A CBC News investigation found illegal video lottery terminals in New Brunswick bars — VLTs not operated by the Atlantic Lottery Corporation.

The machines, if making close to what legal machines do, are diverting hundreds of thousands of dollars from the provincial pot.

Illegal VLTs

A CBC News investigation discovered unregistered video-lottery terminals operating in New Brunswick. (CBC)

Don Denholm, owner of the Morgan Pub and Eatery in Richibucto, where the machines are displayed in plain sight, told CBC News he makes 10 times more money off the machines than he does off liquor sales.

And he is defiant when it comes to the idea of the province cracking down.  When provincial liquor inspectors confronted him he refused to comply.

“I said take my liquor licence and leave.”

'I said take my liquor licence and leave.'- Don Denholm, Morgan Pub and Eatery owner

The Department of Finance told CBC they could not estimate how much the province is losing to illegal machines.

“While it makes sense to assume there is some impact on our revenues, any estimate would only be speculation," officials stated in an email.

But when CBC News reporter Connell Smith and producer Angela Gilbert went looking, they found a dozen machines after visiting 11 establishments across southern New Brunswick.

Eight machines were blinking just inside the Morgan Pub and Eatery in Richibucto, and another four machines were inside a small ante-room in the Sussex bowling alley, Candlepin Entertainment.

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There is no way of knowing how much profit the owners are making, but if the grey machines at those two establishments make roughly the same as what legal, ALC-sanctioned machines do, that would mean altogether they’re netting almost $800,000 a year for their owners.

If they were legal machines, just 15 to 20 per cent of that cash would go to the owner and the remaining money would go back to ALC and ultimately, the public purse to pay for things like roads and health care.

Handwritten signs that read "for amusement only" were taped to the grey machines. But when CBC News cashed out small winnings and took the tickets to the bartender in each establishment, both paid out on the wins.

Legal action planned

Finance Minister Blaine Higgs told CBC News in a recent interview that the province has sent letters to operators with VLTs and told them to obey gambling rules and regulations. He says the next step will be legal action.

Blaine Higgs

Finance Minister Blaine Higgs released his pre-election fiscal and economic outlook for New Brunswick on Wednesday. (CBC)

“We’re working through, as we talked earlier about the agreements, we’ll work through that process. Any information we have on any sort of illegal activity we forward that to the RCMP and then we wait for their response in terms of what action should be taken.”

Neither of the establishment owners agreed to speak on-camera for this story. Both said, however, that they would not remove the machines from their establishments.

Denholm told CBC News that there are “a bunch” of bars and pubs operating grey machines.

Another establishment operator told CBC News that there were 10 to 12 bars with grey machines in the southeastern part of the province.

He said they are speaking with the province now about finding a way to keep the machines, and that they may launch a lawsuit in an effort to earn the right to keep the money-makers.

Public Safety notice about unregistered VLTs