The new Republican-appointed directors of Nassau's off-track betting agency Tuesday moved to replace its $198,000 Democratic president with a longtime GOP operative who had been disbarred in the mid-'90s for diverting client funds to his own use.

But the OTB counsel said the three directors do not have the legal power to appoint Joseph Cairo president of Nassau Downs until the State Racing and Wagering Board approves their appointments.

Dianne Malone, counsel to OTB president Dino Amoroso, said the state board also must approve any officers hired, such as Cairo, after "a background check into his fitness and character to run a multimillion-dollar gambling enterprise." The state board is controlled by Democrats.

Joe Mahoney, a state board spokesman, said its review would be done "as rapid as possible" but would not give a timetable. "It's an activity that involves gambling so you want to make sure there is integrity throughout the system," he said, adding that the board has rejected appointees in the past.

Although Cairo and the directors' attorney, Christopher Ostuni, did not return calls, sources say the issue will likely land in court as early as Wednesday.

Cairo, 64, top lieutenant to Nassau GOP chairman Joseph Mondello, was disbarred in 1994 after he gave up his law license and acknowledged diverting $395,000 in client funds. The Appellate Division cited "evidence of misappropriations from additional clients' trust funds," and Newsday subsequently reported he diverted at least $900,000. He also had hundreds of dollars in court judgments and tax liens.

The longtime North Valley Stream Republican leader was readmitted to the bar in January 2007 and all tax liens have been satisfied, records show. He also has raised tens of thousands of dollars to fight cancer through a charitable foundation named after his late wife.

Republican County Executive Edward Mangano, whose campaign last year was bolstered by Cairo workers gathering petitions for a "Tax Revolt" ballot line, said: "The outgoing OTB administration ran the operation into the ground. Its profit to the county dropped from $16 million in 2003 to an embarrassing $5.3 million this year. I am confident Joe Cairo will reverse this disappointing trend."

Cairo's new job is the latest to raise questions since Mangano took office in January. "Ed Mangano's so-called second-chance administration is becoming more and more clearly a second-rate administration," said Legis. Wayne Wink (D-Roslyn). "Those without a record or tax liens need not apply."

Nassau's OTB has long been a source of patronage for the controlling political party. The county's new Republican legislative majority appointed the three new board members on Jan. 25. They are Republicans Joseph Bentivegna and Frank DeStefano, and Independence Party member Eric Harkin.

Through Ostuni, who is Mondello's son-in-law, the three hand-delivered a letter to Malone yesterday announcing Cairo's appointment "effective immediately." Ostuni, counsel to presiding officer Peter Schmitt (R-Massapequa), is working "provisionally" for the new directors.

Malone said OTB did not get notice of the three members' appointments until Feb. 24 and had just sent that information to the state.

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