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‘It fundamentally changed the social fabric of NSW’: How clubs got hooked on pokies
Once they were modest affairs, but now they are Taj Mahals with a dark underbelly.
Gaming room at the Campbelltown Catholic Club.Credit: Louise Kennerley
When Campbelltown Catholic Club opens its doors to customers at 10 each morning, Mary Medina is usually among a small group of regulars waiting outside. She comes in by bus, sometimes as early as 7am, to make sure she gets her favourite table at the 11 o’clock bingo.
As the doors slide open, she hurries through a resort-style foyer with a high roof, white mosaic floor, potted figs and the names of the founding members immortalised on slender wooden poles along the wall. This week, the club is raffling off a VW T-Cross, which is tantalisingly parked behind the reception desk.
“It’s like walking into one of those really classy hotels and even the staff, you can have a joke with them or whatever,” Medina says. “They’re like family, the staff. It’s like you’re going to a really good party with your family.”
The bingo tables are at the back of the building, past a bright cafe and adjacent to the gaming room. Perhaps afterwards she will have a flutter on one of the 514 poker machines that gleam across the way.
Bingo players Mary Medina and Matthew Hill at the Campbelltown Catholic Club.Credit: Louise Kennerley
Many clubs keep their gaming machines in windowless rooms where the passing of time cannot be gauged. But the Catholic club’s gaming room is flooded with natural light. It has reached an uneasy truce with its moral conscience on gaming machines. Poker machines, after all, are legal. The club spends above and beyond the amount that is required to be donated to the community to qualify for tax concessions. Since it was built in 1968 to raise money for local Catholic schools, it has become an intrinsic part of the Macarthur community: as an employer, an entertainment hub and a second home for the lonely.
It is no secret that the success of this club and others like it was built on their customers’ losses on poker machines. This is the bargain that the clubs have struck with the devil, and the central conundrum of the industry.
Clubs drew an average 61 per cent of their revenue from gaming when the Productivity Commission last measured in 2010. The figure is as high as 91 per cent at Canterbury Leagues Club and 81 per cent at Mount Pritchard and District Community Club (Mounties), according to their latest annual reports. Like an adulterous spouse who does not want to break off an affair, clubs have justified their reliance on problem gamblers with a combination of downplaying, rationalising and compensating for their harms.
But the NSW Crime Commission last month exposed clubs’ reliance on a different type of problem gambler – the money launderer – in a way that has proved more difficult to justify. Estimating that “billions” of the $95 billion annual poker machine turnover in pubs and clubs is the proceeds of crime, the commission recommended the introduction of a mandatory cashless card to track suspect transactions.
It was a finding and recommendation that few in the industry wanted to hear, and landed like dynamite in NSW parliament. Premier Dominic Perrottet says he is determined to adopt the recommendation, but his colleagues in the National Party do not support it, and the Coalition is inching towards a showdown. Peak lobby group ClubsNSW is vociferously opposed to the measure, with its pugnacious chief executive Josh Landis declaring it would treat everyone like criminals.
Senior minister Rob Stokes delivered a stinging attack on the clubs’ reliance on poker machines on Wednesday, declaring that gambling losses entrenched disadvantage and inequality. “We cannot hide from an uncomfortable truth – that human misery is a lifeblood for many NSW clubs,” he said.
He also took aim at Labor, which has tried to stay out of the debate. “The premier has shown true leadership ... Contrast this with the leader of the opposition, who squibbed his chance to join a bipartisan push for action,” he said.
Illegal slot machines, colloquially known as “one-armed bandits”, existed in clubs as early as 1880, but the authorities were inclined to turn a blind eye to them until their rivals in the hotels industry sent a delegation to parliament in 1956 to demand a crackdown.
The postwar years had witnessed a boom in clubs of every variety. From golfers to bowlers, trade unionists to yachtsmen, the descendants of pioneers to students of Czech culture, they gathered in disused church halls and tin sheds, offering affordable entertainment to people living among the regions and in the vast housing estates on city fringe. Without poker machines the hotels could not compete.
It was a hand-wringing moment, and the antecedents of the current debate were voiced in the chambers of parliament. “If clubs cannot exist without the aid of returns from gambling, I fail to understand why the government should legalise gambling for their benefit,” Liberal MP Frederick Hewitt told the house.
Foyer of the Campbelltown Catholic Club reminds patron Mary Medina of a fancy hotel.Credit: Louise Kennerley
But many clubs were run by ex-servicemen, to whom the government was generally sympathetic, and the connections between the clubs industry and members of parliament ran deep even then. Instead of de-licensing the clubs as the hotels wanted, the government legalised their poker machines.
“The effect was dramatic,” says Nick Hartgerink, who co-authored a history of the clubs movement in 2009. “Clubs went from being little scout halls to the Taj Mahal. In half a decade the whole thing changed completely.”
Clubs offered activities such as darts, bowls, cribbage and billiards, and the influx of revenue was invested in live entertainment and restaurants that were previously accessible only to the socially elite. And at a time when hotels still separated women into separate lounge rooms, it was possible in clubs for men and women to dine together.
“It fundamentally changed the social fabric of NSW, and it’s all on the back of poker machines,” Hartgerink says.
But the more the clubs expanded, the greater became their cost bases, which they tended to cover with more poker machines. With the advent of electronic gaming machines, vastly greater amounts of money began to be ploughed into the machines. And as the clubs became increasingly reliant on their machines, state governments saw a potential new revenue stream and began to impose taxes on which they also came to depend.
The relationships between individual politicians and their local clubs were usually cosy. The community-minded people who sat on club boards were the same people who stood for local council. Labor Party branches formed workers’ clubs, which became part of their power base.
“It’s like a home away from home”: Player Barry Brennon loves the Campbelltown club.Credit: Louise Kennerley
And while hotels operated under strict regulations, the clubs continued to enjoy favourable operating conditions. In the 1950s these included longer trading hours and the ability to trade liquor without providing accommodation. Later, they extended to tax concessions, the ability to install 150 machines on green fields sites without paying compensation to the community, and legislation that stopped councils from taking poker machines into account when deliberating on development applications. (The minister responsible for the gaming portfolio when the later amendment was drafted was later found by the Independent Commission Against Corruption to have used parliamentary staff to set up a personal gaming consultancy when he was still in office.)
Stu Cameron, the chief executive of Wesley Mission, says these clauses undermine the harm minimisation objectives of the Gaming Machines Act. “It’s almost as if the industry wrote the legislation,” he says.
“How have we come to the point when authorities in NSW are so blinkered by the industry that they think a new club has to start business with 150 poker machines, when in the rest of the world they have zero machines? How and why have councils been pushed out of the planning process when it comes to poker machines in their communities?”
When individual politicians tried to rein back the advance of poker machines, the parties were invariably hamstrung by MPs in marginal seats who were afraid to antagonise the behemoth that the clubs industry had become. The Nationals and Labor have stopped short of supporting the Crime Commission’s recommendation for a mandatory cashless card, saying they wanted to work with industry.
Monash University gaming professor Charles Livingstone says clubs’ reliance on pokies is partly due to technology that made the machines more profitable, but it is also an accident of history. “[Clubs] got huge legitimacy in the postwar period and that somehow managed to continue,” he says. “Now they are on a bucking bull and they don’t know how to get off it. I’m not suggesting we can cure it overnight, but they’ve got to be weaned off this stream of revenue.”
About 15 per cent of problem gamblers are responsible for 40 per cent of the money waged.
With cash limits of up to $10,000 able to be played on poker machines in NSW, there was another group who spied in them a commercial opportunity: money launderers.
A multi-agency sting operation led by Liquor and Gaming NSW over the three weeks after venues opened from lockdown last year identified $5.5 million worth of suspicious transactions, though the NSW Crime Commission report last month found at least some of this activity was related to legal jackpot chasing.
The commission found that money laundering through poker machines was “widespread and significant” and likely to be in the billions of dollars. Most of the dirty money was being gambled, rather than used to extract clean cash, both of which are defined as money laundering under the act, but it was unable to quantify the precise extent of either due to gaps in the data. Hence the need for a mandatory cashless card to track the movement of cash.
The clubs claim that a mandatory cashless card will impose an unnecessary burden on recreational players. But advocates of the card point out that criminals are unlikely to sign up to an opt-in system. The club that has agreed to trial an opt-in cashless card – Wests Newcastle – was identified in court this week as the location where a 29-year-old man allegedly fed $50 bills into a poker machine before printing a ticket to collect, the day after he allegedly robbed a nearby hotel.
Michael Lavorato, the chief executive of Campbelltown Catholic Club, does not support the recommendation for a cashless card. A 33-year veteran of the clubs industry with close-cropped hair and a boyish smile, Lavorato is proud of what he has built at Campbelltown. He took the Herald on a tour this week through the club’s gin bar and microbrewery, its five restaurants, the luxurious foyer of the Rydges Hotel that it owns and its award-winning fitness centre, AquaFit. Half a dozen women in swimming caps, mostly in their 60s, bob about the rehab pool with foam noodles. “That’s our demographic,” Lavorato says. He is proud of being able to provide this slick amenity to his community, and proud of the $33 million that the club has donated to local charities.
Campbelltown Catholic Club caters to its demographic with facilities such as its fitness centre.Credit: Louise Kennerley
Though the club ranks ninth in NSW for the sheer number of poker machines, its gaming room is not designed to attract high rollers; the average profit per machine is low, which Lavorato says is demonstrative of many people betting small amounts, rather than a few people betting a lot. He detects a sneering undertone to the antipathy displayed towards NSW clubs patrons, while racegoers at glamorous events such as the Melbourne Cup are given positive coverage – including by this masthead. “That patron is measured differently to the one who comes to a club.”
The club drew 67 per cent of its revenue from gaming last year, but the proportion got down to 57 per cent in 2017. The board wants to go below that.
“Sometimes I squirm uneasily about the debate and ‘can we do more?’ but I am comfortable with the fact that the board’s strategy is firmly in the sights of reducing our reliance on gaming.”
But he later ventures a commercial imperative to diversifying the club’s income stream: to make up for lost ground if tighter gaming regulations are introduced. He wants to prevent problem gamblers from entering the club and is running a small trial of facial recognition technology to see if it might help staff to identify them. But he feels vindicated by the Crime Commission’s finding that money laundering in clubs and hotels occurred predominantly among criminals gambling away their dirty cash, rather than cleaning it – and only adds when pressed that criminals are not welcome in his club, full stop.
He does not accept that his club makes the bulk of his revenue from problem gamblers and money launderers. He worries that a mandatory card would exclude casual gamblers from an activity they enjoy, and that staff might lose their jobs.
“We would grow much more slowly,” he says. “There would be an impact immediately on jobs because we couldn’t sustain 400 pay packets in a week. It would have a big impact on profitability and how much we could provide to community organisations.
“By far the majority of people playing the machines here are social, recreational punters. Why are we putting such a burden on that group? I think there’s a big proportion of people who just wouldn’t be bothered.”
Over in the gaming room, 84-year-old Barry Brennon is joshing with one of the staff about the prizes on offer this week. She asks if he’s going for the cash or the car. “Both,” he says. He loves the club, the people he meets there, the meat raffle, the pokies and the bistro. “It’s like a home away from home.” If the government mandated a cashless card, he says, he would stop playing. He points to the recent data hacks at Medibank and Optus.
“I’ll turn around and play bingo.”
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