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Claridge Limited, In the Matter of the Application for a Casino License

Cite As 10 N.J.A.R. 563

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In re Claridge Casino Application
Cite as 10 N.J.A.R. 563
IN THE MATTER OF THE APPLICATION
OF CLARIDGE LIMITED FOR A
CASINO LICENSE
Decided: July l, 1982
Approved for Publication by the Casino Control Commission:
April 8, 1988
SYNOPSIS
Claridge Limited applied to the Casino Control Commission for
a casino license. Following a hearing by the Commission, a license
was issued.
Claridge Limited is a limited partnership consisting of Del E.
Webb New Jersey, Inc. and Claridge Associates. The hearing focused
on the qualifications of Webb, which owns four casinos in Nevada.
The Commission considered evidence of questionable conduct by
Webb which took place in Nevada. While the Commission found that
these past deeds raised serious questions as to the applicant's qualifi-
cation, Webb had experienced many changes since 1981 and its past
improprieties would be viewed in the light of new personnel, policies
and procedures.
Noting that new management had instituted actions to reverse
past problems and that new personnel at top levels of management
demonstrated good character, integrity and business ability, the Com-
mission concluded that Webb had established its good character and
business ability by clear and convincing evidence.
Nicholas L. Ribis, Esq.: Hugh B. McCluskey, Esq., and Robert M.
Pickus, Esq., for Claridge Limited and Del E. Webb New Jersey,
Inc.
Arthur S. Goldstein, Esq., and Gage Andretta, Esq., for Claridge
Associates
Edward A. Zunz, Jr., Esq., and Roger A. Schwartz, Esq., for Del E.
Webb Foundation
James F. Flanagan, Ill Deputy Director; John J. Sheehy, Deputy
Attorney General, and Frederick E. Gushin, Deputy Attorney
General, for the Division of Gaming Enforcement

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Robert J. Genatt, General Counsel: David Arrajj, Special Counsel &
Director of License Division: John R. Zimmerman, Senior Assis-
tant Counsel, and Carol A. Welsch, Assistant Counsel, for the
Casino Control Commission
BY THE CASINO CONTROL COMMISSION:
I. INTRODUCTION
This matter has been brought before the Casino Control Com-
mission (Commission) pursuant to the application of Claridge Limited
for a casino license. The history of Claridge Limited's application,
its acquisition of a temporary casino permit in July 1981, and the
qualification criteria pertinent to this plenary casino licerise proceed-
ing are set forth in the Chairman's Instruction to the Commission,
which is made part of the record in this casino licensing hearing, and
which is incorporated by reference in this opinion.
Claridge Limited is a New Jersey limited partnership consisting
of Del E. Webb New Jersey, Inc. (Webb New Jersey) as the managing
general partner and Claridge Associates as the limited partner. Webb
New Jersey, a New Jersey corporation, is a wholly-owned subsidiary
of Del E. Webb Corporation (Webb), which is incorporated in Ari-
zona. Claridge Associates, a New Jersey general partnership, consists
of seven individual partners. The approximate ownership interest of
each of the partners is as follows: F. Francis D'Addario, 47.6 percent;
Chris Bargas, Francis Oneglia, Leonard J. Massello, Irving J.
Sherman, and Ernest C. Trefz, 9.5 percent each; and Christian Trefz,
4.8 percent. There were originally three other partners, but they were
bought out by Mr. D'Addario in November 1978.
On July 9, 1979, when Claridge Limited was formed, Webb New
Jersey assumed a ten percent equity interest, and Claridge Associates
maintained a ninety percent equity interest. On November 12, 1979
the limited partnership agreement was amended and restated to
provide a fifty percent equity participation by both Webb New Jersey
and Claridge Associates.
In September 1979 Webb was indicted by a Federal Grand Jury
in .Nevada. In July 1981 work was completed on the Claridge Hotel
and Hi-Ho Casino and Claridge Limited sought to obtain a temporary
casino permit so that the facility could begin operations. Since the

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indictment was still pending, and in order to avoid delay in the
issuance of the temporary casino permit, Webb New Jersey sold its
managing general partnership interest to a new entity, Claridge Man-
agement Corporation (CMC). All of the stock of CMC was issued
to Jay Kramer, who, together with F. Francis D'Addario, comprised
its Board of Directors. In November 1981 Webb was acquitted of the
charges against it, and in January 1982 the Commission granted Webb
New Jersey the right to reacquire the managing general partnership
interest in Claridge Limited, subject to certain conditions. Since that
date Webb New Jersey has been managing the casino hotel.
The Division of Gaming Enforcement (Division) issued two in-
vestigative reports which, as modified, have been stipulated and ad-
mitted into evidence. The Division's report with respect to Webb
outlined several areas of concern. The Division's report with respect
to Claridge Associates detailed the history of that partnership, but
did not raise any significant issues with respect to the suitability of
the partnership or the partners for licensure. Thus, the hearing before
the Commission was devoted mainly to the issues raised concerning
Webb. However, before turning to those issues, we will deal briefly
with the suitability of Claridge Associates.
II. THE QUALIFICATIONS OF CLARIDGE ASSOCIATES
In its report to the Commission regarding Claridge Associates
the Division concluded that each of the seven partners qualifies in
all respects to standards applicable to casino key employees. See
N.J.S.A. 5:12-85(e). In its summation at the hearing, the Division
recommended that the Commission find Claridge Associates to be "a
suitable group to hold a casino license in Atlantic City".
Nevertheless, in its summation the Division also expressed con-
cern over the "unnecessary contact between Mr. D'Addario and Al-
bert Tumbiolo, John Peverini and Sunset Tours". The Division
further opined that "Mr. D'Addario would serve the Claridge casino
better if he were to be more careful in the associations he has with
persons of questionable background".
In light of the Division's concern we find it appropriate to exam-
ine Mr. D'Addario's associations with Tumbiolo, Peverini and Sunset
Tours.
From July 1981 to January 1982 the Claridge Hotel and Hi-Ho
Casino was operated by CMC, of which Mr. D'Addario was presi-
dent. During this period D'Addario took an active role in managing

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the facility and flew from his Connecticut home to Atlantic City
several evenings a week to oversee operations. It was while CMC was
marlaging the facility that D'Addario made the acquaintance of
Messrs. Tumbiolo and Peverini, and that Claridge signed a contract
with Sunset Tours, a business with which Tumbioio and Peverini were
connected.
Mr. D'Addario testified that in September 1981 he was in-
troduced to Tumbiolo by one of the Claridge casino employees. It
was common practice for employees to introduce D'Addario to reg-
ular customers. D'Addario subsequently had coffee with Tumbiolo
"a few times" and "went out to dinner a couple times".
D'Addario and Tumbiolo first had dinner on September 16, 1981.
On that occasion Tumbiolo introduced D'Addario to Peverini. It was
D'Addario's only meeting with Peverini. D'Addario also had dinner
with Tumbiolo on September 18, 1981. On that same date, without
D'Addario's knowledge, Claridge signed a contract for bus tours with
Sunset Tours. There is no indication in the record that D'Addario
had any subsequent contact with Tumbiolo.
At the September 23, 1981, meeting of the Audit Committee of
CMC, Mr. D'Addario requested that the surveillance department
accumulate information about Mr. Tumbiolo. Mr. D'Addario testi-
fied that he had become "a little concerned" about Tumbiolo and
had begun to question the source of the huge sums of money with
which Tumbiolo gambled. In late November the surveillance depart-
ment presented the CMC Board of Directors with a report which
stated that Peverini was alleged to have organized crime connections
and that Tumbiolo was under investigation as a suspected loanshark.
On the basis of that report the Board voted to cease doing business
with Sunset Tours and to rescind Tumbiolo's line of credit at the
casino.
On January 5, 1982, the Division issued an investigation report
stating that Tumbiolo had established credit at all Atlantic City
casinos and that many of the bank accounts listed on his credit
application never existed, were closed or were not under his control.
As of January 5, 1982 Tumbiolo still owed money to a number of
casinos, including $100,000 to Claridge. It should, however, be noted
that Claridge was one of the first Atlantic City casinos to rescind
Tumbioio's credit.
The Commission is always concerned when someone required to
be qualified with respect to a casino license has contact with persons
of questionable character or reputation. However, in view of the

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nature of D'Addario's association with Tumbiolo and Peverini, the
manner in which that association arose, D'Addario's action in obtain-
ing information about Tumbiolo's background and CMC's prompt
cessation of dealings with Sunset Tours upon receipt of negative
information, the Commission does not draw any adverse inference
with respect to Mr. D'Addario's qualifications.
Therefore, on the basis of the entire record before us, we concur
with the Division that Claridge Associates, Mr. D'Addario, and all
of the other partners have established their qualifications by clear and
convincing evidence. 
III. THE QUALIFICATIONS OF DEL E. WEBB CORPORA TION
Del E. Webb Corporation was founded as a small construction
firm in 1928 by its namesake, Delbert Eugene Webb. The company
enjoyed tremendous growth and is now involved in a variety of busi-
nesses, including casino gaming. Currently, Webb owns, through its
subsidiary the Sahara-Nevada Corporation, four casinos: the Sahara
Las Vegas Hotel, the Mint Hotel, the Sahara Tahoe and the Nevada
Club, and, through its subsidiary Webb New Jersey, a 50 percent
interest in the Claridge Hotel and Casino. An extensive history of the
Webb Corporation is recounted in the Stipulation of Facts and need
not be repeated here.
In discussing the qualifications of Webb this opinion will deal
primarily with those areas which were the subject of significant atten-
tion during the hearing. Detailed findings with regard to other licens-
ing criteria will be contained in a separate Resolution.
The areas which received significant attention at the hearing were:
(l) political contributions made by Webb to candidates for public
office in Nevada, allegedly in contravention of Nevada law: (2) the
use of Webb corporate funds to provide escorts or prostitutes to
favored casino customers in Nevada, and the mislabeling of these
payments in the corporate records: (3) Webb's preparation of false
invoices concerning rebates for beer purchases from Schlitz Brewing
'We note that two former Claridge Associates partners still hold notes from
Mr. D'Addario relating to his buyout of their partnership interests. These
two individuals. Joseph Pannullo and Benjamin Danzi. have been found to
be financial sources required to qualify under N.J.S.A. 5:12-84(b). and the
Commission has approved a plan for the termination of their status as
financial sources prior to the effi:ctive date of the Claridge Limited casino
license.

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Company: (4) a credit scare in which Webb casinos in Nevada were
defrauded of $810,000: (5) a kickback scheme in which Webb was
defrauded of over one and a half million dollars by its own employees;
and (6) the Federal indictment returned against Webb and one of its
employees, James Comer, arising out of a construction project in
Nevada.
A. Political Contributions
Webb began making contributions to candidates for public office
in Nevada in the late 1960's. The contributions were made only by
the Sahara-Nevada Corporation, a fully-owned subsidiary of Webb.
In 1977 legislation was enacted in Nevada which required candidates
for public office on all levels of government to identify contributors
of $500 or more. The statute did not set a limit on the amount which
could be contributed and Nevada has no law prohibiting political
contributions by publicly or privately held corporations.
As a result of the 1977 change in the law, Keith Ashworth, then
vice-president of the Sahara-Nevada Corporation, suggested to its
then president, William Dougall, a procedure whereby various Webb
subsidiaries would make contributions of less than $500 each, but
aggregating more than $500, to a given candidate, without the can-
didate being obligated to report the contributions under the Nevada
election law. The subsidiaries would all be reimbursed by the Sahara-
Nevada Corporation. Mr. Dougall specifically asked Mr. Ashworth
to research the legality of such activity, and Ashworth sought an
opinion from the Nevada Secretary of State. In reply to Mr.
Ashworth's inquiry, the Secretary of State, by letter dated June 8,
1978, interpreted the reporting requirement to mean that a parent
company and its subsidiary may both contribute up to $500 to a
candidate without the necessity of the candidate reporting either con-
tribution. Ashworth took the Secretary of State's letter to be an
approval of his proposed plan. However, the parties have stipulated
that the letter did not deal with the situation in which the parent
company would fund the political contributions of its subsidiaries.
Ashworth recommended approval of his original plan as outlined
above and Doyle Mathia, who had replaced Mr. Dougall as president
of the Sahara-Nevada Corporation, approved the contributions
outlined in an Ashworth memorandum of August 4, 1978. Robert
Johnson, then president, chairman and chief executive officer of
Webb, also approved the payments, upon the understanding that the
Secretary of State had found the plan acceptable.

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It should be noted that Ashworth, Dougall and Mathia are no
longer employed by Webb. Johnson is also no longer employed by
Webb, but is a person required to be qualified in connection with
Claridge Limited's license application by reason of his control of 28.6
percent of Webb's stock. His qualifications are discussed later in this
opinion.
The practice of channeling political contributions through
subsidiaries was halted in 1979, when counsel for Webb expressed the
opinion that it might be a technical violation of the 1977 Nevada
election law.
I n July 1981 Robert Swanson, the current president, chief operat-
ing officer and chairman of Webb, adopted a new policy under which
political contributions will only be made upon his written direction,
after the receipt of written approval from the Webb Board of Direc-
tors and in accordance with law.
B. Payment to Escorts or Prostitutes for Preferred Gaming
Patrons
In 1969 Webb casinos began the practice of making payments
to escorts or prostitutes for preferred gaming patrons. The casinos
would pay the women with money from the casino cage, after a Webb
employee filled out a "miscellaneous paid out slip." The slip generally
specified air fare or transportation as justification for the payment.
This practice first came to the attention of government agencies in
1976 during an Internal Revenue Service audit. Robert Johnson testi-
fied that he first learned of the payments during the course of that
audit, and that he then sought an opinion from outside counsel as
to the legality of the practice. Counsel opined that payments to prosti-
tutes were illegal, but payments to escorts were not. Webb adopted
a corporate policy statement which provided, in part, that no corpor-
ate funds shall be used for "any purpose which would be in violation
of any applicable law". The policy was widely circulated among Webb
personnel. Webb management believed that this statement adequately
dealt with the prostitution issue, even though the policy statement
failed to specifically mention the practice.
In addition, in June 1977, after Nevada adopted an anti-pan-
dering statute, Webb directed the general managers of its casino hotels
to cease providing "escort services for certain customers".
The payments for escorts or prostitutes were publicly disclosed
by the corporation in its May 7, 1977, Notice to Stockholders and

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its Quarterly Report for the period ending March 31, 1977, filed with
the Securities and Exchange Commission.
Despite Webb's stated polics/, it is evident from the record that
payments to escorts or prostitutes continued after June 1977, at least
in the Sahara kas Vegas and the Sahara Tahoe. The reasons that
corporate policy was disobeyed are unclear from the record. There
is some evidence that the general manager of the Sahara Tahoe, who
is no longer employed by Webb, suggested to the casino manager of
that facility that, rather than lose a good customer, he should continue
the practice. Robert Johnson testified that he was unaware that the
practice was continuing after the June 1977 directire.
In July or AuguSt 1979 four employees of the Sahara kas Vegas
instituted a new procedure whereby escorts or prostitutes were paid
from a safe deposit box in the casino cage. The box was opened under
a fictitious name and funded with corporate money which was not
recorded on Webb's books. The accounts for this box were kept
separately from the other casino books. Upon discovery by Webb
corporate level management in late February 1980, this practice also
ceased. The four employees responsible for setting up the safe deposit
box are no longer employed by Webb, having been given the op-
portunity to resign in lieu of being fired.
Robert Swanson testified that since February 1980 there have
been no further payments to escorts or prostitutes. Swanson listed
several ways in which management tries to assure that such payments
will not occur in the future. First, the new Webb corporate code of
ethics, adopted in December 1980, specifically prohibits this practice.
Second, Webb's internal audit department conducts four surprise cage
counts a year, and the external auditors conduct three surprise cage
counts a year. This is three more counts per year than were performed
prior to 1981. Third, internal security reviews the cage cash payout
slips for any suspicious cash disbursements and also conducts periodic
checks of the safe deposit boxes.
C. Schlitz Beer Rebates
In April 1967 the Joseph Schlitz Brewing Company began a
marketing campaign aimed at large corporate accounts. George Shay,
the supervisor of the Schlitz Special Accounts Department, entered
into a rebate arrangement with Milton Frampton, then vice president
of purchasing for the Sahara-Nevada Corporation. Specifically,
Schlitz paid rebates of fifty cents a case and two dollars and fifty cents

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a keg on all Schlitz beer purchased at Webb hotels. The arrangement
continued until 1973. During this period Webb received a total of
approximately $43,000 from Schlitz. As a result of Schlitz's rebate
program, in 1978 a Federal grand jury indicted Schlitz on numerous
counts of violating the Federal Alcohol Administration Act (FAAA)
and one count of conspiring to violate the FAAA. Schlitz entered into
an offer of compromise with the government in which Schlitz agreed
to pay $761,000 in fines.
The United States Attorney involved in the Schlitz case chose
not to prosecute Webb for conspiracy in this arrangement. Webb did
not violate any Nevada law in accepting the rebates.
Schlitz paid Webb the rebates on a yearly basis, upon submission
by Webb of an invoice for the amount due. These invoices, at Schlitz's
request, falsely represented the nature of the debt. For example, an
invoice dated April 18, 1973 charged Schlitz $8,750 for entertainment
during a Friendship Inns Conference. Evidently no such conference
took place at the Webb hotels during 1972 or 1973. This expense
actually represented price rebates on beer.
The checks received from Schlitz were entered in Webb's books
and reported as sundry income for Federal tax purposes. The receipt
of these payments was publicly disclosed by Webb in its proxy state-
ment dated May 7, 1977, in the corporation's Quarterly Report to
the SEC issued on May 13, 1977, and in its prospectus dated Septem-
ber 28, 1978.
So far as the record reveals only two Webb officials were aware
of the false documentation prepared in connection with the rebates,
namely, Milton Frampton, vice president of purchasing for the
Sahara-Nevada Corporation from 1967 to 1971, and William Dougall,
who held the same position from 1971 to 1973. These individuals are
no longer employed by Webb. Robert Johnson testified that he was
not aware of the rebate arrangement at the time it took place, and
there is no evidence that any other officials at Webb corporate head-
quarters in Phoenix, Arizona had contemporaneous knowledge of the
arrangement.
D. Credit Scheme
In February 1979, Anthony Caputo and 15 associates defrauded
the Sahara Las Vegas and Sahara Reno casinos of approximately
$810,000. This theft was accomplished by converting chips obtained

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on credit to cash and then removing the money from the casino
without paying off the markers for the credit.
The parties have stipulated that the incident occurred as a result
of violations of internal control procedures by certain employees at
the hotel casinos. These employees have either been fired or permitted
to resign. In addition, the internal control and internal audit
procedures themselves have been strengthened in an effort to prevent
the occurrence of any such schemes in the future.
E. Food Purchasing Kickbacks
From 1968 through early 1980 the Sahara Las Vegas Hotel was
defrauded of over $1,500,000 by two of its employees. James
Wahistrom, a food buyer, and Donald Anderson, an executive chef,
defrauded the hotel by requiring kickbacks from food purveyors and
by creating invoices for food never received and dividing the subse-
quent payment with the purveyors.
In 1975 the Sahara Nevada Corporation discovered a substantial
increase in food inventory figures and a five percent increase in food
costs at the Sahara Las Vegas Hotel. Wahistrom, fearing an investiga-
tion by Webb, resigned without notice. Webb was satisfied that any
difficulty in the purchasing department had been corrected by
Wahistrom's resignation. However, Anderson continued accepting
kickbacks, and paying Wahistrom one-half of the funds collected. In
December 1979 Anderson ceased paying Wahistrom. In February
1980 Wahistrom contacted Webb officials, offering information with
respect to a scandal at the Sahara Las Vegas in return for payment.
Upon payment of $5,000, Wahistrom described the entire scheme and
Anderson's involvement. As a result, Anderson was forced to resign
on May 1, 1980.
Following Wahistrom's revelations to Webb officials, all infor-
mation was turned over to the Las Vegas Metropolitan Police Depart-
ment. In addition, all vendors known to have been involved in the
payment of kickbacks were suspended, and the Sahara Nevada Cor-
poration adopted a centralized purchasing procedure to protect itself
against such fraud in the future. Saul Leonard, a certified public
accountant specializing in hotel casino audits, testified that the new
purchasing procedure provides effective internal control over purchas-
ing activities at Sahara Nevada Corporation's properties.

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F. Aladdin Indictment
On September 4, 1979, Webb, James Comer, vice-president of
Webb's Nevada contracting division, and six others were indicted by
a Federal Grand Jury in Nevada. The indictment was in forty-three
counts. The first count, the only one in which Webb and Comer were
named, charged all eight defendants with conspiracy to commit mail
fraud and wire fraud and to transport in interstate commerce money
and property obtained from a scheme to defraud. The trial on count
one, which had been severed from the remaining counts, commenced
on July 1, 1981, and concluded on November 30, 1981, when the jury
returned a not guilty verdict as to all defendants.
The indictment arose out of the construction of a highrise ad-
dition to the Aladdin Hotel in Las Vegas. Count One alleged a
conspiracy to divert and misappropriate funds of the Central States,
Southeast and Southwest Areas Pension Fund of the International
Brotherhood of Teamsters (Pension Fund), which provided financing
for the construction. It was not alleged that Webb or Comer received
any such misappropriated funds. Rather, Count One charged that they
facilitated the diversion of funds to Lee Linton, the project architect,
Sorkis J. Webbe, counsel for the Aladdin, and the Aladdin Hotel
Corporation by concealing such payments as fees, finders fees and
commissions.
Selected transcripts and exhibits from the Nevada trial were
stipulated and admitted into evidence at the hearing before the Com-
mission. Elliot Richardson, former United States Attorney for the
District of Massachusetts and United States Attorney General, stud-
ied these transcripts and exhibits and, after being qualified as an expert
on criminal prosecutions and business ethics, offered the opinion that
"the evidence does not indicate any justifiable basis for calling into
question the honesty, integrity and good faith of Del E. Webb Corpor-
ation or its officers". In addition, Comer and William Collins, who
was executive vice-president in charge of Webb's contracting group
at the time of the Aladdin project testified before the Commission
about Webb's alleged knowledge of or involvement in the scheme to
misappropriate Pension Fund money.
After considering all of this evidence it is clear to the Commission
that there was a scheme to illegally divert Pension Fund proceeds,
and that Pension Fund money was in fact misappropriated to Lee
Linton by means of kickbacks from subcontractors. However, the
Commission is not persuaded that Webb or Comer conspired with

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Linton or anyone else to defraud the Pension Fund. Nevertheless, as
the Division said in its summation, there remains "an open question
as to whether various [Webb] officials became aware of Lee Linton*s
efforts to secure kickbacks," and, despite the existence of FBI and
grand jury investigations, chose to remain silent and to ignore the
ongoing scheme to defraud the Pension Fund.
During the Nevada trial Kim Gregory, the project manager of
one of the potential subcontractors on the Aladdin project, testified
that Linton asked him to add a $100,000 kickback to his estimate.
Donald Taylor, president of this subcontractor, testified that upon
learning this information from Gregory he telephoned Collins and
told him: "under the circumstances it would appear that we were not
going to be able to do the job". However, Collins testified before the
Commission that the information communicated to him by Taylor
did not lead him to suspect that a kickback request was involved, and
we note that Taylor's company was awarded the subcontract without
paying any kickback.
Another subcontractor, Emmett Campbell, testified at the Ne-
vada trial that Linton told him that "sooner or later there would
probably be $50,000 added to the contract". Campbell said that he
called Robert Whitacre, Webb's manager of purchasing, and asked
him, "What's the deal with the $50,000? According to Campbell,
Whitacre responded, "That's handled in Vegas by Mr. Linton".
Campbell thereafter went to the FBI and cooperated in its investiga-
tion.
Finally, during the construction of the Aladdin project two other
subcontractors told Comer that they had "passed some money back
to Lee Linton" and that they were going to cooperate with the FBI
and seek immunity. Comer testified before the Commission that upon
receipt of this information he telephoned Donald Middleton, a Webb
attorney who, after consulting with outside counsel, advised Comer
that Webb had an obligation to complete the project. Comer also told
the Commission that he was aware of the FBI and grand jury in-
vestigations in progress during the construction, but he decided that,
since Webb had done nothing wrong, it had no obligation to become
involved in the investigations.
Since these events occurred Webb's construction division has
been abolished, and its construction activities are now handled by Del
Webb Construction Services Company, a newly-created, wholly-
owned subsidiary incorporated in Arizona. Comer and Collins are no

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longer officers of Webb, but are officers of Webb Construction Ser-
vices. Whitacre is no longer an employee of Webb, but is an employee
of Webb Construction Services. During the hearing the Commission
ruled that, under the decision in In re Boardwalk Regency Casino
License Application, 180 N.J. Super. 324, 349 (App. Div. 1981), certif.
granted 89 N.J. 405 (1982), Comer and Collins, as officers of a non-
New Jersey, non-gaming subsidiary of Webb, cannot be classified as
persons required to qualify in connection with Claridge Limited's
license application. The Commission noted that the Boardwalk Regen-
cy case is on review by the New Jersey Supreme Court, and reserved
the right to reconsider the status of Comer and Collins if there is a
change in the applicable law. However, under the present state of the
law, Comer and Collins are not persons who may be required to
qualify as a precondition to the licensure of Claridge Limited. See
N.J.S.A. 5:12-85(c), (d), (e) and -89.
If Comer and Collins were persons required to qualify the Com-
mission would have to decide, inter alia, whether their good character,
honesty and integrity had been proven by clear and convincing
evidence. While the Boardwalk Regency decision precludes any such
consideration at this time, it does not preclude the Commission from
deciding whether Comer and Collins, and also Whitacre, are persons
of such unsavory character or reputation that Webb's continued as-
sociation with them reflects negatively on Webb's qualifications. See
N.J.S.A. 5:12-89(b)(2). In this regard we must note that their willing-
ness to turn a deaf ear to information which should have alerted them
to ongoing illegal activities, and their failure to report that infor-
mation to the authorities, cannot be countenanced. However, their
failures were basically failures of judgment. There is no evidence that
these individuals engaged in any illegal activity or sought to facilitate
or abet any such activity. Rather, they sought to complete the con-
structing project without becoming entangled in Linton's kickback
scheme or the investigations of that scheme. In addition, there is no
evidence that their actions were part of a continuing pattern or prac-
tice. In short, we cannot conclude Webb's continued association with
them reflects adversely on Webb's qualifications.
One further matter requires comment in this regard. During its
summation the Division said that, if Webb is found qualified, it
"would object to any participation [by Comer, Collins or Whitacre]
in Claridge kimited in any way at all". Counsel for Claridge Limited
and Webb has stipulated that his clients will voluntarily comply with
the Division's suggestion in this regard.

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We have now discussed each of the six issues raised by the
Division concerning Webb's qualifications. However, before we can
reach any conclusion as to those qualifications two other matters must
be considered, namely, the recent personnel and structural changes
at Webb and the qualifications of Robert Johnson.
G. Changes in Del E. Webb Corporation since January 1981
The primary thrust of Webb's presentation at the hearing was
not a denial that the events described in the subsections A through
F occurred, or an attempt to minimize their seriousness. Rather, Webb
argued that it is now a new corporation, materially different from the
one that existed when the various events discussed above took place.
The past misdeeds of Webb, taken together, are certainly serious
enough to cause us to question its qualifications. The Commission
is disturbed by the willingness of Webb employees to manipulate
corporate records, as they did with respect to the beer rebates and
payments to escorts or prostitutes. The payments to females were in
themselves violative of Nevada law and are a serious blemish on
Webb's corporate character. The lack of corporate controls which
opened the corporation to thievery by the Caputo group and by its
own employees, the willingness to make political contributions of
doubtful legality, and the willingness to remain silent when confronted
with evidence of kickbacks during the Aladdin project, are all matters
which give this Commission considerable pause. Nevertheless, the
Commission recognizes that Webb has experienced many changes
since January 1981 and we find it appropriate to view Webb's past
improprieties in the light of its new personnel, policies and procedures.
See In the Matter of the Application of Bally's Park Place, Inc., for
a Casino License, Docket No. 80-CL-2. (1981), at 75-76.
Webb has made substantial changes in personnel in the past
eighteen months. Foremost among these was Robert K. Swanson's
assumption of the responsibilities of president and chief operating
officer in January 1981 and of chairman of the board upon Robert
Johnson's retirement in July of that year. Without detailing the ex-
tensive testimony presented to the Commission concerning Mr.
Swanson, it suffices to say that an impressive array of witnesses
described his character, integrity and business ability in the highest
terms and that no contrary evidence appears in the record.
In the short time that Mr. Swanson has been with Webb he has
made substantial changes. Prior to his arrival the corporation del-

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egated total control to the operating group heads and corporate
headquarters provided minimal oversight and follow-up. In contrast,
Mr. Swanson, while delegating substantial responsibility to the operat-
ing groups, continually reviews and oversees their operations.
In addition, Mr. Swanson has brought improved professional
management to Webb. Upon his arrival at Webb he was surprised
to learn that it did not have an active corporate plan. He has de-
veloped such a plan, which he considers essential to the intelligent
management of a large corporation, and the Commission was pres-
ented with testimony describing Webb's considerable progress in im-
plementing this plan.
In January 1981 Webb also hired Donald Upson, its former
external auditor, as director of internal audit. The status of the
internal audit department within the corporation was also raised, by
naming Mr. Upson as executive vice-president, reporting directly to
Mr. Swanson. Webb also created the position of director of security
and appointed Carl Freeman, a thirty-year veteran of the Federal
Bureau of Investigation, to fill that position. Mr. Freeman was also
appointed a vice-president, reporting directly to Mr. Swanson. Upson
and Freeman are among 13 new officers recruited by Webb since
January 1981. In addition to hiring new people Webb has, as noted
at various points in this opinion, removed a number of employees
who were involved in the corporate misdeeds of the past.
As previously mentioned, Webb adopted a new corporate code
of ethics in December 1980. Each employee is required to sign a
representation that he has read and understands the code and will
comply with it. Swanson testified that he emphasizes to all Webb
officers and employees that violations of the code will be punished
by automatic termination, and that a number of employees have been
terminated for such violations.
Moreover, as noted throughout this opinion, the corporation has
changed specific procedures in areas where problems have occurred.
Finally, we observe that there is no evidence in the record of any
continuing improprieties since the personnel, structural and
procedural changes outlined above were instituted. In its summation
the Division "recognize[d] that the company has made adjustments
in the organization and appears to have left behind its past misdeeds
and internal disorganization".
The Commission has carefully considered all of the facts sur-
rounding Webb's past improprieties, as well as the recent efforts to
remove the malefactors and reorganize the corporation, and has con-

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cluded that Webb has established its good character and business
ability by clear and convincing evidence.
Before we can rule on the ultimate issue of Webb's qualifications,
however, we must consider the qualifications of Robert Johnson.
H. The Qualifications of Robert Johnson
Ihe Del E. Webb Foundation is a non-profit corporation which
owns 28.6 percent of the stock of Webb. Ihe Foundation has been
treated as a holding company of Claridge Limited, see, N.J.S.A.
5:12-26, and the Commission has ruled that Robert Johnson and
Robert Alcorn, the sole members and directors of the Foundation,
are persons required to qualify in connection with Claridge Limited's
casino license application.
Ihe Division has never challenged Mr. Alcorn's qualifications,
and the Commission finds that his qualifications have been established
by clear and convincing evidence.
Ihe Division does challenge Mr. Johnson's qualifications. Be-
tween 1967 and 1981 Johnson was, at various times, president, chief
executive officer and chairman of the board of Webb. In its letter-
report to the Commission on the qualifications of Johnson, the
Division pointed out that it was during this period that the prosti-
tution, beer rebate and political contribution problems occurred. In
that report the Division concluded that Johnson "lacks sufficient
business ability and casino experience to be a qualifter".
At the hearing various present Webb officers and board members
testified to their experiences with Johnson during the period of his
stewardship of the corporation. None of these witnesses questioned
Mr. Johnson's good character, honesty and integrity, although there
was some criticism of his ability to manage a corporation of the size
and diversity of Webb. In essence, these witnesses said that Webb has
reached the stage where it needs a professional manager such as Mr.
Swanson at the helm, as opposed to Mr. Johnson, who rose through
the corporate ranks from the position of timekeeper on a construction
site.
In its summation the Division again pointed out that the beer
rebates, prostitution payments and political contributions occurred
during the time when Mr. Johnson was the chief executive of the
corporation. Ihe Division conceded that there was no proof that Mr.
Johnson initiated any of these activities or that they resulted from
any evil motive on his part, but argued that they were directly at-

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tributable to his nonfeasance and that he must share responsibility
for them. The Division objected to the qualifications of Webb "so
long as Robert Johnson is directly or indirectly affiliated with" the
company.
Mr. Johnson, as a person required to qualify with respect to
Claridge Limited's casino license application, must prove, inter alia,
his good character, honesty and integrity, and that he "has sufficient
business ability and casino experience to establish the reasonable
likelihood of success and efficiency in the particular position in-
volved". N.J.S.A. 5:12-89(b)(3). Mr. Johnson has retired from all of
the positions which he held with Webb. Although he still has a
consulting agreement with Webb, he testified that this agreement is
essentially a vehicle for severance payments, and that he is not called
upon to contribute in any way to the ongoing activities of the corpor-
ation. The Division pointed out in its summation that Mr. Johnson,
by reason of his control of the Foundation stock and his personal
holdings of .015 percent of the corporate stock, is in "a formidable
position which may significantly affect the future of this company".
However, Mr. Johnson testified that he has no intention of becoming
involved in the company's business, and that he seeks to be qualified
by the Commission in order that he may carry on the charitable work
of the Foundation and in order to clear his name of the taint which
he believes would result if he resigned from the Foundation in the
face of the Division's objections. Although we accept Mr. Johnson's
testimony, he does remain in a position of potential influence or
control and he must establish, in addition to his good character,
honesty and integrity, that he possesses business ability commensurate
with his present position.
We have already discussed the political contributions, payments
to prostitutes and beer rebates, and in each instance have discussed
Mr. Johnson's testimony as to his involvement or lack of involvement.
With respect to each of these matters, we find Mr. Johnson's testi-
mony credible, and in light of his current relationship to Webb, do
not find any action or inaction on his part of such a nature as to
render him unqualified. Although his managerial skills and judgment
were questioned by some witnesses, there is no evidence that he ever
acted with evil intent or that he ever disregarded his duties. We also
note that when the time came for a change in corporte leadership,
Mr. Johnson used his best efforts to effect that change. It was during
his tenure as president and board chairman that the new code of
corporate ethics was adopted and that Swanson, Upson and Freeman

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were hired. In short, we conclude that he has established his qualifi-
cations by clear and convincing evidence.
I. Conclusion as to the quah'cations of the Del E. Webb Corpor-
ation
For all of the reasons stated above the Commission finds that
the Del E. Webb Corporation has established its qualifications by
clear and convincing evidence.
IV. CONCLUSION
A plenary casino license shall issue to Claridge I, imited, subject
to the conditions set forth in the Resolution regarding this matter.
You must check the New Jersey Citation Tracker
in the companion looseleaf volume to determine the
history of this case in the New Jersey courts.