The counsel assisting the New South Wales inquiry into Crown Resorts’ casino licence, Adam Bell SC, had only been on his feet for a few minutes on Wednesday when he delivered his bombshell.
“In summary, we submit that the evidence presented to this inquiry demonstrates that the licensee is not a suitable person to continue to give effect to the licence and that Crown Resorts is not a suitable person to be a close associate of the licensee,” he said.
With those words, the catastrophe facing Crown and its major shareholder, the billionaire businessman James Packer, came into stark focus.
Crown faces a real prospect of losing its Sydney high-roller casino licence even before it throws open the doors to the glittering new gambling mecca it has built in Sydney’s tallest building, built at a cost of $2bn.
Crown is now under enormous behind-the-scenes pressure to delay the opening, which is scheduled for 14 December.
Patricia Bergin, the retired supreme court judge who is hearing the inquiry, will make her recommendation by 1 February. And soon after that, the Independent Liquor and Gaming Authority (ILGA) will make a decision on Crown’s fate.
Bergin has already made her view clear. She wants a delay.
The question is whether Crown, imbued with the Packer culture, will be prepared to kowtow.
On Thursday, the NSW premier, Gladys Berejiklian, signalled that she was seeking urgent advice from the ILGA about the opening ahead of the findings from Bergin and a determination by the ILGA.
“I will get advice from the ILGA as to whether that should proceed in December and I am willing to take a decision not to if that’s the advice,” she said.
Counsel assisting’s submissions are just that – submissions – and the first step in a three-step process. But the views of counsel assisting, who acts as inquisitor for the inquiry, generally carry significant weight.
Allegations of money laundering and ‘disastrous failures’
Bell and his colleagues, Naomi Sharp SC and Scott Aspinall, have reviewed the evidence and come to the conclusion that Crown is no longer suitable to hold a casino licence on a number of counts.
Bell focused on the arrest of 19 Crown staff in China in 2016 for breaching Chinese laws against luring Chinese citizens to gamble overseas.
He submitted that “the China incident” alone was sufficient to answer the question of suitability to hold a casino licence, which, he said, demonstrated “disastrous failures” of management and governance.
He said the dominance of Consolidated Press Holdings, Packer’s private company through which he holds 36% of the shares in Crown, had led to “the insertion of informal reporting lines to a VIP working group”, which received more information than the board itself about the China operations.
Bell outlined how a secret controlling shareholder protocol resulted in key executives providing confidential information to Packer, even after he had resigned as a director. That loyalty to Packer had often created conflicts of interest for both executives and directors in Packer’s inner circle.
Sharp on Friday blasted Crown for failing to properly investigate allegations of serious criminality against the operators of junkets at its casinos that have been repeatedly made over the years.
“We say that the failure of Crown Resorts to meaningfully act on these longstanding allegations about the junket operators bespeaks both a culture of denial and a culture of arrogant indifference to regulatory compliance.
“We say this culture permeated the organisation.”
Sharp also took aim at Packer, who the inquiry has heard closely monitored the VIP business.
“Mr Packer set a dubious tone from the top in relation to junkets,” Sharp said.
She said he “drove a culture that put the pursuit of profits above all else.”
Aspinall said Bergin should accept that Crown subsidiaries and the gaming rooms run by junkets at its casinos were used for money laundering.
“What we will see shows a culture within Crown during the period that we will look at that either facilitates money laundering or is recklessly indifferent to whether or not it occurs,” he said.
“That in my submission is wholly unsuitable for a person who holds the privileged position of a licensee in this state.”
Aspinall played footage of hundreds of thousands of dollars being ladled out of shopping bags and a cooler bag in exchange for chips in a private room inside a high-roller room at the company’s casino run by Suncity, a junket operator controlled by Alvin Chau and allegedly linked to organised crime.
This was indicative of money laundering, he said.
“It’s quite extraordinary that you can go into the casino with these shopping bags full of hundreds of thousands of dollars,” Bergin said.
Starting next week, lawyers for Crown and Packer will get a chance to respond to the long list of allegations made by counsel assisting. In the meantime, spokespeople for Crown and Packer’s private company, Consolidated Press Holdings, declined to comment.
Revoke licence, suspend, or impose conditions?
The nuclear option available to the ILGA if it finds Crown unsuitable is to revoke the licence and reissue it to a new casino operator. But this would result in thousands of lost jobs at the casino. Finding a new licensee, who must be checked for suitability, could take a year or more.
It could also suspend the licence for a period.
Or it could also impose conditions. These could include new processes for dealing with money laundering, regulation of junkets, more training, structural changes to ensure better governance and demanding the departure of executives and board members found to have contributed to the problems.
But as Bell explained, the options for imposing conditions on the licence are limited, thanks to a tangle of extraordinary agreements that the NSW government struck with Packer and Crown when the company was negotiating the licence in 2014, at the height of its political influence.
These open the NSW government up to hundreds of millions of dollars in compensation if it imposes conditions or passes laws that impact on Crown’s business.
The more likely outcome is that Crown will offer up proposed conditions and offer to make changes to its operations.
But will it be enough? So far Crown has shown a stubborn reluctance to move on board members and executives and has done little to implement the changes to its operations that it promised.
Therein lies the regulator’s dilemma.
It’s also the dilemma for the regulators responsible for Crown’s operating Australian casinos, in Victoria and Western Australia, who have been embarrassed by their failure to detect and stop the misbehaviour and illegality exposed by the NSW inquiry.
It is believed likely the Victorian and WA regulators, which have been closely watching the hearings, will sit down together once rulings are made and nut out a joint course of action.
The hearings should also concern the UK’s Gambling Commission, which oversees Crown’s London outpost, Aspinalls.
But, having tacitly endorsed Crown’s behaviour through years of inaction, the regulators are not yet keen to explain what steps they might take.
A spokesman for the WA Gaming and Wagering Commission said the regulator was “engaged in the inquiry and will consider its position in relation to Crown Perth once the findings of the inquiry have been handed down”. He did not respond when asked what “engaged” meant.
Meanwhile, a spokeswoman for the Victorian Commission for Gambling and Liquor Regulation said the authority was aware of the submissions made by counsel assisting and it would be “a matter for commissioner Bergin to report on suitability, including what changes would be required to render relevant persons suitable”.
“VCGLR rejects your assertions that it has failed to regulate the Melbourne casino,” she said.
Will Packer be forced to reduce his stake in Crown?
For Packer, who has already retreated from corporate life due to mental health, it likely spells an end to involvement in the empire he built over two decades, other than as a passive shareholder.
Packer gave evidence that by the time he finally left Crown’s board in 2018, he was struggling with bipolar disorder and had since received treatment.
Packer gave evidence to the inquiry in October from his $200m superyacht, Aje, somewhere in the south Pacific.
Bell submitted that Packer was no longer suitable because Packer had admitted that threats he made by email to Mr X in 2015 were “ disgraceful”, “shameful” and inappropriate for a director of a public company.
He said no medical evidence had been presented to suggest that the intemperate email was due to Packer’s bipolar disorder, as Packer suggested in the witness box.
The details of the threat were not disclosed but the inquiry heard that Mr X was put in fear of his life.
Bell said the controlling shareholder protocol, under which Packer continued to receive information about Crown’s operations even after he left the board, opened the company to “an extraordinary level of influence” by Packer and distorted the governance of Crown.
If Packer is banned from being a close associate, he will need to sell down his 36% shareholding to 10% or lower and cease any active involvement in Crown.
For Packer, the end of his involvement in Crown might come as a blessing in disguise. He has been trying to reduce his exposure to Crown since 2018 when he tried to merge with the US-based Wynn Resorts.
The commission has heard that in May last year, when Packer was mulling how to reduce his stake in Crown, he even considered selling 10% of the company to an Alvin Chau-controlled company, Suncity Group.
He eventually agreed to sell 19.9% to Melco Resorts – a transaction that fell over after it created its own problems due to Melco’s links to Stanley Ho, who was banned from involvement with the new Sydney casino due to suspected links with organised crime.
Other options include limiting his voting rights to below 10% while a more orderly sale can take place and requiring undertakings about how he will interact with Crown in the future.
