The Department of Internal Affairs

Te Tari Taiwhenua | Department of Internal Affairs

Building a safe, prosperous and respected nation


Pokie operators to suspend business

5 May 2010

Gaming machine societies in more than 1100 pubs across the country have been told clearly by the Gambling Commission they cannot use pokie money to compete with one another for desirable venues or for unnecessary entertainment expenditure, Internal Affairs Gambling Compliance Director, Mike Hill said today.

He welcomed the Commission’s announcement that it has upheld decisions by the Secretary of Internal Affairs to suspend the licence of The Southern Trust (TST) for five days and increased the licence suspension of The Trusts Charitable Foundation (TTCF) from two days to six. TST has 89 venues with 954 gaming machines and TTCF, 74 venues with 893 pokies. The suspensions must occur within a month of today’s decision.

“Since the Act took effect in 2004 the Department has made strenuous efforts to change unlawful behaviour within the sector,” Mike Hill said. “We have moved from education and persuasion to a more punitive approach with the sector challenging us all the way.

“As the Commission rightly points out, gambling societies are not commercial ventures but exist to hold licences and conduct gambling to raise money for distribution to community purposes. Many societies seem to have lost sight of the fact that that’s why they exist in the first place and their boards are obliged to ensure that they comply with Act.

“It is gratifying that the Commission supports our decisions and expects us to ‘diligently investigate’ similar breaches by other societies and punish accordingly. We are meeting that expectation.”

The Commission said that “consistency of enforcement and treatment is necessary both to do justice between societies and to bring the use of improper practices in a competitive environment to an end.”
The conduct complained of in both appeals was widespread in the Class 4 sector and the decisions have significant implications for gambling operators, the Commission said.

The Trusts Charitable Foundation’s suspension arose from the payment of about $468,000 in fees and expenses to a company operated by one of the trustees to persuade desirable venues to sign with the foundation rather than other societies. This was in addition to the trustee’s annual honorarium of $20,250. Trustees also spent $18,000 on entertainment over less than two years.

“Expenditure which has the purpose simply of securing new venues from other societies does not fall within what is excluded from net proceeds,” the Commission said. “As a result, expenditure on competition for venues between societies cannot be funded by gambling machine proceeds and the scope of competitive activity by all societies is accordingly constrained.

“Entertainment expenditure is subject to the same restrictions and to the obligation to maximise net proceeds and minimise costs. In this case, the Foundation had wrongly proceeded on the basis that its spending was largely a matter of its own commercial discretion.”

The Commission suspended TTCF’s licence for six days to bring it into line with other suspensions involving considerably smaller amounts.

The Department suspended Southern Trust’s licence for five days for spending approximately $190,000 on four venues and for paying $40,000 in brokerage fees for securing agreements with a venue operator covering two venues and for failing to take sufficient steps to disconnect machines after late banking.

The Commission did not uphold the ground related to late banking but found the expenditure on venue upgrades was both a breach of limits set by regulation and a failure to limit expenditure to what was reasonable and necessary and to minimise costs.

“Using gaming machine proceeds to carry out capital expenditure on venues owned by others confers a cash flow or interest benefit on venue operators at the expense of the community,” the Commission commented.

Media contact:

Trevor Henry, communications adviser, Department of Internal Affairs
Ph 04 495 7211; cell 0275 843 679