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In re Application of Boardwalk Regency Corp.

Decided: July 21, 1982.

IN THE MATTER OF THE APPLICATION OF BOARDWALK REGENCY CORPORATION FOR A CASINO LICENSE


On appeal from and certification to the Superior Court, Appellate Division, whose opinion is reported at 180 N.J. Super. 324 (1981).

For affirmance and modification -- Justices Clifford, Schreiber, Handler, Pollock and O'Hern. Concurring and dissenting in part -- Justice Pashman. The opinion of the Court was delivered by Clifford, J. Pashman, J., concurring in part and dissenting in part.

Clifford

[90 NJ Page 364] Boardwalk Regency Corporation (BRC) applied for a plenary license pursuant to the Casino Control Act, N.J.S.A. 5:12-1 to -152 (Act). After conducting investigations and hearings on the

application, the Casino Control Commission (Commission) found that two of the directors of BRC, Clifford S. and Stuart Z. Perlman, had failed to satisfy the standards set forth in the Act regarding "casino key employees." See N.J.S.A. 5:12-84(c), -85(c) and -89(b)(2). The Commission ruled that if the Perlmans were not removed from positions of control in the extensive corporate hierarchy of which BRC and its corporate parents, Caesars New Jersey, Inc. (CNJ) and Caesars World, Inc. (CWI), were a part, BRC's application would be denied. The Commission further required BRC to choose, by November 26, 1980, either (1) to sever the Perlmans permanently from any ownership or employment connection with BRC, any of its parent companies, and any subsidiary of CWI in this or any other jurisdiction, or (2) withdraw as a casino licensee from New Jersey. BRC was also directed to submit a plan for Commission approval to implement whichever alternative it chose. Following the Appellate Division's denial of a stay of these conditions this Court granted a stay pending appeal.

On consolidated appeals of the Perlmans and the corporations the Appellate Division affirmed the Commission's decision as to the non-qualification of the Perlmans, but reversed to the extent that it required the Perlmans to divest their personal interests from non-New Jersey subsidiaries of CWI having no "gaming" activities. In re Boardwalk Regency Casino License Application, 180 N.J. Super. 324 (1981). It remanded to the Commission to recast its order consistent with the Appellate Division opinion and for "reasonable revision of the timetable." Id. at 350. The stay imposed by this Court remains in effect. Ibid.

The Perlmans and the corporations then filed notices of appeal to this Court, asserting "a substantial question arising under the Constitution of the United States", R. 2:2-1(a); and we granted the petitions for certification of the Attorney General and the Commission regarding the Appellate Division's modification of the Commission's order, 89 N.J. 405 (1982). In addition, the Attorney General filed a notice of cross-appeal directed to the same issue raised in his petition, namely, the

Appellate Division's invalidation of the Commission's requirement that the Perlmans disconnect themselves from all non-New Jersey non-gaming activities.

Specifically, the Commission required that as one of the conditions of BRC's casino licensure, the Perlmans must dispose of any interest whatsoever in subsidiaries of CWI that are situated outside of New Jersey and are not engaged in casino gaming activities; must be removed from any position as an officer, director or employee of such subsidiaries; and must not receive any remuneration in any form from such subsidiaries. It is this condition that the court below struck down. Today we reinstate that condition of licensure. With the exception of that single modification, we affirm the judgment of the Appellate Division substantially on the basis of Judge Fritz's comprehensive and perceptive opinion for that court.

I

While the Appellate Division's discussion of the facts, 180 N.J. Super. at 331-32, 335-36, suffices for our purposes today, several features nonetheless bear repeating. Initially, it is noteworthy that CWI, aptly described below as "[a] creature of humble beginnings," id. at 331, is today a multifaceted corporate giant, which, through its various nationwide subsidiaries, owns and operates businesses in both the gaming and non-gaming industries. Of particular import to this case, however, is CWI's relationship to BRC: BRC is a wholly owned subsidiary of CNJ in which CWI owns an 85% stock interest.

Moreover, since the Appellate Division decision, there have been several developments regarding the Perlmans' relationship with CWI and its subsidiaries. By way of background, when the matter first came before the Commission in September 1978, both Perlmans owned an extensive interest in CWI, CNJ, and thereby BRC. Clifford Perlman was Chairman of the Board of Directors and chief executive officer of CWI and CNJ, in addition to holding a 10% stock interest in CWI, and a 1.4%

interest in CNJ. Stuart Perlman was Vice-Chairman of the Board of Directors of CWI and CNJ. His stock ownership in CWI, about 8%, was second only to that of Clifford Perlman. He also held approximately a 1% interest in CNJ.

In contrast to the facts as they appeared when the case was before the Commission and the Appellate Division, the Perlmans' relationship to BRC through their extensive interest in CWI and CNJ has since changed. On October 30, 1981, CWI and the Perlmans entered into an agreement that provided that (1) the Perlmans would sell, and CWI would purchase, the Perlmans' shares of CWI and CNJ stock; (2) the Perlmans would acquire promissory notes for part of the purchase price of their CWI and CNJ stock; and (3) the Perlmans would resign from all of their positions as officers and directors of CWI and its subsidiaries, save for the fact that Clifford Perlman would enter into an agreement to continue as Chairman of the Board and chief executive of Desert Palace, Inc., a CWI subsidiary responsible for operating CWI's Nevada based casino-hotels.*fn1 On December 15, 1981, the Commission, upon ...


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