In response to the mounting policial controversy, the N.S.W. Labor government established a Royal Commission under Judge Kinsella in 1962. Abandoning its longtime opposition to any radical change in the betting laws, the AJC had earlier advocated legalization of off-track betting to tax the illegal SP business whose turnover it estimated at £500 million. During the 1962 state elections the State Opposition leader Robert Askin had promised legalization of SP betting if he were elected and the Premier Mr Heffron, the State ALP leader, promised a Royal Commission as a rejoinder. As the Commissioner began gathering evidence in mid-1962, some 500 to 600 Sydney SP bookmakers began meeting regularly in Randwick to formulate their political strategy. The SP men adopted an open, public posture by retaining the services of a Queen’s Counsel to appear before the Commission, appointing a public relations officer and issuing regular advertisements and press releases. In his first public statement, the SP bookmakers’ spokesman claimed that 85 per cent of the New South Wales population had bet illegally at some time and said the SP men would ask the Commission for the right to continue giving the public a service they had been providing for over fifty years.
Calling themselves the Racing Commission Agents Association, SP bookmakers began appearing before the Royal Commission to give evidence. Describing himself as ‘one of the biggest in Sydney’, the retired SP bookmaker Kenneth F. Williams of Point Piper, testified that he had been arrested only three times during his forty year career and stated that he had enjoyed ‘immunity from conviction for fifteen years’. The Secretary of the SP association, C.W. McCarthy, testified that the State’s illegal betting operators had a total annual turnover of £260 million and between fifteen and seventeen SP bookmakers had turnovers in excess of £1 million each.Demonstrating its good faith in the Royal Commission, the SP association distributed a questionnaire among its 500 registered members about their annual turnover. Among the thirty-six who responded, sixteen had turnovers between £5,000 and £50,000; eighteen had £50,000 to £300,000; and two had £1 to £1.5 million.
Judge Kinsella reported that there were some 6,000 SP operators in the State with a total annual turnover of £275 million and a clientele comprising 28.7 per cent of New South Wales’ adult population. The Commission advocated the establishment of a State-managed Totalisator Agency Board (TAB) system as the most efficient means of eliminating illegal off-course betting and heavy penalties to suppress illegal operators — recommendations that sparked yet another public controversy. It was clear to the Royal Commissioner and leading politicians that eradication of off-course betting was impossible without a prolonged and unpopular police campaign. The question then became the best way to control and tax the vast illegal turnover. The ruling Labor Party was ‘divided bitterly’ over the report. Those members hostile to a TAB system declared their support for licensing the current illegal SP men and denounced the proposed penalties as a ‘return to the convict days’. The protestant churches, though divided, came out in opposition against any form of State regulated off-course betting, an idea so far from social reality that both parties ignored them in the debate.
To block establishment of a State-owned TAB, the SPs’ Racing Commission Agents Association began lobbying Labor Party influential and mobilizing a public campaign against the proposed off-course betting agency. SP operators circulated anti-TAB petitions in Sydney’s hotels and placed anti-TAB advertisements in the press. One such advertisement appearing in the 13 July 1963 edition of the Sydney Morning Herald was headlined ‘Don’t Be Fooled By Propaganda!’ and advocated a system whereby the current illegal SP operators would be licensed and taxed on their turnovers as an alternative to the proposed State TAB. After the State ALP Executive decided to ignore the SP lobby and forge ahead with the TAB, the SP bookmakers made a remarkable offer — a guaranteed payment of £10 million per annum in advance to the State treasury if they were given a franchise for legal off-track betting. The offer aroused a storm of incredulous protest.
Although at least half the State Cabinet was known to favour some concession to the SP operators within the new betting system, the political costs of an open alliance were too high for the Labor Party. The pro-SP elements had to content themselves with the omission of new betting penalties such as those recommended by the Royal Commission. Pressed by allegations of corruption, the Heffron government pushed the requisite bill through Parliament in the early months of 1964 and the State’s first TAB shops opened in December. Simultaneous with the opening of the TAB branches, the N.S.W. police launched a major campaign aimed at the eradication of the SP networks. Although the campaign lasted for over a year and uncovered the SP ‘markets’ centre equipped with thirty telephones, the effort had no lasting impact. SP operators retreated from many hotels into the relative safety of their telephone networks. On the few occasions when they were arrested they faced nominal fines of only £100 maximum.
The TAB network of licensed betting shops simply grew too slowly to absorb the vast SP turnover. In its first six months the TAB succeeded in opening only thirty-four shops, small in comparison with the 6,000 SP bookmakers believed operating. TAB’s turnover grew steadily from $60 million in 1965-6 to $773 million in 1977-8, but it still required a full decade of operation for its turnover to equal the 1962 estimate of the State’s SP operators. While Sydney’s SP men expanded their clandestine phone networks, those in regional centres like Woollongong and Broken Hill operated in open defiance of the new laws. There was some evidence as well that the TAB had not supplanted the established SP networks, but merely expanded the scope of betting by bringing in a new type of clientele — mainly women. While generally barred from the male-only ambiance of the old SP shops, women comprised well over half of TAB’s clientele by 1971 and supplied 95 per cent of its staff.
The State government’s failure to suppress the SP business was a development of considerable importance in the postwar history of organized crime. Faced with a choice between a frontal police assault on the illegal bookmaking industry or its gradual erosion through the establishment of a legal substitute, the N.S.W. government had taken the politically less painful alternative with the creation of the TAB. In theory, the proliferation of TAB betting shops was supposed to wean the off-course better away from the SP and produce a gradual withering away of the illegal book-making business. But the SP networks simply transferred operations from hotel to telephone without losing any turnover, and the illegal industry survived into the 1970s as one of the State’s largest potential sources of organized crime revenue.
from Drug Traffic by Alfred McCoy