THE JUSTICE system gave Craig Arno a break almost 30 years ago after he killed a woman while drag-racing in Philadelphia.

The victim's husband, Steve McNaughton, still remembers Arno as a teenager, cursing at him in court even when a judge sentenced him to just probation for killing his wife in 1981.

"He was arrogant. He had absolutely no remorse, but I figured, if anything, this kid had a chance to start over the right way," McNaughton said. "I thought he would fly straight."

That didn't happen.

Yesterday morning, Arno, 45, of Atlantic City, and Jessica Kisby, 24, of Egg Harbor Township, were arrested at a seedy motel just outside Atlantic City and charged with the carjacking and kidnapping of a North Jersey tourist inside the Trump Taj Mahal parking garage on May 21.

Arno's skin was "falling off" during the arrest, authorities said, because of burns he suffered while torching the victim's car.

Atlantic County Prosecutor Ted Housel said Martin Caballero, 47, of North Bergen, dropped his wife off at the Trump Taj Mahal at 10:30 that night, then went to park his Lincoln MKS in the parking garage. Housel alleged that Arno and Kisby, in his grandmother's silver Toyota, followed Caballero into the parking garage and approached him at the car.

Caballero hasn't been seen since.

Law-enforcement sources told the Daily News that blood was seen on the inside and outside of Caballero's Lincoln sometime before the car was set on fire early the next morning. Housel declined to comment on that information.

Neither suspect has been charged with murder and Housel begged the public to come forward with information regarding Caballero's whereabouts.

"Hopefully, hopefully, it will lead to the safe return of Mr. Caballero," he said.

Housel declined to elaborate on what, if any, altercation occurred, whether any weapons were recovered, or whether anything was caught on surveillance footage in the garage.

Both cars left the parking garage after the encounter and were driven around Atlantic City for about an hour, Housel said. Then Arno and Kisby traveled to a Wawa in May's Landing and a gas station in Pleasantville, where they purchased lighters, accelerant and $5 worth of gasoline in a container they borrowed from the gas station.

Authorities said that Arno was captured on surveillance video using Caballero's ATM card to make a $300 withdrawal at a Bank of America branch in Egg Harbor Township, Atlantic County, at 1 a.m. About 90 minutes later, both cars traveled to Gloucester Township, where Arno seriously burned himself while allegedly setting Caballero's Lincoln on fire behind the Democrat Club on Coles Road.

Housel also urged people to come forward if they have seen either car in the parking garage or traveling in Atlantic City, May's Landing or elsewhere.

Caballero was in Atlantic City on May 21 to celebrate his daughter's 22nd birthday at the casino. He was a manager of a Jersey City supermarket for almost 20 years.Arno was paroled from prison in New Jersey two months ago today, after serving a little more than two years on burglary charges. He also worked at a supermarket - for two days - before restarting his life of crime, a law-enforcement source said.

His grandmother sill lives in Atlantic City, authorities said.

Arno was in trouble with the law even before Oct. 12, 1981, when he slammed into Karen McNaughton's car while tearing down City Avenue. Out on bail, he was arrested again after eluding police on a motorcycle.

Controversy erupted over the murder case when a judge reduced the charges to manslaughter and sentenced Arno to five years' probation. He was sent to jail after he was caught driving while on probation.

In 1997, Arno pleaded guilty in federal court in Camden to depositing counterfeit checks, counterfeiting money, making false IDs, and possessing illegal guns and ammunition. He was sentenced to 70 months in prison.

In April 2006, he was charged in Atlantic City, while out on supervised released, with theft and using false identification. He was ordered to serve an additional 24 months in prison in July 2008.

He was also ordered to refrain from gambling, to join Gamblers Anonymous, and to add his name to New Jersey's self-exclusion list for casinos.

In July 2008, Kisby was charged with conspiracy, weapons possession and other offenses for driving a car that had been involved in a shooting in Egg Harbor Township.

Yesterday morning, Kisby and Arno were arrested at the Golden Key Motel, the same location where four prostitutes were found dead in 2006. Both suspects are being held on $400,000 bail.

McNaughton, now 55, said he never imagined that the same man who shattered his life decades ago would still be ruining lives today.

"I'm distraught that someone else had to go through this because we're not putting the bad guys away and keeping them there," he said. "I grieve for those people now."