The pokies fraud fall guy

Noel Gibbons, 79, at his rest home in Manurewa. Photo / Steven McNicholl

How did an elderly sports administrator with decades of community service end up convicted for a $605,000 fraud? David Fisher delves into the murky world of pokies, pubs and gaming charities

Noel Gibbons is wrestling with the indignity of age. At 79, there are a number of issues that keep him virtually confined to his room in a Manurewa rest home.

One of those issues has nothing to do with his health. Instead, it is the sentence he received for a fraud carried out in the twilight years of his life. A convicted fraudster - his first and only conviction - he wears an electronic bracelet that monitors his movements around the Erin Park Retirement Village.

"I have been the scapegoat and I've taken the blame for everything," he says. "It wasn't just me. I took the blame for what a lot of us did."

Gibbons has lived a life committed to his community. There have been cricket and horses - the rhythm of life in Franklin, south of Auckland. He was a handy bowler once, but proved even more valuable as secretary, treasurer and even president of the Franklin Cricket Association between 1959 and 1986. He is now chairman of the residents' group at the retirement village. Yesterday, he was helping at Cardiac Club.

There was barely a blemish in life until he started trying to bring in money for Counties Manukau Bowls. The lifeblood of community sports and events is money, much of it from pokie machines.

And, for Gibbons, that is where it all began to go horribly wrong.

Nine billion dollars a year are pumped through pokie machines. The actual cash to come out of the machines is about $850 million and a minimum of 37 per cent must go back to the community.

The money is handed out in grants from pokie trusts, which are currently organising a revolt against proposed legislation aiming to end their existence.

Maori Party MP Te Ururoa Flavell has proposed legislation that would restructure the way gaming money is distributed. He says the current system is "consistently being abused".

The chorus of whistleblowers from gaming trusts is becoming deafening. Among them is Francis Wevers, former chief executive of the Community Gaming Association.

"The motivation to operate unlawfully is more powerful than the motivation to comply," he wrote last year in a briefing paper to the Government minister in charge. "The corrupt behaviour has been all-pervasive and pernicious."

Wevers says there is no real deterrent, when set against the money available. The Department of Internal Affairs gained few convictions, and those they did get were fairly meaningless.

The DIA investigators focus on the friction that exists in the odd money-go-round of pokies. The people making grant applications to pokie trusts are not allowed to be pub owners, and pub owners are not allowed to tell the pokie trusts where the money should go. It stops community and sport organisations from effectively running pubs for the benefit of the profits from pokie machines.

It is intended to create an altruistic separation of those generating the money, giving the money and benefiting from the money.

Instead, according to Mr Wevers, the current structure encourages the pubs and pokie societies to take as large a share of the cash as possible. He says it even encourages them to bend or break the rules because the benefits outweight the consequences. At the end of the process, the community organisation contorts itself around the rules to get the money.

And Gibbons proved quite the contortionist.

Counties Manukau Bowls Inc (now in liquidation) became the beneficiary of an ever-increasing level of grants once Gibbons worked out how to get into the pub business, care of investment structure devised by people he knew in trotting circles.

Armed with a template to circumvent pub ownership rules, Gibbons pulled in $1.44 million in grant money between 2006 and 2009 from Century Foundation, Perry Foundation, New Zealand Community Trust and the now-defunct Caversham Foundation.

The DIA spent two years investigating the structure. Those who came under focus in the inquiry speak of having their lives put through the wringer by DIA inspectors.

For all its effort, Gibbons' six-month community detention conviction was the only scalp earned. Charges were laid against only one other person - former police officer and gaming inspector Kevin Coffey, who was then working for the Caversham Foundation. The DIA alleged he had offered to fund Counties Manukau Bowls in return for the club buying a pub into which his trust could put gaming machines. He denied it and the judge hearing the case said there was no evidence to support the claim.

This is how the scheme worked: it required the involvement of some club members among the 23 member clubs of Counties Manukau Bowls who invested money in Dorchester Finance, which would lend money to Waitakere Finance (owned and managed by Kumeu accountant Tony Forlong), which in turn would lend money to Logic Hospitality, a company owned and run by a handful of bowls members. Logic Hospitality would buy and operate pubs with gaming machines, and Counties Manukau Bowls would get money from the trusts which owned the pokies.

In court papers, the structure was described by Internal Affairs as a way to get around the law, although no charges were ever laid in relation to the structure. Mr Forlong said DIA inspectors told him it wasn't in the "spirit of the law", although a judge who later tossed out a case connected to the scheme pointed out: "The Department of Internal Affairs has not challenged the legality of the 'Logic Hospitality Structure'." The judge said all the parties involved believed they were acting legally.

It all ended for Gibbons when a new president came into the club and had concerns about the arrangement. Gibbons was also recorded talking about relationships with the various trusts and the grants obtained. He was offered immunity in return for testimony against gaming trust figures - although no charges were ever laid in relation to the recording.

There was clearly a crime. Court documents claimed Gibbons made "numerous" "fraudulent" applications. Among them, he put 35 applications before the various gaming societies linked to Logic Hospitality's pubs for "bowling green maintenance" and "administration".

According to the DIA, the $605,000 obtained was to make payments on loans, which were used to buy the pubs. The liquidation report for Logic Hospitality Ltd shows it owed $200,000 to Waitakere Finance Ltd. The pubs, when they were sold, were worth just $120,000.

While the money was going to pay the loans, the DIA said Gibbons manufactured quotes from green-keeping contractors to cover his trail. The forged quotes were sent to the pokie trusts, which paid out on receipt. The trusts were later sent forged invoices to prove the money had been spent as promised.

Like Mr Wevers, Mr Coffey is also out of the pokies business. He says the case against him cost his savings and destroyed his consultancy business. He says the DIA, where he was once a senior manager, has become focused on "catching people out". The rules get tighter to compensate for inadequate laws and a broken system. Those trying to get money for their clubs or sporting organisations deal with increasingly complex rules and competition for money. "People get hurt along the way, like me and Noel."

Mr Coffey has previously been lauded by his former employer, the NZ Community Trust, for his dedication to the "long-term survival of the industry". He left there to go to Caversham Foundation.

Both trusts have been criticised for excessive use of funding which would have otherwise gone to community groups. Auditors believed, based on a 2007 audit of Caversham Foundation, that its chairman, Dr Wayne Morris, was being paid "unreasonable" directors fees of $196,000 a year, although a spokesman for Dr Morris told the Weekend Herald he never received that level of payment. Documents from the 2010 financial year show NZCT paid its trustees $251,000, its staff $924,000 and spent $196,000 on travel.

Mr Coffey says every gaming trust needs a board and no more than three staff. "Most people would say it has had its day, the trust system."

He says there is now a widespread perception the trusts are "bad and shonky. It is the system that is shonky."

Mr Coffey says "the system creates victims". The false invoices in the Counties Manukau Bowls weren't created by the system, although Gibbons has never been too specific about how they came to be.

Gibbons said papers were served on others involved in Logic Hospitality but they were never charged. "They were let off the hook provided I took the blame, which I did. I don't want other people implicated in the thing. I know there were clubs involved and all sorts of things but ... I have to wear it."

So, he turned up at court and pleaded guilty. The judge asked Gibbons to move closer so he could hear his sentence pronounced.

The DIA press release carried that big number - $605,000 - but he didn't get a cent. The money was always for bowls, he says. A lawyer once offered to beat the charge for $30,000.

"There's no way in the world I could afford to pay $30,000, let alone $1000. In fact, the DIA offered me immunity if I dobbed somebody else in. It's not my thing. I don't do that."

Come and take my picture then, agreed Gibbons. "People will say, 'there's that bastard again'.

"That's the way people think. I have got to hide behind other people sometimes in my own village, with only 32 apartments, because there are some who still think I'm a cheat. I never cheated anybody in my life.

"There's no way I can clear my name. The court have sentenced me and I've got to ride out my time, simple as that. I'll just go along with that, if I live that long."

Gibbons has about four months of his sentence left to serve. With health problems and surgery approaching, he says he is unsure if he will live to see the electronic bracelet come off his leg. And when it does, it is questionable how much difference freedom will make.

"I've spent my life working for other people in a voluntary situation from the time I was 16 and I'm still doing it. That's my life. That's what I do... try to help people.

"I didn't do it. I didn't sign documents and things like that. I helped... helped clubs. That's what I did."

The problem, said Gibbons, is his family.

His children are "suffering because I'm criminal". The "gossip machine" around the retirement village is also persistent.

"There are some that still think I'm a bloody criminal. I never have been, never will be. I'm broad enough across the shoulders and old enough to say I'll take the buck and that's it.

"I don't care about myself, too late for that now. I'm 79 and about to die."