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In re Sworn Application of Mrs. William G. Wellhofer and Other Freeholders

Decided: May 19, 1948.


On rule to show cause.

For the applicants, Thomas D. Taggart, Jr.

For the City of Atlantic City, William Elmer Brown, Jr.


[137 NJL Page 165] EASTWOOD, J. On April 2d, 1948, a rule to show cause was made, upon the application of thirty-four freeholders, why a summary investigation of the affairs of the City of Atlantic City, pursuant to the provisions of R.S. 40:6-1,

et seq., should not be directed. On April 2st and 22d, 1948, counsel for the city presented voluminous affidavits in answer to those presented by applicants. Subsequently, I allowed further time for counsel to obtain and submit additional affidavits and briefs. The proofs and briefs of the parties have been given careful and thorough consideration.

A concise statement and recital of the grievances alleged by the applicants will serve to clarify the conclusions herein expressed. Applicants assert seventeen specific grounds claimed to merit such action. I deem it essential, for the determination of this issue, to discuss only the following:

1. That the City Commissioners on May 8th, 1947, while one Stanley Adams was serving as a member of the January term Atlantic County grand jury then investigating various criminal charges against City Commissioner Albert N. Shahadi, passed a resolution awarding a contract without advertisement to his firm, L. C. Adams & Sons in the amount of $11,231 for the rebuilding of life guard stands, boxes and other beach equipment exclusive of life boats, in violation of R.S. 40:50-1. It is claimed that the contract in question was awarded pursuant to an emergency resolution adopted by the City Commissioners on May 8th, 1947, and that all the circumstances and reasons for the emergency action have been fully disclosed. Albeit advertisement may not be required if an emergency exists, still it seems from a consideration of the facts and circumstances presented by the applicants that an investigation of the alleged improper action might well warrant such an investigation, when it is borne in mind that the underlying motive for the award of the contract might prompt any reasonable person to inquire whether such award was in any way connected with the presence of Stanley Adams, a member of the firm obtaining the contract, on the grand jury then engaged in investigating charges against Commissioner Shahadi.

2. That the City of Atlantic City advertised for bids for the construction of a comfort station at Kentucky Avenue and Bacharach Boulevard, and thereafter on March 11th, 1948, the governing body awarded the general construction

contract to the Masset Building Company, knowing that one Robert Watson, a city employee, had a direct or indirect interest therein, in violation of R.S. 40:73-2. The city argues that Watson was not an employee; that he was an independent contractor, occupying an office or position as a consultant on Veterans' Housing. Be that as it may, it seems logical to inquire whether an investigation might not be the proper means of ascertaining the truth of the allegations advanced by the respective parties. Although the bid of Masset Building Company was the low bid, still it remains to inquire whether or not any fraud existed. It is not the function of this application to decide those questions.

3. That during the year of 1947, the governing body authorized the execution of a contract to pay the sum of $5,000 to the Northside Board of Trade (a private association), allegedly for the publicizing of Atlantic City, knowing that at the time of the award one C. J. Newsome, who was employed as a special investigator by the City of Atlantic City, had an interest in the award of the contract, and that said C. J. Newsome received for his personal use a portion of said moneys paid over by the City to said Northside Board of Trade, in violation of R.S. 40:73-2; also, that said payment violated R.S. 40:5-1, requiring sworn, itemization of expenditures, which was not furnished. It is said that there is no clear proof evidencing such alleged interest of Newsome, and further that a mere employee of such a corporation might not be said to be directly or indirectly interested in a contract made by a corporation employing him. Again, there seems reasonable cause to believe that such interest might conceivably exist, and that an investigation would be a proper means of determining the true facts, both as to Newsome's interest in said contract and alleged violation of R.S. 40:5-1.

4. That on August 21st, 1947, the governing body authorized the payment of $5,000 to the Atlantic City Country Club, a corporation organized for profit, in payment of services allegedly to be rendered under contract by the club in advertising the advantages of the city in connection with the club's conduct of a pro-amateur golf tournament in September of

1947, said payment constituting an illegal gift of public property to a private corporation in violation of R.S. 40:5-1, in that the sum of $5,000 representing the bill of the Atlantic City Country Club for such alleged services was not itemized, did not specify particularly how said bill or demand was made up, did not set forth the dates and names of the persons to whom the amounts composing said bill or demand were severally paid, and did not include the affidavit of the party claiming payment, that the bill or demand was correct. My perusal of the contract and the voucher submitted by the Country Club leads me to the conclusion that many facts and circumstances surround the transaction which might well cause a reasonable man to inquire whether or not the transaction was bona fide and proper. It seems to me the requested investigation will go far to answering any doubts that might exist in this respect.

5. That in August of 1947 the governing body awarded the electrical contract for the city's new airport office building located at the city's Pomona Airfield to the Garden State Construction Company, knowing that one Ernest Eger, employed by the city as chief electrician of the Convention Hall, had a direct interest in the contract and the profits thereof, in violation of R.S. 40:73-2. The city contends that its answering affidavits clearly disclose all the facts and circumstances with respect to the particular contract referred to by the applicants, and that, in addition, the city has given full and complete data of all other improvement projects upon which the Garden State Construction Company submitted bids. I am asked to dismiss the application on the ground that the city commissioners acted within their discretionary power and awarded the contract to the lowest responsible bidder, and further, that there is no proof of fraud or illegality. Here, too, I am of the opinion that an investigation will bring to light and place in proper focus the true situation regarding this particular transaction. See Dallas v. Sea Isle City, 84 N.J.L. 679; 87 A. 467.

6. That hundreds of thousands of dollars of real estate tax assets of the city have not been ...

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