Catching Up with NSW Inquiry and Crown Resorts Actions

The Crown Resorts scandal can be tough to follow, especially for those without the time or desire to read daily updates and scour the internet for details. But there has been a lot of movement lately from within the New South Wales hearings and in the boardroom of Crown.

It is important to know what’s happening. The gambling world is certainly taking notice, as Crown’s procedures – or lack thereof – with regard to money laundering, its actions and responses, are all a lesson to other gambling operators. And it all trickles down to the customers in some way.

The Eruption of a Scandal

In July 2019, a coalition of media outlets – the Sydney Morning Herald, the Age, and 60 Minutesrevealed the results of a six-month investigation into Crown Resorts.

The report revealed a “lust for profits” within Crown, an “arrogant culture” from the top down. The company overlooked numerous criminal ties between customers and the Chinese triad culture, junkets that facilitated drug rings and human trafficking efforts, as well as money laundering.

According to reports, junket operators often served as loan sharks for gamblers who owed money and sometimes reported to Asia-based crime syndicates. Junket representatives revealed that their contacts with Crown were the reasons for their employment. One of the reps was even a known brothel owner, high-stakes gambler, and suspected sex trafficker.

From the 2016 arrests of Crown employees in China to longtime stakeholder James Packer’s claims of ignorance of any connections between Crown and China, the exposé in 2019 connected it all.

The revelations, in addition to all of the sources to back up the report’s findings, prompted numerous government entities to initiate investigations into Crown.

Should Crown be able to keep its gambling licenses?

Should Crown be allowed to open new casinos as planned?

Scandal on Top of Questions

While the aforementioned report brought many questions to the fore and produced an overwhelming drive to investigate Crown Resorts, it wasn’t the first impetus.

It was in May 2019 when James Packer, large shareholder in Crown (and executive chairman until March 2018), entered into an agreement with Melco Resorts. Melco, headed up by Lawrence Ho, wanted to buy a 20% stake in Crown from Packer.

However, Lawrence’s father, Stanley Ho, had long been suspected of maintaining connections to organized crime groups, though nothing had ever been proven. Based on those widely-recognized suspicions, though, Crown agreed to having no dealings with Ho in his Barangaroo project in Sydney. When Melco entered the picture through Packer, regulators objected.

Ultimately, Melco resorted to buying only 10% amidst the chaos, and Ho sold that to the Blackstone Group. But Packer’s willingness to enter into the deal with Ho in the first place raised eyebrows at the NSW ILGA.

When the media report followed months after the Melco deal first came to light, the ILGA had enough.

First Up: NSW Casino Inquiry

All of the entities wanting to conduct their own Crown inquiries agreed that the New South Wales Independent Liquor and Gaming Authority (ILGA) would be the first. It named former Supreme Court Judge Patricia Bergin to oversee the hearings.

It all got underway in January 2020.

The initial hearings on January 21 set the stage for the inquiry, which focused primarily on setting the stage and eliciting expert opinions regarding money laundering and regulatory frameworks. Similar testimony continued in late February.

Covid-19 came into the picture soon after, and it derailed the inquiry, albeit temporarily.

The inquiry resumed in late June, and subsequent hearings in July probed the China arrests of Crown employees. Experts translated and interpreted Chinese laws, and attorneys discussed Crown’s business dealings in China. Into August, attorneys argued about the burden on witnesses regarding the China arrests, possible deferments, and public versus private hearings. Commissioner Bergin ruled against Crown on those issues, only noting that she will consider private hearings on a case-by-case basis going forward.

August hearings focused on licensing requirements, suitability, and Crown-Melco connections.

Testimony Makes Headlines

By September, the focus turned to money laundering allegations and junkets. One of the many startling discoveries during those hearings involved CEO Ken Barton admitting that he wasn’t aware of the details of Suncity’s junkets accepting cash deposits until a public revelation in 2019. He also didn’t acknowledge awareness of any of the money laundering loopholes.

Commissioner Bergin commented, “This has reached debacle levels; it’s extraordinarily troubling.”

As hearings moved into October, testimony revealed that loyalty amongst Crown executives seemed to take precedent over lawful and regulatorily-sound decisions. Despite Packer being gone from the formal organizational structure for several years, employees’ loyalty to him seemed important. CEO Ken Barton went so far as to send Packer daily updates on Crown happenings, though he denied such communication in the past.

Crown also sent proprietary information regarding confidential company information to Melco before finalizing the deal in May. In addition, Crown revealed that at least one director knew two important facts prior to the China arrests in 2016: Chinese authorities intended to crack down on foreign casinos luring its citizens, and Chinese police questioned a Crown employee in 2015 about organizing illegal gambling tours.

A lot of testimony revolved around the hierarchy and control at Crown. Non-executive directors appeared to possess more decision-making ability than company management. In addition, Packer’s private company benefitted financially from some of that consultation.

Long-Awaited Testimony from Packer

Packer’s own testimony during the first week of October had its own headlines.

He acknowledged sending threatening emails to a person who was helping him transform Crown into a private company. Packer regretted that behavior and blamed his bipolar disorder, something he wished he had told shareholders sooner.

Packer denied any knowledge of Crown staff doing anything illegal in China, saying that bad legal advice was to blame. “It’s a failure in compliance,” he said.

Worse, however, was his claim that he “forgot” that Crown was banned from dealing with any associates of Stanley Ho. When he facilitated the Melco-Drown deal, he assumed the Crown legal team would “cover all eventualities.”

As the week of testimony moved on, Packer admitted that he may need to sell down his stake in Crown in order for the company to keep its license. He also said he would never again serve on the board of directors because the accusations that he dealt with criminals was a “terribly shocking experience.”

Bergin suggested that “some serious changes need to be made.”

Next Steps

Speaking of Commissioner Bergin, the fate of Crown’s licensing in NSW is on her desk. She must now consider all 2020 testimony, all information gathered, and determine the next steps.

Her powers range from the ability to recommend license revocation or new guidelines for Crown to implement. It is safe to assume that the sometimes-startling allegations and testimony will inspire some change orders, at the very least.

Crown is already taking some steps. Earlier in October, the company announced the pause of all junket activities through June 2021. Crown also hired a former member of the Australian Criminal Intelligence Commission to help tighten money laundering controls. It terminated an agreement to share confidential information with Packer. Deputy Chairman John Horvath agreed to step down. Director John Alexander retired.

Shareholders have spoken up as well, demanding changes. One action they took was to vote against executive pay, which may result in removing the Crown board of directors. Shareholders have expressed extreme concern over the Crown employee arrests that may have been preventable and their ignorance – feigned or otherwise – about junkets.

Shareholders also voted against a resolution to adopt the remuneration report. According to Reuters, should they do that two years in a row, they will be allowed to officially call for a resolution to remove the entire board.

More Investigations to Come

As everyone awaits the result of the NSW ILGA inquiry, other investigations await Packer and everyone at Crown Resorts.

The Australian Securities and Investments Commission (ASIC) may be next. Its head of financial services and corporate regulation, Cathie Armour, said they are monitoring the NSW inquiry. “We have seen the reports that there may potentially be a referral to us.” If so, ASIC will take up the matter.

The Victorian Commission for Gambling and Liquor Regulation (VCGLR) served notice to Crown that it will pursue its own inquiry. At this point, the onus is on Crown to show why the regulator should not take disciplinary action in relation to noncompliance with regulations.

At the federal level, the Australian Transaction Reports and Analysis Centre (AUSTRAC) identified potential noncompliance with money laundering laws. Allegations include failures pertaining to customer due diligence and its anti-money laundering and counterterrorism financing program. The Crown Melbourne license is on the line. A formal enforcement investigation is underway.

 

Rose Varrelli

Rose Varrelli has always been passionate about online casinos, as she's been a player at a variety of places for years. Rose turned her personal knowledge and insight into a writing career. She aims to provide readers with the most up to date, informative news in the world of online casinos!

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