Gaming machine societies Lion and Perry Foundations have decided not to contest an Internal Affairs Department decision which bans them from granting pokie funds to four northern harness racing clubs, the department said today.
A third society, Infinity Foundation, is still considering its position.
Last November, the department banned the three societies from making grants to the Thames Harness Racing Club and the Manukau, Kumeu and Franklin Trotting Clubs.
This followed a probe into the grant application process, flow of funds and the relationship between the societies, trotting clubs and Northern Hospitality Management Ltd, which operated at seven venues where the societies had gaming machines.
The investigation showed that while grants to the four clubs totalled about $400,000 up to 2005, between 2006 and December 2008 they received over $5.4 million.
The department's gambling compliance director Mike Hill said it considered the grants were inconsistent with the Gambling Act, which made it clear that decisions about gaming machine grants should be transparent, free from conflicts of interest or conditions.
"The societies lodged an appeal with the Gambling Commission against the condition, assuring us of no wrongdoing," Mr Hill said.
"We are pleased they have now recognised the legitimate concerns of the department and Lion and Perry have told us they will withdraw their appeals.
"The department's concern was not that funding was going to racing purposes, but that arrangements have been entered into to capture the funding.
"Any moves that seek to capture funding flows from pokie machines are rorting the system and the department is working strenuously to expose them.
"We want to ensure community groups have fair access to gambling-generated community funds and there are several investigations under way involving similar such arrangements."
While Lion and Perry did not acknowledge any wrongdoing, the department would continue monitor the sector closely and would prosecute where there was evidence of a breach of the Act, Mr Hill said.
The department has yet to make a decision on a proposal to impose a 21-day suspension of gaming machine operations at the seven venues operated by Northern Hospitality.
