On appeal from the Casino Control Commission.
Fritz, Polow and Joelson. The opinion of the court was delivered by Fritz, P.J.A.D.
[180 NJSuper Page 330] Following extensive investigation and formal hearings on the application of Boardwalk Regency Corporation (BRC) for a
plenary casino license, the Casino Control Commission (Commission) determined that BRC qualified except for the presence of Stuart Z. and Clifford S. Perlman, brothers with extensive interests in the operation. As a consequence, the grant of a plenary license was conditioned in effect on divestiture of any Perlman interest which had any capacity for exerting control over BRC or any related entity. These consolidated appeals by BRC, Caesars World, Inc. (CWI), Caesars New Jersey, Inc. (CNJ) and Stuart and Clifford Perlman challenge that ruling and the constitutionality of N.J.S.A. 5:12-89.
Direct and indirect Perlman interest in and influence upon the affairs of BRC and ample cause for the insistence of the Commission that it be persuaded of the qualification of each of the brothers as a "casino key employee" (N.J.S.A. 5:12-85 c and d) appear indisputably from the genesis of the corporation and are in fact not disputed.*fn1 BRC is a wholly-owned subsidiary of CNJ, 86% of the stock of which is in turn owned by CWI. A creature of humble beginnings, CWI was launched in 1956 when Stuart and Clifford Perlman purchased a "Lum's" restaurant, a small fast-food eating establishment that specialized in hot dogs steamed in beer. The purchase price was $25,000, "half down and the balance over three years." About 1965 the Perlmans started franchising the Lum's stores. Ultimately there were almost 400 of these restaurants in 30 or more states. Lum's was listed on the New York stock exchange in 1969.
1969 was also the year the Perlmans negotiated the purchase of Caesars Palace for 60 million dollars. In 1971 the recession in the restaurant business and the need of the growing Caesars Palace for money produced the sale of the restaurants and the change of the corporate name to Caesars World.
Today CWI is listed on the New York and Pacific Coast stock exchanges. Its 26,100,000 shares of outstanding stock are owned by 70,000 shareholders. Consolidated revenues approximate a half billion dollars annually. Clifford Perlman, chairman of the board and chief executive officer of CWI, owns approximately 10% of the outstanding stock. His brother Stuart owns about 8% of the stock of CWI and holds the position of vice-chairman of the board of directors.
At the conclusion of the hearings the Commission noted, with respect to one of the individuals in the corporate structure who was found to be qualified: "As in all areas of human endeavor, there is in the regulatory process never a situation absent some scintilla, some particle of doubt." Nevertheless, it found qualified for a license the corporation and all the persons required to qualify by N.J.S.A. 5:12-85 c and d, except Clifford and Stuart Perlman. Upon clearly articulated findings and for reasons expressed at length, it announced that it was unable "to find by clear and convincing evidence that Clifford Perlman possesses the good character, honesty and integrity demanded by the Casino Control Act," and that "BRC has failed to meet the affirmative responsibility of establishing the good character, honesty and integrity of Stuart Perlman." The substance of the consequent order was that the application of BRC for a license would be granted but only upon the conditions that
The order further provided for the submission of "a detailed plan and timetable for accomplishing the divestiture of all such securities and removal from all such positions."
The Supreme Court "suspended" "the conditions imposed on the issuance of a license" pending "disposition of the pending appeals" here being considered.
At the outset we observe that all parties agree, as do we, that with respect to the factfinding by the agency our obligation is set and our privilege of independence is limited by Mayflower Securities v. Bureau of Securities , 64 N.J. 85 (1973). Basically we search to discover whether the findings of fact could reasonably have been reached on sufficient credible evidence present in the record, considering the proofs as a whole, with due regard for the opportunity of the Commissioners who heard the witnesses to judge of their credibility. Where expertise is a pertinent fact, we must accord due regard in that respect as well. We agree with a number of appellants' contentions in respect to these standards and others governing our review. First, this search does not require deference to the Commission respecting factual findings in any area in which those findings rest upon a determination as to worth, plausibility, consistency or other tangible considerations apparent from the face of the record, as to which the Commission is no more particularly situated to decide them than are we. See Dolson v. Anastasia , 55 N.J. 2, 7 (1969). Second, it is beyond cavil that in the review function the whole record must be considered. As is expressly pointed out in Mayflower, supra:
We also concur that we are "in no way bound" by the agency's interpretation of a statute or its determination of any strictly legal issue. Mayflower, supra , at 93. Finally, the requirement that we defer to the expertise of the agency is only as compelling as is the expertise of the agency, and this generally only in technical matters which lie within its special competence. N.J. Bell Tel. Co. v. State , 162 N.J. Super. 60, 77 (App.Div.1978).
Where, as is apparently the case here, expertise has not yet developed by experience or special training, no particular deference need be accorded the agency's findings of fact unless there are "demeanor credibility" factors. We do not suggest by this latter comment that special expertise exists in the determination of many nontechnical qualities or properties, such as good character, honesty and integrity. More times than not this type assay calls for the application of common sense and judgment, after credibility problems have been solved.
A careful review of the record in testing the findings is vital to the proper management of a government of laws, for a determination predicated on unsupported findings is the essence of arbitrary and capricious action. See Thomas v. Morris Tp. Bd. of Ed. , 89 N.J. Super. 327 (App.Div.1965), aff'd o.b. 46 N.J. 581 (1966); Morgan v. Saslaff , 123 N.J. Super. 35, 38 (App.Div.1973). If we are satisfied after an application of the standards set out above that the findings of fact do not pass muster, we will not hesitate to reverse or remand, N.J.S.A. 5:12-110 c(3), or, inasmuch as the appeal is "in accordance with the Rules of Court," N.J.S.A. 5:12-110 a, make our own findings and draw our own conclusions. R. 2:10-5; State v. Johnson , 42 N.J. 146, 162 (1964).
On the other hand, if it appears that the findings might reasonably have been reached from sufficient credible evidence, we will not disturb them even in cases in which, had we been doing it, we would have done it differently. Proper respect for the obligation of the agency to accomplish its statutory obligations and consideration for implementation of the legislative intent in the manner designed by the Legislature causes us to proceed with especial restraint in agency matters. See New Jersey Guild of Hearing Aid Dispensers v. Long , 75 N.J. 544, 562-563 (1978). Our original factfinding authority must be exercised only with great frugality and in none but a clear case free of doubt. See Greenfield v. Dusseault , 60 N.J. Super. 436, 444 (App.Div.1960), aff'd on majority opinion 33 N.J. 78
(1960). A difference of opinion concerning evidential persuasiveness of relevant testimony certainly does not justify judicial interference. In re Howard Savings Bk. , 143 N.J. Super. 1, 10 (App.Div.1976). Factual findings of an administrative agency are generally sustained if they are supported by substantial evidence on the whole record. Atkinson v. Parsekian , 37 N.J. 143, 149 (1962).
We have gone to these lengths in explication of legal issues probably not the subject of any substantial disagreement between the adverse factions, in order that the parties might be expressly advised, at the outset, of the criteria we have employed in measuring appellants' challenges. Although we are tempted to begin with attention to the statute and appellants' broadside attacks on it, we are satisfied that exploration of the findings as a first effort, and of appellants' challenges with respect to these, will make more meaningful a later consideration of the legislative mandate.
As noted above, the conclusionary finding*fn2 of the Commission respecting both Perlmans was that it had not been persuaded by clear and convincing evidence that either of them possessed the good character, honesty and integrity required by the Casino Control Act to qualify for a license. The basic or evidentiary facts upon which this conclusion was founded included among others: Clifford Perlman's "repeated and enduring" relationship with one Alvin I. Malnik, "a person of unsuitable character and unsuitable reputation . . . [who] associated with persons engaged in organized criminal activities, and . . . [who had] himself participated in transactions that were clearly illegitimate and illegal," at times subsequent to the media identification of an alleged business connection between Malnik and Meyer Lansky, a reputed organized crime figure. It was stipulated that the CWI directors were told as early as July 1971 that
although Malnik, once indicted for tax fraud, had never been convicted of a crime, the "Federal law enforcement agencies apparently believed Malnik was involved in organized crime." The Commission found that the Malnik-Perlman association persisted long after Clifford Perlman's attention was called to the allegations of unsavoriness respecting Malnik's other friends. Indeed, it found that it persisted even after Philip Hannifan, chairman of the Nevada Gaming Control Board, had "voiced his concerns over Mr. Perlman's association with an individual of Mr. Malnik's reputation," and had received a commitment from Perlman "to extricate himself from the Cricket Club [one of the Perlman-Malnik associations] if Mr. Malnik would not institute a libel suit against Hank Messick, the author of Lansky."
Appellants' response is impassioned and zealous. They point to evidence that "[i]n 1972, when Clifford Perlman entered into the Cricket Club transaction, he had no reason to believe that there was any obstacle to his doing so. . . . [M]any other reputable individuals and financial institutions saw no problem at this time in associating with Malnik." They explain the continuance of the Cricket Club relationship by saying that "Perlman tried repeatedly to sever his connections with the venture, and subsequently did terminate his ties with the Cricket Club, after great difficulty and heavy personal financial sacrifice." They direct our attention to the fact that "In its eagerness to make its point, the Commission suppresses the testimony of Hannafin that he never took Perlman's expression of intent to get out of the deal as a commitment." Both briefs emphasize that Hannafin, no longer a Nevada official, testified he was satisfied with Perlman's efforts.
The foregoing is only one area of several which troubled the Commission. It is typical of the others. As is most certainly to be anticipated, a large portion of the testimony was susceptible not only of varying inferences but of varying conclusions. In like fashion, appellants point to substantial areas of testimony which are highly ...