(ATF) Australian casino operator Crown Resorts has responded quickly to damning findings from a public inquiry into its suitability to run a VIP gaming resort on Sydney Harbour.
Two directors resigned on Wednesday (Feb 10) after allegations that was slow to act on alleged links to organised crime and money laundering during junkets when Asian "high rollers" were flown down to gamble at two other casinos it runs in Melbourne and Perth.
Later on Wednesday, billionaire James Packer’s private company, Consolidated Press Holdings (CPH), cut ties with the board of Crown Resorts after he was deemed to have a "dysfunctional" influence on the company that caused "disastrous consequences".
The news came after the sudden resignation of directors Guy Jalland and Michael Johnston following a damning inquiry into the company, which said that Crown was not suitable to hold a gaming license in New South Wales.
A report by the Independent Liquor and Gaming Authority that was tabled in state parliament on Tuesday said Crown's corporate "arrogance" was a key factor in the company turning a blind eye to illegal money laundering at its venues in other states.
Crown, which is Australia's biggest casino operator, still appears anxious to acquire a license to run the casino in its $2-billion Barangaroo complex, a gleaming 75-storey tower that is perched on Sydney's waterfront.
Former Supreme Court judge Patricia Bergin reported on Tuesday that Crown was "not suitable" for a license as it had been "facilitating money laundering" and doing business with groups linked to Asian triads and organised crime.
She condemned the company for having "poor corporate governance, deficient risk management... and a poor corporate culture" and recommended a slew of reforms before the Sydney project could open to punters.
Bergin said it took 14 months for Crown to address media reports of money laundering, and some in-company investigations "only commenced in earnest" weeks before the casino was due to open last year.
A company lawyer told the inquiry that illicit funds were "probably" laundered through two high-roller accounts at the company's operations in other states.
James Packer, seen here giving testimony to the inquiry last October, has acted quickly to sever ties to Crown, in a desperate bid to allow it a chance to attain a gaming license at the Sydney resort. Photo: Screen grab ABC News/YouTube.
The former judge found that Packer, who gave evidence to the inquiry late last year, was “deeply flawed” as a casino associate because he either forgot or did not turn his mind to an undertaking that Crown made to NSW authorities to exclude the late Hong Kong gambling magnate, Stanley Ho, from the company’s new casino. He also admitted to threatening a business associate and having mental health issues that affected his memory.
Inquiry commissioner Bergin recommended amending the Casino Control Act so that an entity may not acquire, hold or transfer an interest of 10% or more in a casino licensee or its holding companies without the prior approval of a new dedicated regulator. It would be called the Independent Casino Commission and have the powers of a standing royal commission.
The report said Crown had a history of serious corporate failures, including the arrest of its employees in China in 2016.
Crown, meanwhile, insists it has fixed its shortcomings and in a brief statement on Tuesday said it was "currently considering the inquiry report".
There is considerable speculation that Crown will be a takeover target after the report recommended major changes to Crown's business operations and suggested that Packer, who owns 36% of the firm, should no longer be a close associate of the casino company.
Possible buyers could include Blackstone, the American investment firm, which bought a 10% stake in April 2020, or the US-based Wynn, which was in talks with Packer in 2019 to buy out his shareholding until a leak caused talks to collapse.
However, any new shareholder would need to pass a suitability check and the size of their stake may depend on what the state government does – if regulators say investments must be capped at 10%.
Trade in shares of Crown – which has a market capitalization of more than US$5 billion – were halted on the Australian Securities Exchange ahead of the release of the report.
On Wednesday, Crown's shares sank nearly 9% in early trading, compared with a slightly higher broader market, but clawed back some losses as speculation grew about the company's as a takeover target. The shares were down around 3.5% in early afternoon trading, Reuters said.
"The transaction creates an opportunity for trade buyers or private equity to secure a meaningful stake from a forced seller," Citi analysts said in a note. But they said increased regulatory scrutiny would mean "constrained revenue and elevated costs" for the company.
The report's findings and recommendations will now be considered for formal adoption by regulators, and the Gaming Authority will discuss if Mr Packer’s 36% shareholding in Crown is appropriate.
With reporting by AFP, Reuters