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8 N.J.A.R. 126

Merlino, Lawrence and Leonetti, Philip; Gaming Enforcement, Division of, Department of Law and Public Safety, State of New Jersey v
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Citation: 8 N.J.A.R. 126
Decision Date: 1985
Agency: CASINO CONTROL COMMISSION
Synopsis: The Division of Gaming Enforcement sought to have the names of Lawrence Merlino and Philip Leonetti placed upon the Casino Control Commission's list of those excluded from licensed casino hotel facilities pursuant to N.J.S.A. 5:12-71, et seq. and N.J.A.C. 19:48-1.1, et seq. The matter was transmitted to the Office of Adminis- trative Law as a contested case and after review of the resulting initial decision, the Commission remanded the matter for reconsideration. The administrative law judge assigned to the case denied the petition to include Mr. Merlino upon the exclusion list but approved the addition of Mr Leonetti's name pending resolution of an indictment filed against him in Federal District Court. The judge concluded that the Division had failed to prove that respondents were career offenders as defined by N.J.A.C. 19:48-1.1 since the Division's evidence on the question consisted primarily of opinion testimony set out in transcripts of testimonial evidence given by representatives of various governmental agencies in other proceed- ings. Lack of cross-examination led the judge to have serious questions about the reliability of such evidence and the credibility of those witnesses; such evidence could not support a finding of fact. The judge also concluded that the Division had failed to prove that the respondents were associated with career offenders in such a way as to make their presence in a casino hotel inimical to legitimate State of New Jersey 127 gambling. The judge also found that the combination of unreliable evidence and respondents' assertions of their rights to remain silent did not establish a nefarious relationship with career offenders. The Division's inability to prove these allegations resulted in the judge's conclusion that there was no showing that Mr. Merlino's presence in a licensed casino would be inimical to the interest of the State or of licensed gaming pursuant to N.J.A.C. 19:48-1.3(a)(1), (2) and (4). The judge did conclude however that, solely by reason of the pending indictment against him, Mr. Ieonetti's presence would be inimical and he should be excluded pending the outcome of the criminal proceeding. The judge attached minimal evidential weight to hearsay evidence introduced by the Division and refused to draw any adverse inference from the respondents' failure to testify. Accordingly, the judge denied the petition seeking to place Mr. Merlino on the exclusion list but issued an order placing Mr. Ieonetti on that list, pending the outcome of his indictment. Upon review of this initial decision, the Casino Control Com- mission voted three to two to modify the judge's initial decision. The majority of the Commission concluded that although Ieonetti could be excluded solely by reason of the pending indictment, additional grounds for his exclusion had been established. In addition, the Com- mission found that based upon Merlino's subsequent indictment and his involvement with organized crime, his name should also be placed on the exclusion list. In so doing, the Commission determined that the judge had erred on the evidential standard and Fifth Amendment issues and had unduly minimized the weight of the evidence presented by the Division. The Commission found that both respondents had been called upon to testify and had invoked Fifth Amendment privileges from which the judge refused to draw an adverse inference. The Commission held that adverse inferences may be drawn from the respondents' failure to respond to disparaging evidence against them, notwithstanding that their silence was based upon the Fifth Amendment. Additionally, the Commission noted that adverse inferences may be drawn even when a party is a 'target' of a criminal investigation at the time of the civil proceeding or when indictments have been handed up. Such inferences following a refusal to testify are permissible, not man- datory, and in viewing the record as a whole, in this instance the Commission chose to draw such inferences. As to the evidentary standard employed, the Commission de- termined that the residuum rule as set out in N.J.A.C. 1:1-15.8 did not apply to hearings conducted pursuant to the Casino Control Act; rather, the standard to be applied was the one set out in N.J.S.A. 5:12-107(a)(6) which permits the Commission to base any factual findings upon relevant evidence including hearsay, regardless of the fact that such evidence may be inadmissible in a civil action, so long as the evidence is the sort upon which responsible persons are ac- customed to rely upon in the conduct of serious affairs. The Com- mission explicitly rejected the argument that such a standard could be harmonized with the residuum rule in that, although pursuant to N.J.S.A. 52:12-107(a)(6) hearsay may be used in and of itself to support a finding of fact, in the final decision-making process there still must be a residuum of legal and competent evidence to support a judgment or 'ultimate finding'; the Commission found no justifi- cation to distinguish between 'finding' as used in N.J.S.A. 5:12-107(a)(6) and 'ultimate finding of fact' as utilized in N.J.A.C. 1:1-15.8. Nor did the Commission feel it was bound to apply the residuum rule as a matter of Constitutional due process or fundamen- tal fairness pointing to a growing number of Federal court decisions which had not applied the rule. This did not mean, however, that any and all evidence would be relied upon. Many factors were to be considered, e.g., whether or not the hearsay is corroborated, con- tradicted by direct or other reliable hearsay, and whether the hearsay is disputed by oral testimony of the respondents. Applying those factors to this case, the Commission determined that the evidence presented possessed the degree of reliability legally necessary for an exclusion proceeding. The Commission adopted the judge's conclusion that the pending indictment against Mr. keonetti is sufficient in and of itself to establish inimicality and to justify placement on the exclusion list but rejected the notion that the indictment was the sole basis for such action in that if keonetti were subsequently acquitted, there would be no basis for exclusion. The Commission noted that for exclusion purposes, the notion of inimical presence encompasses an evaluation of the conduct and background of the individual in order to determine whether under all the circumstances that person's presence would justifiably under- mine public confidence in gaming operations or would create the danger of unsuitable, unfair or illegal practices in the conduct of gaming. Acquittal of criminal charges would not force a different result, since the standard of proof in criminal matters is higher than civil proceedings. State of New Jersey 129 As to Mr. Merlino, the Commission determined that he was a career criminal offender and based upon his indictment and conduct he should as well be placed upon the exclusion list. The dissent concluded that even in viewing the Division's evidence in toto, it had failed to meet its burden of proof by a preponderence of the evidence, since no direct, competent evidence had been pres- ented to support placement on the exclusion list. In addition, the dissent concluded that while the Casino Control Act clearly permits factual findings to be made upon reliable hearsay evidence, such evidence cannot be relied upon as the basis for every factual finding including the ultimate determination in a case. To hold otherwise, would destroy the tenets of fundamental fairness and due process which should be present in each administrative heating. The appli- cation of section 107(a)(6) of the act and the residuum rule to Casino Control Commission proceedings requires an intelligent balancing and evaluation of all of the evidence presented, to insure that while reliable and relevant hearsay evidence in itself may support a finding, the ultimate determination in a case may not be supported by a record consisting only of hearsay evidence. Accordingly, the dissent would conclude that the evidence presented was insufficient to permanently place either of the respondents' names on the exclusion list. William E. Mountford, Jr., Deputy Attorney General, for petitioner (Howard M. Barman, Deputy Attorney General, prior to the re- mand) (Irwin I. Kimmelman, Attorney General of New Jersey, attorney) Michael L. Testa, Esq., for respondent Mr. Merlino (Harold I. Gatbet, Esq., prior to the remand) (Basile, Testa & Testa, at- torneys) Edwin J. Jacobs, Jr., Esq., for respondent Mr. Leonetti (Tort, Jacobs, Todd & Bruso, P.C., attorneys) Initial Decision
Rule(s) Cited: 1:1-15.8 
Statute(s) Cited: 5:5-33 52:12-107(a)(6) 
Citation Tracker rejected, Casino Control Commission; affirmed -App. Div., A-937-85, A-938-85, 1/15/87; affirmed 109 N.J. 134 (1988) [Updated through 1991]