Pokie Trust Licence suspended

Gaming machines operated by Grassroots Trust in 21 pubs* will shut down for 16 days after the society failed to comply with gambling laws. This penalty is the most severe suspension that a class 4 gambling society has faced.

Internal Affairs’ Gambling Compliance Director, Debbie Despard, said Grassroots was sanctioned for breaches in the financial year ending March 2010 – failing to distribute a minimum of 37.12 pc of gaming machine proceeds to authorised purposes, a shortfall of $561,482 and overpaying venue expenses by$79,359.

The Department initially decided to cancel Grassroots’ licence in December 2011 after an audit revealed compliance breaches. Grassroots was entitled to continue operating while it appealed the decision to the Gambling Commission and sought a judicial review in the High Court.

The Department's dealings with the trust led to a negotiated outcome which will result in higher compliance expectations and more money to the community.  In bringing about a resolution the trust has agreed to licence conditions that require it to distribute a minimum of 40 per cent of gaming machine profit to the community and to limit the expenses it pays to its venues in a year to 14.5 per cent of GMP, rather than the statutory cap of 16 per cent.

As part of the negotiated outcome Grassroots is withdrawing the High Court action and its appeal to the Gambling Commission and the Department is withdrawing the licence cancellation.

Debbie Despard, said the community will ultimately benefit because Grassroots will provide more funds for grant distribution. The trust also committed itself to be a best-practice operator and to improving its funding practices to better target community need.

While some pubs may see themselves as being punished for a society’s misdemeanour, Debbie Despard urged venue operators to exercise caution in entering into an agreement with a society to operate gaming machines in their pubs.  Venue operators should be aware that they cannot receive any benefit from class 4 operators, other than reimbursement that is actual, reasonable and necessary. They should enquire about a society's compliance when choosing their class 4 operator, including where that society directs its grants and whether grant funding stays in the local community.

“We are satisfied that Grassroots has taken an appropriate response to the compliance issues.  High expectations for the future have been set, and the trust has already shown signs of improving its performance.  The successful end to negotiations shows the Department is prepared to be flexible in order to maximise benefits for the community.  

“Gaming trusts exist to maximise gaming machine proceeds to the community and ultimately the community will benefit from the commitments that Grassroots has made.”

Auckland gets Waikato and BOP Gambling Proceeds

   A pokies trust which earns nearly half its proceeds from Waikato and Bay of Plenty gamblers is giving most of its grants to  groups in Auckland,  Green Party gambling spokesperson Denise Roche has revealed.

   An analysis of data provided by pokie trusts reveals Nautilus Trust owns pokies in pubs throughout the Waikato and the Bay of Plenty as well as Auckland, but 98 per cent of the grant funds are distributed to Auckland groups - many of them sports organisations  

   "The Waikato and Bay of Plenty have 44% of Nautilus' 154 pokie machines, but only receive 1.4% of Nautilus' grants," Ms Roche said.

   "This shows the urgent need for a different system of pokies funds distribution which ensures that the harm caused to communities by gambling is at least partly rectified by ensuring grant funding is returned to the same community.

   "Maori Party MP Te Ururoa Flavell's Gambling Harm Reduction Bill, which the Green Party has supported through its first reading in Parliament, will deliver a fairer distribution system and is a good start towards pokie reform.

   "It would ensure at least 80% of the grant funding available from pokie profits is returned to the area they are collected from. The Nautilus case demonstrates exactly why that kind of guarantee is necessary.

   "Out of the total 229 grants that Nautilus made, only eight Waikato groups received funding. The rest went to Auckland,” said Ms Roche.

   "Bay of Plenty groups didn't apply for funding so didn't get any. But funds were still taken out of that community.

   "We need to be proactive to ensure pokie funds do not get siphoned from poor communities into wealthier ones, which is a situation we've seen time and again under the current distribution model," Ms Roche said.

Hamilton City Council votes to support Bill

   By a vote of 10-2, Hamilton City Council today, supported the thrust of the 'Flavell' Bill to remove pokie trusts from the role of distributing pokie machine profits, and place that job in the hands of a 'local, publicly-accountable, democratically selected entity'.

   Only the city's Mayor, and a Councillor with previous close links with the Waikato Rugby Union, opposed the move.

Mayor Hardaker supported pokie trusts

   The Council also supported the Bill's move to require at least 80% of pokie profits to be given back as grants to the local community, to improve gambling harm reduction measures, to give Councils power to license ALL pokie venues, not just new ones, and to end the practice of using pokie money to prop up race meeting prizemoney.
   At a meeting of the Council's Policy and Strategy Committee, discussion took place around the "rorts and ripoffs" associated with the pokie industry, with one Councillor describing his experience of dealing with pokie trust funding processes as being "close to corrupt."
  Evidence was given that Netball, with more players than Rugby Union, received only one quarter the amount of grants from pokie trusts, while sports and racing recieved 53% of all grants in the last year - greatly exceeding community and emergency services, or any other sector.
  Councillors were not convinced by industry 'scare tactics' suggesting that community and sporting groups would get less support under the Bill, and agreed that the current 40% return rate was pathetic, and "not balanced."

Pokie Rorts Must be Stopped - Dominion Editorial

Graph sourced from Pub Charity 2011 Annual Accounts

   The gaming industry has been quick to highlight the glaring flaw in Maori Party MP Te Ururoa Flavell's legislative attempt to tame the pokie machine wild west.

   Requiring the industry to distribute 80 per cent of pokie profits back into the communities in which the machines are located would shave about $280 million off tax revenue and render the industry uneconomic.

   Presently just 37 per cent of machine proceeds are distributed to the community. The remainder is split between the Government in the form of taxes and the industry in the form of rents, salaries, machine hire and administrative costs.

   However, the flaw in Mr Flavell's gambling bill is easily remedied. The number 80 can be changed at the stroke of a pen. Neither Mr Flavell nor other parliamentarians should allow themselves to be dissuaded by the industry's campaign against the bill.

   When it comes to its own affairs, the industry has shown itself to be an unreliable witness. Commitments made are broken; laws and regulations are flouted.

   According to a report prepared last year by the former chief executive of the Charity Gaming Association, Francis Wevers, more than half of the country's gaming machine operators have been sanctioned by the Internal Affairs Department for breaching their legal and operating obligations.

   For five years Mr Wevers served as the industry's mouthpiece, defending it against external criticism while working internally to try to clean up its operations. In his report, prepared for Nathan Guy, a former internal affairs minister, he effectively admits he failed completely.

An industry that is supposed to operate for the benefit of the community is instead run for the benefit of the racing industry, some major sporting codes, pub owners, gaming machine manufacturers and the highly-paid staff of some gaming machine societies.

   Mr Wevers blames the "all pervasive and pernicious" corruption in the industry on its legislative environment. The incentives to engage in unlawful activity outweigh the consequences of getting caught.

   The harm caused by pokie machines is well documented. Gambling addictions devastate some communities. The supposed tradeoff is that those communities get funding for worthwhile projects.

   There is an element of truth to that. Many sports clubs and volunteer organisations have become almost totally dependent upon pokie machine funding. However, much of the money raised in poorer communities is distributed on the other, wealthier, side of town, and pubs and gaming machine trusts are inflating their costs to boost their bottom lines.

   The industry has been given ample time to get its house in order. It has failed to do so. It is time for lawmakers to take a hand. The business of operating pokie machines should be separated from the awarding of grants and operators should be held accountable for their failings. Mr Flavell's bill presents an opportunity to accomplish both objectives. His fellow parliamentarians should seize it.

- © Fairfax NZ News

Time to put the heat on pokie charities - Herald Editorial

   The scrutiny on poker machines and the damage they cause has never been more intense. Such has been the product of SkyCity's proposed convention centre deal and Maori Party MP Te Ururoa Flavell's Gambling Harm Reduction Bill, which passed its first reading in Parliament last month.In such circumstances, it might be expected that pokie charities would be doing everything possible to keep their noses clean. Not a bit of it, apparently. According to the Problem Gambling Foundation, they are using money meant for community projects to oppose Mr Flavell's bill. Such activity succeeds only in further undermining their position and adding weight to the legislation.

   It is easy to see why the gaming trusts strongly oppose the bill. Their very existence is threatened. It would strip power from the gaming trusts that dominate the pokie industry in pubs and clubs, placing the power to distribute the $300 million available to community groups in the hands of committees appointed by local councils. Further, 80 per cent of the poker machine proceeds would have to go back to the communities where the gambling took place.

   The latter aspect has much to commend it. At the moment, poorer communities suffer the consequences of this insidious and addictive form of gambling disproportionately. It makes sense that, as far as possible, the proceeds from pokies help those most harmed by them, rather than community groups, charities, schools and sports clubs in areas where they barely have a presence.         This may encourage the installation of more pokies in such suburbs. The relatively small number of users would, however, temper any such development. Equally, the 80 per cent threshold, rather than a dogmatic 100 per cent, provides flexibility in the distribution of money.

   It should be far harder to support the transfer of that distribution power from gaming trusts to local committees. Such an upheaval makes sense only if the pokie charities are not properly and fairly maximising returns to the community while minimising the harm caused by pokies.

Unfortunately, they are erring in rather too many cases. Two years ago, the Internal Affairs Department suggested that 30 of the country's 50 gambling trusts had "issues of non-compliance" similar to those of the Trusts Charitable Foundation, which paid more than $500,000 to one of its trustees to sign up new pokie venues.

   There has also been discontent over the vast sums going from poker machines to trotting clubs in a way that has raised questions of conflict of interest. In 2009, three trusts were banned from giving any more money to four trotting clubs after their grants to them soared from less than $500,000 a year to $5.4 million over two years.

   Issues of transparency and non-compliance raised by these episodes have been compounded by the money apparently being used to oppose Mr Flavell's bill. Rules governed by the Internal Affairs Department stipulate that pokie proceeds should be spent on reasonable and necessary purposes. It is difficult to see how this spending qualifies. Ethically, it is certainly unsustainable. Money meant to be returned to community groups or to fund harm minimisation measures is being used unconscionably.

   It hardly helps that the Pub Charity Incorporated chief executive insists that the harm caused by pokies is overstated. An abundance of research suggests this is far from so.

The pokie charities' behaviour is self-destructive. It may be all the more reckless given that parties should, by convention, allow their MPs a conscience vote on gambling issues. They will have only themselves to blame if Mr Flavell's bill gains far more traction than initially seemed likely.

Northland communities short-changed by 'Pokie Trusts'

Denise Roche MP

Community and sporting groups in Northland stand to benefit by nearly $10 million annually if a new Bill currently before Parliament is supported, Green Party gambling spokesperson Denise Roche said today.

The Gambling (Gambling Harm Reduction) Amendment Bill is a Private Members Bill put forward by MP Te Ururoa Flavell, which was supported by 85 votes to 7 at its first reading in April.  The Bill will require councils to set up independent committees to distribute funds from the pokie industry.

“Pokie trusts operating in Northland only return an average of 39% of the $26 million lost annually into their pokie machines back to the community,” said Ms Roche.

"The rest is used by the pokie trusts for admin costs, including directors' fees, or goes back to the government in GST and levies.

"The new Bill will change this situation, requiring a higher rate of return of 80% to the local community, or almost $21 million annually in Northland’s case.

“Pub Charity, one of the two largest pokie trusts in Northland, returned only just over the legal minimum of 37.12% of money lost in its pokie machines to community and sporting groups,” said Ms Roche.

"Pub Charity alone would have to hand over about $4 million extra a year to Northland groups if the Flavell Bill goes through.”

"Pokies are the most harmful form of gambling, but as we recognise they will be around for some time, it is vital that any benefits gained offset harm they cause in the communities affected.”

Ms Roche was also pleased that the proposed legislation would clamp down on pokie money being recycled into the gambling industry via donations to support horse-racing and would introduce systems on pokie machines designed to reduce addiction problems.

Submissions on the Gambling (Gambling Harm Reduction) Amendment Bill to the Commerce Select Committee close on 21 June, with hearings expected to be around August. The Green Party supports the Bill.

Pokies and Porkies

Te Ururoa Flavell MP

Am I the only one who thinks folks from the pokie trusts have been telling a load of porkies lately, in their desperate attempts to get public opinion on side?Te Ururoa Flavell’s Gambling Harm Reduction Bill certainly seems to have caused a flurry of lobbying – with Pub Charity and the Lion Foundation, two of the largest trusts, doing much of the lobbying.
In the last week they’ve:
- Emailed thousands of community organisations who are grant recipients, asking them to make submissions opposing the Bill
- Launched a website called Ban the Bill
- Spent tens of thousands of dollars on a 12-page insert in the weekend papers promoting their organisation’s role in the community.
From what I can see, however, all this activity does seem to be based on self-interest, rather than in the best interests of the community.
The Bill, which passed First Reading with a massive 85 votes in favour, with 7 votes opposed, would do away with these self-appointed pokie trusts. They would be replaced with local distribution committees set up by councils, in much the same way the Government’s Creative NZ Fund is currently managed.
Under current law, these trusts are only required to redistribute about 37% of pokie machine takings back to the community. So only about $240 million annually from pokie machine losses goes back to communities. The rest is split between Government levies and the well over $100 million which goes towards the trusts’ own administration costs.
This Bill increases the percentage of pokie machine takings which must be given back to the community to 80%. If the Bill becomes law, the DIA’s latest figures indicate that over $224 million in additional support would be sheeted back to the community in grants, or a total of about $464 million.
The Bill also requires new mandatory gambling addiction prevention measures on pokie machines – something problem gamblers desperately need.
All of this runs counter to what the industry’s saying in the media. Martin Cheer, CEO of Pub Charity, has claimed that the Bill would mean less money for the community. That’s ironic, given that his own outfit is short-changing community groups by nearly $28 million a year, returning only 37.7% of the $65 million currently lost via the pokie machines it owns. That’s one of the worst rates of return of any pokie trust. Mr Cheer ought to clean up his own backyard before criticising this Bill.
What there would be less money for is the expensive salaries and flash offices of the trustees and management in these self-appointed groups. And possibly less for professional rugby and other professional sports.
The reality is that communities are being ripped off by cronyism and rorts in the pokie industry. The funds consumed by the pokie trusts are enormous. The Green Party believes it’s time some transparency and accountability was brought to bear. That’s why we’re supporting Mr Flavell’s Bill.
Submissions to parliament’s Commerce Select Committee close 21 June; to make an online submission click here.
- Green Party MP Denise Roche