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Sonic Services, Inc. v. Pennsylvania Gaming Control Board

Commonwealth Court of Pennsylvania

October 9, 2019

Sonic Services, Inc., Petitioner
Pennsylvania Gaming Control Board, Respondent

          Argued: September 10, 2019




         Petitioner Sonic Services, Inc. (Sonic Services) petitions for review of an adjudication by the Pennsylvania Gaming Control Board (Board) dated November 28, 2018, revoking Sonic Services' Gaming Service Provider[1] Registration (Registration). For the reasons that follow, we affirm.

         I. BACKGROUND

         Michael Giammarino (Giammarino) formed Sonic Services in 1988, and he is the corporation's sole owner. (Reproduced Record (R.R.) at 787.)[2] On August 10, 2016, the Board approved Sonic Services as a Registered Gaming Service Provider, thereby permitting Sonic Services to provide restaurant-related services to an affiliate of Parx Casino (Parx). (R.R. at 785.) Months after the Board made this approval, the Board's Bureau of Investigations and Enforcement (BIE) received information alleging that Sonic Services and/or Giammarino had ties to organized crime. (Id.) BIE investigated the veracity of the claims for a year, after which the Board's Office of Enforcement Counsel (OEC) filed an enforcement action seeking to revoke Sonic Services' Registration. (Id.) According to the enforcement action, BIE's investigation revealed that Sonic Services, through Giammarino, had associations with members of organized crime and, therefore, is not a suitable party for a registration pursuant to Section 1202(b)(23) of the Act, 4 Pa. C.S. § 1202(b)(23), and Sections 421a.1(h)-(i) and 421a.2(a)(4) of the Board's regulations, 58 Pa. Code §§ 421a.1(h)-(i) and 421a.2(a)(4). [3] (Id. at 7-8.)

         The Board's Office of Hearings and Appeals (OHA) conducted a hearing on this matter on May 15, 2018, after which Hearing Officer Jay Lantzy issued a Report and Recommendation (Recommended Report), concluding that OEC "failed to prove by a preponderance of the evidence that Giammarino's associations make Sonic Services unsuitable for a [r]egistration." (Id. at 697.) OEC filed exceptions to the Hearing Officer's Recommended Report, arguing that the evidence OEC presented clearly established that Giammarino's associations made Sonic Services unsuitable for a registration. (Id. at 786.) On October 31, 2018, at a public meeting before the Board, the Board permitted Sonic Services and OEC to present briefly their oral arguments concerning this matter. (Id. at 787.) During a public meeting on November 28, 2018, the Board voted to grant the relief requested in OEC's enforcement action and revoke Sonic Services' Registration. (Id. at 784.) On December 7, 2018, the Board issued findings of fact and conclusions of law in support of its adjudication. (Id. at 785-805.)

         The Board's relevant findings of fact reveal that in 1996, Giammarino's mother and Giammarino's stepfather, John Brescio (Brescio), reopened Lombardi's, a historic pizzeria located in the Little Italy section of New York City. (Id. at 787-88.) Lombardi's is owned by the corporate entity Pizza of 32 Spring Street, Inc. (Id. at 788.) Giammarino's mother was the sole shareholder of Pizza of 32 Spring Street, Inc. until her death. (Id.) Brescio is a reputed captain in the Genovese crime family with at least seven criminal convictions prior to 1986. (Id.) In making that finding, the Board relied, in part, upon testimony from an investigator for the Waterfront Commission of New York Harbor that Brescio was, and continues to be, affiliated with organized crime. (Id.) From 1988 to 1998, Sonic Services only sold and installed security, intercom, telephone, and music systems. (Id. at 787.) In 1998, Giammarino transitioned Sonic Services away from selling and installing technological systems and into the restaurant industry by opening a second Lombardi's location in Philadelphia. (Id. at 788.) In 2004, Giammarino closed the Lombardi's in Philadelphia and began managing the New York location. (Id.)

         In 2011, Giammarino's mother died intestate, leaving ownership in Pizza of 32 Spring Street, Inc. to Brescio. (Id. at 789.) The next year, Brescio transferred his ownership of Pizza of 32 Spring Street, Inc. to JBJV Trust (Trust), which is now the sole shareholder of Pizza of 32 Spring Street, Inc. (Id.) In forming the trust, Brescio named Giammarino as the sole beneficiary. (Id.) Brescio retained the power to appoint additional beneficiaries and replace the trust protector, who, under the terms of the Trust, may replace the trustee and veto investment decisions. (Id.) Furthermore, the trustee must obtain approval from the trust protector for investments larger than $15, 000. (Id.) Peter Cordua, who has served as Giammarino's accountant and as the accountant for Pizza of 32 Spring Street, Inc., is the sole trustee for the Trust. (Id.) Giammarino also serves as the President of Pizza of 32 Spring Street, Inc. (Id.) After transferring his ownership interest in Pizza of 32 Spring Street, Inc., Brescio represented to the media that he owned Lombardi's. (Id.) Lombardi's employees also named Brescio as the owner of Lombardi's in a lawsuit against the pizzeria in 2006. (Id.)

         In 2014, Parx officials became interested in adding new dining options to their casino and met with Joseph DeSimone (DeSimone), a frequent customer at the casino, to discuss DeSimone's contacts in New York City's restaurant industry. (Id. at 790.) Unbeknownst to Parx officials at the time, DeSimone had multiple criminal convictions, was a reputed member of the Bruno/Scarfo crime family, and went by the street name "Joe Fudge." (Id.) Paul Greco, the General Manager of Parx, introduced DeSimone to the other Parx officials. (Id.) DeSimone later introduced the Parx officials to John DeLutro (DeLutro), who owned Caffé Palermo, a pastry shop in the Little Italy section of New York City. (Id.) Weeks later, the Parx officials travelled to Caffé Palermo to meet with DeLutro. (Id.) After the meeting, DeLutro took the officials to Lombardi's where Brescio gave the officials a tour of the restaurant and served them pizzas. (Id.) Based on the success of the meetings, the Parx officials decided to offer Caffé Palermo and Lombardi's the opportunity to set up establishments at the casino. (Id.) Chief Executive Officer for Parx, Anthony Ricci (Ricci), contacted DeLutro to express interest in having Caffé Palermo and Lombardi's on site at Parx's casino. (Id.) DeLutro expressed Ricci's interest to Giammarino, who managed the Lombardi's in New York City, and Giammarino expressed that he had no interest in having a close business relationship with DeLutro. (Id. at 791.) DeLutro and Giammarino were acquainted with each other since they operated businesses near to each other in Little Italy, but, according to Giammarino, the two men only had approximately six interactions with each other throughout their years of acquaintance. (Id.) Parx soon after discovered that DeLutro had two drug-related criminal convictions, was a reputed member of the Gambino crime family, and was known by his street name "Baby John." (Id.) After learning of DeLutro's criminal history, Parx no longer had interest in any business dealings with DeLutro or Caffé Palermo. (Id.)

         DeSimone and Giammarino met, apparently for the first time, in 2015. (Id. at 792.) At that time, DeSimone informed Giammarino that the Parx officials were still interested in having Lombardi's at their casino and offered to set up a meeting between Giammarino and the officials. (Id.) At that time, Giammarino operated three pizzerias: two Gennaro's Tomato Pie locations in Philadelphia and Lombardi's in New York City. (Id.) That same year-in 2015-DeSimone introduced Giammarino to Parx's General Manager, Paul Greco, after which Giammarino and Parx entered into business negotiations in order to place a Lombardi's location at the casino. (Id.) During the negotiations, Giammarino expressed that DeSimone would not be his business partner in the enterprise but that he would pay DeSimone a finder's fee. (Id.) On April 28, 2016, Sonic Services contracted with Parx to assist in establishing a pizzeria at the casino. (Id.) According to the agreement, Parx staff would run the pizzeria and Sonic Services, through Giammarino, would aid in design, management, recipes, recruitment, and other related services. (Id.) Subsequently, on February 1, 2017, Pizza of 32 Spring Street, Inc. entered into a consulting and marketing agreement with Brescio's entity, F&J Solutions. (Id.)

         On December 21, 2017, after BIE received information concerning Giammarino's alleged ties to organized crime and after conducting a year-long investigation into those claims, OEC filed its enforcement action. (Id. at 794.) As a result of OEC's filing, Parx officials evicted DeSimone from its establishment, terminated its agreement with Sonic Services, paid to Sonic Services $155, 000 for, inter alia, services rendered, and returned all artwork or images related to Lombardi's that Sonic Services had loaned to Parx pursuant to its agreement with Sonic Services. (Id.) On February 20, 2018, Giammarino, through Pizza of 32 Spring Street, Inc., terminated the consulting and marketing agreement with Brescio's entity, F&J Solutions. (Id.) The next month, on March 13, 2018, Brescio irrevocably relinquished all retained rights related to the Trust. (Id.)

         On May 25, 2018, at the hearing before the Hearing Officer, Giammarino testified that his interactions with Brescio, his stepfather, have been very limited since his mother's death. (Id. at 793.) Brescio also had no role in managing Lombardi's since Giammarino took over managing the pizzeria in 2004. (Id.) When asked why Brescio would hold himself out to be the owner of Lombardi's, Giammarino stated: "I mean, my wife says she's the owner of my business. My son says the same thing. I said the same thing about [the] New York [location] even before I was in this position. We're a family. I mean, people - you know, people - you're proud. You brag." (Id.) Giammarino later admitted that he allowed Brescio to "handle the media" for Lombardi's. (Id.) Brescio, however, had no part in the agreement between Sonic Services and Parx. (Id.) Thereafter, at the October 31, 2018 public meeting before the Board, Giammarino opted to address the Board personally instead of permitting his counsel to present oral argument. (Id.) In doing so, Giammarino stated, in relevant part:

ii. "In 2004, my mother wanted to retire and my stepfather . . . at the time was having some trouble with his heart and they asked me to take the place over."
iii. "I took the place over and the only thing that I let [Brescio] . . . continue to do was handle media which is something he did during the whole time that he was there."
iv. "In 2011, my mother passed away, I then became President of [Pizza of 32 Spring Street, Inc.] and I continued with that same relationship with him . . . in a more of like a part-time few hours a month type relationship."
. . . .
vi. "He had no managerial duties, nothing at all. It was just these-these media appearances because that was what he was doing over the years."
. . . .
ii. "I don't socialize with the guy. I don't have any business dealings with him, all I do is go to work and I run the business."
. . . .
iv. "[The association with m]y stepfather was the only one that's ...

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