Pokies scam evidence found in car's boot

By ANGELA GREGORY

Important documents were found behind bags of rubbish in the car boot of an Auckland financial director accused of conspiring to defraud charitable trusts in an alleged pokies racket.

The Auckland District Court heard yesterday that Serious Fraud Office investigators found evidence of "contrived and artificial" advertising costs in the car of Stewart Thomas Romley.

Romley, 61, was in court for a depositions hearing with three other Auckland men.

They face fraud charges over their involvement in the Helicopter Trust, ChildFlight Trust and the pub charity GoldTimes Foundation.

Malcolm Beattie, 62, former trust chairman and company director of Mt Wellington, Wayne Porter, 59, company director of Waimauku, Peter John Pharo, 62, hotelier of Remuera, and Romley are charged with conspiracy to defraud.

Nicholas Davidson QC, representing the SFO, told the court the men dishonestly diverted large amounts of money from pub gaming machine takings in the guise of advertising costs.

They gave grants through GoldTimes, which owned gaming machines, to the two charitable trusts, which returned about half the amount to the pubs for "so-called" advertising payments.

"Such payments were made knowingly in breach of legal obligations by the defendants with an element of deliberate concealment from the authorities and from the trustees not in the loop," Mr Davidson said.

It was a "racket" between a small group of people with financial links, mainly through the pubs, GoldTimes, and the two trusts.

GoldTimes' function was to distribute net profits to the community for authorised purposes. Only permissible expenses could be deducted from the gaming machine proceeds.

Apart from site rental money and increased custom, the pubs ought not to have benefited from the gaming proceeds.

"The ethos is the costs of gaming to be reimbursed but the money spent by public should be returned to community," Mr Davidson said.

GoldTimes had granted applications for money from the Helicopter Trust and ChildFlight Trust and declined most others.

The prosecution says the amount paid to those trusts was then heavily reduced by making advertising payments back to the pubs far beyond any proper advertising expenditure.

Mr Davidson said such advertising would have cost about $240,000 a year, compared to the trusts' allocation of $1.65 million.

Of the $13.6 million grants received by the two trusts between January 1995 and April 2002, $5.8 million went towards advertising.

Mr Davidson said evidence for that was outlined in a document found in Romley's car boot.

When the SFO secured a search warrant for Romley's Milford home, he was asked to hand over the keys to two vehicles.

Mr Davidson said Romley had asked it he could go to get milk, and was told he would have to wait until the vehicles were searched.

In the boot of one were plastic shopping bags full of rubbish. Behind them were a small bundle of documents and a folder containing more documents.

Among the documents was a schedule on GoldTimes letterhead prepared by Romley. It was marked "confidential" and set out what was described as "advertising calculation".

The boot also contained other evidence, such as details of how the cost of advertising went down when there was an increase in the value of site rentals.

Mr Davidson said it was part of a money-go-round where the pub owners received money based on a percentage calculation - about half - of the charitable funds.

It would be shown that a "cloak of concealment" surrounded the advertising and it was known only to the alleged conspirators.

In the case of the Palace Tavern, it was alleged that no advertising was done at all.

Mr Davidson said that in 2000, a staff member asked why ChildFlight had paid so much for advertising.

"The witness concerned was told by Beattie that it was none of her business. She later asked Romley and was told it was GoldTimes' business."

Mr Davidson said the staff member was told in a later meeting if that line of questioning continued she and other employees would be in "very hot water".

From May 2001 the financial reporting statements were changed, removing all indication of advertising costs.

"It is notable that after staff enquiries and about the time of the [Internal Affairs] department's interest in GoldTimes, the rate of advertising costs paid to Porter/Pharo reduced significantly."

Mr Davidson said the defendants tried to delay, deflect and defeat the inquiries of an Internal Affairs audit in 2001.

In October 2002, Beattie was instrumental in creating a document to retrospectively solve the advertising problems.

He said Beattie did not take direct advantage, but received substantial remuneration for his role as executive chairman and for a period received income from GoldTimes.

Mr Davidson said the defendants were by their own choice in severely conflicting positions.

They had strict obligations but obvious personal benefits either direct or indirect, including income for Beattie and Romley.

The victims of the fraud were the two trusts and any other person or body entitled to apply for and be granted gaming machine proceeds from GoldTimes.

The Crown said there was clear evidence of dishonest agreement.

"It could never have been a proper commercial business arrangement to pay so much of the gaming funds distributed to the two trusts back to the site operators."

Beattie and Romley's lawyer, John Billington QC, told the court neither his clients nor the trusts had financial interests in the hotels.

"They were contracted employees with no personal interest."

GOLDTIMES CASE

* Wayne Porter and Peter Pharo owned or held an interest in hotels in Auckland city and Otahuhu.

* They included the Birdcage, the Palace Tavern, the Strand Tavern, Cazino Bar and Goldie's Casino.

* Malcolm Beattie was elected chairman of the Helicopter Trust in August 1990 and Porter deputy chairman in May 2000.

* Stewart Romley joined as an accountant in 1994 and progressed to become the finance director.

* ChildFlight Trust was set up in January 2000 with Porter and Beattie as trustees, Romley as finance director and Beattie as executive chairman.

* It operated for charitable purposes under the umbrella of the Helicopter Trust.

* GoldTimes Trust, formed in March 1990, included Porter and Pharo as trustees.

* Beattie joined the GoldTimes board as a trustee. and became chairman in December 1998.

* Romley became secretary in June 1999.

* GoldTimes owned gaming machines installed in the Porter/Pharo pubs.

* It collected the income from the machines and paid a weekly site rental to each of the pubs.