Strategy sent marketing staff to jail
What caused Crown Resorts to flout Chinese law in pursuit of high rollers? A recent report shows the coveted VIP gamblers lost $875 million in Crown casinos in the last financial year.
According to the Australian Financial Review, that’s why Crown marketing staff including senior executive Jason O’Connor continued to pitch Crown casinos in Mainland China in express violation of the country’s gaming laws. Last October O’Connor and 18 others were jailed in China for the crimes. They pleaded guilty in Shanghai Baoshan district court last month.
O’Connor received a 10-month prison sentence but should be released soon based on time served. Ten of his co-defendants have already been freed. They left in the company of family and said nothing about their experience behind bars.
“Everything went OK,” a family member told Reuters.
Crown also paid fines of more than $1.7 million for its employees’ violations.
As part of its case, the court said Crown gave $35.8 billion in rolling chips to its Chinese VIP clients during the financial year; players typically lose around 2.5 percent of the rolling chips issued to them, according to AFR. The court ruling also said Crown handed out big bonuses to its staff in China as high roller business exceeded targets by 16 percent. O’Connor’s salary was reportedly a whopping $750,000.
The arrests had a chilling effect on operations at Crown, which withdrew from its international operations in Macau and the U.S., opting to focus on its resorts at home. Controlling shareholder James Packer pulled out of his Macau joint venture, Melco Crown and tabled plans for a casino resort in Las Vegas. AFR reported the billionaire may still be interested in breaking into the Japan market.
In the aftermath of the shakeup, Robert Rankin resigned as Crown chairman and then left the board. He was followed by former CEO Rowen Craigie. John Alexander was named the new chairman, and Packer himself also rejoined the Crown board. Shares in Crown, which dropped 25 percent after the arrests, have recovered in recent months as the company sold assets and returned capital to shareholders.
The resolution of the legal case in China may not be the end of Crown’s troubles, however. Australian regulators are also on the hunt for evidence that Crown breached its domestic license by sending marketers to China.
Andrew Scott, CEO of Inside Asian Gaming, noted that Crown had a “very substantial business” in Mainland China, but no longer. “It could be down more than 50 percent as their China VIP business has been decimated.”
Meanwhile, Queensland Greens Senator Larissa Waters has drawn an interesting connection between the Crown arrests and new poker machines in Brisbane.
According to NewMatilda.com, Waters believes Star Entertainment Group’s stated plan to make one-third of its revenue from its Queens Wharf development is inherently flawed. “Clearly the business model of relying on high rollers for revenue is broken, so where does that leave the Queen’s Wharf mega-casino?” she asked. “Without Chinese money, the project could very well topple completely, and Brisbane could be left with a half-excavated building site.”
To stem the loss of revenue, she suggested in an op-ed piece, the casino will “rely on installing even more exploitative, addictive poker machines. That should worry all Brisbanites.”
According to the Sydney Morning Herald, the New South Wales Greens have joined a local council in Western Sydney is calling on the state government to limit pokies in communities with high machine density.
“We want the NSW government to create more jobs and invest in infrastructure, not provide more electronic gaming machines in our local area,” said Fairfield City Mayor Frank Carbone. A recent study concluded that Australians spent more than AU$8 billion (US$6.1 billion) on machines in the local area in 2015-16.
“The government must now play its part and give pokies-impacted communities like Fairfield support for a freeze and then reduction in machine numbers,” said Greens MP Justin Field.
