In response to the recent Bell Report which asserted that Australian operator Star Entertainment is unfit to hold a casino license in New South Wales (NSW), the company’s interim chairman, Ben Heap, released a lengthy statement to investors via the Australian Securities Exchange (ASX), pledging reform through what he referred to as a “Renewal Plan.”
“We will not only fix the issues raised in the report but will examine and address their root causes,” he said. “Given the extent and breadth of the issues raised, our Renewal Plan is a multi-year plan, to fully address and embed the fundamental changes required in all aspects of our business.”
Heap added: “Examples of actions we’ve taken to date include introducing stronger controls, enhancing our regulatory compliance functions and training, adding new members to our board, rebuilding our senior leadership team, separating our risk and legal functions, hiring a new chief risk officer, and voluntarily appointing an independent monitor to oversee our progress.”
The state’s newly formed regulatory authority, the NSW Independent Casino Commission (NICC), will make a formal ruling on the matter in the coming weeks, once Star submits its formal response to the Bell Report—the operator has until September 27 to do so.
Numerous financial and operational violations were reported in the investigation, most notably the use of China UnionPay bank cards to transfer gambling funds, as well as the illicit relationship with notorious junket operator Suncity Group (now known as LET Group Holdings) and its former chairman Alvin Chau, who is currently on trial in Macau for charges related to money laundering and illegal gambling.
In the statement to the ASX, Heap vowed that the company’s main priority moving forward is to “earn back your trust and the trust and confidence of the NSW Independent Casino Commission, and indeed all our regulators. I recognize that we won’t be judged by our words, but by our actions. You have my commitment, and that of my fellow directors and senior management team, that we will do everything in our power to make the necessary improvements.”
While the NICC has not said exactly what it plans to do, it certainly has much more authority than perhaps any other regulator in the country, thanks to recent changes in state law.
The commission has the power to issue fines up to US$66.7 million for each violation of state regulations. Additionally, the NICC also has the ability to suspend Star Sydney’s license and transfer it to a state-appointed manager for 90 days, or longer if necessary. Permanent license cancellation is also a possibility, but most around the industry don’t expect this to happen given the amount of revenue the casino brings in for the state, not to mention the thousands of employees who would be punished for the company’s shortcomings.
Angus Hewitt, an analyst for Morningstar, told AFR Weekend that it is “unlikely” Star will lose its NSW license entirely; instead, he said, “there will be fines, and there will be some kind of special manager.”
If the NICC does choose to go that route and appoint an external manager, state law stipulates that “no payment of net earnings” are to be made to the previous licensee without regulatory approval. However, the casino is still entitled to a “fair rate of return” for its earnings—the NICC can choose to siphon off any excess profits towards a fund to be used for fines or other expenses.
