The incompetence of Sydney’s casino has opened the door for Clubs NSW to get what they want… and that spells trouble.

Australian casinos are peculiar beasts. Some shine like a beacon, attracting an international clientele and offering a level of class and sophistication that most can only dream of. Night clubs, bars, top-end shopping and dining… they have it all.

Some are tacky, gaudy even, but they still trade heavily on the “casino” tag. The casino scene in Australia is still relatively new, remember, and no matter how gaudy or contrived they may be, casinos are still generally seen as something a little exclusive.

And then there’s The Star.

Sydney’s sole casino (formerly Star City) has traditionally been a painful place. Badly designed and poorly run, it was famously described by Jeff Kennett as an “RSL on steroids” and the name rightly stuck. The Star has always been an embarrassment to Sydney, right from the moment it opened.

That was all supposed to change. Star embarked on a massive refurbishment in 2009, and in June last year Tabcorp (who ran the casino) de-merged to create Tabcorp and Echo Entertainment. Echo was made responsible for running and revamping the casino… so they changed the name (to The Star, not much of a change really) and brought in a management team from the US to turn things around.

Well, the events of the past couple of weeks have shown that strategy to be spectacularly unsuccessful. General manager Sid Vaikunta was sacked after two sexual harassment claims against him, and executive Tom Snell was sacked under similar circumstances. One of the women who accused Vaikunta was herself sacked after returning from stress leave. These events on their own would be bad news for the struggling casino; coming as they did only weeks after Star’s five-yearly statutory review was completed, a review that concluded that Star was still fit to hold a casino licence, they’re deadly.

I’ve seen the final report from the review, which was conducted by Gail Furness SC. It’s a comprehensive review that found problems with the casino’s culture, and plenty of evidence of money laundering, and alcohol/drug abuse… and despite finding Star fit to continue, Furness made no less than seventeen recommendations for changes to the way the place was run.

I won’t delve too deeply into this story; it’s been prime fodder for the Sydney newspapers for weeks, and shows no sign of abating. But with the critical review, followed by the sexual harassment claims, the sackings and the suggestion that Star may have misled the review about their own investigations, Star are in a world or trouble. Add to this the fact that a new inquiry has been announced to investigate this sad state of affairs, and it’s fair to say that the NSW government has Star over a barrel. They are going to have to jump through a serious number of hoops to stay open.

Hold that thought… and let’s turn our attention to the clubs.

There’s one thing that NSW’s clubs have in common with Australian casinos, apart from a proliferation of poker machines, and that is multi-terminal gaming machines (MTGMs). The concept with MTGMs is that there is a central game, such as automated roulette or electronic blackjack, and a number of terminals attached to it which people can play.

MTGMs can be found in most Australian casinos. They’re classified as table games, not poker machines, and allow casinos to offer many more games without the inconvenience of hiring more staff to run them.

But they’re also found in NSW clubs. Step inside some of the biggest clubs (such as St John’s Park Bowling Club in Fairfield, made infamous recently by their late-night money raffles) and you can play roulette, blackjack and so on to your heart’s content.

The clubs wouldn’t be able to operate MTGMs if they were table games, as these are restricted to casinos. So in NSW they are classified as poker machines for the clubs industry. The situation is the same in Victoria, although there are no longer any MTGMs operating outside of Crown (and the VCGLR has confirmed that this won’t change).

How’s that for a double standard? As table games, they don’t count against Star’s poker machine limit… but as poker machines, clubs are allowed to operate them. Go figure.

The problem with table games is that whatever you call them, they are casino games. They have a $100 maximum bet (unlike the $10 maximum bet on poker machines in NSW) and they wouldn’t be able to take pre-commitment technology (mandatory or voluntary) in the same fashion as pokies. The capacity to lose huge sums of money in MTGMs is staggering.

This fact didn‘t go unnoticed. In 2008, the then-Labor NSW government legislated that clubs would be restricted in the number of MTGMs they were allowed to operate. That figure was capped at 15% of a club’s overall poker machine allotment. In other words, if a club had 100 poker machines, no more than 15 of them could be MTGM terminals.

The Coalition strongly opposed this move. Then-shadow minister George Souris stood up in parliament and explained why Clubs NSW thought this shouldn’t happen. Yes, he literally represented Clubs NSW in parliament. I’ve read the transcript. One of the reasons given was that MTGMs were “universally unpopular” and so legislating a cap on their numbers was a waste of time. Clubs wouldn’t bother installing too many, as they weren’t worth it.

What Souris failed to mention was that by 2008, when this debate took place, the number of MTGMs in clubs in NSW had increased by 1,000% in eight years.

And in 2003, the departing manager of St John’s Park Bowling Club spoke glowingly (to CMA magazine) about his club’s new MTGM, Roulette King. “We installed the Roulette King in early November last year (2002), and it paid for itself in four months,” former general manager Michael Moody said at the time. “It exceeds all of our gaming machines in terms of profitability, and naturally popularity.”

Still, despite Souris’ best efforts on behalf of Clubs NSW, the legislation was passed. Clubs that were over the 15% cap were given until 2013 to reduce their MTGM numbers to comply with the legislation.

Fast forward a couple of years. In late 2010, with a state election looming, the NSW Coalition signed a Memorandum of Understanding (MoU) with Clubs NSW, called “Strong Clubs, Stronger Communities.” They agreed to a range of measures, most of which have since been legislated, including bigger tax breaks and broader concessions. There were also a number of conditions relating to poker machines; one of these was the removal of “limitations on installing MTGMs in clubs.” This didn’t go unnoticed, it made the papers at the time and I’ve blogged about it too. One little line on an agreement with the future ruling party that could allow casino games to spread unchecked across the suburbs… no wonder it was news! But the clubs said nothing, as did the Coalition, and the news faded away.

Then matters took an unexpected turn. It turned out that the 15% cap legislated by the NSW Labor government included an agreement with Star City casino. This agreement promised a massive payout from the government to the casino, if MTGM numbers were allowed to exceed the 15% cap in clubs.

Well, you can imagine the outrage! Clubs NSW howled in indignation, and demanded to know the details of the “secret deal”. They never like it when the shoe’s on the other foot. But there was nothing they could do… and Souris publicly announced that this commitment may not be able to be honoured, not if it involved paying millions of dollars in compensation to the casino.

I’m sure you can see where I’m going with this. The biggest and most powerful clubs in NSW, having identified MTGMs as being more lucrative and harder to regulate that standard poker machines, had embarked on a course of expansion, loading more and more MTGMs into their gaming rooms. This was halted by the 15% cap, but their MoU agreement should have taken care of that… until the Star Casino agreement was revealed. And 2013, the date for compliance with the legislation, is just around the corner.

At the same time, Star is in a fight for survival. After a series of blunders and scandals, the NSW government has them under the microscope, and they will do anything to hang on to their licence.

Such as dropping the MTGM agreement.

It’s not much of a stretch. Let’s face it, what’s the good of penalty fees if you’re out of business? The NSW Government has been bending over backwards to give the clubs what they want, and their relationship with Star has always been frosty at best. Now they have a golden opportunity to rewrite the rule book, and honour their promise to Clubs NSW.

And if they do… then casino gaming will spread across the state like wildfire.