The Department of Internal Affairs has welcomed a decision by the Gambling Commission which has found that a Blenheim based gaming machine society, Bluegrass Holdings Limited, obtained its licence to operate pokie machines by deception and that a decision to cancel its Class 4 operator’s licence was warranted.
The Commission’s decision, published today, 5 August 2014, comes after a two year protracted and complicated process between Bluegrass Holdings and the Department.
Internal Affairs’ Acting Director of Gambling Compliance, Raj Krishnan, says action was taken to cancel Bluegrass’s licence in July 2012 because of concerns about the suitability of Bluegrass’s operations including the actions of particular key individuals.
“Bluegrass’s deliberate and repeated efforts to deceive the Secretary were intolerable. There is no room for such behaviour in the gambling sector and we are pleased that those involved will now need to move on.
“We put a lot of effort into this case as we believe ensuring the integrity of the gambling sector is of great importance. Gaming machine societies exist to distribute funds for the community. Millions of dollars are involved and the utmost integrity is required,” says Mr Krishnan
The Gambling Commission found that Bluegrass provided false and misleading information to Internal Affairs about its funding, those involved in the society and the role of Blenheim man Mike O’Brien in particular.
Mike O’Brien is well-known in the harness racing community and is the son of Patrick O’Brien, former chairman of Harness Racing New Zealand and former chair of Bluegrass, which primarily provided grant money to the racing sector.
The Commission says documentary evidence indicates Mike O Brien “covertly exercised influence over the society’s grants and operation….” (Paragraph 66)
The Commission’s decision notes that the efforts to deceive the Department were repeated and took place from the time of Bluegrass’s initial application, through the investigation process and continued during the course of formal proceedings. The deceit stemmed from Bluegrass’s failure to advise the true source of funding to establish the society as well as the role of Mike O’Brien.
“It is unlikely that the Secretary [of Internal Affairs] would have granted the licence application if he had known either that the money had been advanced by Mike O’Brien or that its ultimate source was three racing clubs. The Appellant obtained its licence by providing materially false and misleading information to the Secretary.” (Paragraph 82)
The Commission also found there was evidence that Bluegrass was open to being influenced by its venue operators, contrary to the Gambling Act 2003 and it believed that allowing venue operators to exercise influence over grants was necessary to its survival. (Paragraph 65)
The Commission found the evidence of Bluegrass’s present chair, Blenheim electrician, Peter Gurr not to be sufficiently credible and compelling to remove the doubts as to Bluegrass’s suitability.
The Commission says the nature of the deception means it is appropriate for Bluegrass’s licence to be cancelled to “deter other applicants from similar attempts in the future”.
“The circumstances of the case illustrate that detection of this sort of deception is difficult and it is important therefore that the consequences following detection are sufficiently serious to prevent the operation of licensing regime being undermined by the provision of false or misleading information for the advantage of applicants.” (Paragraph 89)
Mr Krishnan says: “This type of behaviour detracts from the good work of many others who distribute pokie grants for the benefit of the community. We’d encourage operators to take close note of this decision and let it serve as a benchmark as to what is expected from them.
“This type of deceptive conduct and efforts to mislead are also captured in investigations presently being conducted by Internal Affairs, the Serious Fraud Office and Police.”
Bluegrass Holdings Ltd owns 144 gaming machines (pokies) at eight pubs around New Zealand.
“Internal Affairs is currently assessing the behaviour of the people who are responsible for the gaming machines at those venues. We have a duty to the wider community to ensure that venue operators are ethical and uphold the law. Whether those pubs will be allowed to continue operating pokies will depend on whether we are satisfied that all the relevant criteria are met,” says Mr Krishnan.
In accordance with the Commission’s decision the licence cancellation will come into effect on 18 August 2014.
Questions and Answers
1. What happens on 18 August to the pokie machines owned by Bluegrass?
Once Bluegrass’s licence to operate is cancelled on 18 August all its machines are turned off.
We’d expect the machines to be sold possibly to another gaming machine society. (See Q5 for further details)
2. Doesn’t this action mean less money will go into the community?
There is no evidence to suggest that overall gambling profits will decrease if the venues in question cease to offer gambling. Those who gamble at these venues are likely to simply gamble elsewhere if the venues lose their licences.
3. What happens to the money already collected from people gambling on the machines?
The Gambling Act (2003) specifies that once a society’s licence is cancelled the remaining net proceeds from its Class 4 gambling must be distributed to authorised purposes in the community within 20 working days, unless a further period is agreed to by the Secretary (for Internal Affairs).
Internal Affairs will be working with Bluegrass to ensure the correct distribution takes place.
4. What happens to the organisations which received money from Bluegrass last year?
No organisations which have had their funding applications already accepted by Bluegrass should lose out.
Bluegrass was set up to primarily distribute funds to the racing sector.
There is nothing to stop the racing clubs (or other community organisations) that received funds from Bluegrass from applying for pokie grants from other gaming machine societies, which are the organisations responsible for distributing the proceeds from gaming machines to the community.
5. What happens to the eight pubs which have Bluegrass machines? Can they transfer to another society?
Yes they can, however this requires a fresh licence application to be made to the Department for each venue, and we will assess each application on a case by case basis. We will assess in detail both the behaviour of the venues and the history of compliance of the societies applying to take the venues on. We have a duty to the wider community to ensure that the operators in the gambling sector are ethical and uphold the law.
Each time the Secretary (of Internal Affairs) makes an approval decision in respect of an application by a society to take on a new venue, he must be satisfied of both the venue’s ability and the society’s ability to operate in a compliant fashion. We will not grant a venue application until we have worked through the enquiries we need to make to be sure that these venues and societies are compliant in all respects.
It should be noted a recent decision by the Gambling Commission emphasises that the onus is on the applicant society to satisfy Internal Affairs that the relevant criteria are met.
6. Does the action of DIA mean that those pubs will go under?
If a venue is compliant with the law and aligns with a compliant gaming machine society, then there is no reason why is should not continue to be able to operate pokie machines.
We should point out that pubs host pokie machines voluntarily, and when they do, they are only able to recover the cost associated with hosting those machines, up to a limit. The Gambling Act did not intend for pubs to make profits from hosting pokie machines. Therefore, if these venues are dependent on the money from pokies for their survival something is wrong with the underlying viability of the venue
7. Does this action mean that those involved in Bluegrass will never be able to operate in the pokie sector again?
Yes, it is our intention to ensure the integrity of a sector which generates approximately $800 million per annum in turnover. Given the large amount of funding generated by gambling the highest levels of sector integrity are vital to make sure that the community doesn’t lose out on much needed grant money, and that those in the sector, who comply and do the right thing, aren’t undermined.
Our recent actions demonstrate that we will detect unlawful and dishonest behaviour, and take whatever action necessary to reduce and eliminate non-compliance.
New Zealand Department Of Internal Affairs