Australian casino operator Crown Resorts continues to provide fodder for its critics through the endless string of embarrassing revelations emerging from a New South Wales inquiry.
The NSW Independent Liquor & Gaming Authority (ILGA) inquiry into Crown’s suitability to hold a state gaming license resumed this week, and quickly learned that Crown was effectively prevented from doing proper due diligence before its largest shareholder James Packer sealed a deal to sell 20% of Crown to his former joint venture business partner Lawrence Ho.
Ho, who controls Melco Resorts & Entertainment (MRE), is the son of Stanley Ho, the Macau casino icon who died this spring. A condition of Crown’s NSW gaming license was steering clear of Stanley, due to his alleged ties to Hong Kong triads. Australian media eventually uncovered evidence that Stanley held a stake in MRE’s parent company via a trust.
On Monday, Crown director Michael Johnston told the inquiry that he had “no understanding” that Stanley was connected to MRE and had “no reason” to think otherwise. When ILGA commissioner Patricia Bergin pressed Johnston on whether he’d actually checked if that was true, Johnston conceded that “perhaps we should have looked more deeply.”
Johnston apparently sought more time to investigate the suitability of the MRE deal but Packer sent Johnston a text saying “it’s my life and I’m going to overrule you.” (Packer was originally scheduled to give his own testimony to the inquiry this week but the appearance has reportedly been pushed back one week.)
Johnson, who was also a director on Packer’s investment firm CPH Crown Holdings, didn’t tell Crown’s board of the pending sale until the deal was already signed. Johnston said Crown’s then-chairman John Alexander “didn’t sound happy” when Johnston called to inform him of the deal. (Alexander will give his own testimony later this week.)
MRE initially fought like hell to preserve the deal while keeping its internal documents out of the inquiry’s hands but eventually chose to shelve its Australian ambitions and unload its Crown shares at a significant discount to US hedge fund The Blackstone Group.
CROWN SYDNEY’S FATE UNKNOWN
The fate of Crown’s in-development Sydney casino, which is scheduled for a ‘progressive’ opening starting December 14, rests with the ILGA’s findings, which are due to be released by February 1, 2021.
Should the ILGA deem Crown’s failings – including its Mr. Magoo act when it comes to VIP gambling operations and anti-money laundering practices – to be sufficiently egregious, the company could be deemed unsuitable to hold an NSW gaming license.
JP Morgan analysts issued a note Tuesday saying the far more likely scenario is that Crown will face a temporary license suspension, as well as additional conditions to that license. Crown took the initiative on that front last week by suspending all dealings with junket operators until July 2021 and announcing plans to hire a new Head of Compliance and Financial Crimes.
The Sydney Morning Herald reported Wednesday that Crown’s new compliance chief is none other than John Yates, the Melbourne operations manager of the Australian Criminal Intelligence Commission (ACIC). Yates was deeply involved in the ACIC’s recent investigation of the Suncity Group junket, whose VIP gambling operations at Crown Melbourne have been at the forefront of Crown’s public downfall.