Hooked, page 11
A $2-billion project was always likely to have economic spin-offs, and Crown unquestionably delivered some benefits, at least in the short term.84 The construction of the complex involved the employment of 5500 workers, but Kennett extended the construction boom by using $500 million in Crown’s licensing fees, plus the first tranche of increased gambling taxes, to develop Agenda 21. This was a program to address all the iconic building projects in Melbourne that had gone begging for years: renovations to the State Library, a new museum and renovations to the National Gallery of Victoria. Once it opened, Crown was the single largest private employer in Victoria, employing over 5000 people, and was undoubtedly an attraction for tourists.
However, economists are divided over the long-term economic benefits that arise from casinos. The consensus seems to be that any benefits are relatively small and tend to fade over time. This was certainly the case with Crown’s impact upon tourism to Victoria, as only 20 per cent of its visitors were from overseas or interstate.85 Crown was overwhelmingly directed at the local market. In fact, maximising the local market was crucial to its overall business model.86
What about the benefits of additional jobs? As gambling researchers Francis Markham and Martin Young have pointed out, gambling industries don’t create many ‘new jobs’, because, firstly, they divert employment from other entertainment businesses, and, secondly, spending in the general economy suffers from money lost to gambling.87
Crown therefore set about maximising the local market by creating a culture of gambling around the casino. Between the opening of Crown in 1992 and the explosion of poker machines into the Victorian community, household expenditure on gambling increased dramatically. Between 1988 and 1994, annual household expenditure on gambling rose from $253 to $349, the largest increase of any state.88 Crown was reaping a large slice of this increased expenditure. In the ten years from 1997 to 2007, gamblers at Crown’s poker machines and gaming tables were losing $2.46 million a day – and two-thirds of that amount was coming from locals. In aggregate, over the decade Victorians lost $6 billion at Crown.89
Crown’s staggering profits show how successful the company was at creating a casino culture among Melburnians. But what cost–benefit analysis can be applied to such a mammoth venture? Is the provision of thousands of jobs at Crown offset by lost opportunities in the broader economy and the social damage the casino created? These issues were raised in the 1960s debate about clubs and pokies in New South Wales. As journalists Millar and Houston noted of the first decade of the opening of the Southbank complex, the money Victorians had lost at Crown was ‘money not spent in local shops and restaurants, on education, shares or superannuation’.90 Providing more opportunities to gamble changes how money is spent in the economy.
Because the economics of such a big project attracted powerful players, Crown Casino took the network of power around gambling – already evident from the example of the New South Wales clubs – to another level. Big Gambling sought to protect and expand its business model, and governments became ever more reliant on the tax revenues gamblers delivered. In Crown’s case, these taxes were paid predominantly by ordinary Victorians. Between 1997 and 2007, Crown paid $3 billion in taxes to the Victorian government.91 The state was as addicted to gambling as some of Crown’s patrons. And it wasn’t just Victoria reaping the tax revenues.
By the late 1990s, gambling was the fastest-growing source of revenue for all state governments. ‘Revenue hunger’ had seen every state introduce licensed casinos along with poker machines.92 The search for new sources of revenue had been made all the more urgent by the abolition of estate taxes (also known as death duties). Queensland was the first state to abolish the tax in 1977, and the other states were compelled to do the same. By the early 1980s there were no estate taxes in Australia. Although there was no direct correlation between the demise of estate taxes and the advent of gambling taxes, the effect was nonetheless profound. A tax that was paid by the rich had been replaced by one paid predominantly by the poor.
A silence descended among state politicians about the umbilical cord that now connected governments and the gambling industry. As respected financial journalist Max Walsh conceded, politicians had given up questioning ‘whether taxing the lower income groups, the cannon fodder of casinos, is a way to dispense social justice’.93
In fact, the change was even more insidious, as state governments were drawn to the easy revenue of gambling taxes. As Vic Carroll, one of the giants of post-war Australian journalism, pointed out as early as 1994, the crowds pouring into Crown Casino made gambling Australia’s strongest growth industry; consequently, the ‘problem is how to keep it going’.94 The answer was more casinos and more poker machines, and enhanced gambling technologies, creating more and more opportunities for revenue to be collected. Governments became the linchpin in the juggernaut that was Big Gambling.
Kennett’s successor, Labor’s Steve Bracks, also bowed before the altar of Crown. Under Bracks, the Victorian Labor Party gave up its campaign of trying to hold both the government and Crown management accountable. Labor’s longstanding gambling spokesperson, Rob Hulls, had been a vociferous opponent of Crown and the tendering process, committing Labor to hold an official inquiry into Crown when it came to power. When Bracks won office in 1999, not only was that proposal dropped but Hulls was gone from the gaming portfolio. These developments came in the wake of a $100 000 donation Packer gave to the Victorian Labor Party, the largest single donation it had ever received.
Of course, all parties denied there was any link between the donation and Labor abandoning its principles.95 Soon enough the Bracks government was being accused of cosying up to Crown. Within a year, the government was ‘accepting freebies from Crown and hosting ALP dinners and conferences there’.96
Counting the social cost
Between 1992 and 2022, Victorians lost $65.4 billion on poker machines alone. Adjusted for inflation and expressed in 2024 dollars, the figure is $71 billion. That’s an eye-watering amount taken out of the productive economy put into the pockets of the emerging pokies business elites, immiserating untold numbers of ordinary Victorians along the way.97
The tight nexus between the Victorian government and Crown meant a blind eye was turned to the social cost unleashed by Big Gambling in the state. As Age journalist Mike Richards wrote in 1997, ‘If the government doesn’t recognise the gambling problem in this town [Melbourne], it is deluding itself.’98 But successive Victorian governments preferred delusion to reality, lest the glossy image of Crown be besmirched in any way.
A pathological addiction to gambling was first recognised as a psychiatric disorder in 1980, grouped under Impulse Control Disorders.99 Critics of Crown, of course, were well aware of this science and did not hesitate to focus on it. Tim Costello decried the ‘casino culture’, created by the company and aided by the government, which legitimised ‘a ruthless pursuit of financial gain, and [had] little or no interest in its effects on the community’.100 Gambling researcher James Doughney maintained that problem gambling as a social phenomenon ‘simply did not exist [in Victoria] before the Kirner government introduced poker machines in 1992 and the advent of Crown two years later’.101 And Monash researcher Charles Livingstone depicted Crown as a ‘harm production factory’, because it was ‘open 24 hours a day, almost every day of the year’, and because it was a mega-venue and contained banks of poker machines. ‘We know that large venues attract higher expenditure and higher rates of harm,’ Livingstone said.102
By 1996 the Kennett government recognised – in a limited way – the issue of problem gambling on the back of rising community alarm. The problem surfaced in the magistrates’ courts, where an increasing number of people were explaining criminal acts by pointing to gambling addiction. Kennett hit back, claiming that gambling was simply being used as an excuse for criminal conduct. Legal aid lawyers and police prosecutors disagreed. They pointed out that individual cases of crime related to gambling habits had been documented. ‘Most weeks you would hear comments from the bench in relation to problems with gambling,’ explained Seargent Bob Hodge.103
The Kennett government responded with the limited airing of a $1.3-million television advertising campaign warning about gambling addiction. When they were discontinued, community pressure forced the government to rerun the campaign the following year. The ads were found to have been effective in creating awareness of problem gambling, but they were overwhelmed by the positive press the casino received and Crown’s own tsunami of advertising.104 Eventually, the gambling harm advertising campaign was discontinued. When the Victorian Council of Problem Gambling criticised the government’s decision, it had its funding cut and was forced out of existence.105
Kennett regarded the issue of problem gambling as little more than an irritant. He claimed that initial estimates that 1 per cent of gamblers would experience problems had not been realised.106 Gambling reform campaigners countered that the government’s limited awareness-raising campaign had not done enough, and that not all problem gamblers were coming forward to ask for help. But there was a conceptual problem at the heart of the issue: uncertainty over exactly what constituted ‘problem gambling’.
Are gamblers themselves the problem? Or is the real issue the addictive technology and manipulative advertising propagated by gambling companies? Of course, the industry prefers the terms ‘problem gambler’ and ‘responsible gambling’, as these place the onus on the individual rather than their business model.
There are other definitional problems as well. Gambling researchers have argued that ‘the social costs of gambling are too ill-defined for firm conclusions to be reached’. The social costs had ripple effects on divorce rates, homelessness, domestic violence and alcohol and drug use, which were not well understood or measured in the 1990s.107 Only recently has it been established that the gambling problem of a single individual has direct negative effects on at least six others, which decreases the quality of life of those affected by between 10 per cent and 28 per cent.108
The gambling industry seeks to minimise the extent of problem gambling. Worldwide, the industry promotes the idea that the issue is confined to a small minority: some 1–2 per cent of the general population become addicts (pathological gamblers), while an additional 3–4 per cent present with a less severe form of ‘problem gambling’. To state the obvious, if up to 6 per cent of the general population is likely to suffer harm from a product, then that a serious social problem.
However, some gambling researchers argue that it is misleading to measure forms of gambling addiction within the general population. A better approach is to look at the gambling population: that is, regular or repeat gamblers. Using this measure, the rate of problem gambling might be as high as 20 per cent.109
But so high a figure risked gambling losing its social licence to grow into an even bigger industry. The tobacco industry had lost this battle – a fact well understood by the gambling industry. Thus, Big Gambling needed to control the narrative around the adverse social impacts arising from the industry.
A breakthrough came in 2004 in Reno, Nevada, where a group of academics, gambling executives and government officials met to develop a strategic approach to the concept of ‘responsible’ gambling. Known as the Reno Model, it was based on several basic assumptions: that gambling was legal; that it was harmless entertainment; that the ultimate responsibility for gambling lay with the individual; that gambling harmed only a small number of players; and that programs should only target this population. It was seen as a science-based model.110
While it was welcomed by governments, regulators and the gambling industry across the globe, the Reno Model has been challenged as being ideological rather than scientific. Critics claimed that it placed too much focus on the individual and too little on governments and the gambling industry to create safe settings and modes of gambling. As Hancock and Smith argue in their critique of the model, it ‘helped forge a powerful policy network collaboration between industry, governments and regulators with a vested interest in “business as usual”’.111
The framework was set: people, not the industry, were responsible for the fate of gamblers. According to Financial Counselling Australia, the peak body for the professionals seeking to help everyday people who are under financial stress, the constructs of ‘responsible gambling’ and ‘problem gambler’ are promoted ‘by the whole gambling ecosystem when they want to prioritise their business interests over the welfare of their customers and society’.112
With the issue of problem gambling sidelined, the debate in the late 1990s and early 2000s over the impact of Crown in Melbourne boiled down to employment and tax revenue versus the increase in social harm. With the advent of the Reno Model, the balance tipped in favour of the former, and the power of the gambling industry was applied to ensure that this remained the case. As Jan McMillen, professor of gambling studies at the University of Western Sydney, lamented in 1997, ‘We simply do not have the data on the social and economic effects of casinos.’113
But a sleeper issue lurked in Crown’s business model that threatened to damage its reputation: an ask-no-questions policy on the legitimacy of the money high rollers brought into the casino. Crown quickly became a magnet for fraudsters, embezzlers and drug dealers, many of whom wanted to launder money. It was a ticking time bomb.
Packer’s empire
Back in New South Wales, Sydney Harbour Casino was opened in 1997 after a temporary casino operated for several years. Seen as a sure success given Sydney’s gambling culture, Australia’s second-largest casino also ran into early trouble. Unlike Williams’ unleashing of a tsunami of promotion at Crown, the Sydney casino’s lacklustre management hadn’t allocated sufficient funds to grow the local market.
Kerry Packer came circling again: he bought out Showboat’s management rights and took a 10 per cent stake in what was renamed Star City Casino. Of course, Packer brought in his Nine Network to create some manufactured excitement around the glitzy venue. Max Walsh explained Packer’s move: ‘When it comes to marketing glamour and leisure, no other medium can touch television.’114 And so Packer became the long-term beneficiary of the obliging regulatory changes the Kennett government had offered Crown.
A small stake in Sydney’s only casino was never going to satisfy the Packer family’s ambitions, however. Money, power and political mateship would ensure that their grander plans for a second Sydney casino would be vigorously pursued in the corridors of power.
5 CROWN UNPLUGGED
Victoria’s police commissioner, Christine Nixon, was about to go on annual leave on 3 April 2004, but before departing she made a brief statement to the media that sent a ripple of surprise through the community. Nixon issued an order banning two notorious characters from entering Crown Casino: drug kingpin Carl Williams, then in jail on drugs charges, and construction boss and reputed underworld figure Mick Gatto. He was out on bail, but was accused, and later acquitted, of murdering Williams’ hitman Andrew Veniamin.
In March 2004 Gatto and Veniamin had been locked in a life-or-death struggle in a narrow hallway at the rear of Melbourne’s La Porcella restaurant, with bullets ricocheting around them. Veniamin, described as Australia’s busiest hitman,1 initially overwhelmed his target in his characteristic cowboy style of attack. Pinned but with his gun poking Veniamin’s chest, Gatto let fly a final, fatal fifth shot. At his trial, the jury agreed it was self-defence since Veniamin had been trying to kill Gatto.
Gatto, Veniamin and Williams were frequent visitors to Crown’s elite Mahogony Room for high roller gamblers.
Commissioner Nixon didn’t say why she’d issued the bans. But it wasn’t a challenge to come up with some potential reasons. Melbourne was in the grip of its worst ever gangland war, in which 23 underworld figures had already been shot in an orgy of violence across five years. While the shootings had their own sadistic motives, at heart was a fight over the trade in amphetamines, the new and dangerous stimulant drug flooding the country. Claims surfaced that Melbourne’s big-time drug dealers were laundering money at Crown Casino. It’s important to note, however, that although Gatto was issued with a ban, he has never been charged with any drug-related offence.
Significant proceeds from crime need to be ‘washed’ before criminals can spend them. This is because law-abiding citizens are expected to declare their income and pay tax on it. Any person who has lots of assets but no obvious sources of legitimate income will attract the attention of authorities.
Organised crime figures have long used casinos to ‘clean’ their ‘dirty’ money.2 The simplest method involved criminals buying chips with cash, spending some time on the casino floor and then cashing them out as winnings in a cheque; that money then has a ‘legitimate’ source.
At the time of their bans, Williams and Gatto symbolised a shift in the culture of Melbourne’s underworld. Williams was a cherub-faced young man who hailed from the socially disadvantaged outer-Melbourne suburb of Sunshine, where his father had long dabbled in the drug trade. Carl went on to amass a multimillion-dollar fortune from the manufacture of amphetamines, but he cultivated a casual style, usually wearing T-shirts, jeans or cargo pants and runners. But his genial image hid a sadistic streak and a burgeoning ego.
By contrast, Gatto always looked like he walked off the set of The Godfather. A boxer turned construction industry ‘consultant’, he was described by his enemies as menacing. The 2002 royal commission into the building industry labelled him as one of a breed of people who ‘break legs’.3 Gatto claimed he was unfairly branded as an underworld king; his role, he said, was to mediate between unions and bosses. He has always strenuously denied allegations that he used standover tactics in the construction industry.
