No one denies that Australia has seen a gambling explosion (some would say epidemic) over the last decade. We now have 13 casinos, racing totalisers nationwide, and a flourishing internet-fuelled bookmaking industry.

But there is a fundamental question that is yet to be sorted out in this country. What happens when a gambling establishment knows or suspects that the money a punter is losing is most probably stolen, or, at the very least, clearly beyond the apparent means of the punter? Does a social responsibility exist? Is there a duty of care to the punter, or indeed, to society at large?

What enquiries, if any, should gambling establishments make to ascertain the source of funds of a gambler losing obscene amounts of money? Should gambling establishments be forced to return monies they reasonably ought to have known were stolen, or were lost by a punter clearly out of control, acting with some type of diminished capacity fuelled by their gambling addiction and/or alcohol?

It is now clearly established that premises licensed to serve alcohol have a duty of care to their patrons, and must “cut a patron off” when he or she  has had too much to drink. The difference with gambling is that there are millions of dollars involved. This is a huge incentive for gambling establishments to turn a blind eye.

Take the case of Kim Faithfull. Faithfull was manager of the Commonwealth Bank branch at Karratha, in Western Australia. From 1998 to 2003, he embezzled $19 million and lost $17 million of it, over the internet, almost exclusively to IASBet, a Northern Territory-based bookmaker headed by celebrity-bookie Mark Read.

There is no doubt IAS knew what Faithfull’s job was – they even sent a couple of cases of Grange to him at the bank in Karratha. There are accusations that Read instructed staff to ignore the issue of the source of Faithfull’s funds, because Faithfull was an unskilled punter and was consistently losing serious money. He would lose hundreds of thousands of dollars a week. Clearly, his salary, in the order of $60,000 a year, wasn’t funding these losses.

The CBA was clueless to the scam until a near suicidal Faithfull suddenly confessed. He was sentenced to five years’ jail. The judge questioned how the “absolutely breathtaking” thefts could go undetected by the CBA for so long, but also how IAS continued to take the bets, knowing who Faithfull was and what he did for a living.

At the time, the CBA issued this abrupt 92-word statement. The statement mentions that no customers lost money, but ignores the cost to CBA shareholders.

CBA lodged a claim in the Federal Court alleging IAS “wilfully shut its eyes to Faithfull’s fraud, or consciously refrained from inquiry” as to the source of the stolen funds, and sought $17 million compensation. Mark Read said the claim would be “vigorously defended”.

Years of legal battles ensured, reportedly costing IAS $1.6 million in legal fees, before last month it was announced that IAS settled, repaying the CBA $7 million. The IAS board described the settlement as “fair and reasonable”.

Sadly, this is not an isolated case.

Dennis Telford, a company secretary and CFO, was charged with stealing $22 million from K&S Corporation, owned by trucking magnate and racehorse breeder Alan Scott, and betting it with Sportingbet, another Darwin-based bookmaker.

In a civil action by K&S, the judge found that Sportingbet knew Telford’s identity, that they had “wilfully and recklessly failed to make inquiries an honest and reasonable man would have made” and ruled that K&S was entitled to $2.78 million held by Sportingbet.

In the wake of these cases, Northern Territory Racing, Gaming and Licensing apparently has written to NT online bookmakers to ask what investigations they undertake to check suspicious transactions. I am unaware of any replies.

So, Crikey readers, what is the answer? Do gambling establishments have a responsibility to society at large? With the enormous amounts of money in superannuation, almost every Australian is effectively a shareholder in large companies whose employees could be embezzling monies to lose to bookies and casinos. When this happens there is a direct reassignment of wealth from mum and dad shareholders to gambling companies.

Should gambling establishments owe a duty of care to their patrons? Should they refuse bets from patrons that are intoxicated? Should they refuse bets from patrons clearly emotionally devastated from their ongoing losses? These are questions that we, as a society, are going to have to answer.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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