Crown Resorts had another tough week as it continues to experience the fallout of the 2016 arrest and detention of 18 employees for gambling crimes in Mainland China. And a deal that extends benefits for its rewards points to slot operators across New South Wales has been widely panned.
Last October, staffers including VIP executive Jason O’Connor were picked up in a series of overnight arrests in four Chinese cities. Accused of the catch-all “gambling crimes,” they have yet to be formally charged. The staffers are being held in a detention center in Shanghai. Reports have indicated they could be held as long as a year.
Direct promotion and marketing of gaming is illegal in China and carries a maximum sentence of 10 years in jail. But the Crown employees reportedly continued to do business in the mainland, trying to lure VIP players to Crown’s Australian casino resorts. On news of the arrests, Crown stock fell a record 14 percent in Sydney trading. About $1.3 billion in market value was wiped out that day.
Now the Maurice Blackburn law firm is accepting registrations from Crown Resorts shareholders interested in participating in the class action, the Sydney Morning Herald reports.
“The arrests in China occurred against the backdrop of Crown’s massive investment in its Sydney venture at Barangaroo, which has been marketed as opening as a ‘VIP only’ casino and luxury resort in 2021,” said lawyer Julian Schimmel.
Schimmel said Crown should have known it courted trouble with Chinese authorities after two South Korean gaming companies were reprimanded for the same crimes in 2015. Crown should have disclosed the risks of doing business in the Chinese market to the affected shareholders, he added.
It is unknown what amount shareholders are seeking via the suit, which would be available to anyone who purchased shares between June 2015 and October 14, 2016. The action will be funded by International Litigation Funding Partners and is expected to involve institutional investors, “many of whom exited the stock or reduced their holdings during the share price rout,” according to the Herald.
“This is information that the company’s shareholders should have been told so they could buy their shares on a fully informed basis,” said Schimmel. “That is the essence of the claim.”
Because Crown did not inform the shareholders “exactly what they were up to in China,” he said, they paid an inflated price for their shares, according to the UK Guardian.
“We have reason to believe that: one, Crown knew the risks of its activities in China; two, it knew of the importance of VIP revenue to its business; and three, it therefore knew or should have known that if [its alleged illegal marketing of gambling tours] were revealed, there would be a revenue problem that would be material to Crown’s share price,” Schimmel said.
Meantime, the company inked a 10-year agreement with New South Wales Clubs that offers loyalty points to Clubs members who use the CrownBet online system.
The accumulated points can then be traded for perks like free dining at Crown Resorts properties. Clubs will earn commissions on bets made by their members on the digital service. Members will be able to use a CrownBet app to place bets in venues.
According to the Guardian newspaper, the deal constitutes a direct challenge to rival Tabcorp, which offers wagering through its retail, digital and Sky Media platforms.
Charles Livingstone of the Alliance for Gambling Reform called the partnership “cynical opportunism at its worst” and said the online service would prey on problem gamblers.
“There’s no good news here for people who may have a gambling problem,” Livingstone said. “You could describe it as marketing cocaine to people who already have a heroin problem.”
ClubsNSW CEO Anthony Ball said the deal is good business and a “watershed” development in the gaming industry. Ball noted that most physical clubs have been losing money “as more and more people switch to online wagering.”
“Our arrangement with CrownBet will ensure all NSW clubs get their fair share from digital bets and will help ensure the industry’s long-term viability,” Ball said. “Small and regional clubs will be the biggest winners.”
Senator Nick Xenophon, a longtime critic of the gaming industry, said the deal is “good news for the clubs, bad news for punters. They’ll have even more opportunity to lose their shirts. It’s not enough to lose your shirts at Crown casinos, but you’ll now be able to lose them at clubs and pubs.”
