Sam’s Club is set to be hit with a $700 million fine after being found guilty of “unlawful conduct” for accepting donations from its members.

The payment, due to be made on Wednesday, could potentially mean more than $900 million in losses to the Sydney-based business.

The fine was handed down by the NSW Supreme Court after the trial heard the club accepted donations totalling $70 million from the entertainment industry between 2004 and 2016.

Sam’s Club was fined $700,000 for unlawful conduct over donations to the entertainment sector Source: Supplied Sam’s club accepts donations of $70M over four years from entertainment industry and is seeking damages.

In the first case, the NSW High Court heard the business accepted donations of up to $70,000 from the hospitality industry between 2008 and 2020.

After a hearing in February, the High Court was told the club’s manager would be paid $50,000 per week.

It was alleged the manager accepted the payments from “a number of individuals and entities” and “for the benefit of a number of members and staff.”

The club said the payments were “in consideration of the financial support received from the member for their patronage”.

“The company acknowledges the nature of the contributions and accepts they were received in accordance with the requirements of the Fair Work Act,” it said.

“These are not a new matter.

The matter has been referred to the NSW Fair Work Tribunal, which has been advised of this matter and the proposed sanction of $700m.”

It is understood the company has already appealed the decision.

If convicted, the club would be fined $500,000 and the manager would have to repay $50 per week of the payment.

However, the company could still face up to a $500 million fine if the money was not repaid within 12 months.

One of the reasons given by the court was the “relatively high cost of litigation”.

The High Court also heard a number members of the entertainment industries had been affected by the donation system, with one industry representative citing the impact of “high turnover” at the club as one of the factors.

According to a submission to the court, the number of people who were not involved in the entertainment business and those who were, could be up to 15 per cent of the club, making it “more than an issue”.

Sam is one of many comedy clubs which accept donations from the industry and has previously been hit with similar fines, including the $400,000 fine levied by the Victorian Court of Appeal in January 2017.

Since then, the Victorian government has introduced the $350,000 Fine and Taxable Harm Act, which is expected to increase fines for accepting large amounts of money from the community.

At the time of the court hearing, the business’s chief executive said he was “absolutely” pleased with the outcome of the appeal, adding the “unprecedented amount of money raised” was a “good result for the company”.

This is not the first time the business has faced a fine.

A previous fine of $300,000 was imposed in December 2018 by the High Commission of Victoria, which fined the business $250,000 after the business failed to report over $20 million of donations.

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