- »Crown Faces Two Class Action Lawsuits to Cap Bad Year
Crown Faces Two Class Action Lawsuits to Cap Bad Year
Crown Resorts is not having a good year. That is also a gross understatement.
The company likely looked forward to December 2020, a chance to close out the year after brutal hearings for the New South Wales inquiry regarding licensing, a money laundering investigation by AUSTRAC, other pending investigations, and a closed Sydney casino. All of this piled on to the pandemic that resulted in to-be-determined revenue losses.
Crown has a lot on its plate for 2021, as the above situations will not disappear quickly, but now the company faces two class action lawsuits to close out 2020.
Class Action Lawsuit #1
This case actually began in December 2017. Maurice Blackburn Lawyers initiated a class action lawsuit against Crown Resorts in the Federal Court of Australia. The case includes any person who acquired interest in Crown shares between 6 February 2015 and 16 October 2016.
Shareholders wanted compensation for the significant dip in share prices due to the detention of Crown employees in China. They also wanted to hold Crown Resorts accountable for the actions that led to the arrest of those 19 people.
Class Action Lawsuit #2
This week, Maurice Blackburn filed an additional class action lawsuit, the latest one in the Supreme Court of Victoria. The case includes shareholders between 11 December 2014 and October 2020, a much larger swath of people.
The lawsuit claims that Crown had inadequate systems and processes for ensuring its compliance with anti-money laundering laws. Further, it claims that Crown engaged in misleading and deceptive conduct, breaching its disclosure obligations with shareholders. This goes to engaging in business affairs that ran contrary to the interests of members throughout that entire period of nearly six years.
Instead of typical damages, however, the lawsuit seeks to recover compensation directly from Crown in the form of a share buyback program. They want Crown to repurchase their shares at a fair value and implement a substantial and rigorous anti-money laundering training program.
This case stemmed from the announcement of the AUSTRAC (Australian Transaction Reports and Analysis Centre) investigation into Crown’s noncompliance with anti-money laundering regulations.
More Lawsuit Details
The Sydney Morning Herald reported that the lawsuit provided examples of misleading conduct through Crown’s own public statements in the past six years. As an example, Crown stated that two of its shelf companies – Riverbank and Southbank – were subject to anti-money laundering reporting. Maurice Blackburn claims those statements were untrue.
Miranda Nagy of the lawfirm told the SMH, “They say various things, such as they had robust processes for assessing junket operators that they dealt with, and it has emerged that they had undocumented processes for assessing junket operators.”
Further into the latest lawsuit, Maurice Blackburn will seek to prove that Crown Resorts treated most shareholders differently than James Packer. They plan to point to board members allowing conflicts of interest between Packer and Crown to go unquestioned. Moreover, the board of directors specifically signed off on arrangements that gave confidential information about the company to Packer.
Crown responded in a media release that it will “vigorously defend the proceeding.”
House of Cards Tumbles
Some at Crown believed that the China “incident” was in the company’s past, and settling the initial class action lawsuit may make it finally disappear.
Enter 2019 and the massive exposé by a coalition of media outlets. Allegations ranged from ignoring potential junket connections to crime syndicates to actively overlooking violations of anti-money laundering laws. Throw in evidence of sweeping potential sex trafficking and other crimes under the rug, and Crown had a full-on scandal.
The NSW inquiry by the NSW Independent Liquor and Gaming Authority (ILGA) was the first card to fall. The public hearings that took place throughout 2020 uncovered many flaws, oversights, and just general mismanagement. There were apologies and intentions to change, but the damage was done.
While the final report from Commissioner Patricia Bergin isn’t due until the first quarter of 2021, the Victorian Commission for Gambling and Liquor Regulation (VCGLR) may be starting its own inquiry before then. It is in the initial stage of launching a review of the company’s Crown Melbourne license, a process that it anticipates will conclude in early 2021.
The Australian Securities and Investments Commission (ASIC) also announced an intention to start an investigation, based on the outcome of the NSW inquiry.
Next Moves for Crown
Currently, Crown is searching for new members of its board of directors.
Less than three months ago, Crown hired John Yates to head up its new anti-money laundering division. Yates is the Head of Compliance and Financial Crimes, a position the company hopes will assure interested parties that Crown will take AML controls seriously.
The best way out of all of this, however, might be to find a buyer for the entire company. Next year may be one of big decisions.