On appeal from the New Jersey Casino Control Commission.
King, R.s. Cohen and Stern. The opinion of the court was delivered by Stern, J.A.D.
[250 NJSuper Page 277] Adamar of New Jersey, Inc. doing business as the Tropicana Hotel/Casino (Tropicana), a licensed New Jersey Casino, and John M. Gallaway (Gallaway), President of Tropicana, appeal from a decision of the Casino Control Commission (Commission) which concluded that they violated provisions of the Casino Control Act (Act) and various regulations promulgated thereunder. They also appeal from the penalties imposed. Gallaway had been assessed a $10,000 penalty. Tropicana had had its
ability to extend credit to casino patrons suspended for two days,*fn1 and a $500,000 bad debt "write off" it took from the Casino Revenue Fund was also disallowed.
Before us, appellants contend that the Commission violated their due process rights by finding them to have violated regulations not formally charged in the complaint, that the adjudication was based on policy determinations not embodied in the regulations, that Tropicana's "credit determinations" and "collection efforts" "were reasonable" and that the Commission's contrary conclusion was not justified.
In its Amended Complaint, the Division of Gaming Enforcement (Division) charged appellants and Robert James, a Tropicana Vice President, with: 1) violation of N.J.A.C. 19:45-1.27(a) by Tropicana "by extending credit without adequate supporting information in the patron's credit file to justify said extensions of credit" for the period of March 25, 1986 through May 24, 1986; 2) violation of N.J.A.C. 19:45-1.29(e), N.J.A.C. 19:45-1.27(j) and N.J.A.C. 19:45-1.29(b) by Tropicana "by sending all statements, including those sent upon initial receipt of returned checks and those sent on a quarterly basis, to . . . James and not to Edward Rood", a patron; "by failing to report to CCLV, the Casino Credit Bureau used by New Jersey casinos at that time, on a daily basis . . . regarding any and all of the 24 returned counter checks drawn by patron Rood totaling $1,225,000 [and] . . . through its use of . . . James in making contacts with patron Rood in efforts to collect the $1,225,000 debt owed by patron Rood to . . . Tropicana despite the fact that . . . James was not a member of the Collection Department" and violation of N.J.A.C. 19:45-1.29(b) by James, "in that even though he was not a member of the Collection Department he made contacts with Patron Rood in efforts to collect the $1,225,000
debt owed by Patron Rood to . . . Tropicana"; 3) violation of N.J.A.C. 19:45-1.29(j) by Tropicana and Gallaway "in their failure to pursue reasonable collection efforts; their acceptance of a settlement not supported by the facts involved; and their failure to document properly their efforts to consider patron Rood's returned checks as uncollectible prior to writing off a portion of the debt due and owing"; 4) violation of N.J.A.C. 19:45-1.27(a) by Tropicana and Gallaway "by extending credit without adequate supporting information in the patron's credit file to justify said extension of credit" on May 29, 1987; 5) violation of N.J.A.C. 19:45-1.27(a) by Tropicana "by extending credit without adequate supporting information in the patron's credit file to justify said extension of credit" for the period May 29, 1987 to May 13, 1988; 6) violation of N.J.S.A. 5:12-101a(2) and N.J.A.C. 19:45-1.25(a)(2) by Tropicana and Gallaway "by releasing or discharging $500,000 in casino credit of patron Edward Rood on or about May 29, 1987, without a determination that said debt was uncollectible and without maintaining a written record of required collection efforts in accordance with the rules of the Commission;" and 7) violation of N.J.S.A. 5:12-102m(4) by Tropicana "by its failure to include an adequate reason, including player rating information, within the supporting documentation required to be maintained . . . regarding noncash complimentary gifts in excess of $2,000.00."
A contested hearing was conducted before an Administrative Law Judge (A.L.J.) who recommended dismissal of all charges except those embodied in count two.
The A.L.J. found that Tropicana violated N.J.A.C. 19:45-1.27(j) by failing to advise Central Credit of Las Vegas (CCLV) about Rood's returned checks although obligated to report derogatory information on a daily basis. He found that other casinos were not hurt by Tropicana's inaction only because "Rood's credit was already suspended elsewhere", and that "Tropicana personnel followed a pattern of withholding derogatory information from CCLV about Patron Rood." He recommended a $25,000 penalty against Tropicana for this violation.
The A.L.J. also found that Tropicana and James violated N.J.A.C. 19:45-1.29(b) and (e). As N.J.A.C. 19:45-1.29(e) requires that "collection statements must be sent to patrons by persons in the collection department without incompatible functions," the A.L.J. found that Tropicana and James acted wrongfully in using James as a "middleman or conduit," despite his being "involved in credit issuing decisions and [the fact that] his position clearly forbade collections." For this "failure to utilize routine collection measures after Patron Rood's checks began returning, and the use of . . . James to help collect the debt," the A.L.J. recommended "a penalty of $10,000 against Tropicana, and of $2,000 against Mr. James."
The Commission adopted the A.L.J.'s decision, subject to the modifications embodied in its July 25, 1990 Order. In the Commission's own words (as embodied in its brief before us summarizing its November 9, 1990 twenty-one page statement pursuant to R. 2:5-1(b)),*fn2 it found that:
(1) Adamar violated N.J.A.C. 19:45-1.27(a) on each of the occasions between March 25, 1986, and May 24, 1986, that it increased the credit limit of patron Edward Rood absent adequate supporting information to substantiate the change [Count I];
(2) Adamar and Robert James, a former vice president of casino operations, performed incompatible functions by allowing James to engage in collection efforts concerning Rood's outstanding debt in violation of N.J.A.C. 19:45-1.29(b) [Count II];
(3) Adamar sent collection statements to James instead of Rood in violation of N.J.A.C. 19:45-1.29(e) [Count II];
(4) Adamar failed to report derogatory information about Rood's credit to a casino credit bureau in violation of N.J.A.C. 19:45-1.27(j) [Count II];
(5) The failure of Adamar and Gallaway to pursue reasonable collection efforts required by N.J.A.C. 19:45-1.29(j) resulted [in] an improper write-off of Rood's uncollectible debts [Count III];
(6) Adamar and Gallaway reinstated Rood's credit without adequate supporting information contrary to N.J.A.C. 19:45-1.27(a) [Counts IV and V];
(7) Adamar improperly extended Rood's reinstated credit limit in violation of N.J.A.C. 19:45-1.27(a) [Count V] and
(8) Adamar and Gallaway improperly settled Rood's debt without first determining its uncollectibility in violation of N.J.S.A. 5:12-101(a)(2) and N.J.A.C. 19:45-1.25(a)(2) [Count VI].
These findings were based on the allegations in the first six counts of the complaint. The Commission found no violation of N.J.S.A. 5:12-102(m)(4), as alleged in the seventh count. The Commission thus ordered:
1. The Commission finds Adamar liable for the violations alleged in Counts I, II, III, IV, V and VI of the Division's complaint. The recommended penalty of $35,000 for the violations is rejected. Instead, considering the extensive and egregious violations of the credit and credit-related provisions of the Casino Control Act and its attendant regulations, Adamar is prohibited from extending credit to any patron for a period of two business days beginning 10:00 a.m. Saturday, August 18, 1990, and ending 6:00 a.m. Monday, August 20, 1990;
2. The Commission adopts the findings of liability on Count II as to Robert James. However, the recommended sanction of $2,000 for Robert James is rejected and a monetary penalty of $5,000 is imposed; and
3. The Commission finds John Gallaway liable for the violations alleged in Counts III, IV and VI of the DGE's complaint. A monetary penalty of $10,000 is imposed.
The Commission further ordered that "in view of the finding of liability on Count III and disallowance of the $500,000 write-off, the Division of Financial Evaluation and Control shall ensure that the necessary adjustments are made to the Casino Revenue Fund."*fn3
As noted by the A.L.J., "[m]ost of the facts are either stipulated or undisputed."*fn4 They were summarized by the A.L.J. as follows:
. . . In November 1982, Patron Rood was granted a credit line at Tropicana in the amount of $100,000. Patron Rood was senior partner in the law firm of Rood & Associates located in Tampa, Florida. As of late February 1986, Patron Rood's credit account reflected a credit limit and outstanding balance of $850,000. On March 1, 1986, revisions to N.J.A.C. 19:45-1.27(a) became effective. This new credit regulation required casinos to obtain and verify additional information regarding a credit patron's identification and credit worthiness. From March 25, 1986 through May 24, 1986, Patron Rood received five permanent credit limit increases to his approved credit line. These increases raised his outstanding credit account from $850,000 to $1,350,000. At the time of each such increase, the credit department obtained derogatory information concerning Patron Rood from CCLV and from independent contact with several New Jersey casinos. These sources indicated that on each such occasion, Patron Rood had unpaid credit debts at six different New Jersey casinos totalling approximately $1,500,000, and that his credit accounts at these casinos had been cancelled in each case during 1985.
Mr. Rood's credit file contains an uncertified financial statement dated February 1985 which shows total net worth in excess of $41,000,000 and available cash of $180,000. Most of his wealth was in the form of real estate and oil wells. From 1982 until his checks began to return in June 1986, Patron Rood had gambled approximately $40,000,000 at Tropicana and had lost approximately $7,500,000.
On June 20, 1986, Patron Rood's credit account at Tropicana was suspended due to a returned check. From this date to October 7, 1986, a total of 24 counterchecks and personal checks totalling $1,225,000 were returned unpaid to Tropicana. Patron Rood also owed $225,000 to Tropicana West located in Las Vegas, Nevada.
On the same day that his first check returned, Tropicana's collection department established a collection file for Patron Rood. Entries in the file indicate that from this date until May 20, 1987, eight of ten collection statements sent, went to Robert M. James. Respondent James was vice president of casino operations at the time and was not a member of the collections department. Maureen Cullen Keenan, former collections manager, and Leanor A. Mazzeo-Amoriello, the current collections manager, confirmed in testimony that the file would have contained notations that collection statements were sent to Patron Rood had they been. Respondent John M. Gallaway in a memorandum of July 15, 1986 to Steven R. Bolson, Tropicana vice president and in-house counsel, ...