The lead attorney advising New South Wales regulators in their investigation into money laundering and other misdeeds at Crown Resorts has concluded the gaming giant is not fit to hold the license under which it plans to open a multibillion-dollar casino hotel in Sydney next month.
“The evidence presented to this inquiry demonstrates that the licensee is not a suitable person to continue to give effect to the license,” Counsel Assisting Adam Bell stated on November 3 in his final recommendations to the state’s Independent Liquor and Gaming Authority.
Particularly damaging, his report says, is the influence of controlling shareholder James Packer and his private company, Consolidated Press Holdings, which owns 36 percent of Crown’s ASX-listed stock.
“It’s submitted that the impact of that influence put Crown Resorts in breach of its regulatory agreements with the authority,” the report states. “In those instances, the adverse impact of CPH and Mr. Packer, we submit, was ultimately harmful to the public interest, which is a primary object of the Casino Control Act to protect.”
Though Bell’s recommendations do not amount to a rejection of the license, they raise the prospect that the inquiry will not go in Crown’s favor when it concludes in February with a final report from Patricia Bergin, the retired Supreme Court judge overseeing the commission conducting the probe.
If at that point the ILGA doesn’t strip Crown of the license it’s expected it will impose tough conditions on it, including the likelihood that Packer and CPH will have to divest of their shares or a sizable portion of them.
The authority has been investigating Crown since January, prompted by a blistering series of reports in the national media last year accusing the company of running the VIP business at its flagship Crown Melbourne casino in league with junkets with alleged criminal ties and with lax cash controls potentially rife with money laundering. The reports also revealed that management had ignored warnings that its extensive marketing efforts in China violated Chinese law, a failure that resulted in the arrest in 2016 of 19 Crown operatives in China, several of whom were jailed for months before being expelled from the country.
The inquiry heard how Packer’s sway over decision-making was all-powerful in spite of the fact that he has held no position with the company since resigning as chairman in 2016. Among the damaging revelations was that Packer and CPH received insider trading updates from Crown executives on a regular basis, unbeknownst to other shareholders, as part of Packer’s efforts to orchestrate a number of takeovers that ultimately never materialized.
Packer himself delivered several days of unflattering public testimony to the commission last month in which he acknowledged that corporate governance at Crown was “dysfunctional” and that he expects he’ll be ordered to sell down his holding.
Management has since said it is taking steps to fix the company’s problems, including scrapping an unheard-of information-sharing agreement with Packer and suspending all business with junkets pending a review in conjunction with regulators.
Shareholders are far from satisfied, however, as was apparent at the company’s annual meeting last month in which three directors barely survived re-election, among them Guy Jalland, Packer’s No. 2 at CPH, and Deputy Chairman John Horvath.
Significantly, more than one-third of shareholders also voted down management’s executive remuneration report, a “first strike” under Australian corporate law that could result in the ouster of the entire board if it fails by a vote of 25 percent or more at next year’s meeting.
Horvath has since announced his retirement. John Alexander, who stepped down as chairman in January in the wake of the media revelations, decided not to seek re-election and said he, too, will retire. Both have had close ties to Packer.
The company says it still plans to move forward with Crown Sydney, the A$2.2 billion, 72-story luxury hotel and residential complex with a VIP casino set to debut next month at the city’s popular Darling Harbour waterfront.
Whether it actually comes off is another matter.
Bergin, for one, directly questioned Crown Director Jane Halton about the appropriateness of opening the gaming portion of the resort before the commission delivers its findings.
Chris Sidoti, the attorney who chaired the ILGA from 2008 to 2016, also weighed in. “For Crown, after all that’s gone on, to open the facility before (Judge) Bergin has reported, to me it can only been seen as an act of bad faith” which he said “may well be sufficient to convince the inquiry of a need to make an interim report in which it deals with this question of whether it’s fit and proper to retain the license.”
Local politics could play a hand as well.
NSW Greens MP Jamie Parker, the party’s anti-corruption spokesman, said the fact Crown’s license had not already been suspended showed “just how effectively this multibillion-dollar corporation has intimidated the government.”
“Crown is demonstrably unfit to hold a gambling license in NSW,” the lawmaker said. “At the very least, their license should be suspended until the inquiry has concluded and all the details are public.”
Sophie Cotsis, a spokeswoman for the opposition Labor Party, said she was “shocked” that Victor Dominello, the minister for Customer Service in the administration of NSW Premier Gladys Berejiklian, had “gone to ground” after Bergin voiced her concerns.
Berejiklian, meanwhile, is reported to be seeking advice about requesting delaying the opening “in the best interest of our citizens.”
