Probe tests Pa. casino oversight

A grand jury is considering whether a slots owner misled the state about alleged mob ties.

Posted: September 02, 2007

HARRISBURG - A grand jury investigation involving a Scranton millionaire and a reputed mobster is shaping up as a test of Pennsylvania's oversight of its fledgling casino industry.

The probe, in Dauphin County Court here, is exploring whether Louis A. DeNaples, a power in Scranton's business and civic circles, misled regulators during his successful bid to open a $412 million slots casino in the Poconos.

DeNaples won his license after assuring the state Gaming Control Board that he has no connection with reputed mob boss William "Big Billy" D'Elia.

Rumors of such a tie have dogged DeNaples for years, based in part on unproven information in old investigative reports.

Now the grand jury is digging into those stories again.

D'Elia has been haled before the grand jury to testify, along with a number of his friends and associates. One was Shamsud-din Ali, a Muslim cleric and deal-maker convicted in 2005 in the Philadelphia corruption scandal.

In effect, prosecutors, working with state police, are redoing the background investigation of DeNaples - even though the gaming board has cleared him.

They are excavating DeNaples' fraud conviction from 1978, combing through the gaming board's documents, and turning over uncorroborated allegations about DeNaples and D'Elia found in a six-year-old affidavit compiled by the Internal Revenue Service and state police.

If they turn up damaging information, it could cost DeNaples his license - and deliver a serious blow to the credibility of Pennsylvania's system for scrutinizing and selecting casino operators.

In addition, federal authorities are conducting an inquiry into a business associated with DeNaples - an investigation unrelated to his casino. Details of the federal inquiry could not be learned.

Already, the DeNaples saga has exposed weaknesses in Pennsylvania's regulatory apparatus, and laid bare an ugly bureaucratic feud between the gaming board and the state police.

State police investigators are working closely with the grand jury. But if investigators had any negative information about DeNaples, they refused to share it with the gaming board during DeNaples' hearing - even after Gov. Rendell brokered a deal to make them cooperate.

This mess is in stark contrast with the system in other states.

In New Jersey and elsewhere, independent investigators handle casino background checks. In Pennsylvania, investigators were hired by the highly political gaming board.

New Jersey regulators have been quick to bar owners, executives and firms because of alleged past links to the mob.

Frank Catania, who led New Jersey's Division of Gaming Enforcement for five years, said DeNaples likely would have faced tough going if he tried to open a casino in Atlantic City.

"This is an industry in which you don't have a right to have a license," Catania said. "The industry has just got to be squeaky clean."

Kevin Feeley, a spokesman for DeNaples, declined to comment last week, as did John Donnelly, a DeNaples' lawyer. Previously, Feeley told reporters that DeNaples has "no connection with organized crime. He has no association with Shamsud-din Ali."

An influential figure

DeNaples, 66, is a dominant figure in Scranton - and an influential player in Pennsylvania politics.

He owns landfills, quarries, 35,000 acres, auto-parts and forestry-equipment dealerships, and more - almost 90 businesses. He once headed the board of trustees at the University of Scranton.

Sometimes giving in his own name, sometimes through his partnerships, DeNaples and his partners have contributed about $1 million since 2000 to state politicians and political committees, both Democratic and Republican. Gov. Rendell received $140,000.

Rendell defends DeNaples as "the salt of the earth" and said he was unconcerned about the investigations.

"Grand juries investigate virtually everyone," he said in an interview last week. "It doesn't mean a bloody thing."

Rendell brushed aside criticism of the gaming board.

"The selection process was done exactly the right way. No credible evidence of any connection to organized crime was found, and DeNaples had by far the best application," he said.

"Wait until you see the job he does and the class operation it's going to be."

Still, Rendell said he was sure the gaming board would act swiftly if the grand jury turned up solid information against DeNaples.

"If, in fact, a tie is found between Louis DeNaples and organized crime," Rendell said, "I am confident that the gaming commission will strip him of his license."

Even before the legislature approved casino gambling for Pennsylvania, DeNaples was considered a shoo-in to win a license. Soon after the bill passed, he moved to buy the defunct Mount Airy Lodge - famous for its heart-shaped tubs for honeymooners - and promised to build a hotel and open a gaming parlor with 2,500 slot machines.

To obtain a license, all applicants had to meet the provision of the law requiring casino operators to be "of good character."

DeNaples cleared the hurdle and got a license in December - a decision upheld by the state Supreme Court - after three days of closed-door hearings and a background check by the gaming board's Bureau of Investigations and Enforcement.

First, the board had to discount a criminal case from DeNaples' past.

A fraud conviction

In 1977, DeNaples and three other men were charged with bilking the federal government out of $525,000 set aside to help the area recover from Tropical Storm Agnes.

The trial ended in a hung jury. Afterward, the four made a plea bargain; they pleaded no contest, and were placed on probation and fined.

But the case had another twist: Four other men, including a member of the crime family once led by Russell Bufalino, were later convicted of bribing a juror during the trial. DeNaples has said he knew nothing of the bribery attempt.

Because the case is so old, the conviction alone didn't bar DeNaples from getting a Pennsylvania casino license.

Legislators decided felonies didn't disqualify applicants, provided they had finished their sentences at least 15 years ago.

While DeNaples never again faced criminal charges, rumors of mob ties have followed him ever since.

Most of those whispers include D'Elia, 60, of the Wilkes-Barre area.

Authorities and mobsters have long identified D'Elia as a leader the Bufalino family.

Testifying in 2001, former Philadelphia mob boss Ralph Natale identified D'Elia as the new head of the Bufalino family. In 2003, the New Jersey Casino Control Commission banned D'Elia from doing business with any Atlantic City casino.

D'Elia was indicted twice last year, in May on federal charges of laundering thousands of dollars in narcotics profits and in October of conspiring to kill two witnesses.

Sources say information about a possible DeNaples-D'Elia link surfaced again during the drug investigation - although there is no indication that DeNaples did anything wrong.

D'Elia is behind bars awaiting trial. In July, he was taken in handcuffs to testify to the DeNaples grand jury.

James A. Swetz, a lawyer for D'Elia, said his client had no deal, and continued to dispute the federal charges.

"There are no plea negotiations," Swetz said. "We are headed to trial."

Much, if not all, that is publicly known about the supposed links between DeNaples and D'Elia is sketched out in the 2001 affidavit.

Seeking to trace the flow of cash from mob gambling operations, investigators filed the document with a federal judge to obtain a search warrant of another man's home.

Like many such affidavits, the 46-page document contains a grab bag of evidence - some gathered by police surveillance, other allegations in the form of raw tips from informants.

Investigators said they twice had videotaped D'Elia visiting DeNaples' auto-parts business. They did not, however, see any meeting between the men.

The affidavit also quotes a confidential source as saying D'Elia worked as a salesman for one of DeNaples' landfills. Still another unnamed informant said DeNaples had paid him $10,000 in cash for delivering a gym bag to a New Jersey Italian restaurant; the informant said he had believed the bag contained cash.

No charges were brought against DeNaples, and the affidavit's allegations were not tested in court.

During the gaming hearings, DeNaples "denied any connection with D'Elia, social or otherwise," a source said.

According to sources, the board's investigators tried to interview D'Elia, but were put off by his lawyer.

Feeley, DeNaples' spokesman, said last year that the affidavit was an unfair weapon.

"Frankly, the allegations amount to hearsay upon hearsay, assumptions and idle rumor, and in one instance they referred to one of those sources as basing his source on street talk," Feeley told the Pittsburgh Tribune-Review. "There is a reason none of that has been proven: It is not true."

A breakdown

The DeNaples experience has already revealed an embarrassing breakdown in how the state handed out casino licenses: The gaming board made decisions without knowing what state police knew about DeNaples and other applicants.

A feud began when the gaming board decided to hire private investigators to handle background checks. The state police were outraged; the troopers union even filed a lawsuit, still pending.

When DeNaples sought his license, the board nonetheless asked state police to open its files.

But former State Police Lt. Col. Ralph Periandi, who supervised casino-related investigations until he retired this year, said privacy law barred his troopers from passing along that information.

The governor's office thought it had solved the issue in 2006, drafting a plan to permit troopers to pass along intelligence to gaming investigators. But state police officials weren't satisfied; to make sure, they asked for opinions from the state attorney general and the U.S. Justice Department.

Rendell aides never sought the opinions, saying they were unnecessary.

State police won't say what negative information, if any, they had on DeNaples at the time the board granted him a license. One thing is for sure: If they had anything damaging, they didn't share it.

Finally, the board gave the license to DeNaples. Before it voted, its enforcement lawyer said the inquiry hadn't turned up any reason to bar DeNaples.

The state Supreme Court upheld that decision last year, rejecting an appeal from a rival casino operator.

After reviewing confidential reports and hearing transcripts, the court said DeNaples had responded to all issues "in a coherent and thoughtful manner."

Periandi still blames the gaming board. He said it should have taken time to dig deeper, given the "consistent insinuation" that DeNaples is linked to D'Elia.

"Doesn't it seem like you have some concerns out there?" he asked. "Then why press for a decision?"

Thomas "Tad" Decker, who was chairman of the gaming board, said that the state police's privacy excuse was bogus, and that it would be a "disgrace" if the agency had sat on any damaging information about DeNaples.

Decker quit the gaming board last month. He returned to his old Philadelphia law firm, Cozen & O'Connor – a firm that represents DeNaples. Though his move has sparked some criticism, Decker has said he won't do any legal work that involves DeNaples or anyone else who had dealings with the gaming board.

A new investigation

But the state police files are being explored now, in the grand jury investigating DeNaples.

A number of figures linked to D'Elia have been taken to the grand jury and asked whether they had any dealings with DeNaples.

One of them is Ali, 69, who in August started a seven-year sentence for siphoning money from no-work city contracts.

The link between Ali and D'Elia surfaced publicly during the City Hall corruption scandal. In 2001, the two met in a South Philadelphia tavern to talk about landing city demolition contracts. The deal never got off the ground, and there is no suggestion that DeNaples was involved.

Ali's former lawyer, James Binns, said last week that Ali knew DeNaples. According to Binns, Ali told the grand jury that DeNaples had once called Ali to ask a small favor, help in getting a friend a reserved parking space at a facility where Ali had pull. Binns said he could provide no more details.

Dauphin County Prosecutor Edward Marsico, a Republican, declined to comment.

Republican Attorney General Tom Corbett had authority to investigate DeNaples, but chose to permit Marsico to pursue the matter because the county prosecutor had already begun delving into other gambling-related matters.

Once he applied for a casino license, DeNaples was barred from making campaign donations. Before that, his real estate partnership had given $55,000 to Corbett's campaign fund. A spokesman for the attorney general said those donations had played no role in Corbett's deferral to Marsico.

DeNaples' network of friends includes a U.S. attorney. Thomas Marino, the U.S. attorney for the middle district, which includes Harrisburg and Scranton, has often socialized with DeNaples. He also sent the gaming board a letter vouching for DeNaples' character.

When the federal investigation began last year, Marino recused himself; the inquiry is being led by a prosecutor in Binghamton, N.Y.

Marino recently told associates that he planned to step down soon and probably enter private practice, sources said. Two people close to the matter said the decision was unrelated to the state's DeNaples investigation.

Meanwhile, two Republican state representatives, citing the DeNaples mess, have drafted a bill to toughen Pennsylvania's licensing process.

The legislation would create an investigatory agency with its own budget - one that no longer would have to answer to the gaming board.

At the same time, construction is going full bore at Mount Airy. The casino is scheduled to open Oct. 15.


Grand Jury Witnesses

During hearings to obtain his casino license, Scranton businessman Louis A. DeNaples denied any links to organized-crime figures. In recent weeks, a grand jury in Harrisburg has been calling witnesses to explore whether DeNaples misled the board. Sources said they included:

William "Big Billy" D'Elia, reputed leader of the Bufalino crime family. D'Elia was indicted last year for laundering narcotics profits, then for conspiring to kill two witnesses. D'Elia's possible ties to DeNaples are at the heart of the grand jury probe.

Shamsud-din Ali, a politically connected Muslim cleric from Philadelphia who at one time sought to do business with D'Elia. Last month, Ali began a seven-year prison term for his involvement in no-work city contracts.

Sam Staten Sr., business manager of Local 322 of the International Laborers Union in Philadelphia, who attended a business meeting with D'Elia and Ali. Staten held a minor stake in Riverwalk Casino, which lost its bid for a slots license.

Louis Coviello, who is serving a life term for murder. His late father, Joseph, was convicted with DeNaples 29 years ago for overbilling the government for cleanup work after Tropical Storm Agnes.

James Decker, a former Lackawanna County chief clerk, also among those convicted in the Tropical Storm Agnes case.

Thomas Joseph, who owns a property in Mountain Top, Luzerne County, that was searched in 2001 as part of a money-laundering investigation. That probe also touched on D'Elia and DeNaples, an affidavit said, but DeNaples was not charged.

Claude Limoges, a former executive of ALC Environmental Inc., a consulting and training firm with offices in New York and Philadelphia. His links, if any, with DeNaples could not be determined.

Also at the Courthouse

Two others with ties to DeNaples were seen at the courthouse while the grand jury was meeting, though it was unclear whether they appeared as witnesses:

Sal Cognetti, a Scranton defense lawyer and a former assistant U.S. attorney who prosecuted DeNaples' old fraud case. Cognetti later sent the state gaming board a letter on behalf of DeNaples. Cognetti would not say whether he was there to testify or to represent a client.

The Rev. Joseph Sica, a priest and a longtime DeNaples friend who accompanied the businessman during the casino hearings.


Contact staff writer Craig R. McCoy at 215-854-4821 or cmccoy@phillynews.com.

 

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