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Gaming Enforcement, Div. of v. Bayshore Rebar, Inc./Joseph N. Merlino

Cite As 12 N.J.A.R. 149

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Div. of Gaming v. Bayshore Rebar
Cite as 12 N.J.,,.R. 149
Initial Decision: December 20, 1988
Final Agency Decision: May 10, 1989
Approved for Publication by the Casino
Control Commission: September 22, 1989
The Division of Gaming Enforcement filed a complaint with the
Casino Control Commission seeking disqualification of respondent
Bayshore Rebar, Inc. from doing business with casino licensees and
revocation of its vendor registration because of alleged connections
with organized crime. In addition, the Division objected to Bayshore's
application for licensure as a casino service industry. The matters were
transmitted for hearing to the Office of Administrative Law, where
the application case was consolidated with the complaint. (Hearing
on a third matter involving criminal charges pending against respon-
dent Joseph Merlino was deferred.)
Joseph Merlino, who was president and sole owner of Bayshore
when the Division's original complaint was filed, is the son of Law-
rence Merlino, a career criminal offender and associate of organized
crime boss Nicodemo Scarfo. At the time of the hearing, Joseph
Merlino was vice-president and an employee of Bayshore. His mother,
Phyllis Mistie Merlino, was president of the company, which operated
out of the family home. Lawrence Merlino is not associated with
Bayshore, but the Division alleged he may have helped the company
obtain construction jobs from casino licensees.
The administrative law judge assigned to the case identified the
main issue as whether the Division had proved that Bayshore and its
officers were associated wih organized crime in such a manner as to
be inimical to the policies of the Casino Control Act. Respondent

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argued that the relationship between Bayshore and Lawrence Merlino
was only a family connection, not an inimical business relationship.
The administrative law judge concluded, however, that there was
ample evidence of Lawrence Merlino's involvement with Bayshore to
justify disqualification under N.J.S.A. 5:12-86f. Because of the dis-
qualification, the judge also concluded that Bayshore's application for
a casino service industry license must be denied.
Upon review, this initial decision was adopted by the Casino
Control Commission. In discussing the application of section 86f, the
Commission noted that an association is inimical if it presents the
danger of influence or control over a casino-related business by an
organized crime figure. There need not be evidence of actual criminal
behavior by the associate. The Commission concluded that the nature
and quality of the association between Bayshore and Lawrence
Merlino created a sufficient risk that Merlino might exercise influence
over Bayshore. As to the father-son relationship, the Commission said
disqualification of the father does not alone disqualify the son. How-
ever, the family relationship cannot be used to shield an inimical
relationship from regulatory scrutiny. In this case, there was sufficient
evidence that the relationship between Joseph Merlino and his father
consisted of more than an innocuous family association.
Accordingly, the Commission ordered Bayshore disqualified and
its application for a casino service industry license was denied. In
addition, Bayshore's qualifters--Joseph Merlino and Phyllis Mistie
Merlino--were also disqualified.
Stephen J. Cirillo, Deputy Attorney Gerneral, and Julia McClure,
Deputy Attorney General, for petitioner (W. Cary Edwards, At-
torney General of New Jersey, attorney)
Francis J. Hartmann, Esq., and Charles H. Nugent, Jr., Esq. for
At issue is whether Bayshore Rebar, Inc., a reinforced concrete
construction ("rebar") company operating primarily in Atlantic City,
is disqualified under the Casino Control Act, L. 1977, c. 110; N.J.S.A.

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5:12-1 et seq., from doing business with casino applicants and licensees
because of the allegedly inimical association of its officers with a
member of organized crime contrary to N.J.S.A. 5:12-86f, and
whether it should be denied a license as a casino service industry
pursuant to N.J.S.A. 5:12-92c and N.J.A.C. 19:43-1.1 et seq. Both
sides see this as a case of family ties: the Division of Gaming Enforce-
ment (Division) alleges that the respondent has an inimical association
with the crime family ofNicodemo Scarfo through one of its members,
Lawrence Merlino, a/k/a Lawrence "Yogi" Merlino, who is the
father of Bayshore's vice-president and former president as well as
ex-husband of its current president; Bayshore Rebar, Inc. (Bayshore),
claims that its only association with Lawrence Merlino is purely
incidental to Constitutionally protected family bonds formed through
blood and marriage and that these alone may not provide a basis for
disqualification or denial of a license under the Casino Control Act
and Commission regulations.
The Division filed its initial complaint in this matter with the
Casino Control Commission (Commission) on January 6, 1987, alleg-
ing various connections between Bayshore and its officers and owners
and Lawrence Merlino, an admitted career criminal offender and a
member of a career offender cartel headed by Nicodemo Scarfo.
Joseph Merlino, former president of Bayshore, requested a hearing
on February 11, 1987, and the matter was transmitted to the Office
of Administrative Law on March 5, 1987, for hearing as a contested
case pursuant to N.J.S.A. 52:14F-1 et seq. The Division filed an
amended complaint with the Commission on May 6, 1987, seeking
to disqualify respondent Joseph N. Merlino from vendor registration
under N.J.S.A. 5:12-104b because of his indictment on March 17,
1987, in Atlantic County on charges of aggravated assault, aggravated
assault with a deadly weapon, and possession of a deadly weapon for
unlawful purposes. These criminal charges are still pending. The
parties initially agreed to hold proceedings on the amended complaint
in abeyance pending resolution of the criminal charges, but, as these
charges were not rapidly resolved, it was determined to be more
advisable to proceed to hearing on the allegations of the original
complaint, and a prehearing to this end was held on November 17,
1987, with a prehearing order issued the next day. Decision on the
unrelated criminal charges was deferred, pursuant to N.J.S.A.

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5:12-86d, during the pendency of that charge. The hearing on the
original complaint was scheduled for January 7, 1988, but this date
was adjourned at the respondent's request due to the unavailability
of counsel. The hearing was conducted on March 14, March 29 and
March 31, 1988. After the completion of the hearing, additional
documentation was submitted by respondent on April 7, 1988, with
a ten-day reply period allowed to the Division. Before expiration of
the time period for submission of an initial decision, the Division
advised that it intended to move to reopen and supplement the record
by submission of a sworn affidavit by Thomas A. DelGiorno.
Bayshore filed a letter brief in opposition on July 5, 1988. On July
22, 1988, the record was reopened and the Division was ordered to
produce Thomas A. DelGiorno for testimony; the respondent was
directed to have Lawrence Mefiino testify. Because of a pending
Federal criminal matter in which both men were involved, this could
not be arranged and it was determined, on August 19, 1988, to admit
the proposed affidavit from Thomas DelGiorno. Bayshore was also
given an opportunity to submit an opposing affidavit from Lawrence
Merlino, and did so.
On July 29, 1988, Bayshore applied to the Commission for
licensure as a casino service industry pursuant to N.J.S.A. 5:12-92c
and N.J.A.C. 19:43-1.3 et seq. The Division objected and argued that
the applicant was disqualified on the grounds of its association with
Lawrence Merlino, as well as the indictment of Joseph N. Merlino
and by what the Division characterizes as misrepresentations by the
applicant's principals in the course of the hearing in this matter. The
matter of the application was transmitted to the Office of Adminis-
trative Law for hearing as a contested case with a request that it be
consolidated with the pending matter in OAL DKT. CCC 1445-87.
Consolidation was granted and the parties rested on the evidence
introduced in the previously-filed casino control matter, which had
been heard in March.
On September 7, 1988, Bayshore submitted an affidavit by Law-
rence Merlino, responding to that previously submitted by Thomas
DelGiorno. On September 21, 1988, the Division submitted an af-
fidavit of Division Agent Barbara Friese and excerpts from reports
of the Pennsylvania Crime Commission. On November 4, 1988,
Bayshore forwarded sections of a transcript from a trial in United
States District Court, Eastern District of Pennyslvania, entitled United
States of America v. Nicodemo Scarfo, et al,' in which the testimony
of Thomas DelGiorno as to Bayshore and Lawrence Merlino was

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featured. The Division submitted a responsive argument on November
21, 1988, and the record as to the consolidated matter was closed on
that date. The matter of the indictment pending against Joseph
Merlino remains to be determined through criminal proceedings and
is not dealt with in this decision.
The following material facts are not in dispute. Bayshore stipu-
lated that Lawrence Merlino is a career criminal offender within the
meaning of N.J.S.A. 5:12-86f and N.J.A.C. 19:48-1.1, as well as an
associate of career criminal offenders and a member of a career
criminal offender cartel. Specifically, Lawrence Merlino is an associate
of Nicodemo Scarfo, the acknowledged head of an organized crime
family operating out of Philadelphia in southern New Jersey and the
Atlantic City area. Official notice is taken that, on November 19, 1988,
Lawrence Merlino was convicted on a number of Federal criminal
charges in the matter of United States of America v. Nicodemo Scarfo,
et al., U.S. District Court Criminal No. 88-003. Also convicted were
Lawrence Merlino's brother Salvatore Merlino; his nephew, Phillip
Leonetti; Nicodemo Scarfo, and others. The Merlino brothers are
known to be members of the Scarfo crime family, with Salvatore
Merlino functioning as an underboss, and Lawrence Merlino and
Phillip Leonetti serving as soldiers within that organization. Lawrence
Merlino's association with Nicodemo Scarfo goes back to at least 1979
when the two, along with Philip Leonetti, were charged with the
murder of Vincent Falcone, an Atlantic City cement contractor. The
three were subsequently acquitted. Lawrence Merlino also has worked
as president and part owner of Nat Nat, Inc., a construction company
in Atlantic City. He has also worked for Scarf, Inc., a construction
company owned by Nicodemo Scarfo's nephew, Phillip Leonetti. Be-
cause of his status as a career offender and an associate of a career
offender, Lawrence Merlino was barred from casino premises by the
Commission and this exclusion was affirmed. See, State v. Lawrence
Merlino, 216 N.J. Super. 579 (App. Div. 1987), affirmed, State v.
Merlino, 109 N.J. 134 (1988). Lawrence Merlino is currently in-
carcerated in Pennsylvania awai. ting trial on other charges.
There is also no dispute that Lawrence Merlino was president of
Nat Nat, Inc., a reinforced steel construction company, at the time
of the incorporation of Bayshore Rebar in December of 1985. He had
incorporated a company called Bayshore Rebar, Inc., in Florida prior

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to that time, which corporation was involuntarily dissolved on No-
vember 1, 1985, for failure to file its annual report. Prior to 1985,
Nat Nat operated out of offices at 28 North Georgia Avenue, Atlantic
City, which was the same address used by Scarf, Inc., a construction
company headed by Phillip Leonetti, nephew of Nicodemo Scarfo and
a career offender, as discussed above. The operations of Nat Nat were
later moved to a home located at 15 North Decatur Avenue in
Margate, which Lawrence Merlino had purchased for his former
spouse and children. Lawrence Merlino did not at any time reside
at that address but occasionally visited his children there, as well as
to check on the affairs of Nat Nat, which were being handled by his
daughter, Kimberly.
Joseph N. Merlino is the son of Lawrence Merlino and is currently
21 years old. At the time of the filing of the Division's original
complaint, he was designated as president and sole owner of Bayshore
Rebar, Inc. By the time of the hearing in this matter he no longer
held that office, which had been assumed by his mother, although
he was still vice-president and was principally employed by it in the
construction rebar business. His ownership share had also been re-
duced to twenty-five percent, with his mother holding the rest. The
"rebar" business involves the placing of steel rods at building con-
struction sites prior to the pouring of concrete so that the building
cement structure will be reinforced with steel. Bayshore has worked
on a number of casino sites in Atlantic City. Lawrence Merlino holds
no office in the company and there is no evidence that he holds any
interest in it or that he has been employed by it in any capacity. There
is also no evidence that Lawrence Merlino has received any monies
from Bayshore or, for that matter, from Joseph Merlino or Phyllis
Mistie, his former spouse and the mother of his five children. The
Division also has offered no evidence showing any payments by
Bayshore or Joseph Merlino to Nicodemo Scarfo, Salvatore Merlino,
Phillip Leonetti or anyone else associated with the reputed Scarfo
crime family, nor has any other evidence been offered to demonstrate
business or personal dealings between Bayshore or its principals and
Scarfo, Leonetti, and Salvatore Merlino, beyond Joseph Merlino's
prior employment with Scarf, Inc., and Nat Nat, Inc.
There is no dispute as to the above facts and I so FIND.
The Division offered an affidavit signed by one Thomas Albert
DelGiorno, an acknowledged former member of the Scarfo crime
family who has testified against its members, including Lawrence

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Merlino, in a number of proceedings. DelGiorno states in his affidavit,
which I set forth in full, that:
1. I am currently in protective custody in an undisclosed location.
I currently face criminal charges for various criminal offenses and
have testified for the federal government and the States of New
Jersey and Pennsylvania in various criminal matters of which I
have knowledge. It is my understanding that I will be provided
no favorable treatment as a result of the information provided
in this affidavit, nor have I been provided any other inducement
for the provision of this information, such as a reduced sentence,
deferral or dismissal of charges, or any other promised act in my
2. I first met an individual known as Lawrence Merlino in 1972.
Lawrence Merlino was also known to me and others as Lawrence
"Yogi" Merlino. Since that time, I have met with, and engaged
in matters of mutual interest with Lawrence Merlino on numer-
ous occasions. To my knowledge, Lawrence Merlino is currently
in a Pennysylvania .jail awaiting trial.
3. I was a fully-initiated member of an Organized Crime family
headed by an individual known as Nicodemo Scarfo. I was ini-
tiated into this organization in January 1982. Furthermore, I also
know that Lawrence Merlino is a fully-initiated member of the
Scarfo Organized Crime family. Lawrence Merlino was initiated
in the Scarfo Organized Crime family in the spring of 1980.
Lawrence Merlino was promoted to the rank of captain in the
Scarfo Organized Crime family in 1982.
4. During the approximate period 1982 through 1986, Lawrence
Merlino spoke with me directly and personally on numerous oc-
casions concerning various developments in certain business
interests hem by Lawrence Merlino, including the construction
activities of certain rebar companies operating in Atlantic City,
New Jersey. Lawrence Merlino is the father of an individual
known as Joseph Merlino of Atlantic City. Lawrence Merlino
informed me of a rebar company operating in the Atlantic City area
by the name of Bayshore Rebar, which was the first mention of
that company I heard.
5. With regard to rebar construction contracts, Lawrence Merlino
informed me that it was his practice to obtain various rebar jobs
in and around Atlantic City and to utilize Bayshore to actually
perform the work and to receive payment for the work. Lawrence
Merlino also informed me that he shared the money obtained from
the Bayshore Rebar operations with Bayshore.
6. Lawrence Merlino informed me that he conducted operations in the
above-described manner with Bayshore because he, Lawrence
Merlino, felt he couM not operate in his own name in Atlantic City

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due to his reputation as a member of Organized Crime. Lawrence
Merlino informed me that he believed the authorities wouM never
allow him to operate directly with casinos and other companies due
to his reputation as a member of Organized Crime. For this reason,
Lawrence Merlino also believed that he couM not operate in the
name of his own company, Nat Nat, Inc. For these reasons, Law-
rence Merlino tom me he utilized Bayshore Rebar.
I make this affidavit at the request of the New Jersey Division
of Gaming Enforcement, which agency I understand has charged
that Lawrence "Yogi" Mefiino is associated with Bayshore
Rebar, Inc., and persons within that company. It is my testimony
here that Lawrence "Yogi" Merlino is associated with Bayshore
Rebar, Inc., as I have set forth above (emphasis added).
Bayshore submitted an opposing affidavit from Lawrence
Merlino, which is also set forth in full:
1. I have read the affidavit of Thomas Albert DelGiorno in support
of the Division of Gaming Enforcement's application for
suspension of Bayshore Rebar, Inc., and make this affidavit in
response to the allegations contained within Mr. DelGiorno's
2. In regard to the allegation of Mr. DelGiorno that I discussed
with him a rebar company operating in the Atlantic City area
by the name of Bayshore Rebar, Inc., I had never discussed such
company with Thomas DelGiorno. Further, I never informed
Mr. DelGiorno that it was my practice to obtain various rebar
jobs in and around Atlantic City, nor did I inform Mr. DelGiorno
that I actually utilized Bayshore Rebar to actually perform the
work and to receive payment for the work. Also, I have never
received or shared in any monies obtained by Bayshore Rebar
operations with Bayshore or Joseph Merlino.
3. Nor have I ever informed Mr. DelGiorno that I conducted oper-
ations using Bayshore Rebar because I felt that I could not
operate in my own name due to my reputation.
4. Those allegations of Mr. DelGiorno regarding Bayshore Rebar are
not true, and I submit this affidavit in response to the affidavit of
Mr. DelGiorno. I further d(savow and deny any association with
Bayshore Rebar, Inc., other than that Joseph Merlino is my natural
born child (emphasis added).
At the recent trial in the matter of United States of America v.
Nicodemo Scarfo, which resulted in the conviction of Lawrence
Merlino, Salvatore Merlino, Phillip Leonetti and Nicodemo Scarfo
on various federal criminal charges, Thomas DelGiorno testified on

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behalf of the government and was questioned concerning the above
affidavit. The following excerpt of transcript is taken from the cross-
examination of Thomas DelGiorno:
Q. Mr. DelGiorno, I return to you the affidavit that I asked you
to read yesterday; did you have an opportunity to read it yester-
day before we broke for the day?
A. Yes.
Q. I had started to ask you some questions with respect to the
procedure and the circumstances under which you took this af-
fidavit. You may be repeating some answers, but would you
please tell the members of the jury, under what circumstances
it came about that you were asked to take this affidavit and how
was the affidavit formulated?
A. It's whoever they are from the State of New Jersey--
Q. I'm sorry. Could you speak a little clearer.
A. I said, whoever took this from the State of New Jersey asked
me about Larry's involved in Nat-Nat.
Well, let me see if I understand something and correct me if I'm
wrong. Somebody from the State--and you've already told us
that you were escorted by Federal authorities to a meeting with
some people from the State of New Jersey; is that correct?
And those people, whoever they are, was it one person or more
than one person?
I think there was more than one.
They interviewed you and asked you to tell them what you knew
about Larry, meaning Lawrence Merlino, correct?
Involvement with a company in Atlantic City by the name of Nat-
Nat, that Lawrence Merlino had something to do with; is that
Okay, and you told them, I gather from the answer that you gave
me, that you told them information about what you knew about
Lawrence Merlino's involvement with Nat-Nat; is that correct?
A. Correct.

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Did they ask you any specific questions or did they just say tell
us what you know about Nat-Nat? How did it come about? What
were the questions, if you recall?
I can't recall.
Well, the affidavit was notarized in June of 1988. I can read it,
... see, the June 25th, that's about three or four months ago,
is it your testimony that you can't recall today what you were
asked three or four months ago?
This looks like a summary of it.
It looks like a summary of it?
Is it signed?
Didn't you read it before you signed it?
All right. Now, before I ask you any more questions, I want you
to read the affidavit to the jury.
Why don't you read it? There's a lot of big words there I can't
Q. Okay, fine. All right. I'll read it and if I misstate anything--I
didn't mean to embarrass you but if I--
A. You didn't embarrass me. It's just that it will be faster that way.
[The affidavit is read into the record.]
In that affidavit, and as I understand by your testimony that you
read this before you signed it; is that correct?
Did you actually dictate the words or was it after a conversation
that you had with whoever from the New Jersey Division of
Gaming Enforcement, that they prepared the affidavit and
brought it back to you for your signature?
The prepared it and brought it back.
Now, you told us that--the members of the jury, a few moments

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ago, in response to one of my questions, that they, whoever the
representatives were from the State of New Jersey, asked you
about Nat-Nat; is that correct?
A. Yes, yes.
Q. Well, this entire affidavit is about Bayshore, isn't it?
A. Yes.
Q. Would it surprise you--now, did you also understand from the
people from the State of New Jersey who spoke with you, that
the reason they wanted this affidavit is so that Bayshore Con-
struction, Bayshore Company, the company of Joseph Merlino,
the son of Lawrence Merlino, could not engage in casino con-
struction, did they tell you that's the reason.
A. They said to me, I explained to them that Larry had this place
Nat Nat and he used other companies to get work down the shore,
and that's all I explained to them. Okay.
Q. Well, did they explain to you, as paragraph seven suggests, that
the reason they wanted to talk to you, I mean, this wasn't really
a law enforcement agency, in that nature of that word, that they
were investigating Bayshore--
A. Excuse me, I thought they were a law enforcement agency.
Q. Okay. All right. They were a law enforcement agency. I'll agree
with you, that their purpose was to get you to take an affidavit
that Lawrence Merlino was somehow involved with Bayshore and
was somehow getting money from Bayshore so that Joseph
Merlino, the owner of Bayshore, could not engage in business
with casino industry, did they explain that to you?
A. No, they didn't explain it that way.
Q. Did you understand that?
A. No. They didn't explain it to me that way.
Q. They didn't explain that to you.
A. I tom them, as far as I knew, Joseph Merlino, Larry  son, had
nothing to do, except was a worker, when I knew them. I don't
know what he does now.
Q. Well, is it the--
A. That's what I explained to them.

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Would you agree that this entire affidavit--
They came back with this.
--and your indication in there, that you had spoken with Law-
rence Merlino from 1982 through 1986, leaves one who reads it
to believe that it has to do with Lawrence Merlino's involvement
with Bayshore? [The court rules on an objection.]
Somebody wrote the affidavit and you signed it?
Did you make any attempt to correct any of it?
When I gave-- [The Court rules on another objection.]
THE WITNESS: I explained that--again, I'll explain that I only
knew what Larry did. I had no knowledge of what Joseph Merlino
did. The only thing I knew about Joseph Merlino is that he worked
in a company. When I read this affidavit, to me it doesn't say that
Joseph Merlino did anything wrong. It says, that Larry was involved
in construction and that's what I thought I was signing, Larry.
Joseph Merlino, as far as I know, worked in a rod company. He
was a young kid and he never did anything wrong. I don't know
what that's supposed to mean. I know what I took it to mean.
Well, did you know--did you tell them that you knew about
Bayshore from 1982?
No, I said that he used various companies, I said, one of the
companies he used was a brother-in-law, and ex-brother-in-law and
I didn't remember the name. ,4 nd they said, was it Bayshore? I said,
it could be Bayshore. I wasn't sure. ,4gain, I said, I did not know
what Joseph Merlino did and this doesn't say that Joseph Merlino
did anything.
Is it your testimony then, that the name Bayshore Construction
Company was a name that was sort of foreign to you and was
suggested in response to a question from the New Jersey Division
of Gaming Enforcement? Was it the Bayshore you said it could
have been?
I said, it could have been, yes.
And then you signed the affidavit where it says, Bayshore, doesn't

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Q. Well, did you say to them, hey, I'm not sure it was Bayshore?
A. I read this affidavit and to me this affidavit doesn't accuse him of
anything only that he was in the Rebar business, and I don't even
know it was Rebar. I thought it was ironwork business.
Q. Whatever your thoughts were as to whether it accused anyone
of anything, did you believe that when you signed the affidavit,
which you took under oath, that what was conveying in the affidavit,
that you signed and it was notarized in your presence, was complete-
ly 100 percent the truth?
A. .ds far as I'm concerned it was the truth, yes.
Q. You just said that you didn't even know the name Bayshore until
it was suggested to you, didn't you?
A. No, I didn't say that. I said that he used other companies and they
sam was one of them Bayshore? I said it sounds like one of them,
yes. Okay. Again, I signed the paper, still--it still to me doesn't
say that he did anything wrong in this paper.
Q. Okay, that's your feeling. Would it surprise you to know that
Bayshore, the company in this affidavit, wasn't incorporated until
December of 19857 [Objection ruled on by the Court.]
Q. All right. Do you know Bayshore was incorporated?
A. No, I don't.
Q. Do you know whether or not from the time that you--during
the period of time that you say that you had occasion to speak
with Lawrence Merlino, whether Bayshore ever obtained a con-
struction job with the casino industry or even more so, ever
received any funds from the casino industry?
A. Bayshore was incorporated when I spoke to Larry Merlino. Larry
Merlino was under me in early '86 and he had to explain to me
what jobs he had and how he was getting them. So, Bayshore was
incorporated at the time I was speaking to him. So, when the guy
said to 'me, is it Bayshore? I said, it could be. Larry was supposedly
reporting the job that he was doing through me in early of '86. So,
yes, if it was incorporated in '85 then I heard it in '85. I didn't
know when it was incorporated.
Q. But did Larry have to report to you when he got money from those
jobs too?
A. .ds far as he tom me, he never got no money from the jobs.

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Q. Well, that's not what you said in the affidavit?
A. He didn't get no money from the jobs when I was--when he was
reporting to me. Larry didn't give me any money from the jobs.
Well, will you look at paragraph five of this affidavit, Mr.
DelGiorno, just look at it? Do you want me to read it to you
A. No, I'm reading it.
Does it say in there that Lawrence Medino--[Objection ruled on
by the Court.]
[The Court admonishes the attorneys]
Q. All right. I apologize, Mr. DelGiorno, but does it take a bright
person to r6ad something and understand that it's not 100 percent
A. Yes ... (emphasis added).
As indicated, Lawrence Merlino and the other defendants were
convicted on November 19, 1988 of all charges in the above federal
matter. The federal government was unwilling to release Thomas
DelGiorno for testimony in this matter. Lawrence Mefiino did not
testify in the federal criminal trial.
Based on DelGiorno's testimony in the matter of U.S.v.
Nicodemo Scarfo et al., I FIND as a matter of fact that Thomas
DelGiorno spoke to Lawrence Merlino after December of 1985 and
was advised by him that he used various companies in Atlantic City
to obtain construction jobs. I further find that there is insufficient
believable evidence to find that Lawrence Merlino specifically men-
tioned Bayshore Rebar in his conversations with DelGiorno and also
find that there is no evidence whatsoever that Lawrence Merlino
received payments from Bayshore or its principals. Bayshore initially
objected to the admission of DelGiorno's affidavit on the grounds
that he was a "self-proclaimed murderer, perjurer, drug dealer,
racketeer and all-around criminal" (Bayshore's letter brief of June 30,
1988, at 1). Although that may be an accurate statement of
DelGiorno's resume, Bayshore offered DelGiorno's testimony on
cross-examination as set forth above. In that testimony, DelGiorno,
while unsure as to whether Lawrence Merlino had specifically men-
tioned Bayshore, did recall with sufficient clarity that Merlino had
stated that he used various construction companies to get jobs in

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Atlantic City and that he spoke to Merlino in early 1986 after
Bayshore was incorporated. I therefore FIND that DelGiorno's state-
ments on cross-examination in the Federal matter are, read together
with his affidavit, sufficiently credible to support the above finding
of fact.
The current president and 75-percent owner of Bayshore is Phyllis
Mistie, a former spouse of Lawrence Merlino. The couple had five
children, separated approximately 14 years ago and is now divorced.
Lawrence Merlino purchased the home at 15 North Decatur Avenue
in Margate in response to Phyllis Mistie's request that he provide a
place for her and the children to live. She stated that he sometimes
visited the children at that address and she acknowledged that Nat
Nat, Inc. was operated from the family home. Lawrence Merlino also
obtained work for his eldest son, Joseph Merlino: first, fiye years ago,
a summer job in construction with Scarf, Inc.; and later, regular full-
time employment with Nat Nat, Inc. Ms. Mistie also testified that
her daughter Kimberly worked as a secretary for Nat Nat at the 15
North Decatur Avenue address and that Lawrence Merlino trans-
ferred Nat Nat's business to that address from 28 North Georgia
Avenue in Atlantic City after Kimberly had a child. Phyllis Mistie
claimed that she had a difficult time at first living in Atlantic City
with her former husband and that she was something of a "nervous
wreck". She stated that Joseph Merlino decided to go into business
for himself; he incorporated Bayshore Rebar, Inc., and began to
operate the business out of the 15 North Decatur address. She ac-
knowledges that Bayshore and Nat Nat use the same insurance agent,
C.$. Adams, and she conceded that Lawrence Merlino had paid phone
bills for the 15 North Decatur address, including calls made for
Bayshore, on several occasions. Phyllis Mistie claims that prior to July
1986, she worked briefly as a secretary for Bayshore but held no office
or interest. Although Ms. Mistie appeared to understand the nature
of the company'g business in a general sense, she was uncertain as
to details of the work and unfamiliar with the scope of the company's
involvement in at least one rebar job being done on a bridge. Ms.
Mistie also claims that she had no indication that Lawrence Merlino
was exercising any influence over Bayshore or Joseph Merlino, and
stated that "... my son wouldn't listen to anything he says. His son
knows more than his father."
Joseph Merlino concedes that his father did get him a summer
and weekend job five years ago with Scarf, Inc., which is owned and
operated by the nephew of Nicodemo Scarfo, Phillip Leonetti. Joseph

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Merlino also admits that he later worked for Nat Nat, Inc., which
was operated by his father and formerly by his uncle, Salvatore
Merlino, who is reputed to be the underboss of the Scarfo crime
family. In the course of working for Nat Nat, Joseph Merlino met
Nat Nat foreman Rocco Bunodono and Nat Nat's bookkeeper,
Joseph Golatto, and both of these men later provided professional
services to Bayshore. Eve4n' after Bayshore had been established in
December 1985, Joseph Meflino continued to receive payments from
Nat Nat. On or about March 10, 1986, he received a $15,000 check
from Lawrence Merlino, president of Nat Nat, which check was
characterized as a 1985 bonus check. In 1984, he had also received
another bonus approximately $37,000 from his father for work per-
formed for Nat Nat. In March 1986, Joseph Merlino purchased a
condominium in Margate from Lawrence Merlino, a condominium
which Nat Nat had previously purchased from Scarf, Inc. Joseph
Merlino discussed this purchase with his father and claims that he
sought to acquire the condominium for investment and tax shelter
purposes. There is no evidence that this condominium played any part
in the operation of Bayshore or that the purchase of the property was
in any way improper or irregular. There is also no evidence of any
further bonuses paid to Joseph Merlino from Lawrence Merlino and
Nat Nat subsequent to 1986. Joseph Merlino also claimed, and the
Division did not dispute, that some of the bonus monies were used
by him to repay existing loans from Nat Nat, and that part of the
1986 bonus was applied to the down payment for the condominium.
After leaving employment with Nat Nat in 1985, Joseph Merlino
worked as a general foreman in construction with the United
Carpenters of Glenside, Pennsylvania, and later for G&H Steel and
M&M Construction.
Bayshore Rebar, Inc., of New Jersey was incorporated on Decem-
ber 13, 1985, listing Joseph N. Merlino as incorporator and director,
and it was located at 15 North Decatur Avenue in Margate. Joseph
Merlino's sister Kimberly also worked for Bayshore when the com-
pany was located at 15 North Decatur Avenue. Since that time, the
company, as well as the family, has moved to a Ventnor address which
was purchased by Joseph Merlino and in which Lawrence Merlino
has no proven financial interest. Joseph Merlino is also no longer
president of the company but continues to serve as vice-president and
part owner. He claims that this change was necessary to enable him
to receive his journeyman papers. At the time of hearing, Phyllis
Mistie was functioning as Bayshore's president. Rocco Bunodono,

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formerly a foreman for Nat Nat and a long-time friend of Lawrence
Merlino, has been Bayshore's foreman since March 1986 and has
played an instrumental role in the company, including filing an appli-
cation for a construction contractor's license on its behalf in Septem-
ber 1986 after Joseph Merlino's application had been rejected because
of his comparatively tender age.
Joseph Merlino testified and confirmed his mother's account of
the origins and operation of Bayshore, as well as his prior experience
with Scarf, Inc., and Nat Nat, Inc. Neither Phyllis Mistie nor Joseph
Merlino contest the factual allegations set forth in the Division's
complaint of January 6, 1987, although they claim, and the Division
does not dispute, that Bayshore has since moved its operations and
changed its officers, as discussed above. In a statement given to the
Division on November 20, 1986, Joseph Merlino acknowledged that
he had occasionally consulted with Lawrence Merlino as to Bayshore
matters and, in particular, had asked him whether a contractor named
Feriozzi, with whom Bayshore was doing business, was a "nice guy"
who "pays his bills" and is "a good payer." Joseph Merlino denies
that Lawrence Merlino has gotten any jobs for Bayshore and the
Division offers no direct evidence proving otherwise, with the excep-
tion of the above testimony of Thomas DelGiorno.
Phyllis Mistie further denied that the company had received any
loans from Lawrence Merlino or made any payments to him. She
stated that the family moved some eight months ago to a house in
Ventnor which Joseph Merlino purchased and from which Bayshore
now operates. Nat Nat continues to operate from the 15 North Deca-
tur address and Kimberly Metlino is still employed in that business.
Ms. Mistie testified that she became president and 75 percent owner
of Bayshore approximately six months before the hearing in this
matter because Joseph Merlino wanted to qualify as a journeyman
and felt that he was precluded from doing this while serving as
president. She stated that he was still serving as vice-president, as of
the hearing. She also claimed that an additional motive for her assum-
ing the presidency of Bayshore was to qualify the company for mi-
nority work under affirmative action guidelines. An insurance agent
for C.J. Adams, Deborah Wehran, who handled insurahce for both
Bayshore and Nat Nat, testified that she had discussed Nat Nat with
Phyllis Mistie whenever her daughter was absent or otherwise un-
available and noted that Phyllis was listed as a contact for Nat Nat.
She also claimed that Phyllis Mistie had explained that she was not
employed by or part of Nat Nat.

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Neither Phyllis Mistie nor Joseph Merlino disputes the allega-
tions made by the Division in its complaint. Joseph Merlino denied
that the name Bayshore Rebar, Inc., which had previously been used
by his father to incorporate a Florida company, was adopted at
Lawrence Merlino's suggestion.
One of the first construction jobs obtained by Bayshore was from
cement contractor Joseph Feriozzi, who was involved in construction
of a parking garage at Resorts International Hotel and Casino in 1986.
Ferriozzi was one of the two big contractors in Atlantic City at the
time. Bunodono was working on the job, which was being performed
by C.J.S. Co., a structural construction firm. Because C.J.S. was not
a rebar company and consequently was having some difficulties ade-
quately manning the job, Feriozzi was unhappy with its performance
on the job. Joseph Merlino claims that he became aware of C.J.S.'s
problems on the job through Feriozzi's complaints to a "street man,"
who was responsible for recruiting workers on construction projects.
Joseph Merlino asked Feriozzi if Bayshore could take over the job.
Rocco Bunodono was present when this request was made. Feriozzi
agreed and Merlino asked Bunodono, whom he had known from
working with Nat Nat, Inc., to serve as foreman on the completion
of the Resorts parking garage. Feriozzi agreed to pay Bayshore on
a hi-monthly basis, which was a somewhat usual arrangement but
Feriozzi consented because Bayshore was a relatively new company.
Bayshore offered a certification from Feriozzi, who also testified,
which stated the following:
8. Bayshore Rebar has been the low bidder on a number of projects
including Bally's Park Place and the Tropicana Hotel and has
done sub-contracting work on these projects for L. Feriozzi Con-
crete. Additionally, Bayshore Rebar has subcontracted at Resorts
International Garage after the default of another contractor.
9. The hard work, diligence and quality of work exhibited by Joseph
Merlino and Bayshore Rebar is exceptional.
10. I have found, through my dealings with Bayshore Rebar, that
Joseph Merlino is a dedicated and sincere individual. He is a
person of good character, honesty and integrity.
11. I have no perception or belief that respondent, Bayshore Rebar,
or its President, Joseph Merlino, is in any way involved or as-
sociated with organized crime activity or Lawrence Merlino.
12. Furthermore, I have no perception that respondent, Bayshore
Rebar, or its President, Joseph Merlino, is a "front" for or-
ganized criminal activity or Lawrence Merlino.

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Feriozzi also certified that he has not been the subject of any charges,
indictments or accusations in his forty years of doing construction
business in Atlantic City. Nat Nat had been previously employed by
Feriozzi on a variety of casino jobs. This working relationship was
interrupted in 1979 when Lawrence Merlino was accused, along with
Leonetti and Scarfo, of murdering a cement contractor named Vincent
Falcone. Upon learning of the murder charges against Lawrence
Merlino, Feriozzi stated that he was a "sick pup," and did not know
what to do or what he had gotten himself into; Merlino, Scarfo and
Leonetti were later acquitted of the charge and Nat Nat subsequently
performed more work for Feriozzi. In 1986, when Joseph Merlino
asked if he could take over the C.J.S. job at the Resorts parking
garage, Feriozzi asked him if Lawrence Merlino was his father. Fer-
riozzi testified that he felt concerned that Lawrence Merlino might
become involved. Feriozzi also expressed to Joseph Merlino his desire
that he not have anything to do with Nat Nat, but later became
confident that Joseph was working on his own. Feriozzi denies having
been contacted by Lawrence Merlino, or anyone else other then
Joseph Merlino, concerning Bayshore's request for work. Rocco
Bunodono's presence as foreman also gave confidence to Feriozzi,
because of Bunodono's reputation as an effective foreman who knew
how to get a job done. After agreeing to work as foreman on the
Feriozzi job, Bunodono also assisted Joseph Merlino by completing
an application for a construction contractor's license on September
11, 1986, and listing himself as the company's superintendent. Joseph
Merlino had previously applied but had been rejected because of his
age and relative inexperience. Joseph Merlino denies having asked his
father for any help in obtaining work with Feriozzi at the Resorts
garage job or at any other location, but acknowledges that he asked
Lawrence Merlino who Feriozzi was and that he wanted to know if
he was reliable with payments.
Rocco Bunodono testified that his function as foreman for
Bayshore is to "see that the job runs smooth" and indicates that he
has known Joseph Merlino since the latter was a small child.
Bunodono has also known Lawrence Merlino for over twenty years:
they grew up in the same neighborhood, and Merlino was the best
man at his wedding. He claims that he saw little of Lawrence Merlino
for some ten years after he left Philadelphia and before Lawrence
Merlino became active in construction in Atlantic City. When they
renewed their acquaintance, Bunodono worked as foreman for Nat
Nat for at least six months while completing a rebar job on the Ocean

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Club, and thereafter worked with G & H Construction, as well as
with M & M Construction, a minority contractor. Lawrence Merlino,
as president ol  Nat Nat, visited G & H job sites on occasion to talk
to his son and a nephew employed by that company. The Division
offered surveillance photographs taken by lieutenant Edward Hep-
burn of the Atlantic City Prosecutor's Office showing Lawrence
Merlino and Rocco Bunodono together at various construction sites
including the Taj Mahal Casino project. Lieutenant Hepburn testified
that he conducted surveillance after receiving a report that the M &
M Company (allegedly a minority outfit) was actually being run by
Lawrence Merlino. The photos were taken in April 1985 and show
Lawrence Merlino and Rocco Bunodono on the construction site. The
photographs also show Lawrence Merlino on the steel at a hotel/
casino. Lieutenant Hepburn had no knowledge as to any involvement
of Joseph Merlino in his father's reputed criminal affiliations with the
Scarfo crime family. Bunodono denies that Lawrence Merlino visited
him at job sites, other than those involving Nat Nat. He concedes
that Lawrence Merlino visited him when he was working for M &
M, but states that he has never seen Lawrence Merlino on a job with
Bayshore and that he has no knowledge of any contact between him
and his son's company.
The Division also offered copies of a mortgage and residential
loan application in connection with the purchase of the Ventnor
property from which Bayshore now does business, which states that
Joseph Merlino was married at the time of application in 1987. This
was not the case. Joseph Merlino denies having made such a represen-
tation in connection with the mortgage application, but concedes that
he signed the loan application forms containing the false statement.
There is no dispute as to the above facts, except as indicated,
and I so FIND.
The issues to be resolved are:
(1) whether the Division of Gaming Enforcement has proven by a
preponderance of the believable evidence that Bayshore is as-
sociated with a career offender or a career offender cartel in such
a manner as to create a reasonable belief that the association is
of such a nature as to be inimical to the policy of the casino
control act in the gaming operations within the meaning of
N.J.S.A. 5:12-86f so as to disqualify Bayshore from holding a
vendor registration or casino service industry license;

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(2) whether Bayshore Rebar, Inc., has established its eligibility by
clear and convincing evidence for a casino service industry license
pursuant to N.J.A.C. 19:41-3.2(a)2, including the requirement
that it establish its reputation of good character, honesty and
integrity pursuant to N.J.A.C. 19:43-1.3(c), and that of its officers
pursuant to N.J.A.C. 19:43-1.14.
(1) N.J.S.A. 5:12-86f (Inimical Association)
The state of New Jersey extends strict regulation through the
Casino Control Act to all persons, locations, practices and associa-
tions related to the operation of licensed casino enterprises and to
all related service industries. See, N.J.S.A. 5:12-1b(6). The legislative
findings underlying the Act also provide that:
[1legalized casino gambling in New Jersey can attain, maintain and
retain integrity, public confidence and trust, and remain compatible
with the general public interest only under such a system of control
and regulation as insures, so far as practicable, the exclusion from
participation therein of persons with known criminal records, habits
or associations ... N.J.S.A. 5:12-1b(7).
Moreover, participation in casino operations is deemed to be a revo-
cable privilege conditioned upon the proper and continued qualifi-
cation of individual licensees or registrants. The New Jersey Legis-
lature also declared that:
[s]ince casino operations are especially sensitive and in need of public
control and supervision, and since it is vital to the interests of the
State to prevent entry, directly or indirectly, into such operations
or the ancillary industries regulated by this act of persons who have
pursued economic gains in an occupational manner or context which
are in violation of the criminal or civil public policies of this State,
the regulatory and invesfigatory powers and duties shall be exercised
to the fullest extent consistent with the law to avoid entry of such
persons into the casino operations or the ancillary industries regu-
lated by this act ... N.J.S.A. 5:12-1b(9).
This paramount concern with sealing off, to the extent possible,
the casino industry and the vital service industries that serve it from
infiltration and domination by organized crime is effectuated by the
criteria established for disqualification of applicants seeking casino
The Commission shall deny a casino license to any applicant who
is disqualified on the basis of any of the following criteria ...

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f. The identt]7cation of the applicant or any person who is required
to be qualed under this act as a condition of a casino license as a
career offender or a member of a career offender cartel or an as-
sociate of a career offender or career offender cartel in such a manner
which creates a reasonable belief that the association is of such a nature
as to be inimical to the policy of this act and to gaming operations.
For purposes of this section, career offender shall be defined as any
person whose behavior is pursued in an occupational manner or
context for the purpose of economic gain, utilizing such methods
as are deemed criminal violations of the public policy of this State.
A career offender cartel shall be defined as any group of persons
who operate together as career offenders; N.J.S.A. 5:12-86f
[emphasis added].
The Casino Control Commission has defined the phrase "inimical to
the interest of the State of New Jersey or of licensed gaming" to mean
"adverse to the public confidence and trust in credibility, integrity and
stability of casino gaming operations and in the strict regulatory
process created by the Casino Control Act." N.J.A.C. 19:48-1.1.
At issue here is whether the Division has proved that Bayshore
Rebar or its officers are associated with a career offender or career
offender cartel in such a manner as to create a reasonable belief that
the association is of such a nature as to be inimical to the policy of
the Act and to gaming operations and thereby is disqualified. The
above provision concerning inimical associations was considered by
the Appellate Division of the Superior Court of New Jersey in a 1985
case where a number of members of a union in Atlantic City were
found to be inimically associated with Nicodemo Scarfo, within the
meaning of the act. See, In the Matter of the Hotel and Restaurant
Employees and Bartenders International Union Local 54, 203 N.J.
Super. 297 (App. Div. 1985), certif. denied 102 N.J. 352 (1985), cert.
denied 475 U.S. 1085 (1986). In the Local 54 case, the Appellate
Division upheld the Commission's finding of disqualification under
N.J.S.A. 5:12-86f, where the Division had produced evidence illustrat-
ing the association between union employees and Scarfo. That
evidence consisted of.'
(1) a telephone list seized from Scarfo after his arrest for the murder
of Vincent Falcone which contained names and addresses of
several Local 54 employees, some listed in code;
(2) a note found in Scarfo's dresser drawer on the same occasion
indicating Scarfo's interests in the activities and control of Local
(3) the fact that the bail of Scarfo, Leonetti and Lawrence Merlino

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in the Vincent Falcon? murder matter was paid by union em-
ployees and their relatives;
(4) the fact that one of the union employees put his house up as
property bail in connection with those arrests;
(5) the immunized testimony of Joseph Salerno in the trial of Scarfo,
Leonetti and Lawrence Merlino for the murder of concrete con-
tractor Vincent Falcone as to the fact that Salerno had overheard
Scarfo say that he had control of unions and had obtained union
positions for certain persons. Salerno's testimony did not refer
to any conversations between Scarfo and union employees which
specifically referred to Local 54 by name;
(6) evidence of connections between Local 54 business dealings and
persons or firms tied to Scarfo (e.g., the same insurance broker
and real estate agent; the hiring by Local 54 of a firm that had
put up bail for Scarfo, Leonetti and Lawrence Merlino; use of
the same car rental company). See, 203 N.J. Super. at 310 to 316.
The Appellate Division rejected the argument that the Division had
failed to prove the exertion of any actual influence over union affairs
by Scarfo and found that ample circumstantial evidence of such in-
fluence had been introduced to support the conclusion that the as-
sociation was inimical and thus disqualifying. 203 N.J. Super. at 321.
The New Jersey Supreme Court has also affirmed that the Com-
mission may act to prevent possible inimical influences on licensees
or applicants and need not wait until such influence is exerted. See,
In re Application of Boardwalk Regency, 90 N.J. 361,372 (1982). The
Appellate Division also went on to reject the First Amendment free-
dom of association claim made by the Iocal 54 employees and upheld
the "inimical" criterion against the charge that it was void for vagu?-
The Local 54 case did not involve family relationships between
licensees and career offenders. That issue was dealt with by the Ap-
pellate Division in the racing case of Niglio v. New Jersey Racing
Commission, 158 N.J. Super. 182 (App. Div. 1978). In Niglio, the
Appellate Division upheld a decision by the Racing Commission
suspending the racing license of a person married to another person
who was disqualified from participating in racing because of criminal
connections. Because of evidence submitted of the spouse's extensive
association with the person disqualified, as well as of her financial
dependence, the disqualification was based on the association and
financial dependence, not on the fact of marriage. 158 N.J. Super.
at 186.

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Another case dealing with family ties is D'Ascenso v. Division of
Gaming Enforcement, 2 N.J.A.R. 92 (1980), by the Honorable Joseph
Fidler, ALJ, in which he concluded that a cocktail waitress licensed
by the Commission was not disqualified under N.J.S.A. 5:12-86f by
her father's status as a career offender, because she had had only
infrequent and insignificant contacts with him since her childhood.
Given the nature of her cocktail waitress function at the casino, this
minimal association was seen to pose no appreciable threat to the
proper functioning of legalized gambling. D'Ascenso's relationship
with a live-in boyfriend who was also engaged in criminal activities
was found to present no bar to her licensure and in light of the fact
that the boyfriend did not exercise any significant influence or control
over her and, to [he contrary, as it appeared that she had some
beneficial and restraining effect on him, as occasionally happens in
these matters. 2 N.J.A.R. at 95. There is no evidence of such a
beneficial effect on Lawrence Merlino.
The Division argues in this case that it has shown an inimical
association with Lawrence Mefiino sufficient to disqualify Bayshore
and its principals. In particular, the Division asserts that the affidavit
and testimony of Thomas DelGiorno's provides direct (albeit hearsay)
evidence of Merlino's intention to use Bayshore to get construction
business in Atlantic City. The Division argues that DelGiorno's state-
ments are credible, despite his background in crime, a background
which rivals and probably exceeds that of Lawrence Merlino. it notes
that no promises were made to DelGiorno in exchange or as a con-
dition for his testimony.
Apart from DelGiorno's statements as to Lawrence Merlino's
involvement, the Division conceded that there was "no smoking gun,"
to use a phrase that DAG Steven Cirillo borrowed from another
context, but it argued that there is an accumulation of factors (as in
the Local 54 case) adding up to an inimical association of a non-
familial nature. The Division first notes that Lawrence Merlino has
long been associated with the rebar field and has owned and worked
with several companies, including Nat Nat and the Floridian version
of Bayshore Rebar, Inc. It notds that Lawrence 'Merlino's interests
in the New Jersey Bayshore is a natural extension of his prior activities
and argues that he has been seen on various construction sites visiting
Rocco Bunodono, who is foreman and superintendent for Bayshore
and who was formerly a foreman with Nat Nat, as well as a personal
friend of Lawrence Merlino for many years. The Division notes that
Bayshore initially operated rent-free from a home located at 15 North

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Decatur Avenue in Margate, which home was owned by Lawrence
Merlino and out of which Nat Nat also operated and continues to
operate. The Division notes that the family phone and utility bill for
the 15 Decatur Avenue address were occasionally paid by Lawrence
Merlino. The Division also emphasizes the business dealings between
Joseph Merlino and Lawrence Merlino, including the purchase of a
condominium formerly owned by Nat Nat and Scarf, Inc., which
purchase was partly made possible through bonuses provided by
Merlino and Nat Nat. The Division also notes that Bayshore, in
addition to adopting the same name used by Lawrence Merlino for
another company, relied on the same insurance agency, C. J. Adams,
and also utilized the services of the same bookkeeper and foreman,
who had previously worked for Nat Nat. The Division cites evidence
that Phyllis Mistie Merlino was, on some occasions, involved in the
business dealings of Nat Nat while living at the 15 North Decatur
address. Also noted is the fact that Joseph Merlino's sister Kimberly
runs the operations of Nat Nat during her father's incarceration. The
Division argues that the relocation of the Merlino family does not
negate the various connections between Bayshore and Lawrence
Merlino and Nat Nat in that the inimical association between
Bayshore and Lawrence Merlino has not been severed, although it
may have been better hidden and disguised. Considering DelGiorno's
affidavit as well as and all of the circumstantial evidence, the Division
contends that it has met the standard set forth in N.J.S.A. 5:12-86f
for disqualification of Bayshore.
Counsel for respondents, Francis Hartman, Esq., sees the
Division's case as not only lacking a smoking gun but also consisting
largely of smoke. He argues that the State has, on the most tenuous
of factual allegations, sought to darkly cloud the blood relationship
between Joseph Merlino and his father and imply an inimical business
association between them which has no basis in fact. Counsel for
respondent argues, first (and the Division does not dispute), that the
State has shown no de jure relationship between Bayshore and Law-
rence Merlino in that the latter holds no stock or office in and has
not received any payments from Bayshore. As to the rest of the
underlying de facto aspects of the Division's evidence; respondent
admits that Joseph Merlino worked briefly as a laborer for Scarf Inc.,
when he was 16 and argues that he had no further connection with
that company. As to Joseph Merlino's later job with Nat Nat, respon-
dent claims that there is nothing unusual about  son working for
his father and that the sins of the father should not fall upon his

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children. It is also not unusual, respondent argues, for a person to
start a business from his or her home, as Joseph Merlino did at 15
North Decatur Avenue. Respondent notes that Lawrence Merlino did
not at any time live in the home, and that the fact that he may have
occasionally paid for the phone and utility bills is only incidental to
the fact that his family and former spouse lived in the home and he
chose to shoulder some of their financial obligations. Respondent
notes that Nat Nat was not originally located at 15 North Decatur,
but operated out of 28 North Georgia Avenue in Atlantic City and
was moved to the Margate address only for the convenience of
Kimberly Merlino, who was one of its principal employees. As to
Phyllis Mistie Merlino, respondent notes that she had only minimal
involvement in the affairs of Nat Nat and does not have an amicable
relationship with Lawrence Merlino. Concerning Joseph Merlino's
efforts to get casino work, respondent argues that there is no evidence
that Lawrence Merlino at any time did anything to get work for
Bayshore. It characterizes Joseph Merlino's efforts to establish a
business as the product of a young man's desire to succeed on his
own and describes the opportunity to do so given by Joseph Feriozzi
as a legitimate business transaction in which Feriozzi decided to give
the young man a chance. Respondent also notes, and the Division
does not dispute, that, beyond the criminal charges that are not dealt
with in this decision, no criminal charges have ever been brought
against Joseph Merlino. Joseph Merlino's purchase of property from
Nat Nat, respondent argues, an arm's-length financial transaction
which was in no way unlawful or improper, and which played no role
in the operation of Bayshore's business. Respondent also raises and
dismisses the possibility that Joseph Merlino was given bonuses and
allowed to purchase property in order to shield money belonging to
Lawrence Merlino or Nat Nat from possible forfeiture under RICO,
the federal law pertaining to racketeer-influenced corrupt organiza-
tions. Counsel for respondent also deems DelGiorno's affidavit as
unworthy of belief and argues that it is further weakened by
DelGiorno's statements on cross-examination in the matter of United
States v. Scarfo, et al.
As to DelGiorno's statements, I note that hearsay is admissible
in this proceeding and may provide the residuum of proof required.
See, N.J.S.A. 5:12-107a(6); State v. Merlino, infra. DelGiorno's af-
fidavit, as clarified by his testimony, is credible. Similiar immunized
testimony was found to constitute part of the inimical association in
the Local 54 case discussed above. Although DelGiorno's testimony

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in this case was uncertain as to whether Bayshore was specifically
mentioned by Lawrence Merlino, Salerno's testimony in the Local 54
case also did not contain any recollection of a specific reference to
Local 54 by name. See, 203 N.J. Super. at 318.
Beyond DelGiorno's statements, there is ample evidence of as-
sociation between Lawrence Merlino and Bayshore Rebar, Inc., and
its officers and foreman. Bayshore was formed shortly after a com-
pany of the same name owned by Lawrence Merlino was dissolved
in Florida, and this similarity of names is more symbolic than coin-
cidental given the rest of the connections. Joseph Merlino, who was
Bayshore's initial president and owner, cut his teeth in the construc-
tion business with Scarf, Inc., which has ties to Nicodemo Scarfo
through its owner Phillip Leonetti, and he later worked at his father's
side at Nat Nat, Inc. While it is quite common for sons and, more
recently, daughters, to follow their father's footsteps into business,
the connection between Nat Nat and Bayshore was, at least at the
outset of Bayshore's operation, quite close. The company shared the
same residential office space, the same insurance agency, the same
bookkeeper, and Bayshore relied heavily on Rocco Bunodono, who
had formerly worked with Nat Nat, as its foreman. The importance
of Bunodono's extensive role in this matter as a connection between
Lawrence Merlino and Bayshore is further emphasized by the photo-
graphic evidence of the two men together at construction sites.
Bunodono was also instrumental in obtaining Bayshore's initial
license from Atlantic City, as well as one of its first substantial
construction jobs from Joseph Feriozzi, who testified that Bunodono's
presence reassured him that the job would run smoothly. Feriozzi also
testified that he had felt fear, at least for his business if not for himself,
when he had earlier learned of charges lodged against Lawrence
Merlino for the murder of Vincent Falcone, an Atlantic City cement
contractor. While there is no evidence that Lawrence Merlino inter-
vened to get business for Bayshore, Feriozzi was concerned with his
possible involvement. Joseph Merlino denies having generally dis-
cussed Bayshore business matters with his father, but he admits that
he asked him whether Feriozzi was "a good payer." Joseph Merlino
thus demonstrated that he turned to his father for advice on at least
that occasion and it is not unlikely, given their prior working rela-
tionship, that he did so on other occasions. But this case does not
rest on that sort of speculation. The facts show that Joseph Merlino
consulted with and dealt with his father in other financial matters,
such as the purchase of the Margate condominium, which was made

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possible by substantial bonuses given by the father to the son.
Although this real estate deal was above-board and regular in all
respects, it tends to establish financial dealings between Joseph
Merlino and his father. The fact that Lawrence Merlino also gave his
son Joseph bonuses which totaled some $50,000 also suggests that
Joseph Merlino was, at least to that extent, financially dependent upon
his father and Nat Nat, despite the fact that he worked for United
Carpenters and G & H Construction and had started Bayshore's
business operations. Was Lawrence Merlino simply trying to do right
by his oldest son or were these transactions some nefarious attempt
to conceal Lawrence Merlino's assets from the reach of the federal
government? The proofs submitted do not supply an answer to this
question but the fact of the bonuses and the real estate deal, as well
as the other business connections proven, establishes an association
between Joseph Merlino and his father which goes far beyond one
of simple blood relation. The common business dealings of Bayshore
and Nat Nat are similar to those which were found, in the case of
Local 54, to constitute an inimical association.
As stated, the Division's burden in this case is to demonstrate
that Bayshore, through its officers or principal employees, is as-
sociated with Lawrence Merlino, a career offender and a member of
a career offender cartel, in such a manner as to create a reasonable
belief that the association is of such a nature as to be inimical to the
policy of the Casino Control Act and gaming operations. N.J.S.I.
5:12-86f. The respondents contend that the State has shown much
association between themselves and Lawrence Merlino, but that none
of it is inimical because it is based on the natural and Constitutionally
protected connection of family. They point to the absence of any
evidence showing actual influence by Lawrence Merlino over
Bayshore. Such an argument was also raised, and rejected, in the Local
54 case, where the Appellate Division found ample circumstantial
evidence of Scarfo's influence over union employees. 203 N.J. Super.
at 321. Even without DelGiorno's statements, there is, in this case,
ample circumstantial evidence of the external influence of Lawrence
Merlino on Bayshore Rebar, Inc., and that evidence ranges from the
choice of name of the company to payment of bills and rent for its
initial location, to the selection of insurance companies, bookkeeper
and foreman and also to advice given by Lawrence Merlino to Joseph
Merlino as to the conduct of the business and as to the purchase of
real estate (unrelated to the business) which was financed, in part,
by very generous bonuses provided by the father to the son. Joseph

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Merlino is not merely Lawrence Merlino's son in the context of this
case. Their relationship is far beyond that. Their business dealings
have become inextricably linked with their familial connection. If
Joseph Merlino were not Lawrence Merlino's son but merely a social
or business associate, the evidence in this case would be sufficient to
support a conclusion that the two men are associated and that this
association is of such a nature and it suggests influence and control
of Bayshore by a career offender and therefore is inimical. The fact
that Lawrence Merlino is related to Joseph Merlino by blood and that
he was once related to Phyllis Mistie by marriage should not be
allowed to obscure the nature of the business association which has
formed between them or to put it beyond the reach of State regulation
is the highly sensitive area of casino operations. Family ties, without
greater association, cannot provide a basis for disqualification under
N.J.S.A. 5:12-86f, but they do not preclude a finding of disqualifica-
tion if other evidence of an inimical association, beyond that of
relation by blood or marriage, is proven. See, eg., Niglio v. New Jersey
Racing Commission. Such proof is present in sufficient amount in this
case. This matter is also distinguishable from the case of D'Ascenso
v. Div. of Gaming Enforcement because there the contacts between the
licensee and her father were infrequent and insignificant and posed
no appreciable threat to the proper function of legalized gambling,
especially in light of the licensee's function as a cocktail waitress. Here,
Joseph Mer/ino's contacts with his father are substantial and ongoing,
and while they embrace the usual aspects of the relationship between
a father and son, they also are characterized by extensive business
associations that go beyond the family tie and pose an appreciable
threat to the operations of a casino service industry. The fact that
Lawrence Merlino is now and has since July 1987 been incarcerated
awaiting trial on charges of murder and racketeering does not
diminish this association. It is not unknown for inmates to control
enterprises far beyond the prison walls. The fact that Lawrence
Merlino is in jail because he is unable to make bail also provides a
most compelling incentive and motive for him to be involved in
Bayshore's business affairs. As the respondent notes, there is no
evidence, beyond DelGiorno's statements, that Lawrence Merlino is
directly so involved or that he has received any monies from Bayshore
or from Joseph Merlino. However, such evidence is not necessary to
reach a conclusion that their association is of such a nature as to create
a reasonable belief that it is inimical to the policies of the Casino
Control Act and gaming operations. I CONCLUDE the evidence

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submitted, including DelGiorno's statements, as to the association
between Bayshore Rebar, Inc., and Lawrence Merlino is sufficient to
disqualify Bayshore under N.J.S.A. 5:12-86f and that Bayshore's ven-
dor registration issued under N.J.S.A. 5:12-104b should be revoked.
(2) Casino Service Industry Application
The remaining issue is whether Bayshore Rebar, Inc., and its
officers have proven their eligibility to be licensed as a casino service
industry pursuant to N.J.S.A. 5:12-92c under N.J.A.C. 19:43-1.3 and
1.14. The Casino Control Act provides for licensing and registration
of casino service industries, including construction companies con-
tracting with casino applicants or licensees:
[a]11 casino service industries not included in subsection a. of this
section [those providing goods or services directly relating to casino
or gaming activity] shall be licensed in accordance with rules of the
commission prior to commencement or continuation of any business
with a casino applicant or licensee or its employees or agents. Such
casino service industries, whether or not directly related to gaming
operations, shall include suppliers of alcoholic beverages, food and
nonalcoholic beverages; garbage handlers; vending machine
providers; linen suppliers; maintenance companies; shopkeepers
located within the approved hotels; limousine services and construc-
tion companies contracting with casino applicants or licensees or thqir
employees or agents... d. Licensure pursuant to subsection c. of this
section of any casino service industry may be denied to any applicant
disqualified in accordance with the criteria contained in section 86 of
this act (emphasis added). [N.J.S.A. 5:12-92c, d]
Those grounds of disqualification include those of inimical as-
sociation under N.J.S.A. 5:12-86f, as discussed and concluded above.
The regulations promulgated by the Casino Control Commission
provide, with respect to issuance of casino service industry licenses,
[n]o casino service industry license shall issue unless the individual
qualification of each of the following persons shall have first been
established in accordance with all provisions, including those cited,
of the Act and of the regulations of the Commission . .. [i]n the
case of casino service industry licenses issued in accordance with
section 92c and d of the Act each such applicant in accordance with
the standards of section 92d and 86 and the Act. [N.J.A.C. 19:41-3.2]
The casino control regulations further provide, as to standards for
qualification for a casino service industry license, that:
The general rules relating to casino service industry standards for

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qualification are set forth in N.J.A.C. 19:41-3.2 et seq... (c) Each
applicant required to be licensed as a casino service industry in ac-
cordance with section 92c and d of the Act shall, prior to the issuance
of any casino service industry license, produce such information and
documentation, including without limitation as to the generality of
the foregoing its financial books and records, and assurances to
establish by clear and convincing evidence its reputation for good
character, honesty and integrity . . . [N.J.A.C. 19:43-1.3(a) and (c)]
(emphasis added)
As to disqualification, the regulations state that:
A casino service industry license may be denied to any applicant who
has failed to prove by clear and convincing evidence that he, or any
of the persons required to be qualified, are in fact qualified in
accordance with the act and with the provisions of these rules and
regulations, or who has violated any of the provisions of the Casino
Control Act or these rules and regulations, or who is disqualified
under any of the criteria set forth in section 86 of the Casino Control
Act. [N.J.A.C. 19:43-1.5] (emphasis added)
With respect to persons who need to be qualified before a casino
service industry license can be issued, the Commission has provided
that, as to Casino Service Industry Licenses issued in accordance with
Section 92c and d of the Act of the following persons must be quali-
(i.) The enterprise;
(iii.) Each owner of the enterprise who directly or indirectly holds any
beneficial interest or ownership in excess of five percent of the
(v.) Each director of the enterprise except that a director who, in the
opinion of the Commission, is not significantly involved in or
connected with the management or ownership of the enterprise
shall not be required to qualify;
(vi.) Each officer of the enterprise significantly involved in the conduct
of business and each officer who the Commission may consider
appropriate for qualification in order to insure the good charac-
ter, honesty and integrity of the enterprise;
(viii.) The management employee supervising the regional or local of-
rice which employs the sales representative soliciting business or
dealing directly with a casino licensee;
(ix.) Each employee who will act as a sales representative or otherwise
regularly engage in the solicitation of business from casino
(x.) Any other person whom the chairman may consider appropriate
for approval or qualification. [N.J.A.C. 19:43-1.14(a)2]
As discussed above, Joseph Merlino is currently vice-president
and treasurer, as well as 25 percent owner of Bayshore Rebar, Inc.

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His mother, Phyllis Mistie, is the president and secretary of the com-
pany and also 75 percent owner. Rocco Bunodono functions as the
Superintendent and foreman for Bayshore on various construction
jobs. An application for licensure as a Casino Service Industry
pursuant to N.J.S.A. 5:12-92c, was filed by Bayshore Rebar, Inc., on
July 29, 1988.
The Division objected to that application on August 10, 1988,
maintaining that Bayshore cannot demonstrate, by the requisite clear
and convincing evidence, the good character, honesty and integrity
necessary for licensure. The Division also argued that Bayshore was
disqualified for licensure as a casino service industry because of its
association with Lawrence Merlino and due to the indictment of the
applicant's principal, Joseph N. Merlino. In addition, the Division
asserts disqualification on the basis of N.J.S.A. 5:12-86b because of
alleged misrepresentations made by Joseph N. Merlino and Phyllis
Mistie at the hearing in this matter. No particular misrepresentations
are cited by the Division, which nonetheless argues that the testimony
of the two was "less than truthful concerning several issues of fact"
(Division's objection of August 10, 1988, at 3).
As to the last claim of misrepresentation, I CONCLUDE that
the Division has failed to show that Joseph N. Merlino and Phyllis
Mistie supplied any information which was untrue or misleading as
to any material fact pertaining to their qualifications. The Division's
case, beyond the statements of Thomas DelGiorno, was largely cir-
cumstantial, and the respondent did not deny the allegations of the
complaint. This case turns on the interpretation to be given to those
admitted facts. The Division perceives, and I conclude that it has
proven, an inimical association where the respondents see only family
connections. The Division has not shown, however, that the respon-
dent supplied untrue or misleading information as to any material
facts and I CONCLUDE, on that basis, that Bayshore is not dis-
qualified from receiving a casino service industry license under
N.J.S.A. 5:12-86b.
The Division also cites the criminal indictment pending against
Joseph N. Merlino as an additional basis for disqualification, under
N.J.S.A. 5:12-86c and d. Because the matter of this pending indict-
ment as set forth in the amended complaint was severed in order to
expedite resolution of the original complaint, as well as the casino
service industry license application matter, it is not appropriate at this
time to consider the indictment pending its resolution and I so CON-

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The Division also asserts Bayshore's inimical association under
N.J.S.A. 5:12-86f as precluding the issuance of a casino service indus-
try license in this instance under N.J.A.C. 19:41-3.2(a)2. The Casino
Control Act provides that licensure for a casino service industry may
be denied when the applicant is disqualified under section 86, includ-
ing 86f. See, N.J.S.A. 5:12-92d. The rule requiring that an applicant
also establish its reputation for good character, honesty and integrity
by clear and convincing evidence is in addition to the basic require-
ment that the applicant not be disqualified under N.J.S.A. 5:12-86.
See, N.J.A.C. 19:43-1.3(a), (c). The Commission has discretion to deny
a casino service industry license application if it concludes that the
nature of the disqualification is such as to render issuance of the
license contrary to the policy of the Act and to gaming operations.
In this instance, the evidence supports the conclusion that Bayshore
is disqualified by virtue of its inimical association with Lawrence
Merlino, a career offender and a member of a career offender cartel.
On the basis of this disqualification alone, and without reaching the
issue of the reputation of Bayshore and its officers for good character,
honesty and integrity, I CONCLUDE that the Bayshore Rebar, Inc.,
application of for a casino service industry license should be denied
by the Commission.
On the basis of the above findings of fact and conclusions of law,
it is ORDERED that respondent Bayshore Rebar, Inc., is adjudged
to be disqualified pursuant to N.J.S.A. 5:12-86f and that its vendor
registration, issued pursuant to N.J.S.A. 5:12-104b, be revoked. It is
further ORDERED that the application of respondent Bayshore
Rebar, Inc., for casino service industry license pursuant to N.J.S,4.
5:12-92c and d is denied on the grounds of disqualification under
N.J.S.A. 5:12-86f. It is further ORDERED that all casino licensees
are prohibited from transacting any business--present or future, direct
or indirect--with Bayshore Rebar, Inc.
This recommended decision may be adopted, modified or rejected
by the CASINO CONTROL COMMISSION, which by law is em-
powered to make a final decision in this matter.
This matter arises out of a complaint filed by the Division of
Gaming Enforcement (Division) which essentially sought the terrain-

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ation of business between casino licensees and Bayshore Rebar, Inc.
(Bayshore) pursuant to section 104(b) of the Casino Control Act (Act),
N.J.S.A. 5:12-1 et seq.' Subsequent to the filing of the complaint
Bayshore was required to and did apply for a casino service industry
license pursuant to section 92 of the Act. By order dated April 10,
1989, this application was denied and the relief sought by the Division
was granted by the New Jersey Casino Control Commission (Com-
mission) essentially for the reasons stated in the initial decision which
had been filed in this case by the Office of Administrative Law (OAL).
Bayshore filed an appeal to the New Jersey Superior Court, Appellate
Division and the Commission issues this opinion pursuant to R.
Procedural History
Bayshore reinforces concrete on construction projects. It had
been engaged in business as a subcontractor on several construction
sites of casino licensees or applicants for casino licenses. Pursuant to
N.J.S.A. 5:12-104(b), the agreements between Bayshore and casino
licensees and applicants are subject to review and approval by the
On January 6, 1987, the Division filed with the Commission a
complaint for revocation and an application for a temporary
prohibitory order against Bayshore. The Division sought to prohibit
any further business, direct or indirect, between Bayshore and casinos
based upon the allegation that the company and its principal qualifier,
Joseph N. Merlino, were associated with a member of organized crime
in such a manner as to render it disqualified pursuant to N.J.S.A.
5:12-86(f). The organized crime figure identified in the complaint is
Lawrence "Yogi" Merlino, the father of Joseph N. Merlino.
We denied the Division's request for a temporary prohibitory
order at our public meeting of February 25, 1987. On March 3, 1987,
Bayshore filed an answer to the complaint and the matter was there-
after transmitted to the OAL for a plenary hearing.
On May 6, 1987, the Division filed an amendment to the corn-
'Various provisions of the Act may be cited by section number only, omitting
the prefix, "N.J.S.A. 5:12-."
-'At the time this matter was initiated section 104(b) did not include reference
to applicants for casino licenses. However, the Act was amended in January
1988 to so provide. L. 1987, c. 355, {}8, eft. January 4, 1988.

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plaint alleging that Joseph N. Merlino and Bayshore were disqualified
pursuant to N.J.S.A. 5:12-86(c) (1) and (g) based on a three-count
indictment filed against Joseph N. Merlino on March 20, 1987, for
possession of a deadly weapon for unlawful purposes contrary to
N.J.S.A. 2C:39-4; aggravated assault contrary to N.J.S.A.
2C:12-1(b)(l); and aggravated assault with a deadly weapon contrary
to N.J.S.A. 2C:12-1(b)(2). To expedite a hearing and resolution of the
association allegation, and with the concurrence of the parties, the
Administrative Law Judge (ALl) in his prehearing order dated No-
vember 18, 1987, deferred a hearing on the allegations of the indict-
ment pending resolution of the criminal proceedings against Joseph
N. Merlino pursuant to section 86(d). Hearings on the association
allegation were held on March 14, 29 and 31, 1988. The record was
closed on April 17, 1988. On June 16, 1988, the Division filed a motion
to reopen the record to admit additional evidence, specifically the
affidavit of Thomas A. DelGiorno, an admitted member of the Scarfo
organized crime family.
On June 24, 1988, the Division filed a second application for a
temporary prohibitory order with the Commission. We denied this
application at our public meeting of July 13, 1988, noting in part that
the ALJ's decision on the associational question appeared to be immi-
On July 22, 1988, the ALJ granted the Division's motion to
reopen the record and both parties were permitted to supplement the
In the interim, by letter dated May 18, 1988, Bayshore was
advised that, due to the regular and continuing nature of its business
with casino licensees and applicants, it was required to file an appli-
cation for licensure as a casino service industry pursuant to N.J.S.A.
5:12-92 and N.J.A.C. 19:43-1.2. Bayshore filed its application on July
26, 1988. By letter-report dated August 10, 1988, the Division objected
to Bayshore's licensure on the grounds stated in its complaint, as
amended, and on the further grounds that Joseph N. Merlino and
Phyllis Mistie Merlino, Bayshore's quailfiefs, misrepresented material
facts at the OAL hearing and that Bayshore lacked the good character,
honesty and integrity required by N.J.A.C. 19:43-1.3.
On August 18, 1988, the application matter was consolidated with
the pending complaint matter in the OAL. The record was kept open
until November 21, 1988, to permit the parties an opportunity to
introduce additional evidence..
On December 21, 1988, the ALJ recommended that Bayshore's

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application be denied for the reasons stated in an initial decision.
Essentially, the ALJ's recommendation was predicated upon his find-
ing that Bayshore and its principal, Joseph N. Merlino, had an as-
sociation with Lawrence Merlino, a career criminal offender and a
member of a career criminal cartel, which rendered Bayshore's
licensure inimical to the Casino Control Act pursuant to N.J.S.A.
5:12-86(f) and thus disqualified it for licensure as a casino service
industry. The ALl further concluded that the Division failed to prove
its allegations that Joseph N. or Phyllis Mistie Merlino had made any
material misrepresentations. The judge also noted that the criminal
indictments filed against Joseph N. Merlino were still pending at the
time of the filing of the initial decision and were not considered in
his decision. The ALJ made no determination on the issue of whether
Bayshore carried its burden proving its good character, honesty and
On January 9, 1989, Bayshore filed exceptions to the initial de-
cision. On January 17, 1989, the Division filed a reply.
After consideration of the entire record in this matter, we de-
termined at our public meeting of April 5, 1989, to adopt the initial
'decision, subject to a modification to find that, in addition to
Bayshore, Joseph N. Merlino and Phyllis Mistie Merlino were also
disqualified by reason of section 86(f). Prior to announcing our de-
cision we were informed by the parties that Joseph N. Merlino had
been found guilty of all three counts of the indictment. Counsel for
Bayshore iterated Bayshore's right to have a hearing relating to this
aspect of the case. (Transcript of Commission public meeting April
5, 1989, at 100-7 to 100-112.)
The decision to deny the application was memorialized by order
dated April 10, 1988. Consistent with our determination, the order
further required the termination of all contracts between Bayshore and
casino licensees and their agents within fifteen days.
On April 24, 1989, Bayshore filed with the Commission a motion
for stay pending appeal of our order of April 10, 1989. At our public
meeting of April 26, 1989, we denied Bayshore's motion.
Disqualification Pursuant to N.J.S.A. 5:12-86(f)
The ALl concluded that Bayshore is disqualified pursuant to
N.J.S.A. 5:12-86(0, by reason of the association between it and its
principal, Joseph N. Mefiino, with' Lawrence Merlino. Bayshore con-
ceded that Lawrence Merlino was a career offender and member of

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a career offender cartel, the Act's euphemism for organized crime
figures. This Commission had already determined as much by includ-
ing the elder Merlino on the Exclusion List, pursuant to N.J.S.A.
5:12-71, in 1985. 3 Having reviewed the record in detail we accept the
ALJ's recommendation to deny Bayshore's application and grant
relief sought in the Division's complaint.
The Commission has been charged by the Legislature with
protecting the "public confidence and trust in the credibility and
integrity of the regulatory process and of casino operations." N.J.S.A.
5:12-1(b)(6). To this end the Legislature enacted "a comprehensive
statutory scheme that authorizes casino gambling and establishes a
rigorous system of regulation for the entire casino industry." Brown
v. Hotel and Restaurant Employees and Bartenders International Union
Local54, 468 U.S. 498, 104S. Ct. 3179, 3182, 82 L. Ed. 2d373 (1984).
Keeping the casino industry free from infiltration by or even the
influence of organized crime is the primary mission of the agencies
created by the Act. Ibid.
N.J.S.A. 5:12-92(d) provides that a casino service industry may
be "disqualified in accordance with the criteria contained in section
86" of the Act. The Division alleged that Bayshore should be dis-
qualified pursuant to section 86(f) of the Act. That section provides
in part that any person A who is required to be qualified under the
Act shall be disqualified if such person is determined to be "... an
associate of a career offender or a career offender cartel in such a
manner which creates a reasonable belief that the association is of
such a nature as to be inimical to the policy of this Act and to gaming
operations." As this language has been interpreted and applied, the
association is inimical if it presents the danger of influence or control
over casino-related business by an organized crime figure. See In the
Matter of the Hotel and Restaurant Employees and Bartenders Inter-
national Union Local 54, 203 N.J. Super. 297 (App. Div. 1985), certif.
den. 102 N.J. 352 (1985), cert. den. 475 U.S. 1085, 106 S. Ct. 1467
(1986). We need not wait, however, until this potential control mani-
fests itself in criminal behavior by the associate. Ibid. In accordance
3See State v. Lawrence Merlino and Philip Leonetti, 8 N.J.A.R. 126 (1985),
aff'd. 216 N.J. Super. 579 (App. Div. 1987), aff'd. o.b. 109 N.J. 134 (1988).
4N.J.S.A. 5:12-37 defines "person" as:
Any corporation, association, operation, firm, partnership, trust or other
form of business association, as well as a natural person.

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with these guiding principles, we must analyze the nature and quality
of the association between Bayshore and Lawrence Merlino to de-
termine if it creates an appreciable risk that Lawrence Merlino might
exercise some degree of influence over Bayshore.
The ALJ reviewed the voluminous record in this matter and found
that the contacts between Lawrence Merlino and Joseph N. Merlino,
Bayshore's principal, "are substantial and ongoing and while they
embrace the usual aspects [of] the relationship between a father and
his son, they also are characterized by extensive business associations
that go beyond the family tie and pose an appreciable threat to the
operations of a casino service industry."
Based on our own close scrutiny of the record, we agree with
the ALJ. The Division's proofs established by a fair preponderance
of the credible evidence that the nature and quality of the association
is such that Lawrence Merlino could, indeed, exercise control or
influence over Bayshore. Although the evidence here of a tainted
association is largely circumstantial, it is not for that reason alone
deficient. The Local 54 decision, which also involved an 86(f) disquali-
fying association, was grounded in "a record replete with circum-
stantial evidence." Local 54, 203 N.J. Super. at 321. There, too, no
proof of actual misconduct by union officials at Scarfo's behest was
shown, though there was evidence of Scarfo's interest in union affairs.
Nevertheless, the court upheld the Commission's determination that
the potential for untoward influence by the Scarfo crime family was
In response to the Division's proofs, Bayshore suggests that each
of the indicia of the purportedly inimical association can be explained,
most as the natural elements of a father-son relationship. The appli-
cant's contention essentially is that it has no relationship with Law-
rence Merlino; the only relationship is between Lawrence the father
and Joseph the son and the son ought not be disqualified simply
because of who and what the father is.
We can agree only to a point. The disqualification of the father
does not alone disqualify the son. The old English notion of "corrup-
tion of the blood" has never been part of American jurisprudence and
certainly section 86(f) does not provide reason to incorporate it into
casino law. But just as the father-.son relationship cannot be used as
a sword to disqualify, neither can it be used as a shield from regulatory
In Niglio v. New Jersey Racing Commission, 158 N.J. Super. 182

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(App. Div. 1978), the Appellate Division recognized the public interest
in the strict regulation of legalized gambling and upheld the Racing
Commission's decision to disqualify the wife of an individual con-
victed of certain criminal offenses from racing a horse that she owned.
The court held:
The undesirabilty of an association between those previously con-
victed of a crime or those in affinity with such a person and the
sensitive "business of racing and the legalized gambling attendant
thereupon," is too apparent to justify extended discussion. Certainly
an appropriately strong state interest is involved and there is a
rational basis for the classification imposed. lid. at 188, (quoting
Jersey Downs, Inc. v. Division of New Jersey Racing Commission, 102
N.J. Super. 451, 457 (App. Div. 1968)].
The Niglio decision was predicated, not so much on the familial
relationship per se, but rather on the wife's financial dependence on
her disqualified spouse. In the instant case, the operative question is
whether the evidence cited by the ALJ is sufficient to raise reasonable
concern that Lawrence could influence the activities of Bayshore. We
believe that it most certainly is, as a recapitulation of the pertinent
evidence will demonstrate.
Bayshore was incorporated in New Jersey on December 13, 1985,
only one month after the dissolution of a Florida corporation of the
same name owned by Lawrence Merlino. Joseph N. Merlino's em-
ployment with Lawrence Merlino's company, Nat Nat, ended some
undisclosed date prior to December 1985, yet Joseph received a
$15,000 "bonus" check from his father on or about March 10, 1986.
At around the same time, Joseph bought from Lawrence the con-
dominium that Lawrence had previously acquired from Scarf, Inc?
Phyllis Mistie Merlino, Bayshore's President, is listed on insurance
records for Nat Nat as late as January 16, 1987. Nat Nat and Bayshore
operated from the same premises, the home of Phyllis and her chil-
dren, which is owned by Phyllis' ex-husband, Lawrence, as recently
as eight months prior to the OAL hearings conducted in March 1988.
Bayshore paid no rent during this period and on occasion had its
phone bill paid by Lawrence. It used the same bookkeeper and in-
surance agent as Nat Nat. As of the date of the OAL heatings,
5The background of Scarf, Inc., is discussed in State v. Lawrence Merlino
and Philip Leonetti, Supra, 8 N.J.A.R. at 152-153.

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Bayshore had employed as its foreman, Rocco Bunodono, the former
foreman for Lawrence at Nat Nat.
We cannot dismiss these factors as being "innocuous" as the
applicant suggests. The indicia of a significant, non-familial, associa-
tion between Lawrence Merlino and Bayshore are too recent, numer-
ous and substantial to permit Bayshore's participation in the casino
industry under the strict standards that we are obliged to uphold. The
risk of infiltration by organized crime is too great, too palpable, to
warrant any decision other than denial of licensure in this instance.
Our concerns are in no way alleviated by Bayshore's contention
that, because Lawrence Merlino has recently been sentenced to prison
for life, he is in no position to influence Bayshore. The influence of
the Scarfo crime family in the Atlantic City area is well documented.
We do not share the same confidence that Lawrence Merlino either
directly or indirectly could not influence the operations of Bayshore
even while he resides within prison walls. Moreover, this record is
inadequate for us to reach a firm conclusion as to the finality of
Lawrence Merlino's conviction and sentence.
Disqualification Pursuant to N.J.S.A. 5:12-86(b)
As an additional basis for disqualification, the Division, in its
letter-report objecting to Bayshore's licensure as a casino service in-
dustry, alleged that Phyllis Mistie Merlino and Joseph N. Merlino
each misrepresented material facts at the OAL hearing in an attempt
to cover-up any relationship between Bayshore and Nat Nat contrary
to section 86(b) of the Act. The A[J concluded that the Division failed
to prove its case concerning these allegations. We agree. Because the
Division failed to make any specific allegations of such conduct or
offer any proof in this regard, we do not see any need for extended
discussion on this issue.
Disqualification Pursuant to N.J.S.A. 5:12-86(c)(1)
In its amended complaint and letter-report, the Division alleged
that Joseph N. Merlino had engaged in criminal conduct which was
the basis of a three count criminal indictment filed against him and
disqualifying to Bayshore pursuant to section 86(c)(1) of the Act. To
expedite a hearing on the other issues involved in this matter, the ALJ
accepted a stipulation by the parties to sever the issue of the indict-

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ment and defer consideration of the indictment pending its resolution.
The ALJ properly did not consider the indictment in his initial de-
We were advised by the parties at our public meeting of April
5, 1989, that Joseph N. Merlino has been found guilty on each count
of the indictment. We do not consider this aspect of the case in this
decision. Upon sentencing, because the criminal conduct by Mr.
Mefiino will have been resolved, there will no longer be any basis
for continued deferral under the Casino Control Act. N.J.S.A.
5:12-86(d). Thereupon, the matter should proceed to a hearing in the
Office of Administrative Law to assess whether Bayshore and Joseph
N. Mefiino are also disqualified pursuant to N.J.S.A. 5:12-86(c)(1).
Good Character, Honesty, Integrity Pursuant to N.J.A.C. 19:43-1.3(c)
The ALJ also did not reach a decision with respect to whether
Bayshore established the good character, honesty and integrity re-
quired by N.J.,4.C. 19:43-1.3(c). The criminal allegations against
Joseph N. Merlino, concerning disqualification pursuant to section
86(c)(1) of the Act, are equally relevant to a consideration of
Bayshore's good character, honesty and integrity. Therefore it is ap-
propriate for the good character issue to proceed to a hearing and
be tried along with the issue of disqualification pursuant to section
The possibility of infiltration into the casino industry by the likes
of Nicodemo Scarfo and his associates is the raison d'etre for strict
State regulation. The Division's proofs established by a fair
preponderance of the evidence an association between the applicant
and a notorious organized crime figure well beyond the mere familial.
We are satisfied that this association, manifesting itself in the structure
and operation of a business engaged in casino hotel construction, is
the type envisioned by section 86(f) of the Act, i.e, one which we
reasonably believe to present a threat to the integrity of the gaming
industry. Accordingly, we adopt the ALJ's conclusion that Bayshore
is disqualified pursuant to section 86(f) and his recommendation that
Bayshore's application for a casino service industry license be denied.

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This disqualification runs to Bayshore's qualifters as well. Accordingly
we modify the initial decision to conclude that Joseph N. Merlino
and Phyllis Mistie Merlino are also disqualified pursuant to section
You must check the New Jersey Citation Tracker in the companion
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in the New Jersey courts.