NARRATOR: In country towns across Australia, the big race day is still a highlight of the year. Having a punt has always been a true blue Aussie birthright. But for every dollar Australians spend betting on horses, trots and greyhounds, they spend five on the pokies. Australian pokie players are the world's biggest losers.

PROFESSOR JAN MCMILLEN, AUSTRALIAN NATIONAL UNIVERSITY: Oh absolutely, there's no country in the world that has gambling in clubs and pubs in the way that we do in Australia.

JONATHAN HOLMES: And more than a third of the money the pokies swallow comes from people who can't control how much they spend.

POKIE PLAYER: I've walked in here saying, yeah, I'm gonna lose just a hundred, but $300 later, you know - and I'm still chasing my money.

ANNIE COONEY: I'd gamble everything, and I would pour all that into the machine and only leave if there was no, I had no access to any more money, sometimes I'd go home totally empty handed.

JONATHAN HOLMES: But 50 years after they were first legalised in New South Wales, pubs and clubs and governments are still dancing around the issue of problem gambling.

GRAHAM WEST, MINISTER FOR GAMING AND RACING NSW (LABOR): I've authorised those studies. We've got those Acts under review. We've got the study now that identifies the problem gamblers.

ANDREW TERRY, SOLDIERS, SAILORS AND AIRMENS CLUB, ALBURY: The machines for the vast majority of people are a form of video entertainment.

JONATHAN HOLMES: Meanwhile the hoteliers and the registered clubs have put secret submissions to government on how they'd like the gaming laws changed. The big hotels want lower taxes and more pokies.

JOHN THORPE, PRESIDENT, AUSTRALIAN HOTELS ASSOCIATION (NSW): Look, common sense will dictate that you can't stay put forever.

ADRIAN PICCOLI MLA, NSW NATIONAL PARTY: Well, I think you've just got to look at the contributions that the hotel industry make to political parties of all persuasions.

JONATHAN HOLMES: Tonight on "Four Corners", doing the Hokey Pokie in the State where it all began.

(On screen text: "HOKEY POKIE", "Reporter: Jonathan Holmes")

(Excerpt from archive vision: "This Club Life" July 1962)

NARRATOR: There are 1260 clubs operating poker machines in New South Wales, the only Australian state where the machines are legal.

(End of excerpt)

JONATHAN HOLMES: From the moment they were first legalised in New South Wales clubs, 51 years ago, poker machines have been controversial.

(Excerpt continued):

REPORTER (to pokie player): Can you afford to play the poker machines?

POKIE PLAYER: Not really.

POKIE PLAYER 2: Oh I don't know I think if you're sensible and say you're gonna do so much and put it in, if you lose it well that's it you don't do any more.

POKIE PLAYER 3: If we were to go to a nightclub we'd spend a damn sight more than that, pull the lever love.

(End of excerpt)

JONATHAN HOLMES: Then, as now, the clubs claimed that all the money spent on the pokies came back to their members or the community one way or the other.

(Excerpt continued):

NARRATOR: Poker machines helped support 117 junior football teams sponsored by the club. The Club supports basketball, hockey, judo, and physical culture for girls. Recently it bought a fishing boat for members.

(End of excerpt)

JONATHAN HOLMES: Then, as now, the clubs would indignantly deny that many of these benefits came at the expense of problem gamblers.

(Excerpt continued)

GEORGE WINTLE, MANAGER, SOUTH SYDNEY JUNIOR RUGBY LEAGUE CLUB: I'd say quite frankly in two and a half years' experience as a club manager in this very big club that most people can afford to spend money in a club such as this.

ALAN WALKER, SUPERINTENDENT, CENTRAL METHODIST MISSION: I wish Mr Wintle would come down into my office sometimes and listen, sitting in the corner and not seen, when the compulsive gambler comes, when the wife whose home has been made poverty stricken by this gambling craze, I wish he'd see that, I believe he'd have a different attitude toward the poker machine.

(End of excerpt)

JONATHAN HOLMES: But the cash flow from the pokies was hard to argue with and still is.

From humble beginnings grew sprawling, multi-million dollar empires like the Penrith Panthers, the Balmain Leagues Club, the Mount Pritchard Mounties and Revesby Workers Club in South-West Sydney, which as CEO Ed Camilleri told me, started out in the early 60s as a shack in what's now the club's car park.

ED CAMILLERI, CEO REVESBY WORKERS CLUB: A group of like-minded people got together, a group of workers, wharfies, and they did some chook raffles, bought a block of land, built a club and we're a major enterprise now. Most people who started off this in the 60s would be amazed at where we are.

JONATHAN HOLMES: Revesby Workers Club now has more than 28,000 members.

ED CAMILLERI, CEO REVESBY WORKERS CLUB: And we have three restaurants, a health club with about 3000 members, a show room that seats up to 1200 people, function rooms, large lounge areas, a sports bar with six large international tables, billiard tables, hairdressing salon, bottle shop. We have about 30 odd different sporting bodies and social bodies from soccer, netball, from fishing clubs to darts clubs to chess club, it's just amazing the amount of people over the years that it has attracted and they have their own home here at the club.

JONATHAN HOLMES: And still, 85 per cent of the club's revenue comes from its 450 poker machines - more than $30 million a year.

It's no coincidence that most of New South Wales's biggest clubs are scattered through the suburbs of south-western and western Sydney.

RICHARD BRADING, WESLEY COMMUNITY LEGAL SERVICE: Most poker machines particularly revenue comes from, yeah the poor areas of our society. There's very few poker machines on the north shore.

JONATHAN HOLMES: Revesby Workers Club is in the city of Bankstown, which has 15 pokies for every thousand people. By contrast, the plush municipality of Kuring-gai, in leafy northern Sydney, has just one.

And where there are lots of pokies there's also a lot of suffering, as the researchers who study the figures, and the agencies who pick up the pieces, both know.

PROFESSOR JAN MCMILLEN, AUSTRALIAN NATIONAL UNIVERSITY: The harm from problem gambling is profound. I think you'd find that a lot of people in New South Wales will know of someone who's had a gambling problem and will understand the severity and the impact of that problem both on the individual and on their families and friends.

RICHARD BRADING, WESLEY COMMUNITY LEGAL SERVICE: We here see a constant stream of partners, spouses, sometimes parents or children of problem gamblers, where the gambler has taken large amounts of family assets or borrowed money and incurred some significant debts and they're losing their homes, their losing their savings, sometimes they're becoming bankrupt and that's all to fund the gambling addiction.

JONATHAN HOLMES: But the big clubs still insist as they always have that problem gamblers represent a tiny minority of pokie players.

ED CAMILLERI, CEO REVESBY WORKERS CLUB: I think there's problem gaming but I think it is an exaggerated extent what has been reported in the media. The number of applications that I see come through looking for exclusion from the club from gaming issues, I get very, very small numbers each year coming across.

JONATHAN HOLMES (to Ed Camilleri): What? I mean dozens?

ED CAMILLERI, CEO REVESBY WORKERS CLUB: No. Less than less than half a dozen per year.

JONATHAN HOLMES: But self-exclusion is a last resort. According to those who've succumbed to the hypnotic pull of the pokies, their fellow-sufferers are legion - whether or not they admit it, even to themselves.

ANNIE COONEY: Having played for seven long years and attending those clubs, all sorts of different clubs, for up to I have to say sometimes 24 hours, I was sometimes there all day, and I saw many, many people who were I felt just as addicted as I was. And I was quite surprised at how many of them there were. I would see a lot of people looking stressed, shovelling hundreds of dollars into machines. A lot of professional people as well. And I could see just by talking to them that they had a serious problem just like I did.

JONATHAN HOLMES (to Annie Cooney): It takes one to know one.

ANNIE COONEY: Yes, that's right. It's true.

JONATHAN HOLMES: These days Annie Cooney is beginning to make a living as a garden designer. But for seven years, from the late 1990s, she was addicted to pokies. It all started during a bad patch in her life.

ANNIE COONEY: I'd gone through a lot of changes, a lot of loss. My mother died and my 17-year marriage ended about a year before that.

JONATHAN HOLMES: When Annie Cooney first started going to the Balmain Leagues Club with a friend, the pokies didn't do much for her. As it usually does, the addiction took hold gradually.

ANNIE COONEY: It wasn't very thrilling, it wasn't very exciting. Then after a while we started winning little bits and pieces and then eventually I started going to the clubs during the day, which I think is a fairly major step from putting a few dollars in.

JONATHAN HOLMES: Within months Annie Cooney was spending hours every day in front of the pokies. Unlike many problem gamblers, Annie Cooney never stole to feed her habit, except from herself. She was living on the rent from a house she owned. But as her habit took hold, she sold it.

ANNIE COONEY: At the time I remember rationalising it and thinking, well, actually I could reinvest that money and put it into shares or dividend paying shares, something like that that would pay a larger income, but in fact I think unconsciously I was just deciding I wanted to make all that money available to gamble if I so wished.

JONATHAN HOLMES (to Annie Cooney): And did you spend it all?

ANNIE COONEY: Yes, I did.

JONATHAN HOLMES (to Annie Cooney): The lot?

ANNIE COONEY: The lot.

JONATHAN HOLMES (to Annie Cooney): How much?

ANNIE COONEY: Ah, something like half a million dollars.

JONATHAN HOLMES: For decades, Australia led the world in the design and manufacture of high-stakes gaming machines. There's a global boom in casinos now and companies like Aristocrat are cashing in.

Their collective R&D budgets dwarf the money spent on research into problem gambling. The lights, the music, the shapes and colours are carefully calibrated. The frequency of wins, the free spins and triple rewards, the linked machines offering spectacular jackpots, all distract from the central fact: poker machines are calibrated to retain about 10 cents of every dollar that's put in.

ANNIE COONEY: So in the long run you're going to lose.

JONATHAN HOLMES (to Annie Cooney): And you did you ever know that consciously?

ANNIE COONEY: No, I didn't. No. I thought that if you knew how to win as I believed I did, then you would walk away with a lot more money.

DR CHARLES LIVINGSTONE, MONASH UNIVERSITY: What the manufacturers of poker machines are seeking to do is a), to get people to play their machines in the first place; and b), to get them to play them for as long as they possibly can because c) they want to relieve people of their money. That's their commercial imperative. Well, you know, fair enough.

Unfortunately, in getting people to do that they use conditioning techniques which essentially remove what we call people's agency, people's capacity to make what to an outside observer would be rational decisions.

JONATHAN HOLMES: Most of those who've had serious problems say the pokies induce a trance-like state. It sets them apart from all other forms of gambling. Players often call it "the zone".

JARROD LAWSON: It's very hard to talk to anyone when they're playing the machine because like they're, they're focusing on that on that screen and they're, they're not turning talking to you one on one, you know, they just want to see what comes up in the next press.

JONATHAN HOLMES (to Jarrod Lawson): They're in another world almost?

JARROD LAWSON: That's right yeah.

ANNIE COONEY: I remember one day I was in a club, in the zone, so to speak, and I was so concentrating on what I was doing that I, it was quite crowded, a very crowded Saturday afternoon, and an elderly lady who was playing a machine next to me fainted and fell off her chair on to the floor. I was only slightly aware of what was happening. An ambulance came, picked her up, put her on a stretcher, took her out and I did not stop playing throughout that entire episode.

JONATHAN HOLMES (to Annie Cooney): You barely looked up.

ANNIE COONEY: And that's what the zone is.

JONATHAN HOLMES: As the pokies spread through other states in the 1990s, there were powerful voices raised against them. In Victoria, the inter-church gambling task force is a coalition of the Catholics and the Salvos, the Uniting Church, the Anglicans, and the Baptists - led for many years by the formidable Tim Costello.

REVEREND TIM COSTELLO (speaking at task force meeting): They breach their own code of practice every day, from self-exclusion not one venue's ever lost a license, let alone been fined. I mean that's a classic lack of transparency.

JONATHAN HOLMES: In South Australia, anti-pokie feeling was strong enough in 1997 to get No Pokie campaigner Nick Xenophon elected to the State's Upper House and he's been there ever since.

NICK XENOPHON, MLC, SA, (INDEPENDENT) (speaking at press conference): I would like to think that this vote is the beginning of a significant backlash against the gaming industry and the greed and stupidity of state governments around the country.

JONATHAN HOLMES: In the mid-90s, problem gamblers were an all but invisible group in New South Wales.

Instead, as the clubs' membership continued to swell, the cries of distress from a much more powerful lobby group were sounding in the government's ears. The hotel industry claimed that 600 pubs were going broke.

JOHN THORPE, PRESIDENT, AUSTRALIAN HOTELS ASSOCIATION (NSW): It was a very serious issue. It's a large industry, a big employer. Those jobs of 200,000 jobs now would have been at risk. And of course we just couldn't compete. What was happening was that the clubs were subsidising alcohol and food with poker machine profits. People were sort of saying, well John I'd love to visit your hotel but unfortunately the price is about 50 per cent cheaper at the club, I've got to go to the club.

BARRY PRATER, GAMBLING COUNSELLOR, ST DAVID'S UNITED CARE (pointing out building from car): Okay Jonathan over here on the corner we have the Sodens Hotel, they have about eight to 10 poker machines.

JONATHAN HOLMES: In 1997, the State Government caved in and allowed pubs to acquire pokie machines. Within a few years, there were pokies on almost every street corner in New South Wales.

BARRY PRATER, GAMBLING COUNSELLOR, ST DAVID'S UNITED CARE (pointing out building from car): Just here on our right we have the Three Legged Dog which has approximately eight poker machines in there. Coming up here just a bit further on our right hand side now is the Bended Elbow, and they have about 10 poker machines in there as well.

JONATHAN HOLMES: In the city of Albury on the Murray River, there are 17 pokie venues. Barry Prater, the town's only full-time gambling counsellor, knows them all.

BARRY PRATER, GAMBLING COUNSELLOR, ST DAVID'S UNITED CARE (pointing out building from car): Immediately on our left we have the Albion Hotel, again with eight to 10 poker machines. Coming up on our right we have Albury's biggest club, which is the Commercial Club.

JONATHAN HOLMES: The Clubs still have three times as many pokies as the pubs. But Barry Prater says the pubs tap into a different demographic.

BARRY PRATER, GAMBLING COUNSELLOR, ST DAVID'S UNITED CARE: It allowed those people who could not normally feel okay about going into a club then to be able to play the poker machines. So I feel that's increased the areas of problem gambling clients.

JOHN ELLIOTT: It's cost me everything - my family, friends, job, house, car. Anything that's meant anything to me has been gone, been dissolved through my gambling.

JONATHAN HOLMES: John Elliott's last stamping ground before he gave up gambling for good was the town of Wagga Wagga, an hour's drive north of Albury.

He still lives in Wagga, but these days he goes to the library rather than the pub. In fact he's excluded himself from every pokie venue in town. Even so, he doesn't entirely trust himself.

JOHN ELLIOTT: I don't take my key card with me when I go out. I'll take 20 or $30. Once that's gone I come home.

JONATHAN HOLMES: John Elliott's been a compulsive gambler all his adult life. But when the pubs got the pokies, he found it even easier to spend all the money he could earn, or borrow, or steal.

JOHN ELLIOTT: The thing was to get into a club back in the 80s and 90s you needed to be a member or know a member. It wasn't as accessible as it is today. To get into a pub you walked through the door so when the machines were in the pub you walked into a pub and you virtually had to walk through the poker machines to get to the bar. They were around all the walls. There was no gaming rooms as such. It was strictly straight in your face. The music the noise, the ambience of the gambling, the lighting, you can sit down and have a great, social activity with yourself all day.

JONATHAN HOLMES: These days pubs that have more than 10 pokies have to have a separate gaming room. In any one of them, you'll certainly find the classic recreational gambler.

POKIE PLAYER: Oh I put $20 in, if I don't win, so be it, if I win a hundred bucks it's a free feed, and a free feed next week as well, so, just a bit of fun.

JONATHAN HOLMES: But, though few of them will want to talk to you, there'll be others alongside with a very different attitude.

POKIE PLAYER 2: It's like a drug mate. I just keep pumping it in. Because I've walked in here saying I'm gonna lose just a hundred, but $300 later, you know, and I'm still chasing me money, you know.

JONATHAN HOLMES: In 1999, the Productivity Commission produced a landmark report that raised the alarm. More than two per cent of adult Australians, it found, two and a half percent in New South Wales, had a severe or moderate gambling problem.

That may not sound much, but it represents 300,000 people nationwide and a frightening percentage of those who play the pokies once a week or more.

DR CHARLES LIVINGSTONE, MONASH UNIVERSITY: A relatively small proportion of the overall population actually play the machines. It's around about eight-and-a-half to 10 per cent will play the machines regularly. But of that group more than three in 10 already have, or are well on the path to developing, serious problems with their gambling.

JONATHAN HOLMES: And for every individual with a problem, said the Productivity Commission, an average of seven others are directly affected. It could be many more.

John Elliott lives a lonely life these days but he's the first to admit that he's left a trail of havoc and unhappiness behind him.

JOHN ELLIOTT: It was the lying, the cheating, the deceit, the manipulation. My family have have suffered greatly because of my addiction. My children would love to love me, but they can't trust me. My friends that I've borrowed from, bosses that I've stolen from, you know, don't tell me my gambling hasn't affected them. So, you know, I'm only one person but I've affected well over 50 others.

JONATHAN HOLMES: In the past seven years, the New South Wales Government has been tightening the rules to try to tackle problem gambling.

There are now mandatory warning signs about the dangers of addiction in every venue and on every machine. There are G-line numbers and pamphlets. Every venue must operate a self-exclusion scheme and have a relationship with a counselling service.

But the figures show that only about 15 per cent of gamblers with serious problems actually seek professional help.

JONATHAN HOLMES (to Pokie Player): Do you ever read those little notices on the machine about calling G-line and all that stuff?

POKIE PLAYER: Nah, nah, come on (laugh).

JONATHAN HOLMES (to Pokie Player): Do you reckon you've got any kind of a problem with it, or…

POKIE PLAYER: Well it could be. Yeah, yeah.

JONATHAN HOLMES (to Pokie Player): Do you think you might look for help for it or not really?

POKIE PLAYER: Ah … no.

JONATHAN HOLMES: As their critics see it, five years ago industry and government started doing the hokey pokie again.

In 2001 the Government capped the total number of poker machines state-wide at just over 100,000, as many as all the rest of Australia put together.

Then it came up with a plan to reduce the total number of poker machines. That, it claimed, would reduce the harm they do.

JONATHAN HOLMES (to Graham West): Are you satisfied that that's had any effect at all in actually reducing the incidence of problem gambling?

GRAHAM WEST, MINISTER FOR GAMING AND RACING NSW (LABOR): I'm not sure. I don't have the data to make a claim either way. I do know we've reduced the number of poker machines and that was part of a harm reduction strategy.

PROFESSOR JAN MCMILLEN, AUSTRALIAN NATIONAL UNIVERSITY: I think to assume that just reducing the number of poker machines is an effective harm minimisation strategy in its own right I think is very naïve. The Industry is responding and adapting to these policies and hypothetically could take out 10 machines, replace them with six new generation machines and revenue could double.

JONATHAN HOLMES: Under the new law, poker machine entitlements could be traded from pub to pub and club to club, but for every three entitlements sold, one had to be surrendered to the government.

The market price for pokie entitlements, especially in hotels, took off. There was now a huge financial incentive to transfer poker machines from country pubs, where they weren't earning much, to city pubs where they'd pull in far more.

The Family Hotel, Cootamundra, sold three pokie entitlements for $478,000. One went to the Government, two to the Intersection Tavern in Ramsgate, south Sydney.

The Junee Hotel, Junee made $295,000 when it sold three - one to the Government, two to the Cross Roads Hotel, Prestons in western Sydney.

The Hotel Berrigan sold three entitlements for $200,000 - one to the Government, two to the Hurstville Ritz Hotel in a heavily Chinese enclave of southern Sydney.

And so it went on. As a result of the transfers and surrenders, there are 3300 fewer pokies in New South Wales than there were five years ago. But the amount of money being lost on the pokies hasn't gone down - it's gone up.

JONATHAN HOLMES (standing outside a club): Well it's three o'clock on a Wednesday afternoon, there's 30 machines in there and they're absolutely flat out, in fact some of the machines even have queues waiting for them. And in case the punters run out of money, there's an ATM literally one metre outside the gaming room door.

By contrast, the Hotel Berrigan, where two of those pokies came from, is for sale, with no takers.

Many country pubs have sold all their entitlements, and a pub with no pokies in country New South Wales usually doesn't last for long.

In Griffith, the biggest town in the Riverina, the local state member, National Party MP Adrian Piccoli, reckons the effect of trading pokie entitlements has been bad for communities at both ends of the exchange.

ADRIAN PICCOLI MLA, NSW NATIONAL PARTY: In this part of the world there are 27 towns that have pubs with no poker machines, that means that the pubs themselves are unviable and without those pubs really those towns become soulless and in a lot of instances they've been traded into areas where there already were high proportions of poker machines per head of population. So I think the consequences of that trading really is probably going to exacerbate problem gambling because it's concentrating poker machine where they shouldn't be concentrated.

JONATHAN HOLMES: The big hotels in the cities and regional centres, where most of the transferred pokies find a home, are magnets for a young, risk-taking crowd who don't much favour clubs.

According to recent research by the State Government, around 40 per cent of the State's problem gamblers are people under 24 years old - especially young men. A hotel gaming room like this can generate a million dollars a year in after-tax profit and all the research shows that at least a third of it comes from problem gamblers.

That's not a fact the Australian Hotels Association likes to dwell on, as it enthuses about the benefits of pokies.

JOHN THORPE, PRESIDENT, AUSTRALIAN HOTELS ASSOCIATION (NSW): The expansion of the industry, what's happening to it today in offering the facilities is doing is marvellous. You can go into hotels that offer great services, particularly in the country. I've seen the turnaround, I'm sure you have too, where hotels, we were down to eating the paint off the wall. Well we weren't eating the paint off the wall, we'd eaten that. We were at the chipboard.

JONATHAN HOLMES: And now it's the clubs that are complaining. Small ones are struggling to survive, says manager Andrew Terry. And even his own club, the Soldiers, Sailors and Airmens in Albury, with 370 pokies, is feeling the pinch.

ANDREW TERRY, SOLDIERS, SAILORS AND AIRMENS CLUB, ALBURY: You have a hotel build up around the corner you know that's got 30 machines but it's got a $15 million fitted out bistro that's doing 10, 20,000 covers a week. It is dramatic.

JONATHAN HOLMES (to Andrew Terry): And these are big companies doing the doing the spending.

ANDREW TERRY, SOLDIERS, SAILORS AND AIRMENS CLUB, ALBURY: These are very large companies. We're talking Coles, we're talking Woolworths, we're talking property trusts coming in and we're seeing hotel prices at 50, $60 million being sold, which is just unimaginable.

JONATHAN HOLMES: What's in it for the Government is money.

ANDREW TERRY, SOLDIERS, SAILORS AND AIRMENS CLUB, ALBURY: Let's be real here. I mean it was motivated by taxable revenue; that's why it occurred.

JONATHAN HOLMES: Last financial year, the Government took almost half a billion dollars in tax from hotel poker machines. And the industry spends millions more - it's impossible to find out precisely how much - to buy influence more directly.

ADRIAN PICCOLI MLA, NSW NATIONAL PARTY: Well, I think you've just got to look at the contributions that the hotel industry make to political parties of all persuasions. They are a very powerful lobby group because of the contributions they make, like a number of other lobby groups and you know I think for democracy that's a question that really needs to be solved in NSW and in Australia because I think, you know, it's, they've certainly not done anything illegal but you know, political contributions give people access to politicians and to premiers and give them influence.

JONATHAN HOLMES (to Graham West): Is there any connection between their donations and what the Government does?

GRAHAM WEST, MINISTER FOR GAMING AND RACING NSW (LABOR): Absolutely not! Absolutely not. I don't even know what they donate to the party. I mean, I'm just interested in helping the people of New South Wales as I'm sure most elected members of Parliament are, and we'll work with our stakeholders which include in my instance, clubs and pubs to do that.

JONATHAN HOLMES: A week before equine flu hit New South Wales, its Racing and Gaming Minister could only squeeze 4 Corners into his busy schedule at the Gosford race track.

But in terms of dealing with problem gambling, the state with the largest number of pokies is running well behind the field. Fifty years after New South Wales first introduced poker machines to clubs, ten years after it allowed them into pubs, the Government has finally published a study into the prevalence of problem gambling in the State.

GRAHAM WEST, MINISTER FOR GAMING AND RACING NSW (LABOR): And it found that 0.8 per cent of the population are problem gamblers and about 1.6 per cent are at risk of becoming problem gamblers.

JONATHAN HOLMES: Though the surveys aren't directly comparable, it seems little has changed since the Productivity Commission's 1999 report. Yet it's only now, the Government claims, that it can begin to tackle problem gambling.

GRAHAM WEST, MINISTER FOR GAMING AND RACING NSW (LABOR): We've only just now got the information around what a problem gambler is. I think the actually important thing to worry about is identifying coherently those problem gamblers, what causes them to become problem gamblers, trying to stop them from becoming problem gamblers, and if they have become problem gamblers help them with their problem.

JONATHAN HOLMES: As the Minister sees it, it's the gamblers, not the pokies, that are the problem.

The New South Wales Government's $12 million Responsible Gambling Fund represents about one per cent of the tax revenue it rakes in from the pokies. More than 80 per cent of that is spent on counselling services.

Critics say it's like treating patients who've already developed lung cancer, but doing almost nothing to tackle smoking.

DR CHARLES LIVINGSTONE, MONASH UNIVERSITY: Responsible gambling, as it's articulated, is about identifying problem gamblers and treating them. Well okay that's great, but that probably should be about 10 or 15 per cent of the emphasis. Most of the emphasis if you were serious about stopping problem gambling would be on identifying the characteristics of gaming machines, because gaming machines account for 85 or more per cent of problem gambling, would be on identifying the characteristics of gaming machines which are most likely to induce people to gamble irresponsibly and modifying them.

JONATHAN HOLMES: For example in Queensland, pokie note acceptors won't take more $100 at a time and you can only use $20 notes. In New South Wales, you can feed in $50 or $100 notes - up to $10,000 in one hit.

DR CHARLES LIVINGSTONE, MONASH UNIVERSITY: Now you know why on earth, if these things are actually about a bit of harmless fun at the corner pub, should you be able to load up $10,000? It's madness.

JONATHAN HOLMES: South Australia's Independent Gambling Authority has recommended a card-based system which would let pokie players set a limit to their losses before they start to play. But a system like that might sharply reduce the revenue from the machines for pubs, clubs and governments.

PROFESSOR JAN MCMILLEN, AUSTRALIAN NATIONAL UNIVERSITY: Oh absolutely, harm minimisation, effective harm minimisation strategies are never going to be revenue neutral.

DR CHARLES LIVINGSTONE, MONASH UNIVERSITY: And sadly it seems to me that the reason that we don't take further action is because the governments of Australia are getting vast amounts of money out of this and don't want to see it stopped.

GRAHAM WEST, MINISTER FOR GAMING AND RACING NSW (LABOR): Oh look I think most people of the New South Wales Government, the clubs and the pubs all realise we need to help problem gamblers and that's why we'll work together to do that. I think people are keeping an open mind about how we help these people.

JONATHAN HOLMES (to Graham West): Even if it meant reducing the revenue that comes to the pubs, to the clubs, and to the Government from poker machines?

GRAHAM WEST, MINISTER FOR GAMING AND RACING NSW (LABOR): Well I don't think anyone wants to see problem gamblers. Everyone wants to help them.

JONATHAN HOLMES: Nobody went out of their way to help Theresa Lawson. For seven years she played the pokies almost every night. And as her son recalls, she played big.

JARROD LAWSON: Maximum bets on dollar machines, sometimes $9, $10 a go, two machines at a time playing side by side.

JONATHAN HOLMES (to Jarrod Lawson): So she was literally putting $20 through every few seconds.

JARROD LAWSON: Yeah. Yeah I always thought that she was on top of things you know, because she would always tell you that she was winning. You would never see the amount of money that she was putting in and what she was actually losing, which was you know, substantially more.

JONATHAN HOLMES: Substantially more is an understatement. Australia's biggest retailer is famous for watching every cent. But Theresa Lawson, a $30,000 a year Woolies pay clerk, had been stealing money from her employer for more than five years before the company caught on.

On Good Friday 2002, her son Jarrod returned from a trip around Australia to the Lawson's modest rented house in Western Sydney. His father Chris took him down to the pub.

JARROD LAWSON: And he sat me down and he said, "I've got some bad news for you." I said, "Oh yeah, what's that?" And he said, "Well while you were away Mum got arrested." And I said, "Oh, okay." And I said, "What happened?" And he said, "Oh she stole some money from work." And I said, "Oh." And I said, "How much?" And he says, "Oh I don't know," he says, "but they think it's round about $2.6 million dollars." And (laughs), and I just couldn't believe it at first, yeah.

JONATHAN HOLMES (to Jarrod Lawson): Two point six million is an awful lot of money.

JARROD LAWSON: Oh yeah, oh yeah. And the first thing in my head was, why did she steal the money like? She's got heaps of money, why did she need to steal the money for? And he said, "to play those bloody poker machines." And I said, "Oh." And then, you know, the past five years sort of just all came flashing back when I seen Mum playing the poker machines.

JONATHAN HOLMES: Theresa Lawson was a director of St Mary's Band Club, just down the road from her home. That's where she lost a lot of the money. She was able to fool her husband and her son that she was winning. But the club, says Jarrod Lawson, must have known that she was gambling huge amounts.

JARROD LAWSON: Like, you know, you've got your payout figures, you've got redeem reward points on your membership cards and stuff like that which accumulate from every dollar you put into a machine, so it wouldn't be hard to work out that you're paying, or this person is putting a lot of money into your machines and you're paying a hell of a lot of money to this person too.

JONATHAN HOLMES: The then manager of St Mary's Band Club, who now works at another club, has told "Four Corners" that Theresa Lawson told him she'd had an inheritance and won a jackpot on the lottery.

It would have been easy for the club to check that story discreetly with his dad, says Jarrod Lawson, but no-one did. He reckons the club turned a blind eye.

JARROD LAWSON: Well the club looks at their figures, that's how clubs are run, you know they look at their figures at the end of the year and all that kind of stuff, see a lady there that's putting a whole heap of money into their pocket and they're not about to turn around and stop it. Like for them it's a business.

JONATHAN HOLMES: The former manger says that's just not true. The club had no way of knowing how much Theresa Lawson was losing and it would have breached her privacy rights, he told "Four Corners", to have discussed her financial status with her husband.

For the same reason, most poker venues in New South Wales won't exclude a gambler at the request of a relative, says Richard Brading.

RICHARD BRADING, WESLEY COMMUNITY LEGAL SERVICE: That's right. Unless you choose to self-exclusion, nothing's going to happen. If your family contacts the venue and says, "Look, I'm very concerned about my relative. He's taken the housekeeping money. Would you please stop him gambling?" The venues have been instructed by the AHA and Clubs NSW to do nothing, so they will simply say, "You talk to the relative, it's not our business."

JONATHAN HOLMES: The Revesby Workers Club is minding its own business. It has big plans for the future. They'll cost $100 million.

JONATHAN HOLMES (to Ed Camilleri): So where's the new hotel and shopping centre going to go?

ED CAMILLERI, CEO REVESBY WORKERS CLUB: Okay, just in the east direction over here in this towards this car park and going underground and on this level and about six or seven storeys above the floor plate where we are now.

JONATHAN HOLMES: Last December, the Government changed the law to allow the club to build a hotel and shopping centre next door to a brand new club as long as the shops and gaming room don't directly connect.

The object of the exercise, says Ed Camilleri, is to reduce the club's reliance on the pokies.

ED CAMILLERI, CEO REVESBY WORKERS CLUB: Like most clubs all our eggs are in one basket in gaming. Currently we're about 86 per cent reliant on gaming. With this new developing that will happen in five years we go down to 52 per cent.

JONATHAN HOLMES: Not that Revesby Workers Club is planning on having fewer pokies. As for the big hotels, if they have their way, they'll soon have more. The AHA doesn't deny that it's pushing for the maximum limit to be raised from 30 to 40 pokies per hotel.

JOHN THORPE, PRESIDENT, AUSTRALIAN HOTELS ASSOCIATION (NSW): I can't say no to that, Jonathan, because I've got to move on in terms of the population and in terms of people and in terms of enjoyment. In other words what the demands of the customer base is in the industry.

JONATHAN HOLMES (to John Thorpe): So you may be?

JOHN THORPE, PRESIDENT, AUSTRALIAN HOTELS ASSOCIATION (NSW): I may be.

JONATHAN HOLMES (to Graham West): Is that something that you'd consider?

GRAHAM WEST, MINISTER FOR GAMING AND RACING NSW (LABOR): I haven't seen their submission and I don't want to pre-empt our response to the Gaming Machine Act review at all.

JONATHAN HOLMES: The game of hokey pokey between industry and governments goes on. The Government is currently reviewing its gaming machine legislation. Hotels and clubs have both put in their submissions and both of them are secret.

But it's an odds on bet that they'll say much the same as they've been saying for 50 years.

DR CHARLES LIVINGSTONE, MONASH UNIVERSITY: You know the entire club industry would collapse, the hotel industry would collapse if poker machines were somehow to be restricted in terms of how much money they could make, or heaven forbid taken out altogether.

JONATHAN HOLMES: For his mother at least, Jarrod Lawson believes the dependence on the pokies has been well and truly broken. Every Sunday he goes to visit her in prison where she's serving a seven-year sentence. If she gets out on parole next year, he says, she wants to help other problem gamblers.

It'll be tough though, without the man she was married to for over thirty years. Disgrace and lack of money and the absence of his wife all proved too much for Chris Lawson.

JARROD LAWSON: He rang me one night and he said, "I can't do it any more." And he said, "I can't go on," he said, "I can't, I can't handle not being with your mum," and he said, "I can't handle not being able to talk to her when I want to." I said, "just come home we'll have a chat." And he says, "no". And he just hung up the phone.

JONATHAN HOLMES (to Jarrod Lawson): And what did he do?

JARROD LAWSON: He committed suicide.

JONATHAN HOLMES: The police told Jarrod Lawson that they'd tell his mum. But the next morning she called him from the prison.

JARROD LAWSON: As soon as I heard her voice and she was happy I thought, no-one's told her yet and then she asked me, "What are you doing home?" you know, and then I had to tell her and it was probably, it was probably the worst noise I've ever heard was her screaming down the phone.