Crown: Down But Not Out in Australia

The long-awaited Bergin Report has deemed Crown Resorts “unsuitable” to operate its VIP casino in Sydney, Australia. That may change if the gaming giant shows regulators in New South Wales that it’s cleaned house. Crown Chairwoman Helen Coonan (l.) pledged to work closely with regulators to accomplish that goal.

Crown: Down But Not Out in Australia

An 18-month government probe of Australian gaming giant Crown Resorts has concluded that the company is “unsuitable” to operate a VIP casino at its new multibillion-dollar resort complex in Sydney, Australia.

Last week, with the release of the 751-page Bergin Report, Crown was given a chance—likely its last—to conduct a thorough house-cleaning and prove it’s in compliance with gaming regulations in New South Wales (NSW). The report also recommended a shakeup of executive management and required that Crown cut ties with Chinese junket operations.

The report, made public February 9, found that Crown allowed money laundering at its Australian casinos and also that its junket partners had ties to Asian crime syndicates. The report also focused on the 2016 arrests of 19 Crown Resorts staff members who were found to be illegally promoting Crown casinos in mainland China. Those employees were arrested and held in in a Shanghai detention center for months before being deported.

Commissioner Patricia Bergin, a former NSW Supreme Court judge, reviewed the “stark realities” of the business practices at Crown, which she said included “facilitating money laundering, exposing staff to the risk of detention in a foreign jurisdiction and pursuing commercial relationships with individuals with connections to triads and organized crime groups. It is obvious that such attributes would render an applicant quite unsuitable to hold a casino license in New South Wales.”

According to the BBC, two Crown subsidiaries laundered money at Crown casinos for at least five years. Bergin was unsparing in her criticism of the gaming company, which operates casinos in Melbourne and Perth and once had global ambitions.

“One of the difficulties for Crown was its unjustified belief in itself,” she wrote, “and its unwillingness to entertain the prospect that there was any force in any of the media allegations”—a reference to investigations by ABC News, The Age, the Sydney Morning Herald and other news outlets into money laundering at the company’s gaming halls.

Even after media reports surfaced in 2019, Bergin said, Crown showed a “total lack of commitment to turning inwards and rectifying the obvious problems.” Such inaction showed “present and very deep corporate cultural problems” at the company, majority-owned by billionaire James Packer. She accused Crown of “corporate arrogance,” and advised the ILGA to consider whether Packer is fit to be closely associated with the new casino.

Despite the grave findings of the Bergin Report, all is not lost for Crown. Bergin left it to the NSW Independent Liquor & Gaming Authority (ILGA) to decide if the company can enact sufficient changes in its corporate culture to be worthy of a gaming license. If it does, “it could achieve a fresh start and emerge a very much stronger and better organization,” the judge wrote.

Bergin recommended that the company provide the ILGA with “a detailed written remediation action plan and undertakings in respect of matters including governance, independent review, accountability and any other relevant matters …. It would be appropriate to ensure that such an action plan and undertaking is in the form of an enforceable undertaking.“ She recommended the establishment of a new regulatory body, the Independent Casino Commission (ICC), “an independent, dedicated, stand-alone, specialist casino regulator with the necessary framework to meet the extant and emerging risks for gaming and casinos.” The report also calls for multiple amendments to the NSW Casino Control Act, among them a ban on any casinos from dealing with junket operators.

“It is critical,” the report stated, “that the management and operation of casinos in NSW are free from criminal influence or exploitation.”

Bergin also had choice words for Crown Chief Executive Ken Barton, Director Andrew Demetriou and Director Michael Johnston. She said Barton is “no match for what is needed at the helm” of a casino licensee and called his testimony at the hearings “most unimpressive.” As for Demetriou, she said he delivered a “most unedifying” and “quite bizarre” performance at the inquiry. As for Johnston, in her opinion he should “conclude his tour of duty as soon as possible” after 13 years on the Crown board. The day after the report was released, directors Guy Jalland and Johnston, both longstanding Packer lieutenants, resigned, followed the next day by Demetriou.

Crown opened the lavish US$2.2 billion Crown Sydney in the city’s Barangaroo section in December, but was prohibited from opening the VIP casino that is its centerpiece. The Sydney Crown Towers hotel, bars and two restaurants opened on January 8 under an interim license that must be renewed in May. The casino remains closed.

According to the Canberra Times, ILGA Chairman Philip Crawford told reporters that headlines reporting that Crown must “blow itself up to save itself” are not “far wide of the mark.”

“They’ve got a lot of work to do to satisfy us,” he said. Likewise, Premier Gladys Brazilian said any casino in the state needs to “stick to the rules” and “be above reproach.”

“If parties don’t come with the highest compliance, integrity and lawful activity—well then, all bets are off,” she told Radio 2GB.

Independent federal MP Andrew Wilkie, a longtime Crown and overall gaming critic, said the Bergin Report proves the company “is unfit to continue to operate any casino in Australia.” He called upon premiers in Victoria and Western Australia to suspend Crown’s casino licenses there and establish their own commissions of inquiry.

Meanwhile, Crown Resorts Chairwoman Helen Coonan has struck a tone of contrition. She promised to work closely with regulators to address the shortcomings listed in the Bergin Report.

“The commissioner has made findings of serious conduct, culture and compliance issues that clearly do not accord with our values,” she said in a statement. “I accept criticism is warranted and reiterate our unreserved apologies for these shortcomings. While we have already taken a number of important steps to improve our governance, compliance and culture, I recognize from the commissioner’s report we have much more to do.”

Crawford suggested that, with hard work, Crown could be on firmer footing by spring, and possibly be in a position to open its casino by late April or May, providing all conditions are met.

CEO Barton had not been released as of Friday, but seems to be on his way out, and was recently described by The Age as “a dead man walking.” According to the Guardian, he has offered his resignation but there was no confirmation of his departure.

“Crown and Mr. Barton are continuing to consider his position,” Crown said in a statement last week. Barton became CEO and a director of Crown, Australia’s biggest casino operator, in early 2020 after 10 years as chief financial officer.

He could be replaced by former SkyCity Entertainment Group CEO Nigel Morrison, a new non-executive director. Pending regulatory approvals, Morrison will replace John Horvath, who agreed to exit the board after shareholder voted against him at the company’s annual general meeting in November. He also could eventually replace Barton.

In the undercurrent of the recent revelations is the possibility that another gaming company could come in a snatch up the Crown assets. Reports that Packer’s yacht spent New Year’s Eve in the same harbor as the recently deceased Las Vegas Sands owner Sheldon Adelson ramped up speculation that LVS might be engineering a deal. Wynn Resorts has also been cited as a possible suitor. Former Crown partner Melco Entertainment, however, is not expected to be involved as it was the proposed increase in Crown shares that fueled the investigation into the company originally.