Yeah i do believe he is running the family, you basically just took one sentence that suited your theory and left out the last part which goes against it. The way I intepreted that is the man is saying Merlino was the head of the family at the time of his conviction and that calling his encounters with members and associates as chance encounters is laughable is that he is still involved with Cosa Nostra and is the boss of his family. Why would he risk meeting with members and associates of Cosa Nostra while on parole if he wasn't involved. But everyone is entitled to there own opinion, time will tell.