At the hearing, Friel testified that Pelullo's name never surfaced during his time on the organized crime task force.
"Arthur Pelullo is a man whose name is being tarnished by innuendo," Friel said yesterday.
The Connecticut Division of Special Revenue restored the license, saying there was no evidence to link Pelullo to organized crime. But he is still banned from promoting boxing events at one Connecticut casino, the Mohegan Sun, despite the state's ruling.
Last week, it came to light that Friel's name appeared in a 1974 Pennsylvania Crime Commission report as one of 33 police officers accused of taking money from a nightclub owner. Friel testified before a grand jury about the allegations and was never indicted.
Both revelations, which were first reported in the Philadelphia Daily News, have prompted State Sen. Jeff Piccola (R., Dauphin) to ask Rendell to rescind the appointment.
Rendell, who knew about the crime commission report but not about Friel's testimony in support of Pelullo, continued yesterday to support Friel, a spokeswoman said. So did State Sen. Robert Tomlinson (R., Bensalem), a cosponsor of the gambling law.
"Sen. Piccola has been a vocal opponent of slot machine gaming since Day One, so it should come as no surprise that he would take this opportunity to cast doubt upon the gaming control board," Tomlinson said. "It is unfortunate that he has chosen to sully the reputation of an honest man and one of the finest police officers our area has ever produced."
Earlier this month, Rendell appointed Friel to head the Pennsylvania Gaming Control Board, which will oversee 14 gambling halls authorized under a law signed in July that allows for up to 61,000 slot machines at racetracks and gambling venues across the state, including four in Philadelphia region.
Friel was touted as a good choice for the job because, for six years in the 1980s, he headed the organized crime task force that helped lock up the city's most notorious and violent crime families, including one run by Nicodemo "Little Nicky" Scarfo.
The Connecticut hearing pitted Friel against Scarfo's underboss Philip "Crazy Phil" Leonetti, who at the time was serving a lengthy sentence for murder, but is now in the federal government's witness protection program.
Leonetti testified in the Connecticut hearing that Pelullo and his brother, Leonard, were associates of the Scarfo family and that Leonetti had attempted to do business with Arthur Pelullo, but had never succeeded.
Leonetti's testimony was supported, in part, by retired FBI agent James Maher, according to transcripts of the hearing.
Maher could not be reached for comment yesterday.
In an interview, Pelullo acknowledged that he knew members of organized crime, including Leonetti, because the men had grown up in the same area and because Leonard Pelullo owed money to the mob. Arthur Pelullo said he sometimes gave Leonetti free cigars and meals from his brother's Atlantic City restaurant.
"There is a difference between knowing someone and doing something wrong. . . . They know I didn't do that," said Arthur Pelullo.
Pelullo said he paid Friel's investigative company, Atlantic Securities International Investigations Inc., $5,160 in four payments over 16 months to conduct a background check and provide testimony, according to records provided by his certified public accountant, James E. Fredericks.
The hearing officers concluded that Pelullo's alleged mob relationship was in dispute.
"Due to the contradictory testimony presented, no clear picture has emerged of a beneficial financial relationship between Arthur Pelullo and Philip Leonetti," according to the decision.
Jay Malcynsky, an attorney who represented Pelullo at the hearing, said Friel was one of about a half dozen former law enforcement people who testified for Pelullo.
He said Pelullo has been licensed in more than 10 other states including Nevada, Illinois and Mississippi.
An investigator in Mississippi confirmed Malcynsky's account.
"We couldn't find anything that directly tied him to organized crime other than he grew up in an area of Philadelphia where it existed," said Ray Reed, the Mississippi Gaming Commission investigator.
Ronald Asher, 64, who retired from the FBI after 21 years and served for six years as chief of enforcement for the Nevada Gaming Control Board, also testified in support of Pelullo.
"I can't understand why Friel's testimony would raise a problem," Asher said.
Friel said that, while he discussed the 1974 crime commission report with Rendell, he felt it was unnecessary to disclose his testimony for Pelullo.
"If the finding was that he was a wise guy, I would feel an obligation," Friel said. "Pelullo was not. He was never called as a witness, he was never interviewed, nothing."
He said Leonetti made his claims against Pelullo to ensure his deal with the federal government.
"They brought in a man who had killed and lied and extorted. And why should anyone believe him against a businessman of 20 years who was investigated and licensed in many states?" Friel said.
Friel likened the case to Neil Ferber, a man who spent years on death row after being wrongly convicted of two mob hits. Friel fought to overturn that conviction and eventually succeeded.
Contact staff writer John Sullivan at 717-787-5934 or firstname.lastname@example.org.