Corruption rife in pokie trusts system: Former director

Francis Wevers

[By David Fisher, NZ Herald]

   The former boss of the industry association representing pokie trusts says the system is corrupt and needs total reform.

   Former Community Gaming Association executive director Francis Wevers said the incentives to take advantage were too powerful. The result was "endemic non-compliance" and "corruption" in a business which had a turnover of $9 billion. About $850 million was distributed to the Government, the community and pokie trusts.

   The pokie trusts face extinction under a private member's bill brought by Maori Party MP Te Ururoa Flavell, which would strip the trusts of their powers and create a new system for distributing funding.

   His proposed bill creates a system where local government would distribute the cash with a focus on making grants to local organisations.

   The bill has led to pokie trusts organising a revolt among community and sporting organisations, using the spectre of disappearing funding.

   Mr Wevers said he believed a new system would lead to greater levels of funding going back to the community, though did not believe local government was the right conduit.

   He said the flaws in the current system gave the hospitality sector too much power, allowing host pubs to command too much of a share of pokie proceeds under threat of shifting allegiance to other gaming trusts.         "Right from the start, the hospitality sector has seen the requirement for money to go back to the community as an imposition."

   Mr Wevers said attempts to reform the industry failed as those involved "reverted to behaviour to maximise returns to venues" and trusts. "There were a whole of lot of people and lawyers assisting them who were looking at ways to avoid the law."

   He said trusts sought professional advice to create funding structures that worked around the law, arguing they were not forbidden by the rules. "What they were doing was corrupting the intent of Parliament."

   Mr Wevers said after leaving the CGA he had written a report highlighting the flaws in the industry which went to then-Internal Affairs minister Nathan Guy. He said there was a willingness to fix the system.

   In the report, he said more than half the pokie trusts were subject to sanctions by the Department of Internal Affairs after breaches of legal and operating obligations.

   Mr Wevers said sanctions were light and infrequent. They were seen as an "irritant rather than a disincentive" and "calculated as an affordable cost of business".

   He said it was critical Government found a solution because of the need for funding.

   "There are too many sports organisations that are so dependent on pokie money because they don't have any capacity to raise it any more from people who play the sports."

   Mr Wevers said eradicating pokie machines was not the solution; those who wanted to gamble would find furtive methods to indulge.

   He had made a submission to the select committee considering Mr Flavell's bill, recommending a new system for distributing cash. He believed it should be divided and tendered on a territorial basis with decisions based on those who offered the lowest level of expense and greatest return to the community.

   There also needed to be greater harm-minimisation measures, including swipe cards for players that recorded their level of gambling.

   A further measure he recommended - also in Mr Flavell's bill - was removal of the ability to fund racing stakes with pokie money. Gambling money being used as a gambling stake was "bizarre".

   Current CGA executive director Brian Corbett said he rejected Mr Wevers' views on pokie trusts but would not comment further.

   Internal Affairs Minister Chris Tremain, the third minister to hold the role in a year, refused to be interviewed. In a statement, he conceded "there may be wider concerns in the sector which need to be addressed".

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