‘Not suitable’: where to now for James Packer and Crown’s other casinos?

by | Feb 10, 2021 | Business

The Packer directors are gone. Guy Jalland and Michael Johnston have left the Crown Resorts board in the wake of dramatic findings of the Bergin Report. Chair Helen Coonan and others will remain under pressure. After all, they are responsible, they are the directors, and Justice Bergin found Crown was not suitable to run a casino. So, what’s next, asks Charles Livingstone?

After months of hearings, characterised by spectacular admissions including threats of violence, the report of the Bergin Inquiry into the probity of Crown Sydney Gaming, a subsidiary of Crown Resorts Limited, has been tabled in the NSW parliament.

Crown Resorts runs the Crown casinos in Melbourne and Perth.

The Inquiry found that Crown Sydney Gaming was “not a suitable person” to operate the Sydney casino.

It also found the parent, Crown Resorts Limited, was “not suitable to be a close associate of the licensee”.

The serious corporate failures relate to

  • Crown’s operations in China and the arrests of the employees in October 2016 with “numerous failures to escalate indicators of real risks to the staff”
  • the infiltration and exploitation of Crown’s Melbourne and Perth operations by “criminal elements, probably including international criminal organisations”
  • the probability of money laundering in the accounts of two Crown subsidiaries “and in the casino premises with hundreds of thousands of dollars brought into the casino in cooler bags and shopping bags and exchanged for chips and plaques”
  • Crown’s failures to ensure it only had commercial associations with Junket operators of good repute

Other matters relate to “the structures in place that have contributed to the corporate failures” including:

  • the existence and operation of a Controlling Shareholder Protocol
  • Crown’s relationship with James Packer and his company Consolidated Press Holdings
  • Crown’s risk management structures and their resourcing.

The report says it is clear each director understood as at 2019 that Crown had given an undertaking to the NSW Government and the Authority that it would not allow the late organised crime figure Stanley Ho to acquire a direct, indirect or beneficial interest in Crown.

Undertakings not honoured

Yet it found the late Mr Ho’s associated entity had an interest in Melco Resorts & Entertainment to whom Packer agreed to sell his company’s Crown shareholding and “thereby obtained an indirect interest in Crown”.

James Packer

James Packer giving evidence

Speaking ahead of the tabling of the report, NSW Minister for Customer Service Victor Dominello said that at the heart of the inquiry was concern over organised crime, money laundering, and gambling.

Commissioner Bergin also recommended that a new Independent Casino Commission with the powers of a standing Royal Commission be given sole authority over licensing and disciplinary issues.

Tabling the report in parliament, and invoking parliamentary privilege, is reportedly intended to circumvent the possibility of defamation action by directors and executives of Crown arising from the report.

No confidence in directors

Commissioner Bergin concluded the Independent Liquor & Gaming Authority

would be justified in concluding that it cannot have any confidence in dealing with Mr Barton as a director of the Licensee or Crown

Ken Barton is the chief executive of Crown Resorts Limited.

Another director, Michael Johnston,

should not have been involved in any managerial role with Crown nor on any board Committees particularly relating to corporate governance or risk management

He should “conclude his tour of duty as soon as possible”.

In regards to another director, former AFL chief executive Andrew Demetriou, the report found

The Authority would be justified in lacking confidence in placing reliance upon Mr Demetriou in the future

It concluded that

in the circumstances of the findings against Mr Barton, Mr Johnston and Mr Demetriou, the Authority would be justified in entertaining very serious doubts that Crown could be converted into a suitable person under the Casino Control Act whilst they remain as directors

Another director, Harold Mitchell, should

further reflect on the need to refresh the Crown board and take steps to expedite that process

Remote management by Packer

The report describes a confused culture within Crown, with some directors and executives more loyal to Mr Packer, who is no longer a director, than the company itself.

The stewardship of long-time Packer associate John Alexander, chairman and chief executive between February 2017 and January 2020, led “to disastrous consequences”.

This included processes that exposed its directors to conflicts of interest and remote management by Mr Packer and a failure to protect Crown’s casino licensees from the infiltration of criminal elements through, at the very least, its lack of robust junket approval processes and a lack of proper oversight and monitoring of risks to money laundering in its subsidiaries’ bank accounts.

Bergin suggests the NSW Casino Control Act be amended to prevent any person from holding more than 10% of any licensee or holding company.

The Independent Liquor & Gaming Authority will consider the report and determine its own path forward.

It’s hard to see how Crown, as currently structured, can open the Sydney casino in the near future.

Although the Sydney Barangaroo building is complete, gambling facilities have not been permitted to open.

The report raises obvious questions for the Victorian and Western Australian regulators.

To date there has been little to suggest that Victoria’s Commission for Gambling and Liquor Regulation has the wherewithal to take on Crown.

That has to change. As Greens spokesperson on gambling Senator Rachel Siewert said on reading the report, “we need to know what’s going on in Perth and Melbourne”.

This article first appeared in The Conversation AU.

ABOUT THE AUTHOR

Charles Livingstone

Charles Livingstone

Charles is an Associate Professor in the School of Public Health and Preventive Medicine at Monash University. His principal research interests are in gambling as a public health issue, social theory of gambling, ethics of gambling research and reform of gambling regulation.

5 Comments

  1. Avatar

    Good evening,

    A very good summary by Charles Livingston which highlights the near total absence of Board competence and Governance in a major public company engaged in an industry rife with, and susceptible to, corrupt and untoward behaviour.

    In the circumstances an ordinary person (like me) would expect the Board to be on high alert for the risks involved and ensure the appropriate internal controls were in place to ensure all was well.

    I am surprised that Charles did not comment on Helen Coonan and her role in this imbroglio and frankly disgraceful affair. Coonan has been a non-executive director since 2011 and Chair for the last 18 months or so. In all that time she saw no wrong. Her performance on the Board was very similar to her performance as a Senator – outright self-serving and pathetic. The Commissioner described her as an honest and credible witness. Coonan must have undergone an epiphany or metamorphosis.

    The entire Board should go, John Alexander should be required to repay his parachute gift and none of us should feel sorry for James.

    Corporate governance, or lack thereof, is a serious issue in Australia and elsewhere (try the US). The excuse that Directors are acting in the best interests of the shareholders is fatuous and does not wash. It also twists, perversely, the basic tenet of Milton Friedman that managers and Directors have a single goal – maximise shareholder value. He also goes on to say this should occur within the rules of the game (aka legally). The Coonans and other Crown Directors forget the last bit. Little wonder that Andrew was consulting his notes when questioned about Directors’ responsibilities.

    Kind Regards
    Erik
    Port Macquarie
    0417 337 995

    • Avatar

      What you describe Erik is merely a small example of the corruption practised daily by all major Corporates, business entities and their major backers – the LNP/BCA/IPA coalitions, their networks and closed circles of ineptitude.

      Ethics and Social Justice do not reside here, that is found at the lower end of the scale which is ridiculed, defunded and ostricated by the chorus above, which has also undermined a good portion of seriously committed Social Justice
      organisations that support humans, animals and the Environment at large, NDIS and ABC being the best examples.

      If you decide to play by their rules of the game, you are feted and promoted beyond your levels of capability, if you have any shred of ethics, you are treated badly, marginalised, targeted for bullying and managed out under any excuse, which was gifted to these organisations by John Howard under Work Choices.

      Complacency, resentment and vitriol is the way that LNP/BCA/IPA does ‘business’.

  2. Avatar

    The evil behind this debacle lies with O’Farrell’s decision, aided and abetted by The Parrot, to hand over prime harbour-front land to private interests with no market testing or public scrutiny, for a business whose lifeblood is gambling. Can there be any clearer demonstration of institutionalised corruption than the “unsolicited proposal”? It’s a way of avoiding that pesky oversight by the public, auditors, probity scrutineers, etc. Can there ever be any justification for the large-scale expenditure of public funds that does no involve a market test, such as a tender? We will never know the public benefit we missed by not allowing competitive bids for the use of this site. Gladys continues to defend the “process”. Thanks heaps, Barry.

  3. Avatar

    The evil is, in the fact that corruption is rife in the rich mainstream and it perpetuates because of one thing the media (that is supposed to keep the bastards honest) is controlled by the rich. Time to hunt the fox.

  4. Avatar

    Heather, below, is spot on the money and I would venture to go back a step. Lack of values which is in accord with heather’s comment about ethics (or lack thereof).
    When asked to define Australian Values, the PM Scott Morrison typically responds with a trite meaningless slogan “have a go and you will get a go”, whatever that means.
    Basic values have universal application and I suggest an appropriate list should comprise honesty, compassion, integrity, transparency, responsibility and accountability, predictability, fairness and respect for others. Unfortunately when we consider the actions and behaviour of our politicians, senior officials and senior business executives these basic values are missing in action.
    If they were applied, particularly in politics, many of our existing problems would simply not exist and the world would be a better place for all. I was taught this stuff by my parents and by my teachers. The existing crop of movers and shakers clearly missed out on parental direction and fell asleep in class.
    Regards
    Erik

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