Four charged with fraud in investigation of $30mm pokies grants
An investigation two years in the making has led to the indictment of four prominent New Zealand businessmen. The men have been accused of manipulating the sale of pubs to ensure revenue from the pokies goes towards their own interests, including bonus checks that surreptitiously ended up in their own pockets.
In what’s being called the largest inquiry in the history of the region’s gambling sector, Operation Chestnut has resulted in some very serious allegations of fraud and obtaining by deception. Authorities first began looking into the matter in 2012, dissecting $30 million worth of pokies grants by three trusts, Bluegrass, Infinity and New Zealand Community Trust.
Now, two years later, the investigation into the Bluegrass trust, based in Blenheim, has developed into over 20 counts of obtaining by deception, spread across four men. Among the alleged perpetrators are two distinguished members of the horse racing industry, Patrick O’Brien, former chairman of Harness Racing New Zealand, and his son, Mike O’Brien, both from Blenheim. A former Hospitality Consultant for Ocean Lodge in Nelson, Paul Max, was also charged, along with one count against a former gaming inspector whose name has not been released.
According to reports, the men have been accused of using their connections with the harness racing industry to expedite the sale of pubs to specific buyers. Those buyers would then partner with trusts known to support racing clubs, allowing them to take over the pokies revenue for those pubs. Allegations against one of the four men state that he met with heads of trusts in charge of the pokies to negotiate deals and find out how much money was available for grants. He would then stream that information to the racing clubs, which are permitted to use pokies funds for stakes and the organization of race meetings.
While use of pokies funds is perfectly legitimate, it’s how they were supposedly obtained that is not. It is a direct breach of the law for a “key person” involved in the gambling sector, or one who is involved in the operation of a venue that provides pokies, from having any sway in the cash flow of such organizations. It’s also a crime to accept any type of gift, benefit or monetary gain in return for receiving a grant.
A spokeswoman for Internal Affairs confirmed that Operation Chestnut had resulted in charges against the four men, but declined to offer any further comment. Mike O’Brien also chose not to offer a statement on strict instructions from his lawyer, but did say that he was prepared to “vigorously” fight the charges.
Paul Max offered similar sentiments, confirming only that he would defend the charges. “It’s before the courts so on that basis it’s completely inappropriate for me to make any comment.”
The former harness racing chairman and founder of Bluegrass in 2009, Patrick O’Brien appeared to be stunned by the accusations. “If you don’t think you’ve done anything wrong, it’s a bloody shock to get a summons. I’ll be defending the charges.”
Bluegrass’ gambling license was revoked earlier this year when the Gambling Commission discovered that Internal Affairs had been provided information found to be false and misleading. At that time, Bluegrass controlled over 100 pokies across 8 pubs located in Auckland, Blenheim, Christchurch, Low Hutt and Nelson.
All four men are scheduled to appear in court in February 2015. If convicted, the charges against them could warrant as many as 7 years in prison.