CHARLES LIVINGSTONE. Crown Casino -Too big to regulate?

Apr 30, 2018

Last week, the Victorian Commission for Gambling and Liquor Regulation imposed a record fine, of $300,000, on Crown Casino. The fine, and a letter of censure, were imposed following revelations that Crown employees had ‘tampered’ with electronic gambling machines (EGMs, also known as pokies) by removing buttons from some of them. The effect of this was to reduce the available betting options, encouraging gamblers to bet more than they may have intended. Crown denied this was ‘deliberate’, blaming the unauthorized actions of a group of employees; and disputed whether it breached regulations. Nonetheless, in a statement, they copped the penalty.

As well they might. As a proportion of Crown’s revenue, it’s miniscule – Crown made $1.2 billion from main floor gambling in 2017, most of it from the pokies. Globally, most casino revenue comes from the ‘grind’ – locals using EGMs. Crown is no different, with an estimated $750 million p.a. in revenue derived from its 2,628 pokies. On that basis, the ‘record fine’ comes to 0.04% of pokie revenue. A flea bite at best.

When the allegations were first aired publicly, after former Crown employees blew the whistle, Crown vehemently denied the claims. Since then, further whistleblowers have come forward, claiming that Crown issued multiple loyalty cards to patrons (allowing them to claim loyalty points whilst using multiple pokies simultaneously), and provided them with ‘picks’, small shims that jammed buttons down, allowing pokies to operate automatically (which in other venues is strictly prohibited). Not, however, at Crown. Provisions of the Casino Control Act allow the casino to suspend the limitations imposed on other pokie operators.

Crown usually escapes such provisions, whatever their nature. ATMs have been outlawed in Victorian pokie venues since 2012. Not at Crown. Smoking areas have to be naturally ventilated at other pokie venues. Not at Crown. Pokies are limited to $5 per spin in Victorian pokie venues. Not at Crown.

In 2016, the Victorian Auditor-General had a look at the way the VCGLR regulates gambling. It was not impressed. Amongst a host of findings, the A-G concluded (amongst other findings) that VCGLR’s ‘… compliance division has not applied a level of focus on the casino that reflects its status and risk as the largest gaming venue in the state. As a result, VCGLR has not given enough attention to key risks in the casino’s operations.’

Amongst the original claims made by whistleblowers were allegations of money laundering, undertaken with the knowledge of casino staff. The Auditor General’s report found that

VCGLR has a standard audit program on the risks of money laundering associated with gaming by premium players at the casino. However, this audit has only been conducted three times since VCGLR was established in 2012 due to a lack of staff with enough knowledge to conduct it.

Risks of criminal activity at any casino are significant. That the A-G reported the VCGLR’s inability to exercise regular scrutiny over a key aspect of this is remarkable.

VCGLR’s issues are at least in part associated with a lack of resources. There is, however, the more pressing perception – and perhaps the reality – that Crown is too big to be effectively regulated. Big, flashy, centrally located and closely connected to one of Australia’s most powerful families, it often looks like Crown and Packer family is in a position to dictate to governments how things should be done. It’s one rule for everyone else, and another for Crown. Or so it seems.

The Barangaroo development in Sydney is a case in point. Without any process in place to propose a new casino development, and with apparently little clear idea of what the final development would look like (given multiple iterations of the plan), Crown had no trouble in convincing the NSW government of its virtues (whatever they might be). Ditto in Melbourne, where a proposed hotel development for Crown’s complex was simply waved through by the state government – despite multiple breaches of planning provisions.

Is it revenue that gives Crown such power? In Victoria, the 2017-18 budget papers estimated pokie tax (from clubs and pubs) would raise $1.1 billion in revenue. The casino would provide $236 million. The effective tax rate on the pokies is around 42%, given $2.6 billion in net revenue; for the casino, it’s about 15%.

The casino is touted as a big employer, and a tourism drawcard. It’s also undoubtedly the principal locus of gambling harm in Victoria, and perhaps Australia. We know that big venues are the most dangerous. In Australia, they don’t come bigger than Crown.

Regulating such a behemoth is clearly not straightforward. Regulatory decisions will be regularly subject to legal challenge and resistance at political levels. However, when large corporations behave badly, they threaten public confidence in government and regulators, as the Banking Royal Commission has shown. Gambling businesses are specially licensed because of the fear of corruption, criminal activity, and the probity of the business, which easily lends itself to cheating, perhaps even more so than the finance industry.

The secret here is for politicians to back regulators with adequate resources, sufficient powers, and to make no exceptions for any corporation or individual. After all, our governments seem to have no problem with throwing massive resources and punitive regulation at the powerless (such as Centrelink recipients or asylum seekers). The long history of treating Crown and other big gambling industry businesses as special cases is almost emblematic of the type of institutional corruption that now appears endemic amongst Australia’s big corporations.

Multiple reforms are needed, including on political donations, the privileged access to politicians that corporations and well-heeled businesses enjoy, and cozy retirement jobs for ex-political operators.

However, applying the same rules consistently to all gambling operators would be a good start. Melbourne, and Australia’s other major cities, certainly don’t need casinos to be viable and exciting cities. What we do need is a rules-based order that applies to all, no matter how big or how well connected. Repealing the special regulatory provisions that apply to Crown, and enforcing the rules properly, would be a great start. And, perhaps, the election of politicians capable of standing up to the big end of town, without worrying about their retirement job prospects. That would be refreshing.

Charles Livingstone is a gambling researcher with Monash University’s School of Public Health and Preventive Medicine. He has received funding from the Australian Research Council, the Victorian Responsible Gambling Foundation, the Independent Gambling Authority of South Australia, the (previous) Victorian Gambling Research Panel, and multiple non-Government and Local Government organisations, in Australia and from Canada, Finland, and New Zealand.

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