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The Bracks government in Victoria is considering a $4000 per machine super tax on the state’s 30,000 poker machines which would go some way to clawing back the $5 billion in capital profits Tabcorp, Tattersalls and Crown have made.

Tabcorp have tried to encourage a letter writing campaign by their shareholders and are now planning an advertising campaign against the Government as it contemplates the recommendations of the Harvey report on business taxation heading into the budget in mid May.

The numbers are very straight forward. Jeff Kennett floated Tabcorp at $2.25 in 1994 after the float flopped, partly because of a scare campaign by then opposition leader John Brumby and outrage over the outrageous salary package given to CEO Ross Wilson. But even at the top of the selling range of $2.70, the government sold it for a song. Tabcorp shareholders have received almost $3 per share in dividends and tax returns over the past six years and the stock is still worth $9. Ross Wilson has completed paid off his $6.72 million interest free loan and is personally about $30 million in front. You are in no position to cry poor Ross, who has arguably the easiest CEO’s job of any listed company in the country running a gambling business with government licences and legislated monopolies or duopolies.

Tatts push pokies but act like a charity

Even worse is the Tattersalls situation. They hold a poker machine licence worth about $2 billion but have so far paid only about $150 million in licence fees for the privilege. Tatts have also just picked up the footy tipping gambling licence from the Bracks government. Hawker Britten spin doctor David White was the Minister who gave Tatts its licence for free and we wouldn’t be surprised if Whitey was in there helping Tatts get this new licence. Afterall, Eddie McGuire is part of the consortium and Eddie’s older brother and best mate Frank McGuire was Whitey’s old press secretary back in the 80s. Tatts used to make about $18 million a year on its lottery licence in Victoria and then suddenly found itself swimming in cash with $100 million annual profits from the pokers business which cost them stuff all to get into. The secretive 2000 Tatts beneficiaries, many of whom live in the UK, all become millionaires, including Port Arthur murderer Martin Bryant whose Tatts inheritance was sold for about $1.3 million. The trustees of the trust also do very nicely pocketing about 5 per cent of the annual profits. Tatts are an insidious gambling company making huge profits but they try to portray themselves as a charity with all these ads in the Herald Sun that look like news stories telling readers of the latest wonderful donation they’ve made to some hospital or good cause. Kennett’s former top adviser and gambling expert Alister Drysdale also collects about $500,000 a year for his lobbying efforts at Tattersalls, which is not a bad gig for a former trotting correspondent who rose to become Malcolm Fraser’s press secretary.

Time to slug Packer for a change

Then there is Eddie’s employer Kerry Packer. On the day his PBL announced its $1.8 billion bid for Crown, its shares were trading at $6. They have doubled in the subsequent two years and Crown can well afford to pay an extra $10 million a year in tax on their lucrative 2500 poker machines. It will be a sad day for Victoria if Bracks and Brumby back down to these rent seekers just because Kerry Packer is the most powerful man in Australia. Gambling licence holders in Victoria have made obscene profits from incompetent governments and dopey punters. It is about time the government hit back.

Brumby and Attorney General Rob Hulls are no fans of the Packer family and would love to see them get slugged whereas Premier Steve Bracks is more conciliatory as was exemplified by his meetings with James Packer and Packer door opener Graham Richardson shortly after Jeff Kennett was swept from office.

The government has suffered considerable political damage from the $100,000 donation PBL made to the Victorian branch of the Labor Party two days before the Frankston East by-election and the super-tax would be the best way of demonstrating they are not in the pay or the pocket of Australia’s most notorious manipulator of politicians.

Inside gambling’s insidious advertising

A marketing man with a conscience has sent through an email explaining just how insidious Victoria’s poker machine companies are when it comes to wooing problem gamblers to their machines.

I won’t say which company he worked for as he’s still trying to make a dollar marketing in Australia but it is pretty chilling stuff.

“The category known as Desperate Optimists were the highest spenders of all segments and the most out of control in their behaviour. There were 5 or 6 segments with the total audience representing about 40% of Victorians but it was the DOs we targeted the most.

The DO’s were high in value but small in number – making them very attractive as a target because management and marketing expenses to contact them directly should be small relative to their spend on the pokies.

We implemented several strategies that were designed to ensnare the Desperate Optimists. The “Pareto Principle” is that 80% of your customers are responsible for only 20% of the spend and vice versa – so focus the majority of the spend on the smaller groups that will pay off.

For this reason, we actively targeted those customers that gambled in higher multiples (in terms of spend and frequency of visits) than the average with the idea of increasing our revenues in the most cost efficient way – maximum return for minimum spend.

For the Desperate Optimists, we wanted to make them feel as comfortable as possible in the venues so they never had to leave. We aimed to ‘protect’ their spend by making them special VIP members and providing all kinds of free meals and drinks to keep them – regardless of their reckless spend levels. The strategies were aimed to maximise return with absolutely no regard for the welfare of the prospect of this campaign.

ends

Finally, this is the flyer we handed outside the Premier’s and Treasurer’s offices this morning whilst wearing the seven foot, green foam Crikey suit.

WWW.CRIKEY.COM.AU

SLUG THE RENT SEEKING GAMBLING COMPANIES

MARCH 19, 2001

Australia’s best known independent news web site, www.crikey.com.au, is calling on the Bracks government to support ethical funds management and slug Victoria’s poker machine companies with an additional $120 million in taxes.

The three major gambling licence holders in Victoria – Tattersalls, Tabcorp and Crown – are together enjoying capital profits of about $5 billion on their investment in the government licences and can well afford an additional $4000 per machine annual surcharge.

The Kennett government sold Tabcorp in August 1994 for $2.25 a share and the 50,000 shareholders have already enjoyed dividends and capital returns of more than $3 a share.

The shares are currently worth about $9 so these lucky investors are enjoying profits of about $2.5 billion on their wagering monopoly licence and poker machine duopoly licence.

At least the government got $675 million for Tabcorp because the Kirner government gave Tattersalls their licence in 1991 for free. It is now worth an estimated $2 billion and they have so far paid about $150 million in retrospective licence fees despite pocketing more than $500 million in profits for their mysterious beneficiaries.

Similarly, PBL shares have doubled from $6 to $12 since they bought Crown casino for $1.8 billion in 1998. Kerry Packer’s flagship company has made more than $1 billion in capital profits from Crown and with an estimated personal fortune of $8.2 billion he can well afford an additional $10 million a year in poker machine taxes.

The Crikey Man was working for Jeff Kennett when some of these massive government rents were handed out for a song and believes the Bracks government should deliver on its anti-gambling rhetoric by slugging these rapacious gambling companies with the additional tax.

We are also in the process of establishing a political party which will campaign hard against gambling companies at upcoming council, state and federal elections.

Similarly, the Bracks government is responsible for about $20 billion in funds under management through VicSuper, the TAC and WorkCover, yet you never see or hear them taking a stand publicly on any corporate governance or ethical issues.

Federal Labor is making noises about legislating to compel fund managers to vote on resolutions so it is about time the Bracks government showed some spine and took a stand on behalf of the people whose money they manage.

For further information: www.crikey.com.au

Peter Fray

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