'Money-go-round' under fire
The Nelson Harness Racing Club has been named in a Gambling Commission decision as loaning money to set up a trust to run pokie machines, which the club later benefited from.
Maori Party co-leader Te Ururoa Flavell says the case is an example of a gambling "money-go-round" that he had attempted to stop through legislation.
The Gambling Commission said last week it would shut down Blenheim gaming machines trust Bluegrass Holdings because it obtained its licence to operate pokie machines by deception.
Bluegrass provided false and misleading information to the Department of Internal Affairs (DIA) about its funding, those involved in the society and the role of Blenheim man Mike O'Brien in particular, the commission said in its decision.
"Bluegrass's deliberate and repeated efforts to deceive the Secretary [of Internal Affairs] were intolerable," Internal Affairs acting director of gambling compliance, Raj Krishnan, said.
The trust said it was considering appealing the decision.
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 chairman of Bluegrass.
It primarily provided grant money to the racing sector - in its March 31, 2014 year return of its total donations of $5m, more than $4.1 million went back into the horse racing industry, to clubs through New Zealand.
Bluegrass Holdings was incorporated in June 2009 and traded as Bluegrass Trust, operating 140 gaming machines in eight venues across New Zealand, including Hardy's Bar & TAB in Nelson.
The trust's licence will be cancelled from August 18. Hardy's owner Carmen Cartwright refused to comment on what she planned to do when the trust lost its licence.
The commission decision comes after a two-year process between Bluegrass Holdings and Internal Affairs.
Nelson Harness Racing Club was listed in the ruling as lending O'Brien $100,000 in September 2009. The Kaikoura Trotting Club and Marlborough Racing Club also made loans of $100,000 each to Bluegrass.
In the following days O'Brien advanced $300,000 to his father, Patrick O'Brien, who in turn advanced it to Bluegrass, the ruling found.
On December 22, 2009 Bluegrass was granted a six-month class 4 operating licence to run pokie machines.
In June 2010 Bluegrass repaid the loan to the Nelson Harness Racing Club.
Over the five years the trust has operated, the Nelson club received a total of $620,000 in grants from Bluegrass.
Department of Internal Affairs senior communications advisor Trevor Henry said while it was legal for grants from trusts to go toward racing clubs, there was an issue with the racing clubs that provided funds that then set up the trust.
"Had the department known of this source of funding we would have been concerned. The Gambling Act 2003 anticipated a separation between societies that operate gaming machines, venues that host those machines, and community groups that receive grants."
Nelson Harness Racing Club former president Terry Nelson said he was part of the committee that loaned Mike O'Brien the $100,000 and did not think the loan request was suspicious. He still believed O'Brien was a trustworthy person.
"At the time Mike said he was trying to borrow money and the bank wanted - I would be guessing - quite exorbitant interest rates. He was happy to borrow off the club and pay us a good interest rate. The club was able to make some good money for whatever was needed at the time, and it was duly repaid."
He said he was told it was a personal loan.
O'Brien had helped out the Nelson Harness Racing Club over the years, and had been its raceday secretary.
Nelson was president for four years, and said he left his post because it took up too much of his time. He was still a member of the club.
He said the grants money the club received would often go toward its raceday stakes.
He said he was never suspicious about the connection between lending the funds to O'Brien and then later getting grants from the trust O'Brien's father set up. He said all grants were used for approved purposes and the club would apply to about six different trusts around the country for grants.
"Sometimes you are lucky with Bluegrass, sometime with the others." However, in the Bluegrass Trust grants records, the club was always "lucky" - records show it had never been turned down for a grant.
Maori Party co-leader Te Ururoa Flavell has been championing for change in gambling laws.
In 2010 his Gambling Harm Reduction member's bill was pulled from the ballot, and last year, after it was "watered down", parts of it were used in the Gambling (Gambling Harm Reduction) Amendment Act 2013.
Flavell wanted to cut out racing and racing-stake money as an authorised charitable purpose, but the Government disagreed. It deemed the changes would have too much of a negative impact on the racing industry.
Flavell said the horse racing industry lobbied heavily against the bill, and there was a lot of scaremongering from pub charities, which said the bill would take money from the community.
"What this case [Bluegrass] highlighted, was that the rorts were able to happen within the industry.
"You can pay off yourself or set up a trust basically as a money-go-round.
"That is why I introduced the legislation to stop that.
"We tightened up the rules, it is in the legislation that conflict of interests need to be declared."
He said it seemed an "anomaly you take money from one form of gambling and move it to another, that keeps it alive".
Flavell said most pokie machines were placed in poorer areas.
However those who gambled at the races often had "a little bit more money in their pockets".
Nelson problem gambling consumer adviser Brenda McQuillan said she was glad the DIA had stepped in and investigated the matter. She said the funds from Bluegrass had been going to subsidise further gambling.
McQuillan said she did not believe those who played the pokies would want their money to be going back to the horse racing industry, ahead of local foodbanks or community groups.
"It's public money going to very private business, propping up an industry that has a very flawed financial model.
"If horse racing worked, they would not need pokies."
The Nelson Mail