What a year for Crown Resorts. Two shareholder class actions, a commission of inquiry from the NSW gaming regulator, an enforcement investigation by financial crime and money laundering agency AUSTRAC, a “show cause” disciplinary notice from the Victorian regulator and a padlocked Sydney casino.
Within the past few months Crown Resorts has been pummelled from almost every side as the regulatory/legal wagons circle the company.
The latest instalment in the “Crown under siege” saga could see the casino forced to buy back shares of financially affected shareholders who sign up for a new class action launched on Friday by lawyers Maurice Blackburn.
It is a departure from the traditional approach taken by class action lawyers. Instead of the usual claim for damages, Maurice Blackburn is asking the court to consider ordering Crown to give shareholders a means to sell at a price that reflects the company’s fair value.
It would also raise the vexed question about who would determine fair value and how it would be measured.
Meanwhile there’s not yet a peep about Crown from the main cavalry – the Australian Securities and Investments Commission (ASIC). It may ride in later – it is hard to imagine it won’t show up at all.
The counsel assisting the NSW inquiry has already suggested it could refer Crown’s former chairman, Robert Rankin, to ASIC concerning breaches of directors’ duties. In the years following the handing down of the final report in the financial services royal commission, ASIC launched a deluge of cases and it hasn’t yet finished.
In the meantime Maurice Blackburn has taken a double-headed approach and launched a second class action – both allege that Crown engaged in deceptive or misleading conduct and breaches disclosure obligations.
The initial class action launched three years ago targets Crown for its behaviour in the lead up to the October 2016 arrests of 19 staff in China. The second action, lodged with the Victorian Supreme Court on Friday, is concerned with AUSTRAC’s announcement in October 2020 of a formal investigation into potential non-compliance of anti-money laundering at Crown.
Both the China arrests and the AUSTRAC investigation resulted in an immediate fall in Crown’s share price – slashing the market capitalisation of the company by $1.3 billion and $500 million respectively.
It’s easy to see why Maurice Blackburn has stepped up the fight against Crown – it must be able to smell the potential for damages.
Almost three months of extraordinary and detailed evidence before the NSW commission of inquiry headed by Patricia Bergin has provided class action litigants with a virtual Aladdin’s Cave of documentation and evidence from witnesses.
It has uncovered catastrophic risk and governance failures and raised serious question marks over Crown’s fitness to hold a casino licence.
The latest class action’s allegations of misleading and deceptive conduct will highlight public statements the company has made since 2014.
For example, Maurice Blackburn points out that Crown had made unequivocal statements about two of its shelf companies, Riverbank and Southbank – that both were subject to the usual reporting obligations under anti-money laundering legislation. The law firm alleges these statements were not true.
“They said various things such as they had robust processes for assessing junket operators that they dealt with and it has emerged that they (Crown) had undocumented processes for assessing junket operators,” Maurice Blackburn’s Miranda Nagy said.
The second class action also contains an allegation that Crown conducted its affairs contrary to the interests of members as a whole in the period. In this Maurice Blackburn will seek to argue that there was a distinction between the way the company treated its largest shareholder, James Packer’s Consolidated Press Holdings (CPH), and other shareholders.
Maurice Blackburn said this relies on the fact that the board was not very active or questioning and that it allowed significant conflicts of interest to fly under the radar. Nagy pointed to the fact that the board was signing off on arrangements to give confidential information to Packer and CPH.
Crown, which was prohibited from opening its Barangaroo casino in December, now needs to wait until February to read the recommendations contained in the report from Commissioner Bergin and then whether these will be taken up by the NSW gaming regulator.
This should bear heavily on the casino company’s share price and feed into the class actions.
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Source: Thanks smh.com