How Crown really operated

  Messy as it was, Crown had dodged a bullet in the Kakavas case. But it didn’t prompt cultural change at the company, despite the string of other scandals the company also had to deal with.

  The inner workings of Crown lay mostly outside the public’s view. This changed in 2010 with the publication of Professor Linda Hancock’s research into Crown’s culture. She set out to answer several questions: How responsible were Australian casinos? Was self-regulation working? And was the regulatory system effective? Crown was the case study. The research was based on interviews with 225 of Crown’s staff, interviewed privately in their own time. All were members of the Liquor, Hospitality and Miscellaneous Workers’ Union.60

  Despite the usual limitations that apply to qualitative studies, Hancock painted a devastating portrait of the company’s rogue attitude to exploiting its patrons. Central to Hancock’s findings was a culture of exploitation at Crown. Firstly, she found that poker machines at the venue were more intensively farmed for revenue compared to other casinos in the country – Crown’s machines delivered one-third more revenue. ‘Is higher revenue from gaming machines at Crown linked to predatory marketing practices?’ Hancock asked. She suspected the company was engaged in such behaviour, targeting older gamblers, especially women, and marketing directly to these groups because they were likely ‘to deliver the greatest losses for the least promotional cost’.61

  Hancock reported concern among community groups about the targeting of senior citizens: Crown arranged special bus packages from suburban social clubs. A 2010 pilot survey of 204 participants had been undertaken on behalf of one concerned community group; it found that 43 per cent had spent more than they had planned to, and 24 per cent intended to return to win back money they’d lost.

  Direct marketing to vulnerable groups was just one part of Hancock’s analysis of Crown’s culture. Another focused on the company’s disregard of its own Code of Conduct in relation to responsible gambling. Staff showed ‘disappointing recognition’ in detecting the signs of gambling harm. It was these ‘signs’ that were supposed to trigger staff reports to supervisors. Of course, most staff could see who the problem gamblers were, but they lacked sufficient training to intervene, and the company’s culture did not support them to do so. One employee told Handcock: ‘I’m afraid of losing my job. The casino doesn’t like it when you stop people from giving over their money.’ Almost one-fifth of staff interviewed felt under pressure to keep people gambling.

  A clear lack of training at senior levels around responsible gambling showed Crown’s disdain for its own code. Hancock found that 25 per cent of supervisors and 50 per cent of managers reported that they had never received any training in the area. Yet staff were forced to watch the damage being done to some patrons. ‘They sit at the machines, they won’t get off their ass and get a drink, they won’t even go to the toilet,’ one staff member said. ‘They will sit there and just wee.’ Some patrons even defecated at their machines, so worried were they that someone else would grab ‘their’ machine.

  As Harry Kakavas’s case showed, Crown’s Code of Conduct included provision for gamblers to self-exclude. The rates of self-exclusion were thought to be low, with gamblers rarely reaching that point until they and their families and loved ones had already suffered considerable harm over a long period of time.62

  In Hancock’s study, Crown employees drew attention to the difficulties they had with the company’s policy. There was no system to access up-to-date information on who was excluded, just tables ‘stacked with books, folders, thousands of photos’. The sheer size of the complex made it nearly impossible to spot someone who might have self-excluded.

  It’s well understood that excessive drinking can exacerbate excessive gambling, and Hancock found that Crown management also failed to uphold responsible drinking practices. One staff member related the following story: ‘My old housemate spent 48 hours here [Crown casino] completely smashed and they didn’t throw him out.’ His housemate and their friends gambled for two days and nights while ‘completely hammered’.

  Crown’s business model placed a premium on making profits from its food and beverage department. As one staff member explained, if staff in the food and beverage area ‘make budget and they exceed budget, they will generally get a pay rise within … six months’. In other words, Crown’s irresponsible policy on alcohol helped the company exploit gamblers for additional profit.

  The excessive drinking allowed at Crown Casino made it an unsafe workplace. When asked about how many fights there were at the vast venue every night, staff responded with figures ranging from between ten and 40; one added that ‘you don’t just hear about them’. Security staff would break up the fights and escort offenders out of the building.

  Why didn’t the Victorian Commission on Gambling and Liquor intervene to clean up Crown’s rogue behaviour? In short, its independence had been compromised. Hancock referred to a ‘tick and flick’ culture within the organisation, which was evident in its underuse of sanctions for infringements.63

  Given its long string of serious operational shortcomings in the decade after its much-hyped opening, it is surprising that Crown faced no official sanction or investigation for these breaches. In fact, the reverse happened: Crown was allowed to expand. It had become too big to fail, protected by a political system that was too accustomed to raking in the taxes it generated. There was effectively no watchdog.

  Eventually, Crown faced three official inquiries into its rotten culture. But why was it allowed to become such a rogue corporation?

  A new wave of casino liberalisation was about to wash across Australia: new casinos were about to be built in New South Wales, Queensland and Adelaide. Since Crown had made casinos a dirty word among many in the community, governments devised new ways to describe them, focusing on their perceived economic benefits: they were not casinos but ‘six-star hotels’ and ‘VIP gaming facilities’.64

  In this way, governments continued to downplay the harm to the community from too many casinos housing too many pokies run by companies that appeared to be motivated solely by profit.

  6 THE RISE OF THE POKIES SUPER-RICH

  In 2004 a tale about the hotels industry was doing the rounds of Sydney’s gossip network. An unnamed Sydney hotelier was said to be taking his son with him to purchase a prestigious car. As reported in the press, the father wanted a blue model – but a red one was immediately available from the dealer in Sydney’s inner west. The son decided on the spot that he’d take the red one himself, leaving his dad to wait a little longer until a blue one could be found.1

  Apocryphal or not, the story conveyed a sense of the rivers of gold pouring into pubs at this time – with pokies as an attraction, they were hot property. As the Australian Financial Review said, publicans nationwide had benefited hugely from poker machine licences, with ‘many becoming millionaires many times over. Their rapid success has led to a building boom in the hotel industry, with even the dirtiest of pubs being made over for poker machine inclusions.’2

  The titles of ‘pub pokies baron’ and ‘pub pokies king’ were born.

  From the mid-1990s, gambling companies unleashed a proliferation of poker machines – with legislative approval from state governments – into the community, exacerbating the emerging phenomenon of problem gambling. As we have seen, Kennett released 30 000 poker machines in Victoria. In New South Wales, Labor Premier Bob Carr approved an additional 30 000 machines, bringing his state’s total number to 100 000 and earning it the dubious reputation as the pokies capital of the world. Queensland approved 44 000, South Australia 13 000 and Tasmania 3500.3 Only Western Australia continued to ban poker machines in the community. In all, Australia came to have 20 per cent of the world’s poker machines (with less than 0.5 per cent of the world’s population) and 80 per cent of poker machines outside of a casino.4

  There was little community education or warnings, and overwhelmingly the devices were located in lower socioeconomic suburbs. Multiple policy failures accompanied this avalanche of pokies into the community. The first was obviously the sheer number of machines, which greatly increased their accessibility and heightened social harm. A second was the failure to account for the more addictive nature of modern poker machines.

  Researcher Charles Livingstone has spent years studying the design features of poker machines and their ability to cause harm to players. He says the great change occurred in the late 1980s and early 1990s, when the first partially automatic and then fully automatic machines became available, displacing the old lever-pulling machines. ‘We know how to make poker machines less addictive,’ he explains. ‘It is as if the government, which doesn’t understand how potent these machines are, is licensing them for people to wander in off the street and spend as much money as they like on them.’5

  Neuroscience had made advances of understanding since gambling addiction was first recognised as a behavioural pathology in 1980. Subsequent studies showed that it demonstrated similar characteristics to substance addiction in its effects on the brain: ‘individuals with gambling disorder may experience impaired decision-making abilities due to dysfunction in the prefrontal cortex, a region responsible for rational choices’.6 The science continued to evolve. In 2013 the Diagnostic and Statistical Manual of Mental Disorders shifted problem gambling from an impulse-control disorder to an addictive disorder.

  A third area of policy failure was to permit poker machines to be concentrated in lower socioeconomic areas; in fact, poorer areas were a deliberate target of pokies barons. In the days after the mass release of poker machines into the community, industry representatives quietly explained their business model. A gambling researcher from Victoria University, James Doughney, discovered that the industry saw the pokies as a ‘blue-collar’ form of entertainment. One put it bluntly: ‘This is a poor man’s sport, playing poker machines. It is simple, unstimulating and non-interactive, but more poor, lesser educated people like it more than rich educated people.’7

  However, it would take some years for the extent of the concentration of pokies in poorer areas and the damage they caused to become known. When Livingstone began work for the Footscray Town Council, in Melbourne’s inner west, in the late 1990s, there was no data on the location of poker machines. In fact, the government wouldn’t release any data, other than total number of machines in the state. At the time, Footscray was a very disadvantaged part of Melbourne, with a terrible heroin problem.

  While it was obvious to locals that the number of machines in the area was expanding, Livingstone provided the actual data, going into venues and counting the machines. Once it was established that pokies were being concentrated in the most disadvantaged areas, the press started focusing on the issue.8

  One obvious consequence was that the character of local pubs changed. By 1998, the ‘mum and dad publicans’ were ‘being edged out by big corporations with an eye for strong growth and attractive cashflows’.9 Australia had embarked on a risky social experiment. The country was abnormal in allowing poker machines in non-gaming venues – only 12 countries around the world did so, and then only in small numbers.10 In Australia, by comparison, the unloading of thousands of pokies into community-based clubs and hotels turned these venues into virtual casinos. And it is understood that problem gambling disproportionately occurs on poker machines, and that people who live closer to these devices are more likely to be gamblers.11

  Not surprisingly, the rate of social harm escalated. In 1999 the federal government’s Productivity Commission, on instructions from Treasurer Peter Costello – the brother of the Reverend Tim Costello – conducted a far-reaching report that compiled the first hard data on the problem.

  The brothers had sometimes been rivals on the national stage because they embodied very different traditions arising from their upbringing in the Baptist Church. Peter had studied and then practised industrial law, and had subsequently gone into politics, pushing the neoliberal economic agenda that had swept up the Liberal Party led by Prime Minister John Howard. With his trademark smirk, Peter devoted himself to ministering to the national economy in the corridors of power in Canberra. But in agreeing to his brother’s request for an inquiry into gambling, he aided the cause of gambling reform.

  Tim’s career couldn’t have been more different. Forceful, articulate and driven by compassion for society’s downtrodden, he would later become CEO of World Vision. At this time, on the back of his campaign against the construction of Crown Casino in the early 1990s, he was a leading voice for gambling reform. He’d acted as the Uniting Church’s spokesperson on gambling, advised governments and led community campaigns. And he became a leading public intellectual on ethics and public policy, speaking across a wide range of social justice issues.12

  Costello and Livingstone continued to focus public attention on those damaged by poker machines. The Productivity Commission calculated that there were nearly 300 000 problem gamblers in the country – roughly 2 per cent of the population. It established that 42 per cent of profits generated by poker machines came from problem gamblers.13 However, the commission didn’t challenge the notion of ‘problem gambling’ as peddled by the gambling industry.

  Nevertheless, the Productivity Commission issued plenty of criticism: of the lack of information about the dangers of poker machines; of the unregulated advertising; of the ineffectiveness of the regulatory environment; and of the lack of adequate funding for treatment services. Its report should have been a call to arms to address the problem, but it wasn’t.

  By the early 2000s, voters were becoming increasingly resentful of the insidious presence of poker machines in the community.14 They had spread like a virus and calls for reform grew louder. However, nothing could stop the pokies juggernaut, and problem gamblers simply were pathologised. The message sent out in government-sponsored advertising was twofold: problem gamblers needed to exercise more responsibility or seek specialised help. Overlooked was the structure of the poker machine industry and the powerful interests it served.

  The rollout

  The rollout of pokies was mired in murky politics, particularly in New South Wales and Tasmania. In the latter it was shrouded in secrecy and accusations of a special deal. Under the initial Wrest Point casino legislation, poker machines were banned. But in 1985 they were approved in the venue in an extension of the special deal to the Farrell family’s Federal Hotels group.

  The leap to installing pokies into the broader Tasmanian community bore similarities to the situation in Victoria. Much like Victoria, Tasmania in the early 1990s was in an economic funk. Investment had shrunk and unemployment was on the rise. The Liberal government led by Ray Groom was searching for ways to raise revenue. In addition, he was responsive to arguments from the licensed clubs lobby, which pressed the claim that introducing pokies into regional RSL and football clubs would help them survive the economic downturn.

  However, the move represented a threat to Wrest Point’s monopoly on poker machines. Greg Farrell junior, the 34-year-old son of the original owner, went on the offensive. Mild-mannered but ruthlessly determined, he claimed that allowing poker machines into the community would be a disaster for the state. In an outburst that would reverberate on the company, Farrell claimed that the move would ‘grant access to those who could least afford to gamble’ and that it would ‘have a disastrous effect on the social and special culture of Tasmania’.15

  Paul Lennon, the opposition Labor Party’s gaming spokesman, also campaigned to have the plan scrapped, insisting that the machines would inflict misery on Tasmanian families: money for the pokies, he said, ‘would likely come from families’ budgets for food and clothing’.16

  For a year from mid-1992, Federal Hotels ran a well-funded public campaign to protect their gambling monopoly. As Tasmanian historian and a campaigner for gambling reform James Boyce has written, Federal ‘did not just argue that competition from pokies in pubs would harm the casino, they said it would threaten the casinos’ very existence’.17 Federal had placed on the table the biggest bargaining chip in Tasmania – the jewel in the crown of its tourist industry.

  The government referred the issue to its newly created Committee for the Review of State Taxes and Charges, which confirmed the community’s concerns about the potential damage from poker machines. But the government ploughed ahead anyway. In preparation for the release of the machines, the Liberal treasurer, Tony Rundle, took a proposal to cabinet to create a new statutory authority to be the sole pokies operator, which cabinet endorsed.18 But opposition from across the community produced a stalemate.19 Tasmanians were even more heated in their opposition to poker machines than Victorians.20 Cabinet was split on the issue. In opposing the rollout, the health minister released a report showing that the annual cost of assisting problem gamblers would be around $6 million.21

  The debate settled into an uneasy impasse. But away from the public eye, the Groom government unexpectedly granted the Federal Group an exclusive licence to install poker machines in the community at a very favourable tax rate for 15 years and without the payment of any licence fee to the government. And Federal Hotels was free to decide which pubs and clubs would receive the devices. The deal seemed too good to be true, and it was finalised in just a couple of days. Farrell simply dropped his claim about the potential social misery pokies would cause if allowed into the community. Meanwhile, the Labor opposition dropped its campaign against pokies in pubs; it had always backed Federal Hotels.22