Commission's fear of a

"Scarfo effect." Although Materio's

testimony would produce "additional"

evidence not before the Commission at the

1982 hearings, it 1S inappropriate at this

time. As in the case of Gerace, evidence

regarding events which occurred after the

disqualification hearing are relevant only

for reapplication procedures, pursuant to

N.J.A.C. 19:41-8.8.

Materio also wishes to offer proof

that he no longer functions in any

Capacity involving the representation of

-98a-

casino employees. The Division argues

that Materio's present non-participation

in the ere industry does not rebut his

disqualification. The Commission's orders

could easily be evaded by changing or

vacating positions, if that were the case.

Furthermore, Materio did not resign his

union offices until November 29, 1984.

The Commission did not abuse its

discretion by refusing to reopen the

.- record to obtain Materio'’s testimony.

LaSane, like Materio, testified

‘fully at the disqualification hearings.

His rehearing petition is based on

additional evidence regarding: (1) his

exemplary conduct in office in the past

two years; (2) the fact that his

conviction is now more than ten years old,

and (3) his union responsibilities are

unrelated to employees licensed under the

act.

-99a-

LaSane's conduct since 1982 is not

relevant to a rehearing. Action which

occurred utter his disqualification is

relevant, if at all, to a petition for

early reapplication, pursuant to N.J.A.C.

19:41-8.8. LaSane filed a reapplication

petition with the Commission in November

1984 which was pending as of the date of

this appeal.

In addition, a ten year old

conviction does not automatically absolve

one of disqualification. Conversely,

N.J.S.A. 5:12-86(c)(4) provides that those

whose convictions are more than ten years

old have the opportunity to rebut the

automatic disqualification procedures of

section 86(c). LaSane was given that

opportunity in 1982. However, the

Commission chose not to waive

disqualification.

LaSane finally complains that he was

unable to demonstrate to the Commission

-100a-

that his present employment with Local 54

is unrelated to the casino industry.

LaSane's sxeumans suffers the same

fundamental defect as that advanced by

Materio. LaSane, too, did not resign his

union position until November 1984. The

Commission was not required to consider

testimony relating to his new

responsibilities. We find no error.

VE.

On September 12, 1984, the

Commission ordered Gerace, Materio and

LaSane to cease acting as officers, agents

or principal employees of Local 54.

Appellants argue the Commission acted

outside its statutory scope by imposing

sanctions directly against the union

officials.

In July 1984, the United States

Supreme Court upheld Section 93(b) of the

act against a challenge that the provision

was preempted py federal labor law. See,

-10la-

Brown v. Hotel and Restaurant Employees

and Bartenders International Union Local

54, 468 U.S. , 3ee £.ot., 237%, -22

L.Ed.2d 373 (1984). The Court held,

however, that the Commission's sanctions

could not interfere with the ability of

Local 54 to act as an effective bargaining

agent, and remanded the case to the

District Court, for further findings

consistent with its decision. 104. §.Ct.

at 3196.

On August 6, 1984, the Division

petitioned the Commission for a

supplementary order. The Division

specifically requested the removal from

Local 54 of Gerace, Materio and LaSane.

The Division cited Sections 64, 129(7) and

75 of the act to support its request.

The order issued by the Commission

did not address itself in any way to Local

54, but aimed the sanctions directly

against the disqualified union officials.

ee

-102a-

Appellants contend the Commission

was without the statutory authority to

issue the September 12, 1984 order. In

advancing their position, appellants

advocate that a strict construction of

Section 93 supports appellants' position.

However, as the State argues, appellants’

interpretation renders the Commission

powerless in several circumstances. Thus,

a broader reading of the statutes is

mandated; one that encompasses the

legislative intent.

The disqualification hearings before

the Commission were brought in accordance

with Section 93 of the act which provides,

in pertinent part:

a. Each labor organization,

union or affiliate, seeking to

represent employees licensed

under this act and employed by

a casino hotel or casino

licensed shall register

b. No labor organization,

union or affiliate registered

or required to be registered

pursuant to this section and

-103a-

representing or seeking to

represent employees licensed

under this act may receive

dues from any employee

licensed under this act and

employed by a casino licensee

or its agent, or administer

pension or welfare funds, if

any officer, agent, or

principal employee of the

labor organization, union or

affiliate is disqualified in

accordance with the criteria

contained in Section 86 of

this act. The Commission may

for the purposes of this

subsection waive any

disqualification criterion

consistent with the public

policy of this act and upon a

finding that the interests of

justice so require. (emphasis

provided; N.J.S.A. 5:12-93)

The express language of Section 93

indicates it is the labor organization

that must register under the act. In

addition, it is the union against which

the authorized sanctions are to be

imposed. Conspicuously absent from the

language of Section 93 is any indication

that union officials are deemed

-104a-

"registrants" within the scope of Section

93, and are thus subject to individual

sanctions.

Appellants argue that it is the

express language of Sections 93(a) and (b)

that is controlling. The language of that

provision indicates that regulation of

labor organizations and their officers was

to be accomplished through the

registration of the institution itself.

If the Legislature had intended otherwise,

appellants argue, it would have drafted

the language of Sections 93(a) and (b) to

permit sanctions directly against union

officers and agents.

The State acknowledges that N.J.S.A.

5:12-93 does not explicitly empower the

Commission to issue sanctions directly

against union officers. The State

contends, however, that the act delineates

a procedure designed to indirectly coerce

the removal of disqualified officials.

=

-105a-

Should this indirect coercion fail, the

State arques, the Commission cannot be

left seveehons to protect the casino

industry.

The express language of the act must

be read in light of the legislative intent

which was incorporated into the act itself

in N.J.S.A. 5:12-1. It provides that it

is the policy of this State to regulate

and control all aspects of the casino

industry. This policy was further

expressed by our Supreme Court in Knight

v. Margate, 86 N.J. 374 (1981), where the

Court held:

because casino operations

"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

——

-106a-

civil policies of this State.”

[86 N.J. at 382, quoting,

N.J.S.A. 5:12-1(b) (9);

emphasis added]

Appellants argue that Section 93 of

the act imposes sanctions that are penal

in nature, and therefore, the expansive

view of that provision, as advocated by

the State, must fail. They claim that the

Commission forced the removal from office,

under threat of contempt, of union

officials who were otherwise legally

pursuing their livelihood. The

Commission's order merely substituted

another sanction for that expressly called

for by the act and, thus, the penal nature

of Section 93(b), and the Commission's

action has not changed. Given the penal

nature of the applicable provisions,

appellants argue, Section 93 must be

strictly construed. State v. Grant, 196

N.J. Super. 470, 480 (App. Div. 1984).

-107a-

Most of the provisions of the act

are regulatory rather than penal in

nature. The: Gente argues that those

provisions applied by the Commission,

Sections 64, 129(7) and 75, are

regulatory. In addition, assuming

arguendo that Section 93 sanctions can be

penal, they are not as applied in this

case. The cases cited by appellants on

their behalf involve individuals who were

deprived of their livelihoods by the

suspension of their license. See, New

Jersey State Board of Optometrists v.

Nemitz, 21 N.J. Super. 18 (App. Div.

1952). Here appellants may work as union

officials in this State as long as they

are not affiliated with the casino

industry.

In its petition for supplemental

sanctions, the Division cited several

other sections of the act which govern the

Commission's authority. Section 64, which

-108a-

regulates the Commission's powers and

sanctions, provides in pertinent part:

The commission shall assure

that licenses, certificates,

Or permits shall not be issued

to nor held Sy, nor shall

there be any material

involvement, directly or

indirectly, with the licensed

casino operation or the

ownership thereof by,

ungualified or disqualified

persons or unsuitable persons,

Or persons whose operations

are conducted in a manner not

conforming with the provisions

of this act. For the purposes

of this section, “unqualified

person,” "disqualified

person,” or “unsuitable

person" shall mean any person

who is found by the commission

to be disqualified pursuant to

the criteria set forth in

Section 86 .¢.;'4.; t., Se, 2

h., or to lack the financial

responsibility and capability

specified in the provisions of

section 84. In enforcing the

provisions of this act, the

commission shall have the

power and authority to deny

any application; limit or

restrict any registration,

certificate, permit or

approval; suspend or revoke

any license, registration,

certificate, permit or

approval; and, impose a

penalty on any person

-109a-

licensed, registered, or

previously approved for any

cause deemed reasonable by the

commission pursuant to rules

and regulations promulgated

thereby .... (emphasis added;

N.J.S.A. 5:12-64).

This provision comfers broad powers

on the Commission to take actions against

"disqualified persons." Liberally

construed in light of the legislative

intent, the Commission's powers under

Section 64 to impose sanctions directly

against the three officials is evident.

The Commission's authority to take actions

directly against union officials is also

sanctioned by a strict construction of the

provision. The expressed purpose of

Section 64 is to exclude "disqualified"

persons from direct or indirect

involvement in casino operations. Local

54, and its officers, are "materially

involved" in the daily activities of the

Casino industry through the employment,

-110a-

management and discipline of casino hotel

employees. In addition, the union

officials "registered," pursuant to

N.J.S.A. 5:12-40 and 41. A

"registration," as provided by this act,

is "any requirement other than one which

requires a license as a prerequisite to

conduct a particular business as specified

by this act.” N.3.8.A. 5:12-40. Thus,

even given a strict construction, the

Commission was empowered to disqualify

Gerace, Materio and LaSane pursuant to

Section 64.

In addition, the Commission was

empowered to issue a "cease and desist”

order against the union officials pursuant

if Fe FF 5:12-129, which states, in

pertinent part:

In addition to any penalty,

fine or term of imprisonment

authorized by law, the

commission shall, after

appropriate hearings and

factual determinations, have

-llla-

the authority to impose the

following sanctions upon any

person licensed or registered

pursuant to this act:

(7) Enter a cease and desist

order .... (N.J.S.A. 5:12-129]

As previously mentioned, appellants are

"registered" pursuant to N.J.S.A. 5:12-40.

The final provision cited by the

Division in its petition, N.J.S.A.

5:12-75, dispels any doubt as to the

propriety of the Commission's order.

N.J.S.A. 53:12-75 states:

The commission may exercise

any proper power or authority

necessary to perform the

duties assigned to it by law,

and no specific enumeration of

powers in this act shall read

to limit the authority of the

commission to administer this

act. (emphasis provided)

This provision emphasizes the clear

authority of the Commission to take any

steps necessary and proper in its

enforcement of this act. Read in

conjunction with the legislative intent

embodied in the act, N.J.S.A. 5:12-1, we

-ll2a-

conclude that the Commission properly

issued direct sanctions against Gerace,

Materio and tac.

The Comission's findings that Gerace

and Materio associated with career

offenders are supported by the evidence.

The continual participation of Gerace and

Materic in the casino industry creates an

unacceptable risk of corruption. in light

of the State's compelling interest in

protecting the gaming operations, an

infringement on appellants’ First

Amendment right of association is

warranted. in addition, the Commission

did not deny Gerace due process by failing

to grant him a stay or immunity in 1982,

or by failing to reopen the record for a

rehearing in 1984.

The decision of the Casino Control

Commission is affirmed.

-ll3a-

STATE OF NEW JERSEY

CASINO CONTROL COMMISSION

DOCKET NO. 81-L0O-1

IN THE MATTER OF THE HOTEL AND :

RESTAURANT EMPLOYEES AND : OPINION

BARTENDERS INTERNATIONAL UNION

LOCAL 54.

BEFORE:

Don M. Thomas, Acting Chairman

Martin B. Danziger, Commissioner

Joel R. Jacobson, Commissioner

Madeline H. McWhinney, Commissioner

Carl Zeiz,Commissioner

APPEARANCES:

For the Casino Control Commission:

John R. Zimmerman, Senior

Assistant Counsel

Timothy J. O'Neill, Assistant

Counsel

For the Division of Gaming Enforcement:

Robert B. Sturges, Acting Director

James F. Flanagan, III, Deputy

Director

Gary A. Erhlich, Deputy Attorney

General

Mitchell A. Schwefel, Deputy Attorney

General

Eugene M. Schwartz, Deputy Attorney

General

-lléa-

For Local 54:

Bernard N. Katz, Esq.

Michael Katz, Esq.

Meranze, Katz, Spear & Wilderman, Esqs.

For Frank Gerace:

Ronald F. Kidd, Esq.

Duane, Morris & Heckscher, Esqs.

On May 11, 1981, the Division of

Gaming Enforcment (Division) filed a

letter report with this Commission in

which it alleged that three officials of

Hotel and Restaurant Workers and

Bartenders International Union Local 54

were disqualified under section 86 of the

Casino Control Act, N.J.S.A. 5:12-86. The

Division therefore urged the Commission to

impose the sanctions provided by section

93 of the Act, N.J.S.A. 5:12-93, against

Local 54. The Commission scheduled a

hearing. Local 54 then filed suit in the

Federal District Court for the District of

New Jersey seeking, inter alia, to enjoin

-115a-

the enforcement of sections 86 and 93 of

the Act against it. See, Hotel and

Restaurant Employees and Bartenders

International Union Local 54 v. Danzinger

(sic), et al., 536 F.Supp. 317 (D.N.J.

1982). At the request of the Court the

Commission adjourned the hearing pending

disposition of Local 54's motion for a

preliminary injunction. Following the

denial of that motion, the hearing before

the Commission was again scheduled. On

April 30, 1982, prior to the commencement

of the hearing, the Division filed a

second letter report in which it cited two

additional employees of Local 54 as

suffering from section 86 disqualification

and again urged that the section 93

sanctions be imposed against the Union.

The Commission thereafter held the

hearing, during which it considered the

issues raised in both the May ll, 1981,

and April 30, 1982, letter reports.

-ll6a-

Before proceeding to the resolution of

those issues, we will briefly describe the

statutory provisions involved. Section 93

of the Act provides that a labor union

which seeks to represent persons licensed

or registered under the Act and employed

at a casino hotel must register annually

with the Commission. N.J.S.A. 5:12-93(a).

Local 54 represents approximately 14,000

waiters, kitchen workers, bartenders,

porters and other hotel workers, the large

majority of whom are employed in the

casino hotels in Atlantic City and are

licensed by or registered with the

Commission. Thus, the Union is required

to register under section 93, and it has

done so.

Section 93 also empowers the

Commission to preclude any union which is

required to register from receiving dues

from any person licensed or registered

under the Act and employed in a casino

-117a-

hotel, and from administering pension or

welfare funds, if any officer, agent or

principal employee of the union is

disqualified under section 86, unless the

Commission waives the disqualification

"consistent with the public policy of this

act and upon a finding that the interests

of justice so require.” N.J.S.A.

5:12-93(b).

Section 86 of the Act enumerates

various disqualifying criteria, which

apply not only to officers, agents and

principal employees of labor unions, but

also to all persons who must be licensed

Or registered in connection with the

ownership, financing, management and

operation of casinos and casino hotels.

Only two of the section 86 criteria are

relevant to the present case. Section

86(c) disqualifies persons convicted of

certain enumerated crimes under New Jersey

law or of any equivalent offenses in any

_ *%

-118a-

other jurisdiction. N.J.S.A. 5:12-86(c).

Section 86(f) provides for the

disqualification of any person who is "an

associate of a career offender or a member

of a career offender cartel in such a

manner which creates a reasonable belief

that the association is of such a nature

as to be inimical to the policy of this

act and to gaming operations.” W.J.S.A.

5:12-86(f). This section defines a career

offender as "any person whose behavior is

pursued in an occupational manner or

context for the purpose of economic gain,

utilizing such methods as are deemed

Criminal violations of the public policy

of this state," and defines a career

offender cartel as "any group of persons

who operate together as career offenders."

In its initial letter report of May

11, 1981, the Division alleged that Local

94's secretary-treasurer, Robert Lumio,

and a member of its Executive Board, Frank

-119a-

Materio, were disqualified under section

86(c) by reason of criminal convictions,

and Lumio, Materio and the Union's

president, Frank Gerace, were disqualified

under section 86(f) by reason of their

association with certain career offenders

or career offender cartel members. Robert

Lumio died prior to the hearing before the

Commission, and thus his qualifications

were no longer in issue. During the

hearing it was established that the

statute under which Frank Materio was

convicted was later declared

unconstitutional and that he had been

granted a presidential pardon. The

Commission therefore ruled that it would

not find Materio disqualified under

section 86(c) based on this conviction.

Thus, with respect to Gerace and

Materio, the questions which remain for

consideration are (1) whether they are

associat with a career offender or a

Py

-120a- -

career offender cartel member, and, if so,

(2) whether the association is of such a

nature as to create a reasonable belief

that it is inimical to the policy of the

Act and to gaming operations.

In its second letter report, dated

April 30, 1982, the Division alleged that

two Union employees, Eli Kirkland and

Karlos LaSane, had been convicted of

Crimes enumerated in section 86(c).

During their testimony Kirkland and LaSane

described themselves as "business agents"

and "organizers" for the Union (T-248;

T-287; Dl; D8), and the Union contended

that they are not officers, agents or

principal employees within the meaning of

section 93. Kirkland and LaSane admitted

to their convictions, and certified copies

of the convictions were accepted into

evidence. It is clear that some of the

Crimes involved are among those enumerated

into section 86(c). However, the Union

-l2la-

urged the Commission to waive the section

86(c) disqualification of Kirkland and

LaSane and presented evidence of their

relibtiitetios aad of their value to the

Union's membership and the community at

large. Thus, with respect to these

individuals the issues before us are (1)

whether they are officers, agents or

principal employees of Local 54, and, if

so, (2) whether the Commission should

waive their section 86(c) disqualification:

consistent with the policy of the Act and

in the interests of justice as permitted

by section 93(b).

Prior to the hearing the Commission

ruled that the burden of proof of section

86 disqualification was on the Division.

The quantum of proof required is a

preponderance of the evidence. In the

Matter of the Application of Resorts

International for a Casino License, Docket

No. 79-CL-1 (1979), at 12. In determining

-122a-

whether the Division has met its burden we

will first deal with the evidence against

Gerace and Materio and then turn our

attention to Kirkland and LaSane.

GERACE AND MATERIO

I. ORGANIZED CRIME

The Division alleges that Gerace and

Materio are associated with career

offenders or members of a career offender

cartel, and thus it has the burden of

establishing the identity of the career

offenders and the existence of a career

offender cartel.

The Division presented extensive

evidence designed to prove that certain

persons are career offenders or career

offender cartel members. Counsel for

Local 54 and Gerace, who was separately

represented, repeatedly indicated that

they had no intention of litigating the

-l123a-

point (see, e.g., T455; Brief at 15).4

However, during summations counsel for

Local 54 questioned whether the Division

had met its burden on this threshold issue

(T2464). We find that it has.

There was substantial evidence

adduced during the course of the hearing

regarding the existence and structure of

Organized crime in the Philadelphia

metropolitan area and the southern portion

of New Jersey, including Atlantic City.

Much of this evidence was introduced

through the testimony of John Tamm and

James Maher, special agents with the

Federal Bureau of Investigation, and Gino

Lazzari, an agent with the Pennsylvania

Crime Commission, all of whom have

extensive experience in investigating

T refers to the transcript. D. refers

to the Division's exhibits. R refers

to Local 54's exhibits. C refers to

the Commission's exhibits.

-l24a-

organized crime (T429; 1002-1003; 1268).

They indicated that their familiarity with

the structure of organized crime and the

individuals involved therein was based

upon their own investigations,

intra-agency communications, contacts with

other law enforcement agencies,

conversations with confidential

informants, authorized wiretaps and

discussions with purported members of

organized crime (T440; 462; 481; 1003;

1014).

These witnesses described an

Organization of men who routinely engage

in a variety of illegal activities

including gambling, loansharking, labor

racketeering, extortion, murder, arson,

pornography and narcotics trafficking

(T430; 452; 1015).

This organization is referred to by

its members as La Cosa Nostra which,

roughly translated, means "this thing of

-125a-

ours" (T429). La Cosa Nostra consists of

a number of groups commonly called

"families," which are generally identified

by the name of a significant figure in

that family (T451). Generally, each

family limits its selivirios to a

particular geographic area (T442).

Furthermore, each family adheres to a

basic hierarchical structure. The boss is

the head of the family (T1006), and the

underboss is the second in command (T449;

1007). The consiglieri or counsellor

advises the boss and assists him in

resolving intra-family disputes (T449;

1007; D54, at 62-64). iicekh the family

leadership are units known as regimes

which are headed by a capo (T4500; 1007).

Each regime consists of initiated members

of the organization called soldiers (T450;

1007).

-l26a-

The primary family which operates in

the Philadelphia-South Jersey area is

known as the Bruno family, so named for

Angelo Bruno, who reputedly headed the

family for a number of years until he was

murdered in March 1980 (T449; 451; D15).

Following Bruno's death it was reported

that his underboss, Philip Testa, assumed

control of the family (T1027; D18; D54, at

34). Testa had a lengthy criminal record

(D18). He was killed in a bomb blast in

March 1981 (T1028).

Agents Tamm (T544) and Lazzari

(T1028) testified that Nicodemo Scarfo now

heads the Bruno family (see also, R8, at

37-38). Scarfo has a lengthy history of

Criminal involvement. In March 1950, he

pled guilty to setting up an illegal

lottery and conspiracy (D97). In February

1964, he pled guilty to involuntary

manslaughter after being charged with

murder (D96). In June 1971, he was held

-127a-

in contempt for refusing to testify before

the New Jersey State Commission of

Investigation and was committed to

Yardville Correction Center (D92). In

July 1976, he was incarcerated for

refusing to answer questions before a

State grand jury investigating allegations

of obstruction of justice in a criminal

prosecution (D93). Lastly, he was

convicted of possession of a firearm by a

convicted felion in 1981 (D95). In

sentencing Scarfo to prison for two years

for this last conviction, the court

concluded: "Mr. Scarfo is surrounded by

violence" (D60, at 92, part 2).

There was evidence presented during

the hearing of Scarfo's recent involvement

in both loansharking and illegal gambling

endeavors (T487-88; D14; D60, at 38-42

first part).

On November 4, 1977, the FBI, using

a court-authorized wiretap, recorded a

-128a-

conversation at the Tyrone Denittis Talent

Agency among Nicodemo Scarfo, Philip

Testa, Harry Riccobene and Frank Narducci

(T534; D54). Both Riccobene and Narducci

have extensive criminal records (D21; D43)

and are alleged to have been associates of

Scarfo and Testa (T515; 1039). During the

recorded conversation the participants

referred repeatedly to "La Cosa Nostra"

(D54, at 56), “boss” (D54, at 40, 43, 54),

"underboss" (D54, at 34) and “consiglieri"

(D54, at 35, 36, 62), and clearly

indicated that they are members of the

Bruno crime family.

Scarfo further evidenced his

Criminal nature by attempting to recruit

members for his criminal group. Joseph

Salerno testified to Scarfo's efforts to

persuade him to become "a gangster"

(T678). Salerno is presently

participating in the federal witness

-129a-

protection program and his testimony will

be discussed at considerable length below.

In December 1979, a telephone list

was seized from Scarfo following his

arrest for the murder of Vincent Falcone

(T906-0). This list contained the

telephone numbers of numerous individuals

who have criminal records and have been

associated with organized criminal

activity (D9; D1l6), including Ralph Puppo

(T505-506, 1029; D60, at 45-46, first

part), Philip Testa (D18; D19; D109),

Lawrence Merlino (T1030), Salvatore

Merlino (T1028; D59, at 15), Alfred Iezzi

(T1030; D58, at 44), Nicholas Russo

(T1031), Frank Narducci (T1032; D20; D211),

Anthony Ferrante (D24; D25), Antonio

Caponigro (T525; D3l; D32; D59, at 45),

Ralph Napoli (T522-523; 1033; D29),

Anthony Casella (T1035; D58, at 45), Frank

Monti (T1035; D40; D58, at 48), Salvatore

Testa (T1036), Salvatore Profaci (D48),

-130a-

Lawrence Centore (D51; D60, at 100, first

part), Louis Pacella (T527; DS50) and Frank

Serpico (T530; D49).

We find that Scarfo is a career

offender and an active member of a career

offender cartel.

Numerous other individuals were

identified as being members of La Cosa

Nostra or associates of Scarfo during the

course of the hearing. However, we will

focus specifically on only four of these

men as relevant to the matter at hand.

Nicholas Virgilio has been twice

convicted of murder (D117-120), and has

been identified as a member of the

Philadelphia-based crime family (T1039).

He 1s a close associate of Scarfo (T943;

1225). We find that Virgilio is a career

offender and a member of a career offender

cartel.

Phillip Leonetti who is Scarfo's

nephew, was identified as a member of his

-l3la-

Crime syndicate (T676-7; 1041-42).

Leonetti and Vincent Bancheri are partners

in a concrete business called Scarf, Inc.

(D121). Joseph Salerno testified that he

was told by Bancheri that "Nick Scarfo was

really the boss, but they couldn't have

him in the corporation" (T667). The

Scarf, Inc. office is located at 28 North

Georgia Avenue, Atlantic City which

adjoins 26 North Georgia Avenue, the

residence of Scarfo (T675-6; D64).

Leonetti's criminal record consists

of several arrests, two of which were for

murder, and a single conviction for a

disorderly persons offense in 1975 (D47).

Salerno testified, and we find, that

Leonetti arranged a usurious loan to him

using assets derived from Scarfo (T487-88;

D14; D60, at 38-42 first part). We find

that Philip Leonetti is closely associated

with Scarfo and has engaged with him in a

Criminal enterprise.

-l132a-

Salvatore Merlino reportedly holds

the position of underboss in the |

Bruno-Scarfo family (T1028). According to

Salerno, Salvatore Merlino has assisted

Scarfo in his illegal gambling operation

(T487-488; D14; D60, at 38-42). Lawrence

Merlino has been identified as an

initiated member of La Cosa Nostra and a

close associate of Scarfo (T700-701; 710;

949; 976; 1043). We find it unnecessary

to make specific findings with regard to

the Merlinos' status as career offenders

or as members of a career offender cartel,

although their names will come up again in

this opinion.

We now turn the more difficult issue

- whether the Division has proven that

Gerace and Materio are associated with a

career offender or a career offender

cartel member "in such a manner which

creates a reasonable belief that the

association is inimical to the policy of

-l133a-

[the] act and to qaming operations”

N.J.S.A. 5:12-86(f). In this respect the

hearing focused on the relationships of

Gerace and Materio to Scarfo. We now turn

to the evidence concerning the existence

and nature of their relationships.

Il, RELATIONSHIP OF GERACE AND MATERIO

TO SCARFO

The evidence presented by the

Division on this issue is diverse and does

not lend itself to neat categorization,

which is understandable considering the

nature of the issue. We must consider

each of the areas raised by the Division

and the evidence adduced by all the

parties to determine whether the Division

has proven a section 86(f)

disqualification of Gerace and Materio.

We will begin with two pieces of

documentary evidence taken from Scarfo

when he was arrested for murder on

December 23, 1979.

-134a-

On December 16, 1979, Vincent

Falcone was murdered. Scarfo, Leonetti

and Lawrence Merlino were arrested and

charged with the murder. They were tried

and found not guilty.

As previously noted, at the time of

Scarfo's arrest a telephone list (D16) was

taken from his person (T906). A duplicate

thereof was taken from a dresser drawer in

his apartment at 26-28 North Georgia

Avenue (T908).

Law enforcement officials determined

that many of the names on the list were

aliases and many of the telephone numbers

were in code. After deciphering the code

they determined that generally, but not

invariably, the coded numbers related to

associates of Scarfo or of organized crime

or of organizations associated with

Scarfo. Many of the unccded numbers

related to reputable persons, such as

dentists and lawyers, not deemed to be

-135a-

associates of Scarfo (T920-922; 974; D9;

D10).

There were five persons on the list

who are or were employed by Local 54.

Frank Gerace was listed under the name

"Percy" and his telephone number was in

code. Frank Materio was listed by his

proper name and his business and home

numbers were listed in an uncoded fashion.

Robert Lumio, who served as secretary-

treasurer of Local 54 from September 1979

until his death in June 1981, was listed

as "Bob L," with an uncoded number. Frank

Lentino, a business agent for Local 54

(T1665) and, since June 1981, office

manager of its Camden office, was listed

as "Frank Gray," with coded phone numbers

for his home and a Teamsters local for

which he once worked. Susan Holland, the

branch manager of William L. Meyers, Inc.,

administrator of the health and welfare

funds for Local 54, and a "collector" for

-i 30a

the Local's severance fund (T924; 1732;

1904), was listed as "Percy girl," with a

coded number. In addition, Gerace's

mother, who also lives at 26-28 North

Georgia Avenue, was listed as "Percy Mom,"

with a coded number.

It can be inferred that the persons

on the list are those who Scarfo had

occasion to speak with or anticipated that

he might have occasion to speak with on

the telephone. In view of the constant

attention he receives from the police, it

can further be inferred that he kept

certain numbers in code because he did not

want evidence of his association with

those persons to fall into the hands of

the authorities. The appearance of five

Local 54 employees on the list is evidence

of Scarfo's interest in the Union and

access to its leaders, and his encoding of

the Gerace and Holland entries evidences a

desire to mask his association with them.

-137a-

The other document in question is

another piece of paper taken from Scarfo's

dresser drawer after his arrest for the

Falcone murder (D62). The writing on this

paper is less than clear, but, according

to the Division and according to our own

reading of the exhibit, it contains the

words: "KIS - POTS - GON ALL OUT BACK TO

54 ST. BEFORE FEB" (T936). The Division

alleges that the note refers to Thomas

Kissick, Ernest Potts and Thomas "Goony"

Walsh, and their removal as union

officials when Local 491 merged with Local

54 in September 1980.

Thomas Kissick was the head of Local

491, a bartenders local which originally

merged into Local 54 (T1824) sometime

around 1975 (R8, at 37). Thereafter

Kissick became secretary-treasurer of

Local 54 (T927). According to Warren

Borish, an attorney for Local 54, as

Casinos became a possibility in Atlantic

-138a-

City Kissick petitioned the International

Union to again split Local 491 from Local

54 so that he could again have his own

bartenders union (T1824), and in August

1979 Local 491 was in fact split from

Local 54 (T1825; R8, at 42).

Kissick was appointed acting

president (R8, at 42) or acting secretary-

treasurer (T937) of the new Local 491.

The International appointed Ernest Potts,

an International trustee, and Thomas

"Goony" Walsh, an International organizer,

to run the day-to-day affairs of the Local

(T927; 1825; 1859-1860; R8, at 42). The

International also directed the creation

of a joint board to oversee 491 and 54 and

Gerace became the chief executive officer

of that joint board (T1825-1826).

In September 1980, after one year in

existence, 491 again merged into 54.

According to Borish, this merger resulted

from 491's inability to survive on the

'-139a-

dues it was collecting and the desire of

the International to avoid having to

register under section 93 of the Casiino

Control Act as a result the existence of

thé joint board (T1826-1827). At any

rate, aS a consequence of the merger,

Kissick, Potts and Walsh were out of their

union jobs (T937).

We find that the words on D62 refer

to the ouster of Kissick, Potts and Walsh

from their union positions when 49]

remerged with 54. [It is true that there

1S no indication what the letters "st." on

the paper mean, and that the paper says

"before feb." and the remerger and

consequent removal of Kissick, Potts and

Walsh did not occur until September 1980.

However, the words on the paper are

sufficiently clear to support the

interpretation given by the Division. The

fact that Scarfo had the paper in his

possession indicates that he has an

-140a-

interest in the affairs of these unions

and in keeping up to date on who is

running them, and that he was supplied

with advance notice of the remerger of 491

and 54.

During the hearing the Division

attempted to obtain a handwritting

exemplar from Scarfo in order to determine

if D62 is written in his hand. The

Commission ordered Scarfo to produce the

exemplar, and upon his failure to do so

certified to the Superior Court facts

underlying his contempt of the Commission.

See, N.J.S.A. 5:12-107(c). However, we do

not think it is of particular importance

whether the words on the paper are in

Scarfo's handwritting. The significant

fact is that he had the paper in his

possession.

The events surrounding the Falcone

murder arrests yield still further

evidence of the relationship of Gerace and

-lé4la-

Materio to Scarfo and his associates.

Shortly after their arrest, Scarfo,

Leonetti and Merlino were released on

$92,000 cash bail (T1158). The bail was

supplied by Toro Con8Struction Company

($45,000), Scarf, Inc. ($20,000),

Catherine Scarfo, Scarfo's mother and a

residert at and the owner of 26-28 North

Georgia Avenue ($7,000), and Lillian

Gerace, Gerace's mother and another

resident at 26-28 North Georgia Avenue

($20,000) (D68).

The Division presented documentary

evidence establishing that half of Lillian

Gerace's contribution to the bail was

supplied by Frank Gerace.

On December 28, 1979, Gerace

withdrew $10,000 from his $18,316.74

Savings account (D69) and transferred it

to his checking account (D70). On the

same day he wrote a $10,000 check to

Lillian Gerace (D71; D72), and she

-142a-

obtained a $10,000 treasurer's check

payable to Catherine Scarfo (D73), thus

completing the transfer of $10,000 from

Frank Gerace's savings account to the

$92,000 bail pool (T1197-1206; 1890).

Shortly after Scarfo, Leonetti and

Merlino were released on the cash bail

Frank Materio put up his house as property

bail for Leonetti and Merlino in order

that part of the cash bail could be

released (T1608; D68). Despite having

done so, Materio testified before the

Commission that he knew Leonetti only by

sight and had never spoken to him, and

that he did not know Merlino (T1605;

1626).

Materio did admit that he had a

relationship with Scarfo. He said that he

had met Scarfo in a bar approximately 25

years ago (T1604), but had only seen him

S1x or seven times in the prior five years

(T1604), had never spoken to him on the

-143a-

phone, and had no idea why he was on his

telephone list (T1612). Materio also

testified that he knew Catherine Scarfo

and that occasionally he had played cards

with Nicodemo's late father, Dan (T1648).

Materio claimed that Lumio

approached him on behalf of Catherine

Scarfo and he agreed to use his home as

bail as a favor to her (T1628), despite

the fact that it is his only real property

(T1627) and despite the further fact that

his wife was "dead against it" (T1744).

We find Materio's explanation

unconvincing. We cannot believe that he

would put up his house, over the objection

of his wife, as bail for people he barely

knew. Even if he thought he was putting

up bail for Scarfo, or as a favor to

Catherine Scarfo, we cannot believe he

would do so if his relationship with these

people was as casual as he claims. In the

ordinary course a person would not put up

-~144a-

his house, or $10,000 of the $18,000 in

his savings account, as bail unless

motivated by some strong sense of

obligation or loyalty.

The telephone list, "KIS-POTS-GON"

document, and the providing of bail, taken

together, are persuasive evidence that

Gerace and Materio have a more than casual

relationship with Scarfo and his

associates, and that Scarfo has an

interest in the affairs of Local 54.

However, there is further evidence in this

regard which must be considered, much of

which is based on the testimony of Joseph

Salerno.

Salerno was the principal witness

against Scarfo, Leonetti and Merlino at

their trial for the murder of Vincent

Falcone, and is now in the federal

protected witness program. He testified

before the Commission, and before the

United States Senate (R8), about his

-14S5a-

experiences while a resident at 26-28

North Georgia Avenue, and in particular

about the contact he observed between

Scarfo and his associates and Gerace,

Materio and other Local 54 officials.

Salerno was a plumber operating a

small business in Brigantine, New Jersey

(T665-666). In 1978 he encountered

financial problems and went to Philip

Leonetti, whom he had met on a job site,

for help (T668-669). Leonetti loaned

Salerno $10,000, which he said he had

gotten from Scarfo (T871), and charged him

interest of $250 per week until the

principal was repaid (T669-670). Salerno

wound up paying Leonetti $19,000 in

principal and interest and going into

bankruptcy (T6700).

Salerno also had marital problems

and in June 1979 he moved out of his home

and Leonetti allowed him to stay at a

house in Margate owned by Salvatore

-~146a-

Merlino (T671). He later moved to an

apartment in Ventnor for two weeks and

then into an apartment at 26-28 North

Georgia Avenue (T672). He resided on

those premises from sometime in September

(T672 until December 17 or 18, 1979

(T677).

While residing at 26-28 North

Georgia Avenue Salerno had frequent

contact with Scarfo, Leonetti, Lawrence

Merlino and Lumio, who was then secretary-

treasurer of Local 54 and also a resident

at 26-28 North Georgia Avenue.

Scarfo bragged to Salerno about

having killed a man with a knife (T682)

and claimed that his criminal organization

was "going to own Atlantic City some day"

(T683). he also tried to recruit Salerno

into his crime family. He talked to

Salerno about their having the same "blood

line," asked him if he could "stand up" if

he saw “something happen" in front of him,

ee

-147a-

and several times asked him if he "would

like to be a gangster" (T678; 681-683).

Salerno admitted to the Commission that he

was intrigued by the idea of being

involved in organized crime, and that he

told Scarfo that he would like to be "a

gangster (T852).

Salerno admitted to Scarfo that he

had two guns, and, at Scarfo's request, he

Gave the guns to him (T689-693). It was

one of these guns with which, according to

Salerno, Leonetti murdered Falcone in the

presence of himself, Scarfo and Merlino

(T693-694). The day after the murder

Salerno left 26-28 North Georgia Avenue

and soon thereafter he told his story to

the police (T7011).

Salerno testified that he met Gerace

in the office of Scarf, Inc. soon after

moving to 26-28 Georgia Avenue (T706). He

estimated that he saw Gerace in Scarfo's

company ll or 12 times during the course

-148a-

of his stay at the North Georgia Avenue

property from September through

mid-December 1979 (T707).

Salerno estimated that three or four

of these meetings occurred at the office

of Scarf, Inc. (T829); one occurred at the

My Way Lounge, a bar owned by convicted

extortionist and reputed Scarfo associate

Saul Kane (T829-830); three or four

occurred outside the premises of 26-28

North Georgia Avenue (T831), and two or

three occurred in Scarfo's apartment

(T831). The meeting in Scarfo's apartment

occurred while Scarfo, Salerno and others,

such as Lumio, Leonetti and Lawrence

Merlino, were having dinner (T707).

Gerace was not part of the dinner group

(T865), but he would stop by for long

enough to have a glass of wine (T832;

864). Gerace and Scarfo would walk off

from the others and talk privately (T708).

Salerno said he saw Gerace and Scarfo have

-149a-

these private conversations about six

times, but he was never able to overhear

what was said (T709).

Additionally, Salerno said that on

at least three occasions when he was in

the Scarf, Inc. office he accepted

telephone calls from Gerace for Scarfo

(T717). On the one occasion when Scarfo

was at home, Salerno relayed the message

to him and Scarfo told him to tell Gerace

that he would return the call (T717-718).

Scarfo then went to a telephone booth on

the corner to make a call (T718). Besides

the three calls he had taken, Salerno said

he saw messages for Scarfo from Gerace

taken by others (T719).

In his testimony before the Senate

Salerno said that Gerace and Scarfo had

daily contact directly involving the

operation of the Union (R8, at 99).

However, when cross-examined about this

statement before the Commission, he

-150a-

admitted that he never overheard any

conversation between Gerace and Scarfo and

never heard them say anything to each

other about L54, and had merely assumed

that they discussed Union business (T795).

Counsel for the Union and Gerace

have made much of this change in Salerno's

testimony, and have urged that we reject

his entire testimony. However, we can

understand how Salerno came to assume that

Scarfo and Gerace were conferring about

Union business, and we note that when he

waS cross-examined on this topic before us

he readily admitted that he had not

actually heard Gerace and Scarfo discuss

the Union.

It is clear from Salerno's testimony

that he concluded that Scarfo talked to

Gerace about Local 54 because of the

frequent and surreptitious nature of their

conversations, and because of certain

-15la-

statements he had heard Scarfo make about

unions and Local 54 in particular.

For example, Salerno testified that

Scarfo told him: "Don't ever worry about

the unions, we own the unions” (T684).

Salerno's testimony also established that

Scarfo is a braggart and a liar (T892),

and certainly this assertion by Scarfo

could not be the basis for a finding that

he and his associates "own the unions.”

However, his claim that they do is

evidence of his desire to bring unions

within the sphere of influence of his

Criminal organization, and helps to

explain Salerno's conclusion that Scarfo

talked to Gerace about Local 54 business.

Salerno also related an incident

when he and Scarfo were in Scarfo's

apartment and Lumio stopped in and began

reading a newspaper article which linked

Scarfo to Local 54 (T714-715). At one

point Lumio began to laugh because the

-152a-

article disclosed that he had been

convicted of a crime several years earlier

(T715). Apparently, Lumio found it

humorous that his father might finally

come to know of the conviction. This

provoked Scarfro, who started to scream

and curse at Lumio (T716). Salerno quoted

Scarfo as saying:

Let me tell you something, I

got you your job and I got

that other big fat j-o [Gerace

(T839)] downstairs his job and

don't you forget it. [T715]

When he heard this Lumio "just

humbled himself kind of and shook his head

up and down and just listened and left

(Syse7s

Salerno identified the newspaper as

the Philadelphia Bulletin and

approximately the date of the article as

between early November and mid-December

1979 (T847). Subsequent investigation by

the Division revealed that a Bulletin

article dated December 2, 1982, had

-153a-

discussed the allegation that Local 54 was

connected with organized crime, and had

noted Lumio's 1974 conviction (D122).

We reject the Division's argument

that Scarfo's hearsay statement provides

the basis for a finding that Scarfo

"engineered Gerace's ascension to the

presidency of Local 54." However, we find

that Scarfo did make the statement and

that based upon the circumstances and

Lumio's behavior, Lumio did evince his

acceptance of the statement. We thus find

in this testimony further evidence of

Scarfo's desire to influence and control

Local 54 and Lumio's belief that Scarfo

waS 1n some way responsible for Lumio's

position with the Union. This evidence

also provides further explanation for

Salerno's assumption that Scarfo discussed

the Local's business with Gerace.

Salerno also testified to an

incident which occurred when he and

-154a-

Leonetti visited a building at 200 Texas

Avenue, Atlantic City, which Local 54 had

purchased and planned to renovate as its

new headquarters (T720). Salerno said

that when they arrived they met "Frank

Monterino, or something like that” (T721).

The Division later established that

Salerno was referring to Frank Materio

(D65).

Salerno stated that Materio showed

him around the building (T721), after

which they then rejoined Leonetti, who was

conversing with Lumio (T722). Leonetti

was insisting that he and Salerno get the

plumbing work at the Local instead of a

Vineland plumber named Falaska (T722).

Leonetti told Lumio that he would inflate

the bill and divide the overpayment among

the two of them and Salerno (T723).

Materio was within earshot of the entire

conversation (T723). However, Salerno

never submitted a bid on the plumbing work

=1>5a-

+

because he was busy on other jobs (T23,

T881) and the work was done by Falaska

(T835-840).

Materio testified that he never saw

Leonetti at Local 54 headquarters (T1605)

and that he has never met Salerno (T1610),

and he denied that the incident described

by Salerno ever took place (T1610).

We accept Salerno's testimony that

this incident occurred, and find that

Leonetti, a close associate of Scarfo,

attempted, albeit unsuccessfully, to

influence the affairs of Local 54. We

also accept Salerno's testimony that

Materio was in a position to overhear the

Leonetti proposal, and reject Materio's

contrary testimony. Further, we find the

fact that Leonetti would make this illicit

proposal in front of Materio an indication

that the association between them is not

as casual as Materio would have us

believe. Finally, we find that this

-156a-

incident is still further evidence of the

interest of Scarfo and his associates in

his affairs of Local 54 and a further

explanation of Salerno's assumption that

Scarfo and Gerace talked about the Union.

Considering all of the evidence

discussed to this point-the telephone

list, the "KIS-POTS-GON" note, the bail,

the Gerace-Scarfo contact and the various

incidents testified to by Salerno - a

clear picture emerges of a group of

Criminals who have an interest in unions

and especially Local 54, who covet Local

54 as a vehicle for the spread of their

Criminal enterprise and seek to exercise

influence and control over it, and who

have frequent contact with its leaders.

As for Gerace and Materio, the evidence

shows that they have a long-standing

relationship with Scarfo and a sense of

obligation to him, and that he has access

to them. Whether all of this adds up to _

-157a-

the type of association proscribed by

section 86(f) is a question we need not

decide, because there is considerable

evidence, yet to be considered, concerning

the Union's dealings with Scarfo

associates and the role of Gerace and

Materio in those dealings.

III. DEALINGS OF LOCAL 54 WITH SCARFO

ASSOCIATES

The dealings in question fall into

categories: the appointment to Union

office or employment of persons tied to

Scarfo, and business dealings of the Union

with persons or firms tied to Scarfo.

We will deal first with the

appointments, starting with discussion of

Gerace's position in the Union and

authority to make appointments, then

discussing his role in appointing Materio

to his Union position, and finally

considering the actions of Gerace and

-158a-

Materio in appointing other persons tied

to Scarfo to positions within the Union.

Frank Gerace did not testify before

the Commission, and the record is sparse

on the subject of his background. It

appears that he held some elective office

in Local 508, which became Local 54 in

about 1974, and that he then assumed the

vice presidency of Local 54 (T954-958;

1867). Further, it appears that in 1976

he ae elected vice president of Local 54

while Jack Brown was elected president.

Sometime later in 1976 Gerace assumed the

presidency when Brown left to become an

Organizer with the International (T958).

In the beginning of 1978 Brown returned

and resumed that top post, but he left

again in the fall of 1978 to take a job

with Resorts International Hotel Casino

(T958). At that time Gerace again assumed

the presidency (T959). He was elected

-159a-

president in 1979 and 1982 (T1867), and he

serves in that position today.

As chief executive officer, Gerace

is authorized by the by-laws of the Local

(C3) "to hire and discharge Business

Agents, Organizers, Assistants and all

other agents, subject to approval by a

majority of the Executive Board." Article

IX, Section 1. Furthermore, Article VI

provides in pertinent part:

([V]acancies in all offices

shall be filled for the

unexpired term by appointment

of the President, subject to

the approval of the Executive

Board.

Turning to Materio, a letter dated

February 2, 1978, from the International

to Jack Brown, then president of Local 54,

indicates that Brown had solicited

financial assistance from the

International in order to hire additional

employees for the Local (C3, letter of

2/2/78). The International acceded to

-160a-

Brown's request and three “local

organizers" were hired by Local 54 on July

3, 1978. One of the three was Frank

Materio. The vice president Gerace moved

to accept Materio and the others as

organizers (C3, minutes of 6/30/78). On

January 16, 1979, the Executive Board

approved President Gerace's appointment of

Materio to the Executive Board as trustee

(C3, minutes of 1/16/79).

We turn now to the appointments of

the other Scarfo-connected individuals.

Robert Lumio

As previously explained, in August

1979 part of Local 54 splintered ouay and

became Local 491 and Thomas Kissick,

secretary-treasurer of Local 54, resigned

to joint Local 491 (C3, minutes of

8/13/79). To fill the vacated office of

secretary-treasurer, Gerace appointed

Robert Lumio (D56). Lumio occupied that

-l6la-

position until his death by natural causes

in June 1981.

We have already explained that Lumio

lived at 26-28 North Georgia Avenue and

have discussed Salerno's testimony about

Lumio's ties to Scarfo. In addition, we

note that Lumio characterized himself as

being friendly with Scarfo, Leonetti and

Lawrence Merlino (D611). He was a proposed

alibi witness for Leonetti following his

arrest in 1977 for the murder of Guiseppi

"Pepe" Leva (D67), and again for Leonetti,

Merlino and Scarfo following their arrest

in 1979 for the murder of Vincent Falcone

(D61).

Frank Materio testified that he put

up his house for bail for Leonetti and

Merlino as a result of a request made by

Lumio on behalf of Catherine Scarfo.

(T1608).

On April 4, 1979, an agent of the

State Commission of Investigation saw

-162a-

Lumio and Nicholas Virgilio exchange a

kiss in front of 26-28 North Georgia

Avenue (T941-942). On April 7 the agent

Saw Lumio and Scarfo leave North Georgia

Avenue in a car and later return

(T942-943). On April 11 he saw Lumio with

Scarfo and Leonetti (T943-945). On

November 16, 1979, he saw Lumio with

Scarfo and Leonetti at the Scarf, Inc.

office (T947). Lumio was at the police

station when Scarfo was released on bail

after his arrest for the Falcone murder

(T984) and attended a subsequent

celebration at the Scarf, Inc. office

(T987). On January 22, 1980, the

Philadelphia police photographed Lumio in

the company of Virgilio at the funeral of

the mother of Saul Kane (T1221; D75). In

short, Lumio's ties to Scarfo, Virgilio,

Leonetti and Merlino were manifest.

-163a-

Albert Daidone

According to his testimony before

the State Commission of Investigation,

Albert Diadone became a member of Local

170, a bartenders local in Camden, in

about 1965 (D126, at 25-26). In 1978 he

was elected vice president of that Local,

running on a ticket headed by Ralph Natale

(D126, at 26).

In January 1979 Natale was convicted

of arson, racketeering and mail fraud and

in February 1979 he was convicted on drug

charges. He is serving a l2-year sentence

on the former charges and a consecutive

15-year sentence on the latter (T1389;

D104; D126, at 144; R8, at 25). He was

described by FBI agents testifying before

this Commission and the SCI as a major

distributor of illegal drugs and the head

of an arson-for-hire ring (T1389-1390;

D126, at 144), and also as a "very close

-l164a-

associate" of Angelo Bruno (D126, at 142).

Charles Allen, a government informant and

participant in the federal protected

witness program, testified before the

United States Senate about Natale's

Organized crime activities (R8) and before

the SCI about his involvement with

Rittenhouse Associates, a union dental

plan administrator with organized crime

ties, and with Larry Smith, the head of

Rittenhouse (D126).

Daidone told the SCI that he is a

friend of Natale (D126, at 32), Smith

(D126, at 2930) and convicted drug dealer

(D105-107) Raymond Martorano (D126, at

33). He said it was his custom to see

Martorano three or four times a week, and

sometimes to act as his driver and to

accompany him when he looked for locations

to place vending machines (D126, at 34).

He also said that he stayed with Martorano

every day after Angelo Bruno was murdered,

-165a-

but he denied that he had acted as his

bodyguard (D126, at 33-34). Daidone also

admitted knowing Angelo Bruno (D126, at

36), Philip Testa (D126, at 37) and Frank

Vadino (D126, at 35). He said that he had

read in the newspapers that all of the

above-named individuals were connected

with organized crime, but that he had no

other information in this regard (D126, at

32-38).

When Natale went to prison in

February 1979 Daidone continued to serve

as an officer of Local 170. However, the

Union then became Local 33. According to

Daidone's SCI testimony, the new name was

intended to "change the image of the

union" (D126, at 31). At any rate, in

early 1981 Local 33 merged into Local 54

(T1352-1353; C3, minutes of 11/4/80).

When Local 33 merged into Local 54,

it became necessary for Local 54 to open a

satellite office in Camden. At the

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Executive Board meeting of December 29,

1980, Frank Materio moved to authorize the

Local 54 officers to appoint several

individuals to staff the Camden office,

including Daidone in the position of

business agent (C3, minutes of 12/29/80).

Materio told the Commission that at that

time he knew nothing about Daidone and

made this motion at the behest of Gerace

(T1681-1685). Less than four months

later, Gerace appointed Daidone to the

Executive Board of Local 54 (C3, minutes

of 4/28/81). Within another two months

Gerace appointed Daidone vice president of

Local 54, following the death of Robert

Lumio (C3, minutes of 6/8/81).

Daidone remained vice president of

Local 54 until his removal in September

1982 during the hearing before the

Commission. Counsel for Local 54

explained that Gerace removed Daidone from

office due to his indictment, along with

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Martorano, for conspiracy and extortion,

and subsequent indictment for the murder

of an official of the Philadelphia roofers

union.

Joseph Erace

Gerace informed the Executive Board

at its meeting of March 9, 1981, that

Joseph Erace, a business agent, was among

three new staff members at Local 54 (D55).

On December 14, 1981, Gerace appointed

Erace to the Executive Board to complete

the unexpired term of a deceased Board

-member (C3, minutes of 12/14/81).

Donna Savarese, a wine consultant

and lounge manager at the Tropicana Casino

Hotel, testified that on February 6, 1982,

Erace approached her and stated: "I've

got a friend I'd like to introduce you to"

(T1114). Savarese accompanied Erace to a

table where he introduced her to several

people, including Scarfo, who he referred

to as "my friend Nick Scarfo” (T1114).

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Later, Savarese was again approached

by Erace and he questioned her about a

member of the Tropicana security staff who

had been following him and his party,

which included Scarfo. Erace remarked

that if this surveillance continued his

"friends will take care of him" (T1116).

Savarese understood Erace to be referring

to Scarfo and his associates as his

"“triends” (Tiiie?.

Roger Brown, lieutenant of security

at the Tropicana, testified that he had

been advised that Scarfo, Leonetti and

Merlino would be dining at one of the

Tropicana's restaurants on February 6,

1982, and that he was directed to keep

them under surveillance. During the

course of the evening, Brown saw Erace

conversing with the three in the hotel

lobby for approximately fifteen minutes

(T1188). He said that when they

approached they were all "friendly," but

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that the conversation became "business

like” and "serious" (T1189).

Frank Lentino

It 1s unclear exactly when Frank

Lentino first became employed with Local

54. Materio testified that Lentino had

worked as a business agent for Local 54

for approximately a year and a half

(T1665). On June 8, 1981, Gerace

appointed Lentino Camden County office

manager (C3, minutes of 6/8/81).

Lentino was a proposed alibi witness

for Scarfo in connection with the Falcone

murder (D66). Also, Lentino appeared on

the Scarfo telephone list under the name

Frank Gray, with a coded number (T1034;

D9).

There are thus six present or former

employees of Local 54, 1.e., Gerace,

Materio, Lumio, Daidone, Lentino and

Erace, who are connected to Scarfo and

other members of the Bruno crime family.

-170a-

Of these six, all but Lentino now serve or

have served as Union officers. Materio

was appointed to his Union office by

Gerace, as were Lumio and Erace. Lentino

waS appointed Camden County office manager

by Gerace. Daidone was appointed business

agent on Materio's motion and was

appointed an Executive Board member and

vice president by Gerace.

We turn now to Local 54's business

dealings with persons connected with

Scarfo.

Toro Construction

At the January 16, 1979, Local 54

Executive Board meeting the board approved

an expenditure of $105,000 for renovations

of the new union headquarters and

authorized the officers to "seek the best

union contractors" for the job. (C3,

minutes of 1/16/7). Toro Construction

Company became the general contractor for

“1 7ia-

the renovations (T1673). The job was done

in March, April or May 1979 (T893).

As previously noted, Toro

contributed $45,000 in cash to the bail

for Scarfo, Leonetti and Merlino following

their arrests for the Falcone murder

(T1159-1160; R8, at 48; D68).

At the March 9, 1981, meeting of the

Union Executive Board, a motion was made

by Materio and passed by the Board to

approve payment of $10,956.22 to Toro (C3,

minutes of 3/9/81). It is clear from

Materio's testimony before the Commission

that when he made this motion he had no

idea whether Toro had done work justifying

this payment, but that he merely moved to

pay the bill because it was on the table

before him (T1667-1669). It is not clear

if this bill was related to the original

renovation work.

Local 54 presented testimony of John

Rich, a business agent for Local 33 of the

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Bricklayers Union and president of the

Building Trades Council of Atlantic City,

that to the best of his knowledge Toro is

a legitimate company, and was one of four

ori\five union contractors he recommended

to Gerace for the headquarters renovation.

There is no evidence before the Commission

of any irregularity in the way Toro

obtained contracts or performed work for

Local 54. However, Toro is one more

connection between Scarfo and the Union.

Rick Casale

Rick Casale is a roofing contractor

who was described by an SCI agent who

testified before the Commission as a "very

close associate" of Scarfo (T938-939), and

whose name was on Scarfo's telephone list

(D9). He was also described by Salerno as

a frequent visitor to 26-28 North Georgia

Avenue (T848-849). Casale did the roofing

work on the renovation of Local 54

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headquarters (T939). There is no evidence

that there were any irregularities in the

way the work was done or paid for.

However, Casale represents one more

connection between Scarfo and Local 54.

Vincent Sausto

Vincent Sausto, whose name was also

on the Scarfo telephone list (D9), is an

insurance broker and real estate agent who

handles insurance policies for Scarfo and

his relatives, who has been seen with

Scarfo and on the premises of Scarf, Inc.

"On numerous occasions," and who has

admitted being a “social acquaintance" of

Scarfo (7939-940). Sausto received part

of the real estate commission on the sale

of the Local 54 headquarters building

(T939-940). The building was sold for

$175,000. The commission was $14,500, of

which Sausto received $5,800. The

remainder of the commission went to

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Phillip Guber, the owner of the real

estate agency for which Sausto worked, and

to a Mrs. Lashman, the listing broker

(T978; 966). The commission on the Local

54 building was one of only two real

estate commissions earned by Sausto in the

year 1979 (T989). Of course, the

commission was paid by the seller of the

building, a Mr. Jack Apple (T978).

However, it appears that Sausto was the

agent who represented Local 54 in the

purchase of the headquarters property, and

he represents one more tie to Scarfo.

Affiliated Leasing

In March 1979 Affiliated Leasing

Systems, Inc. leased a car to Phillip

Leonetti. As a result of a “lead" from

Leonetti, Affiliated sold a car to

Virgilio. On December 18, 1979, Robert

Wayne, an account executive with

Affiliated and his superior, a Mr.

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Goldblatt, went to the offices of Scarf,

Inc. to deliver the Virgilio vehicle.

Leonetti, Scarfo and three or four other

persons were present at the Scarf, Inc.

office (T1463-1464). Someone suggested to

Wayne that he contact Local 54 with regard

to the possible leasing of other vehicles

(T1466). Wayne testified before the SCI

that it was Scarfo who made this

suggestion (T1472-1473). In interviews

with the SCI, the FBI and the Division,

Wayne also identified Scarfo as having

made the suggestion (T1474-1475; 1497).

However, in his testimony before the

Commission Wayne said that "for the

longest period of time" he believed it was

Scarfo who made the suggestion (T1467),

but that he had discussed the matter with

Goldblatt, and Goldblatt had told him that

he had been sitting next to Scarfo and

that Scarfo had said nothing (T1485).

Therefore, at the time of his testimony

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before the Commission Wayne was no longer

sure who had made the suggestion (T1467;

1484). But, he did contact Lumio, and as

a result Affiliated leased two vehicles to

Local 54 (T1468-1470). Shortly before

Wayne's testimony the Union returned the

vehicles "on the advice of counsel”

(T1476).

We find that it was Scarfo who

suggested to Wayne that he called Lumio

about the possibility of renting cars to

Local 54. In addition, the mere fact that

the discussion took place in the presence

of Scarfo, at the Scarf, Inc. office, is

sufficient to find this one more

indication of Scarfo's interest and

involvement in the affairs of Local 54,

notwithstanding Wayne's testimony that the

lease agreements between Affiliated and

Local 54 were entirely legitimate

(T1482-1483). Nevertheless, this is one

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more instance of Scarfo's involvement in

the affairs of Local 54.

Frank D'Addairo

Frank D'Addario is a partner in

Claridge Associates, which in turn is a

partner in Claridge Limited, which owns

the Claridge Hotel and Casino. D'Addario

is also one of the two members of Claridge

Management Corporation, which for a time

managed the Claridge. During that time

D'Addario met with Frank Gerace and asked

him about the unfavorable newspaper

publicity involving Local 54 (T1062;

1072). Gerace responded that because of

his mother's friendship with Scarfo's

mother allegations were being made that

Scarfo had influence over the Union

(T1062-1063). D'Addario was later

introduced to Scarfo at a boxing match at

the Claridge, and said to him: "Say hello

to my friend, Frank, if you see him”

-178a-

(T1060-1061). Scarfo responded that he

had heard of D'Addario "either through or

from" Gerace (T1063).

The Division asks us to take

Scarfo's statement that he had heard of

D'Addario through or from Gerace as an

indication that Gerace discusses Union

business with Scarfo. However, to do so

we would have to accept Scarfo's hearsay

statement as true. We can make a finding

on the basis of hearsay evidence if it is

legally competent evidence under one of

the exceptions to the hearsay rule, Evid.

R. 63, Or, failing that, t£ s¢ is

nonetheless “the sort of evidence upon

which responsible persons are accustomed

to rely in the conduct of their serious

affairs.” N.J3.8.A. 5:12-107(a)(6). See,

In the Matter of the Application of

Seymour Alter for Licensure as a Casino

Key Employee, Docket No. 79-EA-60 (1980),

at 4-7. Scarfo's statement does not fall

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within any exception to the hearsay rule,

and the Division does not suggest that it

does. Nor do we think that an off-hand

social comment by Nicodemo Scarfo is the

type of evidence upon which responsible

people would rely in the conduct of their

serious affairs. We therefore decline to

rely on Scarfo's statement as establishing

that he in fact heard about D'Addario

through or from Gerace. However, we do

find that Scarfo made the statement, and

we see it as an indication of his

willingness to use his relationship with

Gerace to give the impression that they do

discuss Gerace's business affairs.

In summary, the “business

associations” evidence establishes that

the commission for the sale of the Union

building was paid in part to a Scarfo

associate; the $170,000 renovation of the

building was done by a company which put

up $45,000 in bail for Scarfo, Leonetti

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and Merlino; the roofing work was done by

a Scarfo associate; and Scarfo was aware

of the Union's need for vehicles and

recommended that the leasing company used

by Leonetti and Virgilio contact the

Union. When these four business

connections are considered together with

the fact that six persons with ties to

Scarfo were officials of the Union, the

inference that there is more at work here

than coincidence becomes irresistible.

However, before attempting to reach any

broader conclusions, we must consider one

additional evidentiary item urged by the

Division, i.e., Gerace's failure to

testify, and also give further

consideration to the evidence offered by

Local 54.

IV. FAILURE OF GERACE TO TESTIFY

Frank Gerace was called as a witness

by the Division and refused to testify,

-18la-

invoking his Fifth Amendment privilege

against self-incrimination (T2368-2371),

and the Division asks us to make a variety

of findings based on Gerace's silence.

Of course, the Fifth Amendment

guarantees "the right of a person to

remain silent unless he chooses to speak

in the unfettered exercise of his own

will, and to suffer no penalty...for such

silence." Malloy v. Hogan, 378 U.S. 1, 8

(1964). Thus, Gerace had a right to

invoke the Fifth Amendment and the

Commission cannot impose any "penalty"

because of his exercise of that right.

However, the Division argues that

the drawing of evidentiary inferences from

Gerace's silence would not constitute a

"penalty." The Division relies on

Duratron Corp. v. Republic Stuyvestant

Corp., et al., 95 N.J.Super. 527 (App.

Div. 1967), certif. den. 50 N.J. 404

(1967), a civil action seeking damages for

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fraud, in which it was held that the

finder of fact could draw an adverse

inference from the refusal of a defendant

to testify. The court explained that the

defendant "risked only the probative

strengthening of a civil claim against

himself with an ultimate hazard of nothing

more than a money judgment against him,"

and also that even this consequence did

not flow automatically from his invocation

of the Fifth Amendment, but lay within the

discretion of the factfinder. The court

concluded that this was not such a

momentous "penalty" as to run afoul of the

Constitution, and explained:

The permissible drawing by the

factfinder of an inference of

inability truthfully to deny a

Civil claim from a defendant's

failure to testify as to

relevant facts within his

personal knowledge which might

refute the evidence adduced

against him, is a logical,

traditional and valuable tool

in the process of fair

adjudication. It subserves

private justice. We conclude

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that it does not impair the

privilege against self-

incrimination.

[95 N.J.Super. at 533]

Similar reasoning has been applied

in cases involving consequences other than

money judgments. In Baxter v. Palmigiano,

425 U.S. 308 (1976), involving an inmate

who refused to testify at a prison

disciplinary proceeding, the Court applied

"the prevailing rule that the Fifth

Amendment does not forbid adverse

inferences against parties to civil

actions when they refuse to testify in

response to probative evidence offered

against them.” 425 U.S. at 318. In

Diebold v. Civil Service Commission, etc.,

611 F.2d, 697 (8 Cir. 1979), the court

applied the same rule to an administrative

proceeding in which a public employee

suspended because of pending criminal

charges sought reinstatement in his job.

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However, Local 54 and Gerace raise

several a

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