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While denouncing a state prison guard's public display of a Nazi flag as "reprehensible," New York's top court refused Tuesday to overturn an arbitrator's order that he be reinstated in his job.

State officials claim Edward Kuhnel's flying of the flag on the front porch of his home threatened to touch off racial violence in the prisons, where inmates are mostly nonwhite, and had sought to fire the veteran guard.

In its 7-0 decision upholding lower-court rulings, the State Court of Appeals said, "As abhorrent as Kuhnel's personal conduct is, judges cannot reject the factual findings of an arbitrator simply because they do not agree with them."

In the wake of the ruling, Michael McKeon, a spokesman for Gov. George E. Pataki, said: "The governor believes it's absolutely absurd to allow this type of hate-mongering in our prison system. We're going to look at legislative and administrative remedies."

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