Billionaire James Packer has admitted he didn’t “give a thought” to special clauses in the Sydney casino licence which banned the Macau casino mogul Stanley Ho from having an interest when he inked a deal in May 2019 with Ho’s son, Lawrence, selling him 19.9% of Crown Resorts.
The “Stanley Ho clauses” were included by the New South Wales government because of concerns voiced by other casino regulators in the US about Stanley Ho’s connections with organised crime.
“I had forgotten. I regarded Melco as Lawrence’s company,” Packer told the NSW inquiry, which is examining whether Crown and its associates, including Packer, remain suitable to hold the high-roller licence at Barangaroo.
The deal was potentially a breach of the Barangaroo licence because Stanley Ho had an interest in Melco International via a family trust called Great Respect. The trust was specifically banned from being an associate of the licence as well as Stanley Ho, who has recently died.
Crown did not tell the Independent Liquor and Gaming Authority about the sale because Packer and executives from Consolidated Press Holdings, his private company, did not inform them until it was done.
Packer on Wednesday admitted he was aware in 2006 that Great Respect had acquired a 20% interest in Melco International, via convertible notes which were issued after Stanley helped Packer and Lawrence secure a prime site for their City of Dreams casino in Macau.
Asked how he could have overlooked this restriction when negotiating with Lawrence Ho, he said: “I just didn’t give the matter any thought. I had forgotten it.” He said he thought the lawyers would check all legalities.
Packer also faced a grilling over whether he had acted in Crown’s interests or his own, particularly after he left the board due to illness in 2015 and again in 2018 after briefly rejoining. As its largest shareholder with about 46% of the stock at the time, Packer still received confidential information under a major shareholder protocol.
The billionaire told the inquiry he considered he was “fully aligned” with the other shareholders in Crown. But the special access Packer received once he left the board has raised serious issues about the governance of Crown.
The inquiry heard that Packer was routinely given access to Crown confidential briefings on table turnover, revenue updates and how Crown was performing compared to its rival Star.
The inquiry heard about numerous emails Packer sent to executives of Crown on matters such as budget forecasts and cost-cutting. Packer insisted he was not giving instructions but requesting information.
“You made the requests and they carried them out?” the counsel assisting, Adam Bell SC, asked. “In the examples given, I agree,” Packer said.
“Are there any examples there where executives declined to do it?” he was asked. “No,” Packer replied.
The issue of Packer’s status is particularly relevant because the Crown board was not aware of the sale of 19.9% to Melco until it occurred, although at least one board member who was also a director of CPH, Michael Johnston, was aware, as was Guy Jalland, a director of Crown and an employee of CPH.
Packer denied he had asked Crown’s then-chief financial officer, Ken Barton, to alter forecasts just a week before the sale to Melco was clinched. He said the email he sent was just “a continuation of normal budget process”.
“His job was not to work for you, his job was to work for Crown, wasn’t it?” the presiding commissioner, Patricia Bergin SC, asked on Wednesday. Packer agreed.
The deal with Melco was announced in late May 2019 and the first 10% was transferred to Lawrence Ho. But the second part of the deal did not proceed due to Covid-19, which has shut down casinos worldwide.
Lawrence Ho’s withdrawal was announced on 6 February.
The inquiry heard that Packer had had a phone call with Lawrence around this time and that Ho said he did not want to proceed. Packer agreed, despite there being no legal triggers for the deal to be terminated.
“I would never hold Lawrence to something that he didn’t want to do,” Packer explained.
Earlier, Packer had been asked whether he considered he was under an obligation not to do harm to Crown Resorts. “I would have assumed that obligation,” Packer replied.
The hearing on Wednesday also focused on the period in late 2015 and 2016 when Packer said he was struggling with bipolar disorder and Crown’s casino business was facing mounting scrutiny from the Chinese authorities.
In October 2016, 19 Crown staff were arrested and jailed in China for gambling crimes.
The inquiry previously heard evidence that senior staff working for Crown overseas had warned the head of VIP gaming, Barry Felstead, as early as 2013 that “staff were living in fear of being tapped on the shoulder” by Chinese authorities.
The inquiry has also been told that the company had sought external legal advice about the risks of having people working from their homes in China, and that concern among the international VIP executives had increased after staff of a Korean casino had been arrested en masse in mid-2015.
In May of that year, the Chinese authorities had announced a crackdown on foreign companies trying to solicit gamblers to travel overseas. The VIP executives wrote in emails they were taking steps to ensure that all China-based staff were issued work permits in Hong Kong and Singapore, so they could falsely claim they were working overseas, not in China.
But Packer told the inquiry that as executive chairman he had not been told of the arrangements in China, or the staff fears, nor were they relayed to either the board or the risk committee.
Only one director, Johnston, has admitted to knowing about the legal advice and the staff arrangements in China. But Packer said Johnston did not pass the information on, despite being a longtime employee of CPH and a member of Crown’s risk committee.
Asked if he accepted that the “ ethical failures” around the China VIP business took place when he was executive chairman, Packer replied: “I accept some but not all.”
When asked who was responsible for not acting on the risks to staff, Packer said he blamed Robert Rankin, who took over from him as chairman of Crown in March 2015, and Rowen Craigie, the then-chief executive of Crown.
He said Rankin “was meant to be a China specialist”.
Packer was asked whether he thought “a culture that focused obsessively on profit” was to blame. “No, I do not,” Packer said.
He said that at that time the VIP business contributed only 7% of Crown’s profits and that putting the company at risk for 7% “didn’t make sense”.
But Packer was at a loss to explain why executives had not passed the warnings about the changing business environment in China up to the board, saying that was “not the culture of the company that I was trying to build”.
Packer is appearing before the gaming authority inquiry via video link from his $200m superyacht, IJE, which is somewhere in the Pacific.
He will continue giving evidence on Thursday, when he is due to face questions about his knowledge of junkets operating in partnership with Crown and allegations of money laundering in the Melbourne casino.
