Gaming machines shut down

17 July 2012

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 being made available 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.”

Media contact:
Trevor Henry, senior communications adviser, Department of Internal Affairs
Ph 04 495 7211; cell 021 245 8642

*Grassroots venues are in the Bay of Plenty, Waikato and Auckland