If ever a company didn’t deserve a social licence to operate it is Crown Resorts.
What has become abundantly clear from the NSW inquiry into its suitability to operate a casino at Barangaroo is stakeholders including politicians, gambling regulators in Victoria and Western Australia, management and Crown’s directors, all failed to do their job.
For an inquiry sparked after Crown’s biggest shareholder James Packer signed a deal to sell part of his stake in Crown in May 2019 for $1.76 billion to Melco, arguably in breach of a regulatory undertaking, it is certainly packing a punch.
Melco is run Lawrence Ho, the son of Stanley Ho, and when the NSW government granted Crown a licence to operate a casino at Barangaroo, Crown gave an undertaking it would not deal with or sell any shares to Stanley Ho or his associates due to concerns he had links to organised crime.
When Packer sold to Melco he kicked an own goal that has come back to bite him. How big a bite will depend on the inquiry’s recommendations and whether it prompts the Australian Securities and Investments Commission, AUSTRAC and gambling regulators to come out of the shadows.
Behind all the evidence that has poured out of the inquiry is a culture of hear no evil, see no evil and speak no evil. The evidence includes money laundering, junket operators linked to organised crime, secret bank accounts run through two of Crown’s entities to avoid regulatory requirements such as anti-money laundering laws, and a corporate structure riddled with conflicts as well as executives and directors passing confidential information to Packer when he wasn’t on the board.
It applies to the inner workings of the company as well as politicians and the regulators and it is driven by money.
Crown has spent a fortune on political donations and hiring powerful lobbyists to influence the decision makers. Also in the mix are the billions of dollars a year state governments collect in gambling taxes. In Victoria alone, the government earns more than $2 billion a year in gambling taxes and of that Crown contributes more than $230 million.
This clout has served it well over the years. For instance, in 2009 the Brumby government struck a deal with Crown to “equalise” taxes which resulted in it getting better tax rates than hotels and clubs that also operated pokies. At the time Liberal Party politician Michael O’Brien compared it to George Orwell’s Animal Farm “where some animals are more equal than others, and Crown is obviously a more equal animal when it comes to gaming machines than hotels and clubs”.
The influence it has had with governments undoubtedly explains some of the weak regulations currently in place. On Thursday the inquiry heard that in NSW the Casino Control Act states that any conditions or restrictions placed on Crown’s licence in Sydney can only be amended by agreement with Crown.
“Have you ever experienced such a legislative provision anywhere else in the world?” Commissioner Patricia Bergin asked incredulously of Packer, who replied, “In Victoria, we’ve got regulatory certainty as well…”
Over the years there have been a number of media exposés on Crown. In 2017 ABC’s Four Corners exposed links with junkets, organised crime and money laundering. Then in 2019 a joint venture with The Sydney Morning Herald, The Age and 60 Minutes revealed Crown had links to Chinese crime bosses, drug syndicates, money laundering and alleged sex trafficking rings.
Where is the financial crimes watchdog AUSTRAC? Where was the board? What about the Victorian Commission for Gambling and Liquor Regulation (VCGLR), which dropped the ball on a 2018 inquiry into Crown? Or the WA gambling regulator?
If Victoria wasn’t in shutdown it would be business as usual for the Crown casino, as it is in Perth.
AUSTRAC said it wasn’t appropriate to comment on operational issues. The VCGLR said it “continues to monitor investigations and inquiries currently underway by other regulators into Crown and will take appropriate action should new information or evidence come to light”. It said it had been assisting the NSW Casino inquiry and was inappropriate to comment while the inquiry was ongoing.
ASIC said it was also watching the inquiry with interest but failed to say anymore. The WA regulator said: “The Gaming and Wagering Commission of WA is engaged in the inquiry and will consider its position in relation to Crown Perth once the findings of the inquiry have been handed down.”
The inquiry is about Crown’s fitness to operate a licence but it gives a window into how public companies are run. There are ASX listing rules about corporate governance and many public companies have corporate governance or risk committees as well as independent directors. Crown had all of this in spades.
But in the cut and thrust of the Crown operation, corporate governance took a back seat. Profit was king, bad news was buried and the company and directors were tone-deaf to media articles exposing wrongdoing.
At the hearing on Friday independent director Harold Mitchell was asked what he talked to Packer about. “The main thing we spoke about was how to lose weight,” he said.
The main thing we spoke about was how to lose weight.Harold Mitchell
Counsel assisting Scott Aspinall asked Mitchell if he thought independent directors didn’t take an inquisitive enough approach to challenging management.
Mitchell’s response was “of course we could have done more”. The problem is they did very little and were told very little. They were naive, innocent bystanders who didn’t think to ask questions because they assumed executives were dealing with them.
This is not dissimilar to how many boards operate. Inquisitive directors aren’t part of the club.
Mitchell joined Crown almost 10 years ago after a call from Packer inviting him to become an independent director. There was no induction or formal training about pertinent areas such as casino regulations.
The inquiry delved into Mitchell’s relationship with the Packers and how Kerry Packer helped him during a difficult time in his life with a $1.9 million interest-free loan in the early 1990s and the later investment by James Packer in a company that would list on the ASX. When asked if this influenced his independence, as had been raised by the media, Mitchell said it was not true.
It then turned to Mitchell’s role as a director of Tennis Australia, which resulted in a court ruling that he breached director duties. Commissioner Bergin asked if he had given consideration to whether he should remain on the board of Crown in light of the findings, to which he said, “I have given it consideration and I should stay on the board of Crown.”
The inquiry heard from Ben Brazil, who joined as an independent director in 2009 after speaking to Packer, who still refers to Brazil as a good friend and confidante after he left the board.
Next week the inquiry will hear from other directors to paint an even clearer picture of the inner workings of Crown.
Meanwhile, Packer and his minions will be testing the waters to see how bad it is shaping up and pray a threatening email to a private equity executive doesn’t get leaked.
At the very least this should be a wake-up call to corporate Australia that the old mates club has had its day.
Source: Thanks smh.com