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Rutgers-Newark Law Library
Bally's Park Place, Inc., In the Matter of the Application for a
Casino License and the Application of Bally Manufacturing Corporation for a
Casino Service Industry License
Cite As 10 N.J.A.R. 356
Page 1 of 68 View in DJVU
In re Bally's Casino Application
Cite as 10 N.J.A.R. 356
IN THE MATTERS OF THE APPLICATION
OF BALLY'S PARK PLACE, INC., a
New Jersey Corporation, FOR A
CASINO LICENSE AND THE APPLICATION
OF BALLY MANUFACTURING CORPORATION,
a Delaware Corporation, FOR A
CASINO SERVICE INDUSTRY LICENSE.
Decided: March 16, 1981
Approved for Publication By The Casino Control Commission:
April 8, 1988
SYNOPSIS
Bally's Park Place applied to the Casino Control Commission for
a casino license and Bally Manufacturing Corporation applied for a casino
service industry license. The matter was heard by the Casino Control Commission.
In its decision, the Commission explained that the criteria for casino
licensure (N.J.S.A. 5:12-84, -86 and -89) and service industry licensure
(N.J.S.A. 5:12-92(a), -92(b), -86 and -89) must be affirmatively established by
the applicant by clear and convincing evidence. The clear and convincing
standard requires producing a firm belief as the truth of matters sought to be
established. Thus, the test is more than the civil standard of preponderance of
the evidence but less than the criminal standard of beyond a reasonable doubt.
The Commission first examined the persons who must qualify under Section 85 as
persons who have the ability to significantly influence or control the
operations of the corporate applicant. Those persons must demonstrate good
character, honesty and integrity as required by Section 89(b)(2). In applying
this standard, the Commission is required to make a predictive judgment as to
how an individual will conduct himself in the future based on evidence of past
conduct. Evidence of specific acts should be given more weight in making this
determination than opinion testimony regarding an individual's reputation.
Applying these standards, the Commission found that the one Bally officer and
major stockholder, William T. O'Donnell, did not demonstrate good character and
was therefore not qualified. This determination was based on O'Donnell's past
association with individuals with ties to organized crime and on his
participation in an attempt to influence legislators in Kentucky.
Page 2 of 68 View in DJVU
Prior to the hearing, and as a condition for issuance of a
temporary casino license for Bally's, O'Donnell had resigned from his corporate
office and agreed to other conditions terminating his influence as a
shareholder. He had, however, requested a determination as to his
qualification. Another major shareholder, Alexander R.A. Wilms, similarly
severed ties to Bally and was not considered during the hearing as a person who
must qualify. No determination was made as to Wilms' qualification. The
Commission found that 22 individuals other than O'Donnell and Wilms who were
required to qualify did demonstrate requisite good character and were therefore
qualified. Regarding the corporate applicants, the Commission measured their
integrity by the integrity of the persons controlling the companies. Even if
only one person had engaged in improprieties, the corporate entity would not be
qualified if other persons in control ratified or tolerated the improper
conduct. In this case, the Commission found that O'Donnell's conduct did not
reflect on the present management of the corporate applicants. The corporate
applicants had demonstrated requisite good character for licensure. However,
conditions were set out continuing O'Donnell's severance from influence and
control. Bally's Park Place was granted a conditional casino license and Bally
Manufacturing was granted a conditional casino service industry license. Both
licenses were dependent on O'Donnell, Wilms and the corporate applicants
abiding by conditions set out in the Commission's decision to prevent any
influence or control by O'Donnell and Wilms. Clive S. Cummis, Esq.; Stanley
Tannenbaum, Esq., and Robert A. Blaime, Esq., for Bally's Park Place, Inc. and
Bally Manufacturing Corporation (Sills, Beck, Cummis, Radin & Tischman,
attorneys) Albert E. Janner, Esq,; Anton R. Valukas, Esq., and William D.
Heinz, Esq., for William T. O'Donnell (Jenner & Block, attorneys) Peter H.
Ehrenberg, Esq., and Freda L. Wolfson, Esq., for Alexander R.A. Wilms and Family
(Lowenstein, Santiler, Brochin, Kohl, Fisher & Boylan, attorneys) G.
Michael Brown, Assistant Attorney General; Robert B. Sturges, Assistant
Attorney General, and Stephen C. Becker, Deputy Attorney General, for the
Division of Gaming Enforcement R. Benjamin Cohen, General Counsel; Robert J.
Genatt, Senior Assistant Counsel, and David C. Missimer, Assistant Counsel, for
the Casino Control Commission BY THE CASINO CONTROL COMMISSION: INTRODUCTION On
February 24, 1978, Bally's Park Place, Inc., a New Jersey corporation (then
known as Bally of New Jersey, Inc.) applied to the Casino Control Commission
for a casino license.' In accordance with the Casino Control Act, the
Commission requested the Division of Gaming Enforcement ("Division")
to conduct a comprehensive investigation into the qualifications of Bally's
Park Place. While the investigation was in progress, Bally's Park Place
proceeded with the reconstruction of the former Dennis Hotel into a proposed
casino hotel facility involving substantial other new construction upon the
site of the former Marlborough-Blenheim Hotel. On October 1, 1979, Bally's Park
Place formally requested issuance of a temporary casino permit pursuant to
N.J.S.A. 5:12-95.1, et seq. After conducting a hearing on this request, the
Commission found that, subject to certain conditions, Bally's Park Place met
the requirements for a temporary casino permit. The Commission then issued such
a permit and a certificate of operation effective December 29, 1979. Bally's
Park Place has been operating its casino hotel continuously since that date.
The temporary casino permit expired at midnight on December 29, 1980. The
statutory requirements for a temporary casino permit are limited to areas which
do not concern the suitability of the corporate applicant or the suitability of
the entities and persons required by law 'Bally's Park Place, Inc., the
corporate casino license applicant is a wholly-owned subsidiary of
publicly-traded Bally's Park Place, Inc., a Delaware corporation. ["Bally's
Park Place (Delaware)"]. Bally's Park Place (Delaware) is in turn an 82.8
percent owned subsidiary of publicly-traded Bally Manufacturing Corporation, a
Delaware corporation whose principal place of business is at 2640 West Belmont
Avenue, Chicago, Illinois. As will be seen, Bally Manufacturing Corporation is
itself a direct applicant for a casino service industry license.
Page 4 of 68 View in DJVU
to be qualified for a casino license. However, those deferred
suitability issues are essential to this plenary casino license determination.
In addition to the casino license application of Bally's Park Place, this
Commission must decide the casino service industry license application of Bally
Manufacturing Corporation, a Delaware Corporation [hereinafter, at times, "Bally"].
On January 25, 1978, Bally applied for a casino service industry license
seeking authorization to conduct business directly relating to casino or gaming
activity pursuant to N.J.S.A. 5:12-92(a) and (b). In the usual course, the
matter was referred to the Division for investigation. On August 12, 1980, the
Division filed with the Commission its "Report" with regard to the
application of Bally's Park Place for a casino license and the application of
Bally Manufacturing Corporation for a casino service industry license. Along
with the Report, the Division filed a "Statement of Issues"
emphasizing several matters which the Division deemed significant. These
documents were submitted by the Division pursuant to its statutory
responsibility to investigate the qualifications of each applicant and to
provide all necessary information to the Commission. N.J.S.A. 5:12-76. Although
they assist the Commission in focusing its inquiry into the qualifications of
the applicants, these documents are not evidence of the matters stated therein.
Nor did the Report and Statement of Issues initiate the present hearing. The
Casino Control Act requires a hearing on every casino license application and
each applicant must meet the statutory criteria regardless of the tenor of the
Division's report. See N.J.S.A. 5:12-87. In order to expedite the proceedings
and to fairly permit the parties to prepare for the hearing, five pre-hearing
conferences were conducted. Those conferences resulted in five pre-hearing
conference orders delineating the factual matters which were to be the primary
subjects of the hearing. Essentially, those subjects concern the areas
described in the Division's Report. Further, the applicants and the Division
have entered into limited stipulations of fact relevant to those areas. These
stipulations have been accepted by the Commission. As to any other factual
matters not placed in issue nor actually litigated during the hearing, it must
be assumed that such matters pose no cause for concern. In this regard, the
Commission takes notice of the fact that the applicants have to date filed
numerous documents which pertain to uncontested matters and which were not
introduced at the hearing. The real task at hand is to determine whether the
evidence
Page 5 of 68 View in DJVU
actually developed at this hearing indicates that the applicants
are suitable or not. The statutory standards which must be applied in deciding
the suitability of Bally's Park Place for a casino license are contained in
sections 84, 86 and 89 of the Act. N.J.S.A. 5:12-84, -86 and -89. Sections 84
and 89(b) set forth the criteria which the casino license applicant and the
other persons required to be qualified as a condition of such licensure must
affirmatively establish by clear and convincing evidence. The clear and
convincing evidence requirement falls between the ordinary civil standard of
"preponderance of the evidence" and the criminal standard of
"beyond a reasonable doubt." The preponderance standard means simply
that when the record is considered as a whole the credible evidence renders the
existence of the fact in question more likely than not. In contrast, the
familiar criminal standard means that the trier of fact must not have a
reasonable doubt, that is, one based on the evidence or the lack of evidence. A
reasonable doubt is one which has some justification rather than an imaginary
or possible doubt. The clear and convincing standard is much higher than the
preponderance standard but somewhat less than the reasonable doubt equirement. Clear
and convincing evidence should produce in the mind of the Commission a firm
belief or conviction as to the truth of the matters sought to be established.
In order to sustain its burden, an applicant must present clear and convincing
proof of the facts upon which the Commission may reach a reasonable conclusion
as to suitability. Further, the Act requires that four of the five Commission
members must concur in any necessary finding for casino licensure. N.J.S.A.
5:12-73(d). As noted, a casino license applicant must establish by clear and
convincing evidence that it meets the criteria of Section 84 and that the
persons who must be qualified meet the criteria of Section 89(b) for casino key
employees. For Bally's Park Place, a corporate casino license applicant, the
persons required to so qualify are described in Sections 85(c) and 85(d) of the
Act. N.J.S.A. 5:12-85(c) and -85(d). In determining whether a person is one
required to be qualified, the paramount consideration is whether or not that
person has the ability to significantly influence or control operations of the
relevant company. Under Section 85(c), the following persons connected with
Bally's Park Place must qualify: (a) each officer: (b) each director;.
Page 6 of 68 View in DJVU
(c) each person holding any beneficial interest, direct or
indirect, in the securities of the applicant corporation; (d) any person who in
the opinion of the Commission has the ability to control the corporation or
elect a majority of the board of directors of the corporation, other than a
bank or other licensed lending institution which holds a mortgage or other lien
acquired in the ordinary course of business; and (e) any lender, underwriter,
agent or employee of the applicant corporation or other person whom the Commission
considers appropriate for qualification. Under Section 85(d) the officers,
directors, lenders, underwriters, agents, employees and securities holders of
Bally's Park Place, Inc., (Delaware) (the intermediary company) and Bally
Manufacturing Corporation (the holding company) must qualify to the standards
under Section 89, except residency. See N.J.S.A. 5:12-89. However, since both
the intermediary company (Bally's Park Place, Inc., (Delaware)) and the holding
company (Bally Manufacturing Corporation) are publicly traded corporations, the
Commission and the Director of the Division may agree to waive such
qualification requirements as to any person who is not significantly involved
in the activities of the applicant corporation, Bally's Park Place, and who
does not have the ability to control the holding company or the intermediary
company or to elect one or more directors thereof. During the pre-hearing
conferences, the Division submitted a list of persons whom the Division deemed
required to be qualified in order for Bally's Park Place to receive a casino
license. The Division also indicated those individuals to whom it interposed an
objection and the grounds for such objection. These materials were provided to
the Commissioners and the parties. Of the 23 persons ultimately required to
qualify, only William T. O'Donnell drew a specific and express objection from
the Division. Although the Division initially objected to Alexander R. A. Wilms
as well, the Division later agreed to waive Mr. Wilms as a person required to
qualify if certain conditions are met. These matters are discussed in greater
detail below. As to the licensure standards themselves, Section 84 and 89(b)(2)
establish essentially the same qualification criteria which must be
demonstrated by clear and convincing evidence for the corporate applicant and
the persons to be qualified. The first such affirmative qualification criterion
is that of "financial stability, integrity and responsibility".
N.J.S.A. 5:12-84(a); N.J.S.A. 5:12-89(b). The second affirmative qualification
criterion appears in Section 84(c) and in Section 89(b)(2). Although the
wording of the two sections is not precisely the same, the difference is
without consequence. A casino license applicant or a person required to qualify
must demonstrate "by clear and convincing evidence ... reputation for good
character, honesty and integrity", N.J.S.A. 5:12-89(b)(2). Although
literally this language refers to "reputation", the Commission has
previously held the basic standard to be the actual character and
trustworthiness of the individual. See In the Matter of the Application of
Resorts International Hotel, Inc., .for a Casino License, (1979) Opinion at pp.
8-9. Of course, reputation is an accepted indicator of character and an
applicant would be obliged to convincingly dispel any negative reputation
evidence. 2 The third affirmative qualification criterion requires the
applicant or qualifying person to demonstrate, by clear and convincing
evidence, "sufficient business ability and casino experience as to
establish the likelihood" that the applicant will create and maintain
"a successful, efficient casino operation", or that the qualifying
person will achieve "success and efficiency in the position
involved", N.J.S.A. 5:12-84(d); N.J.S.A. 5:12-89(b)(3). A fourth
affirmative criterion applies only to the casino license applicant which must
establish the "integrity and reputation" of all financial investors
or lenders whose investments or loans are related to the Atlantic City casino
hotel project. N.J.S.A. 5:12-84(b). As previously indicated, in addition to the
casino license application of Bally's Park Place, the Commission must also rule
upon the casino service industry license application of Bally Manufacturing
Corporation. This corporation seeks to provide goods or services to New Jersey
casinos which directly relate to casino or gaming activity. More precisely,
this company is a manufacturer and supplier of gaming equipment. Thus, the
suitability standards to be satisfied by Bally Manufacturing Corporation in
order to obtain a casino service industry license are those set forth in
Sections 92(a) and 92(b), 86 and 89 of the Casino Control Act. N.J.S.A.
5:12-92(a), -92(b), -86 and-89. Under Section 92(b), Bally Manufacturing
Corporation, as well as its owners, management and supervisory personnel and
other principal employees must qualify under standards, except residency,
established for qualification of a casino key employee under Section 89 of the
Act. The affirmative qualification criteria of this section have been set forth
above. The so-called negative or disqualification criteria of Section 86 are
also incorporated by reference in Section 89. N.J.S.A. 5:12-89(d). As to the
persons who must meet these criteria as part of the Bally casino service
industry license application, they will be considered together with the group
of individuals who must similarly qualify as part of the Bally's Park Place
casino license application. Simply stated, the task of the Commission on these
applications is to determine whether Bally, Bally's Park Place and the persons
required to individually qualify have convincingly demonstrated the positive
attributes required by the Act? In its investigative report and its
"Statement of Issues" the Division directed the attention of the
Commission to several areas of concern. Each of the significant areas were
fully explored at the hearing. At the conclusion of this proceeding, the
Division objected to William T. O'Donnell as a person who must qualify for both
the casino license application of Bally's Park Place and the casino service
industry license application of Bally Manufacturing Corporation. Further, the
Division objected to both companies as being generally unfit for licensure. A
review of the lengthy record and the voluminous exhibits reveals that Mr.
O'Donnell either initiated the most important events in question or bore direct
responsibility for them in his role as Bally's undisputed leader. Put
differently, to recount Mr. O'Donnell's activities is to recount the relevant
history of Bally. Thus, we address ourselves first to Mr. O'Donnell's
suitability and the suitability of the other "qualifiers".
Thereafter, we consider the suitability of the corporate entities. II. PERSONS
REQUIRED TO QUALIFY A. WILLIAM T. O'DONNELL 1. INTRODUCTION William T.
O'Donnell who presently resides in Winnetka, Illinois, was born on September
26, 1922, in Chicago, and was educated at koyola Academy and Sullivan High
School in Chicago. He left high school before graduation to help support his
family. From 1943 to 1945 he served in the United States Marine Corps. Early in
1946 William O'Donnell became employed by Lion Manufacturing Company in the
purchasing department. Approximately six to eight months later he moved to the
sales department. By the mid 1950's he had become the sales manager and by late
1950's the general sales manager.
Lion Manufacturing had been founded in the 1920's by Raymond J.
Moloney, primarily as a mail order business. In 1931 the company was
incorporated and began manufacturing a pinball machine known as the
"Bally-hoo". During the 1940's and 1950's Lion produced and sold
pinball machines and various other types of coin operated machines (including,
until about 1949, slot machines), primarily for domestic consumption.
In 1958 Mr. Moloney died and his estate, which included Lion
Manufacturing, was placed in trust with the American National Bank and Trust
Company of Chicago as administrator. William O'Donnell was one of five
directors of Lion appointed by American National. In 1962 American National
advised the Lion directors that it intended to liquidate the assets of Lion
since the company was not then profitable and since American National felt that
liquidation was in the best interests of the estate. Mr. O'Donnell requested,
and American National granted him, the opportunity to raise the necessary money
to purchase the assets of Lion. Ultimately, Mr. O'Donnell succeeded in
assembling a small group of investors who acquired the assets of Lion on June
17, 1963, from the estate of Mr. Moloney for $1.2 million. In March 1968, Bally
Manufacturing Corporation was incorporated, and in April 1968, Lion was merged
into Bally. In 1969, Bally made its initial public offering of common stock,
and in 1971 Bally made a second public offering of common stock. In August
1975, Bally's, stock began to be traded on the New York Stock Exchange.
Bally is today a publicly-traded corporation. The approximately
25,500,000 shares of common stock of the company are distributed amongst approximately
22,676 stockholders of record and approximately 65,000 beneficial owners. In
addition, approximately $35 million of 6 percent convertible subordinated
debentures due 1998 are owned by 369 holders of record. Bally's principal
business involves the design, manufacture, sale and distribution of slot
machines, German gaming machines, various types of pinball machines,
arcade-amusement games and other related products. Bally-owned distributors
sell these and competitive lines of machines, as well as types of coin-operated
equipment which Bally does not itself manufacture.
Bally operates 209 arcade-amusement centers in 37 states and
leases coin-operated products and equipment, including slot machines. Since
December 29, 1979, a majority-owned subsidiary has operated a casino hotel in
Atlantic City. Products manufactured by Bally are distributed throughout the
world by a network of distributors, including distributors which are
wholly-owned or majority-owned subsidiaries of Bally. Distributors of Bally's products
market such products through approximately 70 locations in the United States
and Canada and approximately 20 locations abroad. 18 distribution locations in
the United States and 6 locations in other countries are maintained by
wholly-owned or majority-owned subsidiaries of Bally. As of December 31, 1979,
Bally had total assets of $602 million. For the first three quarters of 1980,
Bally's revenues were $347 million, net income was $38.6 million and earnings
per share were $1.45. Until December 1979, Mr. O'Donnell was president,
chairman of the board of directors and chief executive officer of Bally. At
that time, investigative concerns relating to Mr. O'Donnell's suitability were
expressed by the Division with regard to the application of Bally's Park Place
for a temporary casino permit. As part of an agreement among Bally
Manufacturing Corporation, Bally's Park Place (Delaware), Bally's Park Place
and Mr. O'Donnell, dated December 5, 1979, Mr. O'Donnell resigned as president,
chairman of the board, employee and director of Bally and all its subsidiary
companies. He agreed not to exert any influence or control over Bally and its
subsidiary companies. Additionally, he further agreed to execute an irrevocable
voting trust with regard to all his shares of stock in Bally Manufacturing
Corporation and in Bally's Park Place (Delaware). The voting trustees are
authorized and directed to vote Mr. O'Donnell's shares in accordance with the
majority of the shareholder votes cast in any particular election by the shareholders.
Finally, Mr. O'Donnell agreed that: (1) upon a Commission finding of
non-qualification as to him, he would promptly submit to the Commission for
approval a plan of divestiture of his stock; and (2) upon final adjudication of
a Commission finding of non-qualification as to him, he would divest himself of
the stock of Bally and its subsidiaries owned by him. This agreement was made a
condition of the temporary casino permit issued to Bally's Park Place,
effective December 29, 1979. Mr. O'Donnell is the largest single stockholder of
Bally. In addition, he owns stock in Bally's Park Place, (Delaware). Mr.
O'Donnell was, up until the time of his resignation, the acknowledged leader
and prime mover of the Bally group. As an officer, director, major stockholder
and principal employee of Bally and some of its subsidiaries, William O'Donnell
clearly would have been a person who must individually be qualified for
approval as a casino key employee (except for New Jersey residence) in order
for Bally's Park Place to be eligible to hold a casino license. While Mr.
O'Donnell has resigned from these positions and placed his stock in a voting
trust, all parties to this proceeding, including Mr. O'Donnell, seek a
determination as to his qualification. In any event, by virtue of the history
of Mr. O'Donnell's relation to Bally, his significant stock interests and his
intent to return to a position of control should he be found to be qualified,
he is a person whom the Commission considers appropriate for qualification.
N.J.S.A. 5:12-85(c) and (d). For these reasons, Mr. O'Donnell also falls into
the group of "owners, management and supervisory personnel" who must
meet the same high standards as part of the application of Bally Manufacturing
Corporation for a gaming-related casino service industry license. See N.J.S.A.
5:12-92(b). Mr. O'Donnell, therefore, has the affirmative responsibility to
establish by clear and convincing evidence his "financial stability,
integrity and responsibility", his "good character, honesty and
integrity", and his "business ability and casino experience".
N.J.S.A. 5:12-89(b). With regard to Mr. O'Donnell, the bulk of the evidence
presented to the Commission relates to the licensure criterion of "good
character, honesty and integrity". The Act requires the Commission in
determining an individual's "good character, honesty and integrity"
to examine, among other factors, that individual's "family, habits,
character, criminal and arrest record [if any], business activities, financial
affairs and business, professional and personal associates". N.J.S.A.
5:12-89(b)(2). In order to determine whether an individual is in fact
qualified, this Commission must make a judgment as to how that individual will
conduct himself in the future. The need to make that predictive judgment, in
turn, requires investigation of what has been denoted the individual's
"character". This character inquiry is not undertaken to pass moral
judgment on a person's behavior or to punish past wrongs. Rather, the good character
standard has been established under the Casino Control Act because of its clear
and close relationship to the paramount objective of an honest and efficient
casino industry. See N.J.S.A. 5:12-1(b)(7) and (15). The good character
requirement heads off the risk of wrongdoing. It assures to the extent
practicable honest performance. It meets the public expectation that casinos
and the industries which directly serve them will be operated by individuals of
unquestionable honesty and integrity. "Good character" is a concept
used repeatedly in legal as well as everyday affairs. It is demanded in sundry
situations, including, among others, business, personal and governmental
relationships. A person's "character" is usually thought to embrace
"all his qualities and deficiencies regarding traits of personality,
behavior, integrity, temperament, consideration, sportsmanship, altruism, etc.,
which distinguish him as a human being from his fellow men". Mester v.
United States, 70 F. Supp. 118, 122 (E.D. NY. 1946), aff'd 332 U.S. 749 (1947).
Because of its generality, the subject defies a cataloguing of all conceivable
facts and factors which define the standard. When viewed in a vacuum, the
concept loses all significance. The standard, however, draws specificity from
each setting and from the particular objectives sought to be achieved. Trap
Rock Industries v. Kohl, 59 N.J. 471,483 (1971) cert. den. 405 U.S. 1065
(1972). So here, the nature of the subject, that is, the suitability to
participate in the sensitive casino gaming industry in New Jersey, itself
supplies concreteness to the concept of "good character". The demand
is for a party who will perform honestly and whose record does not suggest a
lack of that essential integrity. Hence, we must look to an individual's past con-
duct as a guide to how that individual is likely to operate a casino facility
in the future. In an effort to meet his statutorily imposed burden, Mr.
O'Donnell produced evidence in support of his good character, honesty and
integrity. Witnesses having substantial backgrounds in law enforcement
testified as to Mr. O'Donnell's good character, honesty and integrity. David P.
Schippers, a former head of the Chicago Strike Force, whose prior testimony was
placed in evidence, stated that at no time had he received "information
indicating that any of the officers or agents of that firm [Bally] were
directly or indirectly involved in organized crime". Mr. William F. Beane,
the former FBI Special Agent in Charge for Chicago, testified that he had personally
reviewed the FBI files on Bally and Mr. O'Donnell and that he "would be
willing to put [his] 28 years in the Bureau on the line and go to work for
them". The Commission also heard the testimony of Thomas A. Foran, a
former United States Attorney with an impressive record of prosecuting
organized crime, who testified that when he asked the FBI for a report on Mr.
O'Donnell, he was told that "Bill O'Donnell was as straight as an arrow
and was extremely helpful to the Bureau". James M. Rochford, Bally's Vice
President of Corporate Security and a former Superintendent of Police for the
City of Chicago, described Mr. O'Donnell as "absolutely honest" and
"a man of his word and when he says something you can bet your life on
it". Numerous bankers and other members of the financial community gave
their opinions of Mr. O'Donnell's good character and testified to his good
reputation in the financial community. These included: J. Joseph Anderson,
Senior-Vice President of Continental Illinois Bank and Trust Company; Alan Stults,
Honorary Chairman of the Board, and Robert Engelman, Jr., Executive Vice
President, both of American National Bank and Trust Company of Chicago; Samuel
W. Sax, Chairman of the Board of the United of America Bank; and Lee S. Isgur
of Paine Webber.Other witnesses testified as to Mr. O'Donnell's good character
and his reputation in the community where he lives and works. Two Jesuit
priests, the Reverend Lawrence Reuter, president of Loyola Academy (a private
secondary school operated by the Society of Jesus), and the Reverend John H.
Reinke, Chancellor of Loyola Univeristy in Chicago, stated that Mr. O'Donnell's
reputation in the community where he lives and works is "very
favorable" and "impeccable". In addition, the Honorable Abraham
L. Marovitz, Senior Judge of the United States District Court for the Northern
District of Illinois, testified that Mr. O'Donnell's reputation in the
community is that of "an honest, decent man and member of our
community". Judge Marovitz also testified that in his own opinion, Mr.
O'Donnell is "a very excellent human being". Still other witnesses,
such as Mary Mitchell and Walter Wojtaszek, testified as to good deeds done by
Mr. O'Donnell during his lifetime. In examining the whole man and the entire
circumstances in which he performed, the Commission must carefully consider all
of the testimony regarding Mr. O'Donnell's character, honesty and integrity.
Several individuals with impeccable credentials willingly came forward to
praise Mr. O'Donnell's candor, honesty, generosity and compassion. Based either
on their personal contacts with Mr. O'Donnell or on law enforcement sources
available to them, these witnesses were aware of no reason to doubt that Mr.
O'Donnell is an upright, trustworthy and law abiding businessman. Due regard
must be given to such positive opinion and reputation testimony. However, in
determining the proper weight to accord this evidence, the Commission must
consider not only the relationship of each witness to Mr. O'Donnell and Bally
but, more importantly, the reliability and scope of the basis on which the
opinion or reputation testimony rests. In point of fact, none of the character
witnesses produced by Mr. O'Donnell exhibited knowledge of all the significant
information regarding his activities and associations which has now been
brought to the attention of this Commission. Thus, with the opinion and
reputation testimony in mind, the Commission must scrutinize the entire record
to reach its own conclusion as to the character of Mr. O'Donnell. Since the bulk
of the evidence concerned specific acts and events in which Mr. O'Donnell was
personally involved or for which he was directly responsible, a threshold
question arises as to the relative value of specific act evidence, opinion
testimony and reputation in judging character, honesty and integrity. Again the
latter two types of evidence may not be ignored. However, if the Commission
finds that an individuals engaged in certain conduct which, under all the
circumstances and in light of all the relevant evidence, indicates character
flaws or shortcomings, the insights thus obtained would naturally deserve
greater weight than contrary favorable proofs in the form of opinion or
reputation evidence. Evidence of specific acts provides "the most decisive
revelation of character". McCormick, Evidence, ?187 at 443 (2 ed. 1972).
Although true character can never be viewed directly, it is manifested by the
actual behavior of the individual. Opinion and reputation, when accurate, are
themselves nothing more than the residue of an individual's conduct. Quite
simply, it is a theorem long-since proven by human experience that actions
speak louder than words.
The Division of Gaming Enforcement has recommended that the
Commission find William T. O'Donnell to be unsuitable for qualification. In so
recommending, the Division points to evidence of specific acts and events which
assertedly belie the favorable opinion and reputation testimony and raise
serious questions about Mr. O'Donnell's character. Thus, the Commission is required
to determine whether Mr. O'Donnell's actions, viewed in the context in which
they occurred, do disclose a lack of fitness. While the record is too
voluminous to permit a detailed recitation of the proofs regarding Mr.
O'Donnell's behavior, the Commission has taken pains to carefully assess all
the pertinent evidence. We now proceed to comment upon these matters which we
deem most significant.
Page 15 of 68 View in DJVU
2. GERARDO CATENA
Shortly after he began working for Lion in
1946, Mr. O'Donnell became acquainted with a company known as Runyon Sales,
which was for many years the largest distributor for Lion, having exclusive
rights to the New York, New Jersey and Connecticut areas. (In the coin machine
business, the distributor is the entity which purchases the product from the
manufacturer, and in turn sells it to the operator, who is the ultimate owner
of the equipment). Mr. O'Donnell was in frequent contact during that period
with Runyon Sales' principals including Abe Green, with whom he became friends.
Mr. O'Donnell also had telephonic and personal contact during this period with
Barnet Sugarman, a partner in Runyon Sales. On a visit to Runyon Sales in the
middle 1950's Mr. O'Donnell was introduced to Gerardo Catena, whom he knew to
be associated with Runyon. Sometime in the early 1950's, Mr. O'Donnell had
heard rumors that both Catena and Joseph "Doc" Stacher were connected
with Runyon Sales. He had also learned at that time, from a Dun and Bradstreet
report, that Runyon Sales was reputed to have hoodlum or unsavory connections.
At that point Mr. O'Donnell had asked Abe Green if Catena or Stacher were
Green's partners. Green had replied that Stacher had been, but was no longer,
and that Catena still was a partner. In point of fact, during the period from
1950 to 1965 Gerardo Catena was the subject of numerous governmental and media
reports in the public record, all of them negative and all referring to his
organized crime affiliations. One particular example involved the so-called
Apalachin meeting in 1957, in which Catena was stopped in a car along with
Russel Bufalino and Vito Genovese. The matter generated substantial publicity.
Based upon this and other factors, the reputation of Gerardo Catena was that he
was a member of organized crime. Catena's reputation was, in the words of the
Nevada Gaming Commission, of a "notorious and unsavory" nature. In
1962, four years after the death of Lion's founder, Raymond Moloney, American
National Bank and Trust Company of Chicago ("American National"), the
administrator of Mr. Moloney's estate, stated its intent to liquidate the
assets of [ion. Mr. O'Donnell sought an opportunity to raise the necessary
money to purchase [ion. Mr. O'Donnell made unsuccessful attempts (a) to
persuade American National to finance the purchase of [ion; (b) to persuade the
Moioney family to keep the company together; and (c) to purchase Lion's assets
in conjunction with R.F. Jones (a San Francisco-based Bally distributor).
Thereafter, Mr. O'Donnell turned to Abe Green of Runyon Sales, with whom such a
proposal was discussed at a dinner meeting in Chicago. At that point in time
Mr. O'Donnell knew that Green was a partner with Gerardo Catena in Runyon
Sales, that Green and Catena were also partners in other businesses, and that
Catena was reputed to be a hoodlum. Green indicated interest in Mr. O'Donnell's
proposal, and in 1963 contacted Sam W. Klein concerning the purchase of Lion.
Klein was already acquainted with both Green and Catena since, as O'Connell
learned later, Klein had met Catena and had attempted to purchase Runyon Sales
in 1960. Klein brought in Louis M. Jacobs, a principal of the Emprise
Corporation, who, in turn, contacted Frank J. Prince. Another investor was
Barnet Sugarman. As noted, Mr. O'Donnell knew Mr. Sugarman to be a partner in
Runyon Sales. Green and Sugarman also brought in Irving Kaye, who was known to
Mr. O'Donnell and who was an owner of the Irving Kaye Company along with Green,
Sugarman, and Catena. The named individuals formed a corporation, K.O.S.
Enterprises, which in June of 1963 acquired the assets of Lion for
approximately $1.2 million. The principals of K.O.S. were at that time divided
into two groups: (1) the O'Donnell group, consisting of Messrs. O'Donnell,
Kaye, Green, and Sugarman; and, (2) the Klein group, consisting of Klein,
Jacobs, and Prince. Klein and Jacobs subsequently purchased Prince's shares. In
March of 1964 Barnet Sugarman died. Mr. O'Donnell testified that he then first learned
that Catena had a hidden ownership interest in kion. Specifically he was
advised that Sugarman and Abe Green had each acquired one-half of their
respective interests in K.O.S. Enterprises for the benefit of Catena. At that
point Catena and Green purchased what had been Sugarman's interest in K.O.S.
from his widow. Thereafter Green told Mr. O'Donnell that Catena was getting
older and wanted to liquidate his assets. Mr. O'Donnell was interested in
buying out Catena because of his reputation and prior hidden ownership of Lion.
By this time, Catena's underworld reputation as the underboss of the Vito
Genovese crime family was well documented publicly. In July of 1965, an
agreement was signed whereby Mr. O'Donnell purchased some of Green's record
shares of Lion. This agreement was intended to buy out Catena's interest in the
company, although it contains no reference to Mr. Catena or any other third
party.
Page 17 of 68 View in DJVU
In the meantime, in October of 1964, a partnership was formed
for the purpose of purchasing the real estate on which the Lion premises were
located. This was the 2640 West Belmont Avenue Partnership, and consisted of
all the shareholders of Lion, those then being Messrs. O'Donnell, Klein, Kaye,
Green and Jacobs. Although Mr. O'Donnell had learned prior to that time that
Green had fronted for Catena in the purchase of Lion and in the Irving Kaye
Co., he recalls making no inquiry of Green as to whether he was fronting for
Catena in the real estate partnership as well. Green himself remained a partner
of Catena in Runyon Sales until late 1970 and Runyon Sales was retained as the
exclusive Bally distributor in the New York, New Jersey, and Connecticut areas
until at least 1974, when it was nominally replaced by Coin-Op. Although Mr.
O'Donnell had "some concern" over Bally's use of a distributor partly
owned by Catena, such concern was not acted on in any way other than for
O'Donnell to occasionally express such concern to Green. Green did not buy
Catena out of Runyon Sales until December of 1970 at a time when Catena was in
prison for contempt of the New Jersey State Commission of Investigation. During
the period from 1970 to 1975, Catena was confined continuously in New Jersey
for his contemptuous refusal to answer questions put to him by the State
Commission of Investigation concerning organized crime activities, following a
grant of testimonial immunity. According to Mr. O'Donnell, irving Kaye first
learned in March of 1964 that Green and Sugarman had been fronting for Catena
in the irving Kaye Co. Kaye nevertheless knowingly remained a partner of Catena
in that company until 1971. This was despite suggestions from Mr. O'Donnell
that Kaye, who, was a vice president of Bally during this period, should buy
out Catena because of Catena's reputation. Meanwhile, Bally Manufacturing
Corporation was incorporated in 1968. In 1966 the Jacobs interests were
purchased by the Klein and O'Donnell groups. Thereafter,
in 1968, Bally Manufacturing Corporation was formed and Lion was merged into
Bally. The resulting equity structure of Bally remained
substantially unchanged from the Lion ownership until Bally's initial public
securities offering in 1969. By this time, Mr. O'Donnell's ambitions for Bally
had begun to be realized. In a period of just four years, Bally had become so
dominant in the Nevada slot machine market that, in 1968, Bally sold over 90
percent of the new slot machines in that State. Mr. O'Donnell attributed this
near sales monopoly to the superiority of the company's product. The evidence
before us suggests that during the 1960's there were hidden ownership interests
in a group of casinos in Nevada, including the Sands, Flamingo, Freemont, and
Horse Shoe, to which Bally supplied its slot machines. Hidden profits were
reportedly skimmed out of these casinos, and some were ultimately funnelled
from Las Vegas to New Jersey where they were shared by, among others, Gerardo
Catena. Michael "Mickey" Wichinski, who was Bally's first successful
Nevada slot machine distributor during the 1960's, had a familial relationship
with Catena by virtue of the marriage of Wichinski's nephew to Catena's
daughter. Wichinski had been referred to Mr. O'Donneil by Abe Green. Wichinski
himself held a percentage ownership in the Sands Hotel, which was one of the
first Nevada casinos to which Bally sold slot machines, and Wichinski received
commissions for all these sales. Wichinski also
became an investor along with Mr. O'Donnell in the Westronics Co. in or about 1965 and remains so to this day. In 1971 Bally made
a second public offering of its stock. A portion of the proceeds therefrom were
used to redeem the shares owned by Abe Green and his family. This was prompted
by earlier discussions with Nevada authorities concerning Bally's contemplated
bid for public registration there. Nevada officials
indicated to Mr. O'Donneil that Bally would have difficulty being licensed as
long as Green was associated with the company. Pursuant to
an agreement with Bally, Irving Kaye also disposed of a quantity of his stock
and used the proceeds to buy out the record and beneficial interests then held
by Green, Catena and Mrs. Catena in various companies in which maybe was an
owner. Subsequent to the 1971 public offering, the only remaining share-holders
of Bally who had participated in the 1963 acquisition of [,ion were Irving
Kaye, Sam Klein, and William O'Donnell. In 1975, Kaye was denied a gaming
license in Nevada based upon his "numerous business relationships over a
period of years with Gerardo Catena, a person of notorious and unsavory
reputation". Kaye subsequently resigned as an officer of Bally and sold
his stock. Kaye died in 1977. In 1976, Klein's probationary licensure was
revoked by Nevada, and Klein was ordered to resign from Bally and divest
himself of his stock, although his continued partnership with Mr. O'Donnell in
the 2640 West Belmont Avenue Partnership was left, and remains to this day,
undisturbed. These events now leave William O'Donnell as
the only remaining shareholder of Bally who participated in the acquisition of
Lion. From these facts it is apparent that, in order to acquire
Lion Manufacturing in 1963, William O'Donnell entered into partnership with
individuals (Green and Sugarman) "fronting" for
Gerardo Catena, who was then known to Mr. O'Donnell as a member of organized
crime. Mr. O'Donnell was made aware that Green, Sugarman and Kaye were partners
with Catena in numerous business ventures. Moreover, another of the K.O.S.
partners, Sam Klein, turned out to be too tolerant of the disreputable Gerardo
Catena. Nevada's 1976 revocation of Klein's probationary license followed his
being observed in May of 1976 playing golf in Florida with Catena. These
relationships occurred, for the most part, at the very inception of what was to
become a highly successful gaming enterprise led by Mr. O'Donnell. They were
conceived as a result of his calculated business judgments which, from a
strictly commerical point of view,proved well-founded. They were cultivated by
Mr. O'Donnell, through the years, despite his notice and increasing awareness
of facts that should have counseled him to immediately sever these potentially
corruptive influences. Illustrative is the fact that although Catena's interest
in Bally (then Lion) was bought out in 1965, Bally nevertheless continued a
business relationship with Runyon Sales until at least 1974, and that until
1971, Catena continued his part ownership of Runyon. Moreover, to this very
day, William O'Donnell remains a partner of Sam Klein's in the 2640 West
Belmont Building Partnership which leases to Bally the p'remises on which its
main factory in Chicago is located. 3. DINO CELLINI Another questionable and
disturbing association which William O'Donnell was instrumental in formulating
was one with Dino Cellini, whom this Commission has previously found to be an
"associate of Meyer kansky and a person of unsuitable character". In
the Matter of the Application of Resorts International Hotel, Inc., for a
Casino License, (1979) at p. 36. ["Resorts"]. According to Mr. O'Donnell,
Dino Cellini appeared at his office, unannounced, sometime in 1964 or 1965.
Cellini had been referred by Cyril Schack, who was a princi- pal of
Phonographic Equipment Co., a substantial Bally distributor in England. Schack
and Cellini were part owners of the Colony Club, a private gaming club in
England, at which Cellini also performed managerial functions. Mr. O'Donnell
himself had visited the Colony
Page 20 of 68 View in DJVU
Club during the 1960's and had there socialized with Cellini? At
the meeting in Mr. O'Donnell's office, Cellini told Mr. O'Donnell that he would
have the authority to select slot machines for a new casino in the Bahamas.
Based upon this conversation, in 1965 Mr. O'Donnell accompanied Cellini to the
Bahamas where, after various discussions, the Bally Bahamian Company was set
up. Shortly thereafter, Cellini contacted Mr. O'Donnell to inform him that he,
Cellini, had been excluded from the Bahamas for formerly running one of Meyer
Lansky's casinos in Cuba. At that time Mr. O'Donnell knew Meyer Lansky to be a
notorious organized crime figure. In 1967, Cellini was excluded from Great
Britain for the same reasons he had been excluded from the Bahamas. Bally
continued to pay commissions to Cellini for his sales of Bally slot machines in
the Bahamas and Portugal in 1967 and 1968. However, Cellini was not paid
directly. His commissions went instead to third party companies. This method of
payment may have been selected to avoid the appearance of Dino Cellini's name
in Bally's records. At some subsequent point, Mr. O'Donnell recommended to
Alexander Wilms that Cellini become a slot machine salesman for Bally
Continental, a Belgium based distributorship which became a wholly-owned Bally
subsidiary in 1969. Cellini did commence such employment in that year. Subsequently,
Cellini began to receive from Bally Continental a draw against commissions in
the amount of $2,000 per month. In addition to his receipt of this draw
Cellini's business expenses (which in some years totaled in excess of $50,000)
were also paid by Bally Continental. Sometime in 1971, inquiries were made
concerning the possibility of Bally Manufacturing Corporation becoming licensed
in Nevada for the purpose of purchasing Bally Distributing, a separate
corporation selling Bally slot machines in Nevada. William O'Donnell was
informed by Philip Hannifin, Chairman of the Nevada Gaming Control Board that
the company’s association with Dino Cellini would cause substantial problems
insofar as licensing was concerned. From December 1971, (when a Federal indictment
was returned against Bally and Mr. O’Donnell in New Orleans) until April 1973,
The Colony Club's other owners included Alexander Wilms, the managing director
of one of Bally's European distributorships, and Carl Glickman, a close friend
of Sam Klein and a Bally consultant. Also noteworthy is the fact that in 1968
newspaper articles appeared in Britain which alleged that Klein was a hidden
owner of the Club.
Page 21 of 68 View in DJVU
(the date of their acquittal on that indictment), Bally's licensing
initiative in Nevada was held in abeyance. Mr. O'Donnell spoke to Wilms
occasionally during this period about terminating Cellini. Mr. O'Donnell
testified that Wilms resisted, and so he, O'Donnell, did not insist.' Dino
Cellini was eventually severed in May of 1973 about one month after Bally's
acquittal and one month before its licensing effort in Nevada was resumed in
June of 1973. 4. SOUTHLAND DISTRIBUTING: THE KENTUCKY BRIBERY INCIDENT In the
late 1940's or early 1950's, William O'Donnell first met or spoke to Gilbert K.
Brawner, who was then an employee of Branson Distributing Company. Branson was
at that time Lion's distributor in Kentucky and was selling bingo machines.
Brawner later came to own Branson, which became Southland Distributing Company.
As a result of Federal legislation in 1961, a question arose as to whether
these bingo machines could be sent into various states. Test litigation
involving a machine shipped to Branson in Kentucky was initiated by Bally in
1964, but was abandoned in 1966 when the Kentucky Legislature amended the
applicable statute so as to clearly prohibit importation of the bingo machines.
In late 1967, Mr. O'Donnell became aware of an initiative on the part ot'
Brawner and others to attempt to have the Kentucky statute amended to legalize
the bingo games. Letters on the subject were exchanged between Brawner and Mr.
O'Donnell. The passage of such an amendment was in the interest of both Bally
and Mr. O'Donnell. In response to a request from Brawner, legal advice was provided
by Bally's attorneys at Bally's expense. In a letter dated February 2, 1968,
addressed to Mr. O'Donnell by Brawher, Brawher stated in part: One other thing,
Bill, 'e have turned the bingo bill into the Research Committee this week. It
seen is as though more of the representatives and senators who have read the
bill so far seem 'In this period, on June 6, 1971. Dino Cellini was indicted by
a Federal grand jur) in Florida. The indictment charged Cellini with evasion of
taxes due on money skimmed from junkets to casinos in London and the Bahamas.
Meyer Lansky was named as a co-defendant. Although O'Donnell was aware of this
indictment, he claimed to have no knowledge of the specific allegations. The
indictment was ultimately dismissed in 1977 or 1978.
Page 22 of 68 View in DJVU
[sic] to think that we do have a very good chance of putting
this bill over. My biggest problem is trying to raise enough to take care of
the expenses in Frankfort ... Brawner also stated, in a letter to Mr. O'Donnell
dated February 20, 1968: ? . . 1 am awfully afraid that I am not going to have
enough money to get it through the House. It is really shameful because we have
made all the arrangements with the representatives, and they all tell us that
we have a 99 percent chance to get it through. We are not worried too much
about the senate, as we have made the senators an if come basis. Just last
night I gave the chairman of the committee, which this bill is im $500. That is
what he wanted. It seems as though word got out that we have given him some
money. Now, they are trying to put me on for more money ... In still another
letter to Mr. O'Donnell dated February 23, 1968, Brawnet stated: Our bill came
out of the House favorably. There was [sic] eleven on the committee, and ten voted
for it. We feel that we do have a big job ahead of us: but in addition, we have
made a lot of contacts with the representatives. We feel that we will have in
the neighborhood of 67 votes out of 100, which we only need 51. The only thing
that we are now worried about is being able to have enough money on hand to get
it through the House, but we are hoping that we will be able to get a lot of
the representatives with less money than they are asking for. Mr. Akers, who
introduced the bill, and myself have obligated ourselves to all of them. It is
like I mentioned the other day that we feel that we will be able to work a deal
with our Senate when it gets that far. Our biggest problem is in the House ...
On March 1, 1968, Mr. O'Donnell sent an airmail, special delivery letter to
Brawner which read in part: Enclosed is the $4,000 loan you asked me for. Also
enclosed is a note which I ask you to please sign and return to me. At the time
this letter and check were sent, the bill Brawner was supporting had passed the
House and was pending in the Senate. The bill did not ultimately pass the
Senate, however, and the $4,000 was returned to Mr. O'Donnell with a letter
from Brawner dated March 18. which read in part:
Page 23 of 68 View in DJVU
Enclosed you will find the note along with a check for $4,000. I
want to take this opportunity to thank you for all the favors you have done for
me, and I am sorry that we have to return this, as it could have been a real
big thing for you and myself In testifying before this Commission, Mr.
O'Donnell stated clearly that he interpreted Brawner's February 20, 1968,
letter to be referring to bribery. In particular, he interpreted the "if
come basis" language of the second paragraph to refer to a contingent
bribe arrangement with senators. Mr. O'Donnell's explanation of this matter was
that he never saw the February 20 and February 23 letters from Brawner, and
that the $4,000 constituted a loan to Brawner. Mr. O'Donnell said he supposed
he had spoken to Brawner prior to sending him the money, but could not recall
any details of the conversation or the purpose for the loan other than his
conviction that it was not for purposes of bribery. When questioned as to how
he could be so certain that he had never read the February 20th and February
23rd letters, Mr. O'Donnell responded: I think there are two facts that make
[me] believe I never read those letters. The first fact is that it was in my
files. The second fact is that I never would have sent a check down there if I
had read those letters. At a later point, Mr. O'Donnell again stated that, had
he read such letters, he would have thrown them away without bringing them to
the attention of any enforcement agency. On still another occasion, Mr.
O'Donnell stated: If I had read those letters, your question is would I have
referred that to a law enforcement agency ... I think I have to answer I'm not
sure what I would have done. 5. OTHER MATTERS OF CONCERN During the course of
the hearing, evidence was adduced on numerous other matters which bear upon Mr.
O'Donnell's suitability. Although no single one of those other matters appears
as meaningful as any of the three areas set forth above, several of them do
give cause for concern. Moreover, when these seemingly less significant events
are viewed together with the more serious ones, the developing picture of Mr.
O'Donnell is brought into sharper focus. Specifically, the quality of his
business practices, the nature of his attitude toward regulatory authorities,
and the degree of his commitment to disentangle the company from its suspect
origins are better revealed in the added light cast by these other matters. As
always, the Commission has considered each event or sequence of events in the
context of the entire record and in the circumstances in which they occurred.
In the interest of clarity and brevity, however, our comments are directed to
those which best serve to illuminate and refine the critical issue of whether
Mr. O'Donnell may be trusted to influence or control a casino operation or an essential
casino service industry. In the fall of 1971, Federal law enforcement
authorities were conducting an investigation into illegal gambling in Chicago.
Pursuant to court authorization, a wiretap was installed on the telephone line
of one of the suspected participants. On four occasions from September 16,
1971, to October 17, 1971, conversations involving Mr. O'Donnell were
intercepted and recorded. These taped conversations were introduced into
evidence along with transcripts of their contents. Mr. O'Donnell admitted that
he was a party to the telephone conversations, that the purpose of the calls
was to place wagers on football games and that he then knew bookmaking activity
to be illegal under Illinois law. He claimed not to have been aware at the time
that the act of placing a wager with a bookmaker was also illegal under
Illinois law. See 38 Ill. Rev. Stat. ?28-1(a)(2). 6 However, Mr. O'Donnell
acknowledged that he was then familiar with the fact that illegal bookmaking
and gambling operations frequently provided funds for other organized criminal
ventures. 7 Thus, some importance attached to the question whether Mr.
O'Donnell regularly bet substantial sums with a person whom he knew to be part
of such an operation. According to Mr. O'Donnell, he had previously engaged in
a course of friendly wagering with a long-time friend, one Arthur
"Jake" Sommerfield. These bets had escalated to $500 or $1000 each
when Mr. Sommerfield indicated he would be traveling out of the state. Mr.
O'Donnell explained: "I knew it was illegal to bet across state lines and
I asked him if he knew somewhere where I could place the bet and to give me the
number". Mr. Sommerfield obliged and qt is understood that New Jersey does
not impose criminal penalties on individuals who participate in illicit gaming
solely as players. See N.J.S.A. 2C:37-2. 7The New Jersey Supreme Court has
recognized the fact that illegal gaming operations are a prime source of
revenue for organized crime. See State v. DeSatasio, 49 N.J. 247, 257 (1967).
Page 25 of 68 View in DJVU
Mr. O'Donnell called the number four times at approximately one
week intervals to place bets on the next weekend's football games. In the first
call, Mr. O'Donnell was instructed to refer to himself as "Bill for
J" which signified that he was referred by Jake Sommerfield. This form of
identification was necessary because different people might answer the
telephone when Mr. O'Donnell called and because Mr. O'Donnell was told to
"straighten up whatever you do with J". The other party explained
that Mr. O'Donnell should pay his losses or collect his winnings through Jake
Sommerfield and that when "he [Jake] lets me know then your figure will be
clear". To avoid con- fusion, the other party decided to begin "clean"
with Mr. O'Donnells account notwithstanding Mr. O'Donnells assertion that he
was $1500 "to the good" with Sommerfield. The other party added that
if tells me to give you credit for $1,500, I will gladly do it". The other
party then proceeded to inform Mr. O'Donnell of the betting "line" on
that week's football games and Mr. O'Donnell made wagers aggregating $5,000. In
the three subsequent calls, Mr. O'Donnell announced himself as "Bill for
J" and made bets totaling $2,500, $6,000 and $2,000 respectively. Mr.
O'Donnell testified that an unidentified man would come to his office to
collect losses or to pay winnings. In fairness, it must be observed that sports
betting is widespread in our society. Nevertheless, Mr. O’Donnell's illicit
gaming hardly serves to enhance his image. Of more significance are Mr.
O'Donnell's responses to questions regarding this episode. On direct
examination, he was asked whether he knew he was placing bets with an illegal
bookmaking operation. He answered that "if I had thought about it, yes, I would
have known that it was a bookie". On cross-examination, Mr. O'Donnell
restated this response and declared that he had not given any thought at the
time to whether he was dealing with a bookmaker. While anyone would be
reluctant to admit he knowingly patronized an illicit gaming operation with its
probable organized crime affiliations, this motivation only makes Mr.
O'Donnell's answers more disturbing. A man of Mr. O'Donnell's intelligence and
acumen could hardly have failed to realize he was betting with a bookmaking
ring. Indeed, if Mr. O'Donnell truly did not grasp this fact, then he is
capable of ignoring or avoiding the most obvious implication of information
coming to his attention. Thus, Mr. O'Donnell was being less than honest either
with the Commission when he testified or with himself when he placed the
wagers. Neither alternative speaks well for Mr. O'Donnell's trustworthiness and
candor.
Page 26 of 68 View in DJVU
Similar doubts about Mr. O'Donnell are raised by the evidence regarding
Bally's efforts to sever business relationships with Louis Boasberg whose
company, New Orleans Novelty Company, had been Bally's distributor in Louisiana
for many years. As noted previously, Mr. O'Donnell and Bally were indicted by a
Federal grand jury in 1971 for interstate transportation of illegal gaming
equipment, to wit, Bally "bingo" pinball machines, and for conducting
illegal gambling with such equipment. Louis Boasberg was also named in the
indictment. Following the jury trial at which Bally and Mr. O'Donnell were
acquitted, Mr. Boasberg was found guilty of promoting illegal gambling and
operating an illegal gaming business, i.e., New Orleans Novelty Company.
Contemporaneously with this prosecution, Mr. Boasberg was charged in a separate
Federal indictment with bribery of public officials. The stated purpose of the
bribery was to protect an illegal gaming operation using coin operated
machines, including Bally "bingo" machines. Mr. Boasberg ultimately
pleaded guilty to the bribery charge and was sentenced in 1973 to several
months in Federal prison. Thereafter, in January 1974, Mr. Boasberg was
sentenced on the jury verdicts to a $7,000 fine and a three year probation to
commence on his release from Federal prison on the bribery sentence.
Mr. O'Donncll was fully aware of the existence and nature of Mr.
Boasberg's Federal convictions. Despite this knowledge and despite his
professed intolerance for bribery of any sort, Mr. O'Donnell initiated no
action to ascertain whether Bally should cease using Mr. Boasbcrg's company as
a distributor? Indeed, New Orleans Novelty Company continued its relationship
with Bally during Mr. Boasberg's imprisonment and after his release on May 15,
1974. Eventually, the Nevada Gaming Commission demanded, as a condition of the
probationary registration order entered on March 20, 1975, that Bally terminate
all business relationships with Mr. Boasberg or any company under his control.
By letter dated March 24, 1975, Bally notified Mr. Boasberg of the Nevada order
and advised him that New Orleans Novelty Company would be discontinued as a
Bally distributor on May 24, 1975. 'Mr. O'Donnell's response was also
inadequate in the face of convictions or admissions of four other Bally
distributors regarding illegal gambling operations or bribery of public
officials or both. No effective action was taken with respect to these matters
until Nevada demanded severance of business relations with such individuals in
1977.
Page 27 of 68 View in DJVU
Thereafter, Mr. Boasberg arranged to have the Bally
distributorship transferred from New Orleans Novelty Company to Playtime Sales
Company, a partnership composed of Mr. Boasberg's five children and one other
individual. This arrangement was acceptable to the Nevada authorities so long as
Mr. Boasberg refrained from any involvement in the new company. However, Mr.
Boasberg was allowed to purchase Bally equipment front Playtime for use in his
pinball and vending machine routes. In addition, New Orleans Novelty Company
remained as a distributor for several other coin-operated machine
manufacturers.
By its order of October 20, 1977, the Nevada Gaming Comntission
found that Bally had failed to comply with certain requirements of the 1975
registration order and, more specifically, that Bally had continued to maintain
business relationships with Louis Boasberg or a company under his control.
Front the evidence in the present record, there is no doubt about the
correctness of Nevada's finding. In fact, shortly after the order was issued,
Mr. O'Donnell instructed James Rochford, Bally's newly appointed vice-president
for corporate security, to conduct an on-site inquiry into the involvement of
Louis Boasberg with Playtime Sales Company. Mr. Rochford, accompanied by
Bally's General Counsel Glenn Seldenreid and its Nevada counsel, Donald Carano,
visited the premises of Playtime Sales Company and Louis Boasberg's New Orleans
Novelty Company in New Orleans. The two companies were located at the same
address in adjacent rooms. When he viewed the facility and spoke to Louis
Boasberg, it became immediately apparent to Mr. Rochford that Mr. Boasberg
controlled the operation of Playtime through his son, G. Robert Boasberg.
Although Bally's compliance failure is established, Mr. O'Donnell's personal
culpability, if any, must be determined. Mr. O'Donnell testified that he was
intent on complying with the 1975 Nevada order and that he was confident the
company was "in every way" complying. His confidence was based upon
the internal report- ing system which had been established to assist Nevada
authorities in monitoring the company and upon the "almost daily"
contact between Bally representatives and Nevada officials. Mr. O'Donnell's
confidence was not shaken when he learned that Mr. Boasberg's company (New
Orleans Novelty) and Playtime Sales were located in the same building.
According to Mr. O'Donnell, Nevada had been informed of this fact and had
registered no protest. Nor was Mr. O'Donnell troubled by Mr. Boasberg's
continuing use of stationary proclaiming New Orleans Novelty as the Louisiana
and Mississippi distributor for Bally. In a response reminiscent of his
explanation regarding his illegal wagers, Mr. O'Donnell stated: "I'm
afraid I have to say I didn't reflect on that". Mr. O'Donnell asserted that
other items coming to his attention after the 1975 order provided no cause to
question Mr. Boasberg's separation from Bally or Playtime. In January 1976, Mr.
O'Donnell's secretary approved payment by Bally of a trip to be taken by Mr.
Boasberg from New Orleans to Chicago to London and back to New Orleans. This
payment was made at the behest of Ross Scheer, Bally's marketing director, to
reward Mr. Boasberg for research and marketing assistance which he provided to
Bally prior to the 1975 severance order. Mr. Scheer acknowledged that Bally was
under no legal obligation to provide this benefit. Mr. O'Donnell was unsure
when he first learned of this payment although he claimed that the Nevada
officials were aware of it. In Mr. O'Donnell's view, there was no reason to suspect
that the trip was payment for more recent services or business with Mr.
Boasberg. Mr. O'Donnell maintained his position notwithstanding certain
communications from Mr. Boasberg. By all accounts, Mr. Boasberg was a prolific
correspondent. A batch of letters introduced at the hearing attests to this
trait and to his close personal relationship with Mr. O'Donnell. Mr.
O'Donnell considered the business advice and suggestions offered by Mr.
Boasberg to be consistent with Mr. Boasberg's use of Bally equipment as a route
operator, Le., a customer of a Bally distributor rather than as a distributor.
While many of the letters do not indicate any involvement of Mr. Boasberg in
Playtime, some contain passages which are difficult to reconcile with that
conclusion.
In a letter dated February 16, 1976, and written on the
stationery of New Orleans Novelty, Mr. Boasberg complained to Mr. O'Donnell
about the price which Bally was charging for its pinball games. Mr. Boasberg
asked: "[H]ow can a distributor get $35.00 more" for a certain Bally
game than a competitor's model. Later in the same letter, Mr. Boasberg wrote:
Other evidence of the duration and closeness of this
relationship appears in the record. For example, Mr. Boasberg guaranteed a
$50,000 bank loan for Mr. O'Donnell in 1966, the proceeds of which were used to
pay off a debt secured by a voting trust in favor of Louis Jacobs. At the time,
Mr. Jacobs was attempting to wrest control of Lion from the other founders.
Page 29 of 68 View in DJVU
We won't use many Flip Flops [a Bally product] not only because
of the price but because we still haven't been paid yet for some Wizards [a
Ball,,,' product] to say nothing of Bows and Arrows [a Bally product] and other
games. We have reached the end of the line as far as credit, and need a little
rest to catch up.
After receiving this letter, Mr. O'Donnell sent copies to key
personnel in Ballv's marketing and engineering operations. In his transmittal
memorandum, Mr. O'Donnell stated that Mr. Boasberg's letter was "self-explanatory"
and that Bally's response would be "that he [Boasberg] had better
buy" the named pinball game at Bally's current price. By letter dated
April 30, 1976, again on New Orleans Novelty stationery, Mr. Boasberg advised
Mr. O'Donnell that Bally's direct operation of an amusement arcade had
alienated competing operators who were also purchasers of Bally equipment. Mr. Boasberg enclosed a letter from one such operator who had
written to New Orleans Novelty to protest such competition and to state his intent
to boycott Bally products. In Mr. Boasberg's letter, he bemoaned the loss of a
good customer and noted in a post-script that "TAC did not order any Old
Chicagos [a Bally product], however, Operation Sales did order ten". On
April 20, 1976, Boasberg wrote to Mr. O'Donnell once again on New Orleans
Novelty stationery. Most of the letter, which was designated as
"personal", was devoted to praising Bally and Mr. O'Donnell for their
recent success. In the final paragraph, however, Mr.
Boasberg changed the subject to his own business concerns: Now after all this
lovemaking, let me remind you that I have on order two trailer loads of Capt.
Fantastics. Will you please inform your Sales Department to stop sending
Fantastics to the bootleggers, the home offices, and take care of New Orleans
Novelty Co., and how about cutting my price on Twin Joker to $250. Mr. O'Donnell saw this request as perfectly consistent with the
fact that Mr. Boasberg's company ran a large route operation which was
permitted by the Nevada order to purchase Bally equipment from Playtime Sales
Company. Mr. O'Donnell also insisted that Nevada knew all of this, although he
could not cite a specific conversation or document discussing this with the
Nevada officials prior to Ne- vada's expression of dissatisfaction in mid-1977.
While we have carefully considered the explanation given by Mr. O'Donnell, we
are constrained to find that the combined facts known to Mr. O'Donnell should
have given him a clear signal that Mr. Boasberg was continuing as a Bally
distributor through his sons' company. Instead of heeding the warning signs,
Mr. O'Donnell either did not "reflect" on them or did not see them as
being inconsistent with compliance. Mr. O'Donnell's failure to properly
interpret these indications does not necessarily mean that he intentionally
violated the Nevada order. However, at best, his performance does reveal an
indifference to a regulatory restriction which required Bally to terminate a
well established and successful distributor. Further, when considered together
with his lack of reaction to other distributors involved in illegal gaming and
bribery, Mr. O'Donnell's conduct displays an acceptance, if not an approval, of
such practices by Bally distributors. The 1975 Nevada order contained other
conditions to Bally's registration as a slot machine operator and manufacturer.
As already discussed herein, Abe Green had held a hidden interest in Bally for
the notorious Gerardo Catena. In addition, Mr. Green was a business partner of
Mr. Catena in several ventures including Runyon Sales Company, a New Jersey
corporation which had long been Bally's distributor for the New York
metropolitan area. Mr. Green assertedly purchased Mr. Catena's interests in
their businesses in late 1970 or early 1971. Mr. Green also sold his own Bally
shareholdings back to the company in 1971. However, Nevada's 1975 order
required Bally to have no business dealings with Mr. Green or with any company
which he controlled or in which he had a 5 percent or greater interest in voting
securities. Mr. O'Donnell understood that this requirement meant Bally could no
longer deal with Runyon Sales. In apparent anticipation of the Nevada position,
Abe Green's son, Irving Green, had advised Mr. O'Donnell in mid-1974 that he
would be using the trade name Coin-Op. An internal memorandum dated July 15,
1974, to key Bally personnel, including Mr. O'Donnell, stated that Runyon was
to be replaced by Coin-Op for all purposes. Subsequent to the Nevada
prohibition, by letter dated May 16, 1975, Irving Green reminded Mr. O'Donnell
of his earlier notification that "in the future, Runyon Sales Company
would be conducting business as Coin-Op Distributing with Irving Green as its
president". Mr. Green asserted that Coin-Op had been engaged in the
distribution and sale of coin-operated machines since the 1974 notice. Id.
Attached to this letter was a trade name certificate, dated May 9, 1975, in
which Irving Green declared that he was "about to transact" business
under the name of Coin-Op Distributing and that the business "will be
conducted" at Route 22 and Fadem Road, Springfield, New Jersey.
Page 42 of 68 View in DJVU
The Commission was thus faced with the very difficult issue of
whether any or all members of the Wilms family must be qualified as part of the
casino license application of Bally's Park Place. Alexander Wilms, through his
counsel, steadfastly maintained that he should not be required to qualify as
part of the application of Bally's Park Place. Therefore, the record of this
proceeding is sparse as to the ultimate issue of the qualification of Alexander
Wilms. If the Commission were forced to make a determination as to the
qualification of Alexander Wilms based upon this record, the Commission might
be unable to find that the statutory standard has been met. Thus, a
determination that Mr. Wilms was required to qualify as part of the casino
license application of Bally's Park Place could potentially have serious
ramifications for that corporate casino license applicant. The Commission
considered whether an alternative response to this problem would be feasible
and appropriate. The policies and purposes of the Casino Control Act would best
be served by a resolution which adequately protects the law enforcement
concerns contained in the Act without needlessly frustrating the mutual
interests of the State and the corporate applicant. These interests, namely the
economic revitalization of Atlantic City and the issuance of a casino license
to an otherwise qualified applicant, would be unjustifiably jeopardized by
placing in the hands of a shareholder, who is unable to control the actions of
the corporate casino license applicant, the power to disqualify that applicant
by refusing to cooperate in the application process. To avoid this dilemma
without eroding the Act's mandate that the integrity of any controlling or
influential person be established, the Commission proposed that certain
restrictions be imposed as a precondition to issuance of a casino license to
the applicant. These restrictions were specifically designed to assure that
there will no control or significant influence over the operations of Bally's
Park Place or Bally Manufacturing Corporation by any member of the Wilms
family. On December 23, 1980, as part of its preliminary determination, the
Commission announced its intent to pursue this course of action and described
the conditions which would be imposed. In view of the fact that William T.
O'Donnell would be foreclosed from playing any role in the management or in the
formulation of policy of the corporate applicants as a result of his failure to
qualify, the Commission believed that the proposed conditions would effectively
foreclose the ability of Alexander Wilms or any other member of the Wilms
family in DJVU(1) to significantly influence or control the operations or
policies of the casino license applicant or (2) to control Bally or Bally's
Park Place (Delaware) or elect one or more of the directors thereof. After
expressing these findings and opinions, the Commission offered the Director of
the Division an opportunity to consider whether he would join the Commission in
waiving any qualification requirement for the Wilms family members, pursuant to
Section 85(d)(1). When the license hearing reconvened on December 29, 1980, the
Director declared his agreement with the Commission's position that waivers of
qualification were appropriate. The Director emphasized that his continuing
concurrence was contingent on strict compliance with the proposed conditions
and unstinting cooperation by the applicant with the Division in enforcing
them. Additionally, the Director suggested a modification to the condition
imposed on business dealings between Bally and Alexander R. A. Wilms. We
consider the suggested modification, which expands the scope of the condition
to include other Wilms family members, to be a reasonable safeguard against
indirect influence by Alexander R. A. Wilms. We therefore adopt it. Section
92(b) of the Act, N.J.S.A. 5:12-92(b), requires that the owners, among others,
of a casino service industry license applicant which is subject to the
provisions of Section 92(a) (gaming related) must qualify under the standards,
except residency, established for qualification of a casino key employee under
the Act. See N.J.S.A. 5:12-89. Commission regulations provide that each owner
of a casino service industry license applicant who directly or indirectly holds
any beneficial interest or ownership in excess of five percent of the
enterprise must so qualify. N.J.S.A. 19:43-1.14(a)(1)(iii). As with casino
license qualifters, these statutory and regulatory provisions are grounded in
those policies of the Act which require all individuals who may have the
ability to significantly influence or control the operations of a Section 92(a)
enterprise to be qualified under the appropriate standards of the Act. Bally
Manufacturing Corporation, in addition to being a holding company as to Bally's
Park Place, is itself an applicant for a Section 92(a) casino service industry
license as a gaming equipment manufacturer and supplier. If the Bally stock
held by the Wilms family were to be aggregated, the Wilms family could be found
to be an owner required to be qualified in accordance with the provisions of
the Act and Commission regulations. There is no credible evidence in the record
of this proceeding, however, which would support a finding that the members of
the Wilms family have historically pooled the non-voting beneficial interests
which accrue as a result of their ownership of Bally stock; furthermore, there is
a similar lack of support for a finding that such an event is likely to occur
in the future. By imposing the same conditions on the casino service industry
license as will be imposed on the casino license, including a restriction on
the voting power of the Bally stock owned of record by Alexander, Elise, Alfred
and Lucien Wilms, the Commission hereby finds that none of these individuals
are now persons required to be qualified as an owner of a Section 92(a) casino
service industry enterprise. The conditions thus imposed upon both the casino
license of Bally's Park Place and the casino service industry license of Bally
Manufacturing Corporation to assure that the Wilms family members are
appropriately granted a waiver from any qualification requirement are as
follows: 1. That the irrevocable proxies which were executed on December 12,
1979, by Alexander R.A. Wilms, Elise Wilms, Alfred Wilms and Lucien Wilms in
accordance with the December 5, 1979, agreement and which provide that the
Wilms' stock in Bally Manufacturing Corporation and Bally's Park Place
(Delaware) shall be voted with the majority of shareholders voting on any
matter, shall be continued in full force and effect so long as the companies
are holding or intermediary companies with respect to a licensed New Jersey
casino operator, or so long as either company holds a gaming related casino
service industry license: 2. That Bally Manufacturing Corporation and Bally's
Park Place (Delaware) shall notify the Commission and the Division before
recording any transfer of stock in said companies held by any member of the
Wilms family: 3. That the management and directors of Bally Manufacturing
Corporation and its subsidiaries shall immediately notify the Commission and
the Division of any effort by any member of the Wilms family to influence any
actions or decisions of the companies, their officers, directors or employees:
4. That Bally Manufacturing Corporation and its subsidiaries shall have no
direct or indirect business transactions of any nature whatsoever with
Alexander R.A. Wilms, Elise Wilms, Alfred Wilms or Lucien Wilms or any
corporation or other business entity controlled by them, or any of them, or in
which they or any of them own beneficially a 5 percent or greater interest of
any class of voting
What’s that old adage, the “story within a story”…
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