Moffitt called for Bally to be banned from operating in Australia.

  The commissioner also found that local organised crime figures had gained control of several Sydney clubs and were extorting their profits. He detailed the activities of ex-policeman Murray Riley, who teamed up with McPherson. The two were involved in ‘organised plundering of clubs’ – skimming profits and obtaining secret commissions – by means of threats and intimidation. Presumably, Lennie McPherson provided the crucial evidence.

  Moffitt concluded that organised crime had infiltrated clubs, but he was unsure about its extent. Nonetheless, he was strongly critical of the manner in which poker machines could lead to criminal activity.

  What, then, about a cover-up? Moffitt was clear about one thing: there was no evidence indicating that Askin had directed McNeill to gut his first report. The premier’s public disclosure of the contents of the first report was evidence enough. And, he added, Askin had made ‘all reasonable inquiry’ about the contents of the final report. But Askin’s evidence to the inquiry was less than convincing. With the passage of time, and given Askin’s fall from grace after he left office, exonerating the premier on limited evidence seems an overly hasty conclusion.

  Moffitt had done a sterling job putting the pieces of the puzzle together and clarifying the seriousness of organised crime – he was the first government official to do so. And he created a strong case that there was, indeed, a cover-up, at least by McNeill. But Moffitt felt that the case against the head of the Consorting Squad was too circumstantial. Key details of what had occurred were missing, lost in a fog of misinformation, denials and falsehoods. Therefore, Moffitt explained the dramatic change in tone of McNeill’s reports as having been caused by flaws in his character and inadequate policing methods. He simply could not discount the likelihood that McNeill had had a genuine change of mind about the existence of, and the threat posed by, organised crime.

  In his report, Moffitt made some sensible suggestions about the need for improved police handling of organised crime, particularly through the establishment of a designated police unit. He called for improved Commonwealth–state cooperation on the matter, and for tighter legislative controls around the administration and inspection of clubs.

  The Askin government acted on only one of these recommendations: the establishment of a Crime Intelligence Unit. Decades later, when a royal commission into corruption in the New South Wales Police Force was finally established, Justice JRT Wood was critical of the government’s lack of response to the Moffitt inquiry: ‘little action was taken of a significant remedial kind, despite the clear signs of the presence of police corruption and organised crime’.50

  The silence from the police over Moffitt’s report was even more deafening, as Justice Wood also noted. He wrote that Commissioner Frederick Hanson had responded ‘very defensively’ to Moffitt’s report, which, he said scathingly, ‘was symptomatic of an entrenched police mentality that would not accept criticism’.51

  Thus, an opportunity was lost not only to rein in the clubs and their poker machines but also to deal with organised crime and police corruption. Clubs in New South Wales went on their not-so-merry way, and the concerns over their damaging social impacts faded as the public debate turned to the next vexed issue about gambling: what to do about casinos.

  In the meantime, Joe Testa went the way of many members of the mafia, becoming the victim of a gangland murder. In June 1981 a bomb went off in his car in Oakland Park, Florida, while he was in it. As he lay dying, the police arrived and asked him who might want to kill him. Joe replied: ‘Yeah, a lot of people.’52

  3 VEGAS DOWN UNDER

  Few things symbolised the Australian hunger for sophisticated, post-war entertainment better than casinos. Clubs and poker machines appealed to working men and women, but casinos held a special lure for the better-off. And Australians were fascinated by the rise of the gambling mecca, Las Vegas.

  In the early 1950s newspaper editors sent over a handful of journalists to inspect this new, hyper-gambling city, and the correspondents mostly gushed about the novelty of it all. They marvelled that out of the blazing Nevada Desert had emerged a ‘Babylonian city’ dedicated to gambling and pleasure.1 They were struck by the size and opulence of the venues, and by their evocative names – the Flamingo, the Copacabana, the Sahara. And on offer was 24/7 access to roulette wheels and blackjack tables, 365 days a year. It was a ‘social phenomenon without compare in the world’, wrote the correspondent for a regional Queensland newspaper.2

  Las Vegas became a byword for decadence and indulgence. In the early 1950s, there were more gambling devices crowded into the small city of only 35 000 people than anywhere else in the world. And, as Australians were told repeatedly in newspaper articles, millions of people were flocking to the city as tourists, attracted by the opulent facilities, the unrestricted gambling and the cabaret shows, which featured top entertainers. ‘Vegas’ was simply ‘Luckytown, USA’.3

  Las Vegas, Australian readers were informed, had experienced unprecedented opportunities for economic growth because of its enthusiastic embrace of gambling. As Sydney’s Sunday Herald explained, Nevada was ‘the only State in the Union which legalises gambling. On this one fact, prosperity has been built.’4 The message to Australian governments was clear: more legalisation of gambling was required – and the more casinos, the better. And, like the development of the clubs industry in New South Wales, the state could get a slice of the action as well. Nevada collected 1 per cent of the net takings of all gambling ventures, which by the mid-1950s had amounted to US$61 million.5 An expansion of Big Gambling was on the horizon.

  But behind the glitz and the glamour, visiting Australian journalists also glimpsed the parallel world of Las Vegas’s early history: an alcohol intake twice the US average; the nation’s highest suicide rate; racketeers; flare-ups with mobsters; and a gambling industry bent on exploiting its patrons. Indeed, exploitation was built into the city’s business model. ‘Gambling in Las Vegas,’ explained the Sunday Herald in 1953, ‘is a calculated scientific industry.’6

  Gambling in Las Vegas was largely unregulated, which inevitably led to a range of serious problems: skimming of profits by casino operators; laundering of money from illegal sources; strong-arm tactics used against patrons who left without paying their losses; and cheating by casino staff. The wild west practices of many Las Vegas operations stemmed from mafia involvement.7 In fact, a clutch of mafia figures, including ‘mob accountant’ Meyer Lansky, put up the funds to build The Sands casino in the early 1950s. That made it a focus of attention for the FBI, which unsuccessfully tried to penetrate its mobster connections.8 In this era, the mafia controlled Las Vegas.9

  Over time, Australia emulated the Las Vegas model. But the issue of casinos would shape and convulse Australian politics for decades. Casinos – both legal and illegal – and corruption were two sides of the same coin. They were the drivers of three of the nation’s most notorious political scandals: the allegation that New South Wales premier Bob Askin was ‘on the take’ from illegal gambling operators; a similar charge in Queensland, under the leadership of Joh Bjelke-Petersen; and the allegation that the legalisation of Australia’s first casino, sponsored by Eric Reece’s Tasmanian Labor government, was shrouded in a corruption scandal.

  In political terms, casinos were like nuclear waste – deadly to touch, but equally dangerous to ignore. The lessons from the dilemmas posed by casinos should have guided the long-term management and regulation of these entertainment venues, which were popular among a large segment of the population. But the lessons went mostly unheeded.

  Tasmania leads the race

  In 1973 Tasmania opened Australia’s first legalised casino, Wrest Point in Hobart. At the time, it was a big deal nationally, especially as the state seemed the least likely place for a slice of Las Vegas magic.

  When I grew up in Tasmania in the 1960s and early ’70s, the island was a rustic backwater. A sleepy, bucolic land of mountains, rivers and grazing livestock. Tasmania was best known to outsiders in the 1960s as the ‘Apple Isle’, although many were also aware of its status as Australia’s most disadvantaged state.

  When I was a teenager, I ventured with my friends each May school holidays into the fog-laden valleys south of Hobart to pick apples. The conditions were freezing and we lived in ramshackle wooden huts. The isolated and poorly educated communities of this region were more like those of backwoods Appalachia rather than modern Australia. And after the United Kingdom joined the European Economic Community on 1 January 1973, the traditionally strong British market for Tasmanian apples dried up. One of the state’s mainstay industries went into quick decline, and environmentally destructive industries came to dominate the economy: mining, zinc processing and woodchipping.

  Even by the late 1960s Tasmania was seeking alternative industries, and it was Las Vegas’s model that it chose to emulate. Local company Federal Hotels began exploring the viability of a casino to lure tourists to the state: both international ‘high rollers’ and local and interstate gamblers would be attracted to a Vegas-style complex offering international cabaret acts, complete with dancing girls. Quaint Tasmania would finally be put on the map in its own right.

  But the prospect of a casino quickly flared into a bitterly fought controversy. Divisions engulfed the community: some favoured the promise of economic development, while others worried about the social harm caused by gambling. Especially concerning to opponents was the likelihood that a casino would inevitably lead to the introduction of poker machines, the advent of which was widely opposed. Federal Hotels faced quite the challenge to make its development a reality.

  The company had been founded in 1948 by Greg Farrell Senior, and it had become a leading provider of tourist accommodation in the state. That made it a powerful player in the island’s business and political communities.10 It owned Wrest Point, a riviera-style hotel on the picturesque Derwent River foreshore, close to the centre of Hobart. But by the late 1960s the complex’s best days were behind it: the hotel had grown shabby, and with it Federal’s share price had lagged. The proposed casino was set to be the company’s ‘money-spinner’.11

  A push for a casino was always likely to rock such a conservative and insular state. Initially, Premier Eric Reece was caught between the rival groups: he was an early opponent of a casino but changed his mind. The crinkly-haired, gnome-like political survivor was a parochial, dictatorial backer of the island’s polluting heavy industries and its rampaging woodchip industry. The son of a miner, his had been a hardscrabble life: he began work at 13 as a miner. He’d moved into politics in 1946 and been premier since 1958. Now, by the late 1960s, after a long political career, he seemed unprepared for the onset of modernity.

  The manner in which the controversial proposal was taken from an idea without clear public approval to a successful development left a roadmap that future casino entrepreneurs would follow. The ingredients required were a combination of high-level political support, backdoor political wheeling and dealing, and corporate spin. Essentially, the Tasmanian public had to be tricked into accepting a casino.

  Leading the fight for the casino inside the Reece government was Mervyn Everett, a tough, sharp-minded former divorce lawyer. Alongside the ageing Reece, Everett was a dominant force in Tasmanian Labor politics, first as the Minister for Health and later as the Attorney-General and Deputy Premier. Everett is thought to have been corrupt: there is a credible story of him arriving in the parliamentary dining room, direct from the airport, whereupon he flashed around a briefcase full of cash to distribute to selected colleagues.12

  Everett led the debate in support of the casino development inside the Labor caucus, but even his lawyerly powers of persuasion couldn’t win over a majority of MPs. An alternate route was found: a referendum. Tasmanians would be asked to choose whether or not they should have a casino. The enabling legislation was rammed through parliament in November 1968 after a marathon debate during which MPs lay snoring in their seats or prostrate on lounges in the corridors. To placate the public, the proposed legislation would include a ban on poker machines in the new complex. But the date set for the vote – 14 December 1968 – left only three weeks for a public campaign.

  More shenanigans followed. The wording of the question was deliberately ambiguous: ‘Are you in favour of the provisions of “Wrest Point Casino Licence and Development Act, 1968”, the full text of which has been published in the newspapers?’ According to critics, the question made it seem like voters were being asked to approve two new convention centres, with an added-on small casino, all of which had been presented in the publicity material developed by Federal Hotels’ PR team. Critics decried that the referendum question was ‘loaded to trap the indifferent voter’.13 The subsequent vote was hardly a ringing endorsement for the proposal and its political backers: just 53 per cent endorsed the building of a casino at Wrest Point.

  The vote to build a casino in Hobart sparked into life the always-simmering rivalry between Tasmania’s north and south. Aggrieved northerners felt that if the south had a casino, it was only fair that they got one too. If such parochial politics was a poor basis for policy-making on such a contentious issue, it was irresistible in Tasmania, where the unique preferential voting system typically produces close results.

  A state election was held in May 1969, ending in a tie: 17 seats each to the Liberals, led by Angus Bethune, and to Eric Reece’s Labor Party. Independent member Kevin Lyons from the Centre Party thus became the kingmaker. Lyons came from an esteemed political family: he was the son of a former prime minister, Joseph Lyons, and his wife Enid Lyons, who was also a federal politician. Kevin Lyons had been elected to the Tasmanian lower house in 1948 as a Liberal but had defected in 1966 to form his own fledging outfit.

  Lyons’ broad smile and open, friendly face hid a difficult personality. He attracted continual headlines in parliament for his fiery manner and he had a reputation as a hard man to do business with.14 Bethune must have known that trouble lay ahead when he negotiated with Lyons, ultimately making him a generous offer: he invited the independent to become deputy premier and the minister for tourism as part of a Liberal government. Lyons’ voice would therefore be influential in deciding how the second casino licence was implemented.

  A farmer from the rugged, sparsely populated region of central Tasmania, Bethune was a quiet, even shy man, but he had a keen political brain. And on the matter of how a second casino licence should be awarded, he proved a politician of principle. Philosophically opposed to monopolies, he decided to open the second casino licence to tender. Following a review completed in 1971, Stocks and Holdings Ltd was selected over Federal Hotels.

  Soon after this decision was announced, Lyons informed Bethune that ‘mutual trust’ with his leader had broken down and that he was resigning from the government. Having lost his slender majority, Bethune had no choice but to go back to the polls.15 Bethune lost the subsequent election, which returned Eric Reece and Labor to power. The resurrected government overturned the awarding of the second casino licence to Stocks and Holdings Ltd and handed it to Federal Hotels.

  The abrupt turnaround offers a prime example of how easily Big Gambling interests can influence governments. But, at the time, the more pressing issue was how this had happened. People smelled a rat: had Lyons’ decision to break with Bethune been an elaborate plot? Had Lyons been bribed?

  One insider knew the answer. Hugh Dell had been the principal private secretary to Reece and, earlier, to Merv Everett. In 1973 he took the dangerous step of becoming a whistleblower when he presented Reece with an affidavit outlining illegal inducements he alleged Federal Hotels had offered to Kevin Lyons, in return for his resignation. This, he claimed, included $29 000 on his home mortgage (over $340 000 in today’s money) and an offer of a well-paid job at Federal Hotels. Dell had his suspicions that Everett was the mastermind of the plot to bring down Bethune. After the new government was sworn in, Dell noted, Lyons and Everett had become ‘thick as thieves’, with the two often dining together and regularly talking on the phone.

  News of the alleged bribery created another public furore. Calls for an inquiry became deafening, especially when Bishop Robert Davies, a mild-mannered but principled Anglican leader, used a sermon from the pulpit of Hobart’s imposing St David’s Cathedral to call for a royal commission into the sordid affair. The congregation assembled before him included lawyers, judges and politicians.16

  Reece had little choice but to respond, but instead of establishing a royal commission, he handed the allegations over to a police inquiry and assigned Merv Everett to oversee its completion. Once the police report was completed, Everett released only selective details, which exonerated all concerned, and then the report was secreted from the public for the next 25 years as a cabinet document.17

  Tragically, Hugh Dell went the way of most whistleblowers. His expulsion from the Labor Party was led by Reece, who angrily declared to the party faithful the need to ‘get rid of the animal’. Such vitriol from the party to which he had dedicated his career took a toll on Dell’s health. ‘It was hell,’ he said when interviewed in 2017, when he was in his early eighties. In the wake of his expulsion, his career had nosedived and his marriage had collapsed.18

  More than 40 years after the Lyons affair, award-winning Tasmanian historian James Boyce examined the case and published his findings in a book titled Losing Streak: How Tasmania Was Gamed by the Gambling Industry. His research confirmed that the heads of three key state industries had met secretly with Everett, complaining about policies advanced by the Bethune government. Federal Hotels wanted a monopoly of casinos in the state. Off-course bookmakers opposed the introduction of the Totalisator Agency Board (TAB), the government-run betting agency. British Tobacco, meanwhile, was worried about a proposed government inquiry into its allegedly fraudulent purchase of a large parcel of land. A plan was hatched to bribe Kevin Lyons to resign, with a payment disguised as an advance for publishing his memoir. The ‘book deal’ never turned into a book, and after he left politics Lyons quickly took up a job with Federal Hotels.