They don’t call it Brisvegas for nothing. The Queensland government has three new casino licences out for tender, and in its haste to kick-start the projects before next year’s election, it has left no time for proper probity checks.
Besides the Queens Wharf casino in Brisbane (or “new world-class Integrated Resort Development”, as they like to call casinos these days), there is a project in Cairns and another on the Gold Coast.
Hong Kong’s Aquis has been short-listed as developer at a site near Cairns and the Chinese ASF Consortium is short-listed for the Gold Coast casino. Each proposes to spend up to $8 billion. Thousands of jobs will be created.
The new casinos were announced late last year by Premier Campbell Newman’s government. Newman faces an election in March next year. So the plan is to award the casino licences in early 2015, just before the election is called.
The recent announcement, however, of two preferred applicants for the two regional licences – before probity and environmental impact statements are conducted – is highly unusual.
It is particularly unusual in the Australian context where, traditionally, all expressions of interest (19 in this case) are subject to a first round of probity investigations before more detailed investigations at the short-list stage.
In Sydney and Melbourne, probity requirements are rigorous and investigations have historically taken roughly a year. It must be asked if Queensland is taking the process seriously or just hurling the kip in the air and calling “head-’em-up!” Probity tenders – for legal and financial services to assist the state’s casino regulatory body – were lodged in June but the successful applicants are yet to be selected two months later, despite references to a proposed start in mid-July and a very short investigation period from then until November, followed by a decision by the Newman government early next year before the election. Less than three months is woefully inadequate to evaluate the myriad offshore business connections of the operators.
As an interesting aside, there was a story in these pages last week quoting the head of the NSW Independent Liquor and Gaming Authority saying the reason Singapore casino operator Genting HK had not been approved to lift its shareholding in Echo beyond 10 per cent after two years of investigations was because Genting was not co-operating fully.
The Queensland rush job is by no means convenient for the licence contenders either. In its haste to hook up with two substantial international partners, Echo Entertainment – operator of Sydney’s The Star casino – announced in June a strategic joint venture with the Hong Kong-based Far Eastern Consortium (FEC) and Chow Tai Fook (CTF) to bid for the Queen’s Wharf Casino in Brisbane.
They are competing against a consortium of James Packer’s Crown and Greenland (a Chinese state-owned property group). FEC is listed on the Hong Kong Stock Exchange and incorporated and registered in the tax haven of the Cayman Islands. It is a proposed 25 per cent investor in the Echo-FEC-CTF joint venture.
CTF, another 25 per cent player in the joint venture, is also listed in Hong Kong. It is the largest jewellery retailer in the world. CTF Enterprises Ltd is the majority controlling shareholder in the Hong Kong Stock Exchange-listed New World Development Co Ltd, chaired by Cheng Yu Tung, a 92-year-old Hong Kong-based billionaire who, according to Bloomberg, has a net worth of $US21 billion, making him among the 50 richest persons in the world. Mr Cheng’s family controls CTF.
Section 20 of the Queensland Casino Control Act requires the Minister to have comprehensive investigations conducted into applicants for casino licences in the State of Queensland.
Section 20(1)(f) requires the Minister to ensure that: “None of them (applicants and associates) has any business association with any person, body or associate who or that, in the opinion of the Governor in Council, after investigation made or caused to be made by the Minister is not of good repute having regard to character, honesty and integrity or has undesirable or unsatisfactory financial resources.”
A simple Google search will throw up stories showing how Cheng Yu Tung and Stanley Ho have been business associates for more than 30 years. Cheng Yu Tung acquired a 10 per cent stake in STDM, the Macau group which operates about half of the legal casinos in Macau, in 1982 and still holds this stake today.
A company owned by Mr Cheng’s family also recently spent $1 billion to buy the largest casino junket operator in Macau.
Stanley Ho is an 88-year-old billionaire who owns a majority controlling stake in STDM and other assets in Macau and Hong Kong. For many years, Ho and his associates have been attempting to expand their casino and gaming interests into Australia, Canada and other countries, though without success.
He has been rejected on a number of occasions by casino regulators in Australian states and Canada on the basis of reports from law enforcement agencies and other sources that have found him to be associated with Chinese triad gangs in his Macau casinos.
Two of his children, Pansy and Lawrence, have been forced to sever business relationships with their father to obtain casino licences. Pansy was cleared by US authorities to enter into a business relationship with the US MGM Grand Group, while Lawrence was cleared by Australian casino regulators to enter into a partnership with Crown to own and operate several casinos in Macau. Stanley Ho is persona non grata with international casino regulators outside of Macau.
Whether this compromises the Echo bid is not the point. The Stanley Ho connection is merely one corporate connection which those conducting probity checks will have to evaluate. Each will take time, and with billionaires and their business interests there are many corporate associations in many jurisdictions.
For Echo, the stakes are high. It holds a current licence in the old Treasury building in Brisbane, which will be adversely impacted if a new competitor such as Crown opens a new casino in the same city, namely at Queen’s Wharf. The company also needs to keep its casino licence and not enter into any new business relationships which might prove complicated for its casino licences elsewhere (that is, Sydney and Gold Coast).
Around inner-city Brisbane in recent times, people have been sporting T-shirts saying “here we Joh again”. If the state government fails in its probity investigations, one of the beneficiaries is likely to be the manufacturer of those T-shirts.