Grand jury calls for gaming oversight overhaul

HARRISBURG - A state grand jury report issued Tuesday calls for an overhaul of state oversight of the casino licensing process and looks exhaustively into the many controversies surrounding the awarding of a slots license to Mount Airy Casino Resort in 2006.

But the 102-page report released by the state attorney general's office includes no charges of wrongdoing against anyone associated with a licensing process that began shortly after Pennsylvania legalized slots casinos in 2004.

The report appears one day after the Senate confirmed veteran prosecutor Linda Kelly as Pennsylvania's newest attorney general to succeed Gov. Tom Corbett.

It also comes one week after a Dauphin County judge ordered court records in the dismissed perjury case against Mount Airy founder Louis A. DeNaples expunged and destroyed.

That perjury case was based on a Dauphin County grand jury's charges that DeNaples lied about whether he knew organized crime figures, namely William D'Elia, a reputed head of the organized crime family founded by the late Russell Bufalino. DeNaples consistently denied those charges. The questioning about D'Elia occurred in August 2006 when DeNaples gave sworn testimony for his slots license application.

Dauphin County District Attorney Edward Marsico dropped the perjury case against DeNaples in April 2009 in exchange for an agreement by the Dunmore businessman to hand over casino ownership to his daughter Lisa DeNaples. At that time, Marsico said he had concerns based on a linguistic analysis about the lack of precision in the questioning of DeNaples in 2006.

But references to D'Elia resurface in this report by the 31st investigative state grand jury based in Allegheny County.

The grand jury is sharply critical of the Pennsylvania Gaming Control Board for failing to protect the public from unlawful gaming practices, maximizing potential new revenue to support school property tax relief and being preoccupied with making the licensing process fair to applicants.

The report states that the Gaming Board treated Mount Airy differently from other applicants, including its main competitor, Pocono Manor, another Monroe County resort.

"Whether this was because the potential suitability issues were known or because this was a critically important license from a political standpoint is unknown," the report stated. "The investigation revealed significant areas of concern regarding the character, honesty and integrity of Louis DeNaples. These areas concerned his prior felony conviction, the re-titling of tractors damaged by the Katrina flooding, a series of third party political contributions, and his potential ties to organized crime."

The grand jury concluded the Gaming Control Board did not give proper weight to evidence that a DeNaples company was investigated by the FBI and state police over its sale of trucks that had been refurbished after sustaining damage in Hurricane Katrina in 2005. The investigation centered on allegations that the company failed to properly indicate on the titles of the trucks that they were flood-damaged, as required by state regulations. DeNaples' attorneys maintained the trucks were properly titled. No charges were ever filed in the case.

Efforts to reach DeNaples at three family businesses were unsuccessful on Tuesday.

"While the investigators assigned to the applicant testified they were largely able to investigate these issues, each and every investigator and enforcement counsel who appeared to offer testimony to the Grand Jury expressed their disappointment in the Board's decision to grant a license to Mt. Airy," the report stated.

The report also includes this testimony:

- Around the time of his 2004 appointment by former Sen. Robert Mellow to the Gaming Board, William Conaboy said. Mellow told him he would like to see a casino in his district.

- One of the key tasks facing the Gaming Board is determining the suitability of license applicants. The final suitability reports for Mount Airy did not reflect the investigative facts developed by the board's Bureau of Investigations and Enforcement, the report said.

- Two Gaming Board officials ordered Nan Davenport, the board's deputy enforcement counsel, to change four pages of information about DeNaples' alleged ties to D'Elia and other organized crime figures in the suitability report.

- Former Gaming Board member Kenneth McCabe received a BIE report of an interview with Frank Pavlico, D'Elia's cousin, in December 2006, prior to the licensing vote, according to the grand jury report. It detailed family events and business meetings that DeNaples and D'Elia attended together. That information was kept out of the suitability report because it contained secondhand information, testified Roger Greenbank, a BIE official who conducted the background investigation of DeNaples.

- It sheds new light on DeNaples' association with RAM Consultants, which gave $522,000 in federal and state political contributions between 2000 and 2005. Louis DeNaples and Dominick DeNaples are partners in D&L Realty, according to a footnote in the report. D&L has a one-third interest in RAM. Accordingly, Louis DeNaples had a 16.6 percent interest in RAM and failed to disclose that in his slots license application.

A Gaming Board member called the report a rehash of "old news" at a significant cost to state taxpayers.

"The Board has steadfastly and repeatedly said that we did our work well, we have protected the public, and the citizens of Pennsylvania are reaping tremendous dividends from our work," said Chairman Greg Fajt. "After the grand jury met for more than two years, there were no arrests, no presentments, no indictments. They found no criminal activity because there was, in fact, no criminal activity to be found."

However, Rep. Curt Schroder, R-155, Exton, chairman of the House Gaming Oversight Committee, said he will hold hearings this summer on the grand jury report. The report reaffirms the need to transfer BIE away from the Gaming Board, he said.

The grand jury said the Pennsylvania Crimes Code is inadequate to the job of combating public corruption.

The report also recommends making BIE an independent law enforcement agency, giving the state auditor general power to audit the Gaming Board, a housecleaning of current Gaming Board employees and preventing Gaming Board employees from taking a job with a casino or associated firm for four years after leaving the agency.

That a state grand jury was investigating slots licensing has generally been known, but the scope of its investigation was revealed only with this report. A state Supreme Court order in January 2010 made a reference to grand jury proceedings involving the Gaming Board.

Dave Janoski, staff writer, contributed to this report.

Contact the writer: rswift@timesshamrock.com