Friday, 15 January 2010

Woolies Exploits Pokie Subsidies

Woolworths, "The Pokies People", seem to be relentless in their pursuit of converting gambling losses into earnings. By their business of leasing and operating state subsidised pokie clubs, search of gambling commission records disclose that their ALH joint venture receives more from the operations than the associated club itself. And even though public money is at stake, the Victorian government does not want the public to know the particulars.

Here's the way I believe they do it. Click here to see how the ownership of The Rex pokie club is put together. So it seems that you have a Woolworths (The Pokies People) associate owning the land and maybe another Woolworths (The Pokies People) associate managing the pokies. In Victoria, pokie clubs are required to lodge a document setting out what they spent to benefit the community. Unsurprisingly, its called a Community Benefit Statement. Click here to read the latest Community Benefit Statement for The Rex. The graphic below is a screen shot of the latest relevant numbers:4 figures are noteworthy:
  • $10 was given to charity
  • $171,305 went to the Port Melbourne Football Club
  • $89,657 was paid in management fees.
  • $129,504 went to rental
My guess is that the $89,657 management fees and the $129,504 was paid to an associate of Woolworths (The Pokies People). That's more than the footy club got and a lot more than the $10 that went to charity.

That's straightforward. The Vic Inn is something different. This is boring dry stuff but it does disclose a confusing picture. From the latest return it seems that the Doggies are not charged any rent nor any mangement fee. Or maybe its just not being disclosed. There are inconsistencies even though the signatory on all statements is Ross Blair-Holt as Chief Operating Officer. Yes, the form changed in 2009 but that did not prevent Mr Blair-Holt disclosing management fees or rent for The Rex.

Examination of the past Community Benefit Statements lodged for the Vic Inn show the following payments:
  • 2005 - Sporting - $105,538 / Rental $121,043
  • 2006 - Sporting - $149,990 / Rental $108,864
  • 2007 - Sporting - $0 / Rental $111,417
  • 2008 - No rental or sporting dividend disclosed. Expenditure of $42,727 on culture, $13,051 on player appearances, $25,540 on rental of Whitten Oval, Leeds Street and Barkly Street, $64,745 Football - direct costs and $12,427 on Spirit West.
Remember the statements recorded by the VCGR in the Club Edgewater decision about the Vic Inn providing "between $150,000 to $200,000 in profit annually" to the Footscray FC (click here to have a look at the extract)? It does not seem that these payments are fully disclosed in the Community Benefit Statements filed on behalf of the Vic Inn.

The 2009 CBS may tell the story of a massive catch up. The item for wages dropped from $552,308 to $407,849. Even if $45,864 is added back for workcover and superannuation, this is a decline in wages of nearly $100,000 or 18%. Perhaps 18% of the staff was fired.

In the 2009 CBS there is no record of payment of rental. There's no disclosure of management fees like the The Rex. The surprise is $423,164 now being expended on sporting facilities for club members, subsidising food and voluntary services. It's only a guess but perhaps this new money came from the rise in pokie losses from gamblers at the Vic Inn between 2008 and 2009. The increase was $441,725 (Total pokie losses at the Vic Inn were $3,931,693 at $65,528 per pokie).

The point is not the minutiae of whether there is a discrepancy or not. The point is that these pokie gambling operations get a government subsidy for a business that derives profit from a harmful business. If the public are subsidising, then the public should know everything. From these two venues what the public gets is either a picture of inconsistency (the Vic Inn) or a picture of Woolworths (The Pokies People) grossing more money than the venue operator itself.

In August 2008, I asked the Minister for Gaming, Hon Tony Robinson to disclose the nature of these management relationships that prey upon the tax relief given to pokie losses at these clubs. He would not even disclose who the parties were let alone the nature of the responsibilities set out in these agreement. Here's his letter (I have deleted my home address):By virtue of the harmful nature of pokie gambling, there can be no good reason for confidentiality. Remember also that the Victorian government censored my submission to the review of the gambling legislation when I wrote about Woolworths (The Pokies People) and mentioned the pokie club management agreements.

What are they hiding?

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