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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

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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.

 

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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.

 

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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

 

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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;.

 

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(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.

 

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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.

 

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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

 

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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.

 

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(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.

 

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[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:

 

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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).

 

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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.

 

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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.

 

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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.

 

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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.

 

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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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_ stay tuned _

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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