LAWRENCE, N.J. -- Merv Griffin, seeking a permanent license to operate the Resorts International Hotel Casino, spent most of a hearing Monday before the state Casino Control Commission answering questions concerning the associates of one of his former top aides.
Griffin, who was the only witness called at the session, said the allegations of misdealings by associates of former Griffin Co. Chief Executive Michael Nigris Jr. were 'guilt by association.'
He told the commission, 'I have yet to see the report that indicts' Nigris.
Griffin wrested control of Resorts from New York developer Donald Trump in May 1988 in a leveraged buyout that put Atlantic City's oldest casino $925 million in debt.
With Resorts burdened by annual debt service fees of $133 million and falling revenues, Griffin has been forced to declare a moratorium on debt payments. He has asked the holders of Resorts bonds to accept cash, stock and new debt instruments with lower returns.
Nigris guided Griffin's companies involved in the Resorts deal until October 1988, when he was demoted to handling Griffin's non-casino businesses. That continued until May, when he was dismissed over an unrelated business deal involving a Boston radio station, Griffin said.
Problems with Nigris first arose in August 1988 when Griffin learned from Drexel Burnham Lambert, his investment banker, that reports cast doubts on Nigris's ability to receive a casino license because of his association with Ernest Barbella and Martin Kern.
Barbella, who attended college with Nigris, was the chief executive of Morgan Capital Corp., the company with which Griffin had signed a contract for Nigris's services. Kern was hired by Nigris to act as a monitor of Resorts during the transition between Trump's and Griffin's ownership of the casino-hotel.
Griffin's attorneys previously agreed with a report submitted by the state Division of Gaming Enforcement in which Barbella was named as having been charged in 1988 by the Securities and Exchange Commission with various forms of securities fraud. The report noted that Barbella paid an $85,000 penalty in 1986 to settle charges a meat company he owned gave 'valuable consideration' to meat buyers at supermarket chains and that in 1981 he was embroiled in suits and countersuits with the Great Atlantic & Pacific Tea Co. of Montvale. N.J., that included charges of phony billings.
The report also said Kern was mentioned in a conversation held by known mobsters in a New York social club on July 9, 1984, as someone who had been bribed in the past and would be willing to accept payments in the future.
Nigris was demoted after he received a private investigator's report on Barbella and Kern in October 1988, Griffin said.
At that time he denied any knowledge of the activities of Barbella and Kern, said Thomas Gallagher, an attorney for Griffin who delivered the news of his demotion to Nigris.
'Through (Nigris's) 20-year association there was no question of his integrity or his honesty,' Griffin said. 'It was only when the Resorts deal came through that I saw (Barbella and Kern) and I cut them off immediately.'
Commissioner E. Kenneth Burdge asked Griffin why it took nine months to remove Nigris from his companies.
'I am not in the indicting business' and there never have been any charges leveled against his former employee, Griffin answered.
Griffin also testified about the physical condition of the casino-hotel, his financial arrangements and efforts to get Resorts back in the black.
The $13 million debt payment due in September could have been paid, but 'that would have been a foolish thing to do,' he said.
'We could make debt payments through the first of the year but we would lose the business' because that would drain cash from investments needed to attract more customers, he said.
Griffin said he hopes the restructuring plan will be approved by those who hold Resorts bonds before the casino goes before the commission for a new two-year license in February.
The physical problems with the hotel led to his hearing 'horror stories every day' about improper repairs, he said, adding repair estimates have soared to $60 million from $25 million.
Griffin maintained he never heard anything negative about Nathan Jacobson and Meyer Blinder, two principals in the American Leisure Corp., while he was a director of the company from 1981 to 1983. In plans that never materialized, American Leisure had hoped to build Camelot's Castle in Atlantic City, Griffin said.
