The ball is now firmly in the Crown Resort board’s court.
It is facing an existential decision. It must either offer up a major program of reform for the company to the NSW regulator, the Independent Liquor and Gaming Authority (ILGA), including enhanced money-laundering protections and a wholesale cleanout of its board, or lose its Sydney casino licence – and possibly licences in other states.
The report by former NSW supreme court judge Patricia Bergin SC found Crown was unsuitable to hold a casino licence, but also indicated how Crown could remedy its unsuitability.
Bergin has not ordered Crown to do anything, but she included some forceful suggestions about steps it would need to change its culture, its governance and internal controls, particularly around money laundering and its dealings with junket operators who recruit high rollers.
What’s the next step?
ILGA was briefed on her findings last Monday. It has not made any formal decision at this point.
Following the release of the report, ILGA has indicated that it will consider it further at a special meeting on 12 February and then again at its regular board meeting on 17 February.
One of the big problems for the NSW regulator is that the NSW government has agreed in various deeds to punitive compensation up to 10 times the value of the economic damage done, if it changes laws or imposes obligations on Crown. However the regulator retained the power to revoke the licence if Crown was unsuitable.
This means it may need to be a negotiated settlement, with ILGA holding the big stick of revocation over Crown.
Crown issued a statement on late Tuesday saying it would work with ILGA in relation to the findings and recommendations noting it would do so “as contemplated in the regulatory agreements between Crown, ILGA and the NSW government”.
Bergin has made some definite suggestions – she thinks the CEO, Ken Barton, and some of the board, should go in order to make Crown suitable. That means Crown will probably need to make wholesale changes to the board in the next few months.
She also suggested enforceable undertakings which might include timetables for Crown to improve money-laundering controls and better train staff.
Does Packer have to sell his 36% stake?
The short answer is no. But Crown will need to have strict controls to prevent Packer being able to exercise “remote management” probably as part of the enforceable undertakings.
Bergin stopped short of finding Packer unsuitable as a casino associate but was highly critical of his actions in ignoring or forgetting to notify authorities of the 2019 deal with Melco, which raised regulatory questions. She also criticised his threatening behaviour toward an investor, which he agreed was “shameful.” But she also noted his mental health issues, which he talked about in evidence.
She also suggested, as part of her wider reforms of casino regulation, that the government may want to consider caps on holdings in casino companies of 10%, with higher levels requiring approval. That might have implications down the track.
The question is whether Packer will want to continue to hold such a large shareholding without any direct say in the business.
Possible buyers could include Blackstone, the American investment firm, which stepped in to buy a 10% stake in April 2020.
Other buyers could include international casino operators. The US based, Wynn had been in talks with Packer in 2019 to buy out his shareholding until a leak caused talks to collapse. Any new substantial shareholder would need to pass a suitability check and depending what the government does, they might be capped at 10%.
Could Crown appeal?
The Bergin report is a recommendation to ILGA, not a formal decision so if Crown decides to go legal, it will probably need to wait until ILGA makes a decision. If ILGA ultimately decides to revoke Crown’s licence, there’s a high probability it will end in court.
The casino operator expressed its unhappiness with the Bergin inquiry’s processes and made noises that it was denied fairness and due process during the inquiry.
But balanced against the temptation to take on the government in the courts will be the fact that Crown requires a social licence to operate and many people have been shocked at the revelations that emerged from Bergin’s inquiry.
Can the Barangaroo casino open in the meantime?
It seems unlikely. ILGA has declined to grant the approvals to allow the casino to open, however the restaurants and hotels in the tower are now open.
What will the NSW government do?
Bergin has made a series of recommendations for legislative reform including an independent casino commission with strong investigative powers, stronger laws requiring casinos to prevent money laundering, a ban on junkets operating in NSW casinos and the caps on shareholdings, discussed above.
The business and innovation minister, Victor Dominello, gave every indication he would act on the report.
“Among other things, the report raises serious issues relating to organised crime and money laundering in our community,” he said.
“We will consider its recommendations very carefully before providing a formal response in due course.”
What happens to Crown Melbourne and Crown Perth?
Casino licences are granted by states, but obviously Bergin’s report will be highly influential, particularly as much of the conduct she examined occurred at Crown Melbourne.
In December 2020, the Victorian Government asked Victorian Commission for Gaming Liquor and Racing (VCGLR) to bring forward by two years, the next major review of Crown’s Melbourne casino licence, known as the seventh review. And there are still matters outstanding from the sixth review.
“The final report and recommendations will inform any regulatory action which may be required in Victoria and may also be relevant to previous work done by the commission,” CEO, Catherine Myers said ahead of the release of the Bergin report.
She said VCGLR had been working on a series of issues within its regulatory remit relating to Crown Melbourne while the Bergin review took place. It started a comprehensive review of Crown’s internal control statements (including junket operations and premium players) and issued a “show cause” notice to Crown in October last year.
“The notice requires Crown to show cause why disciplinary action should not be taken for failing to ensure controls regarding junket participants were implemented. A decision could come swiftly.”
VCGLR investigations surrounding the arrest of Crown staff in China also intensified during the NSW inquiry.
“The VCGLR investigation was nearing completion when Crown announced mid last year it was waiving legal professional privilege over a voluminous amount of material it had previously declined to provide,” Myers said.
“Our forensic review of that material then prompted further inquiries, which are now coming to an end.
The WA authorities have also signalled they will start a review once Bergin reports.
