Pokie chief must repay $1m

Photo / APN

The former trustee of a defunct South Auckland pokie trust has been ordered to pay back almost $1 million, which he admitted taking for his own personal gain.

In a High Court decision last week, the South Auckland Charitable Trust, trustee Alvin Shane Cosgrave and his company, Integrated Commercial Solutions Ltd (ICSL), were ordered to repay $975,629.39 to the Department of Internal Affairs.

The court found Mr Cosgrave had kept money which should have been distributed to the community.

Internal Affairs declined to comment on the case yesterday.

The trust, which was licensed in 2003, operated pokie machines in the South Auckland area until Internal Affairs became concerned over its operations and decided not to renew its licence in September 2007.

Rather than appeal, the trust sold its pokie machine operation to another trust, the Lion Foundation, on June 30, 2008.

However, after reviewing its financial statements, a forensic accountant for Internal Affairs noted a "significant increase in the trust's operating costs" for the last 13 months of its pokie machine activities.

Payments identified included a change in the management agreement between Mr Cosgrave and ICSL, two months after he was told the trust's licence would not be renewed.

The new agreement included increases in the company's charges for gaming machine services, and compensation payable in the event of any early termination of its contract.

This early termination clause was triggered when the trust decided not to appeal against its licence not being renewed, and its assets were transferred to Lion Foundation.

Compensation was paid to ICSL in three payments totalling $766,782 including GST.

Payments from the trust to Mr Cosgrave's company, Clendon Inn 2007 Ltd (CIL), were also identified, including $75,202.25 used for the day-to-day running of the Manukau-based pub and restaurant.

The court judgment said Mr Cosgrave admitted in an interview with Internal Affairs to signing all three cheques and using the funds for his own personal gain. It said he later admitted that he had stolen the money.

The trust also paid $45,202.25 for building work at the Clendon Inn, and $44,004 for a fit-out of the pub's gaming room, with additional payments for legal services ($10,750) and vehicles ($5494).

Internal Affairs took a civil action against Mr Cosgrave and his company. It was the first case under section 112 of the Gambling Act.

The decision found the payments were not "actual, reasonable or necessary".

"The monies paid were in fact part of the trust's 'net proceeds' which were required by the act to be distributed only for authorised purposes," the decision noted.

The Gambling Act 2003 states pokie trusts must conduct gambling to raise funds for "authorised purposes", and the use of funds for unauthorised purposes can lead to prosecution or licence cancellation. Authorised purposes include charities, and non-commercial purposes of benefit to the community.

Problem Gambling Foundation of New Zealand chief executive Graeme Ramsey said the High Court decision had established a precedent and he expected other cases to follow.

"When I read this judgment it was very clear. It said that the money from pokie machines must be used for community purposes."

Mr Ramsey said the case illustrated that the system is open to rorts and called for more action to have the sector reformed.

Mr Cosgrave is also facing nine criminal charges of theft.

- Otago Daily Times