Billionaire’s dream casino in Sydney hangs in the balance

Billionaire James Packer’s dream of opening a landmark casino in his home city of Sydney hangs in the balance after a damning report into money laundering and organised crime links found Crown Resorts isn’t fit to hold a gaming licence.

In an excoriating report released on Tuesday, retired judge Patricia Bergin recommended that Packer, Crown’s largest shareholder with a 36% stake, be subject to a 10% ownership cap that requires special permission to be lifted. She called for the departure of the CEO and key directors and an overhaul of the firm’s culture and governance before the casino can open.

“The scorching light of this inquiry has exposed a number of problems that would have otherwise remained unearthed and unresolved,” Bergin said in the 751-page report. Crown was “quite unsuitable” to hold a casino licence in Sydney, she said.

Bergin said it was clear Crown “enabled and facilitated” money laundering through bank accounts tied to its Perth and Melbourne casinos for at least five years before 2019. Crown had prioritised profits before the welfare of its staff and worked with people connected to organised criminal gangs, she said.

CEO Ken Barton “has demonstrated that he is no match for what is needed at the helm of a casino licensee”, Bergin said.

Crown shares plunged as much as 8.9% before closing down 3.4% in Sydney. That valued the Melbourne-based company at A$6.6bn. S&P Global Ratings placed its rating on Crown on CreditWatch, saying Bergin’s proposals “heighten the risk of permanent licence loss for Crown Sydney and its operations”.

The report, one of the most damning indictments of an Australian company in recent memory, caps a torrid period for Packer, who’d envisaged the soaring A$2.2bn harbourside hotel and gaming complex as his family’s legacy to Sydney. Any forced sale of his empire’s cornerstone investment would complete Packer’s retreat from Australia’s corporate landscape, which his media baron father, Kerry Packer, dominated for decades.

“If that’s enforced, Crown will be changed forever,” said Warren Staples, a lecturer at the University of Melbourne who focuses on business ethics and corporate governance, referring to Bergin’s proposed limit on individual shareholdings. “It’s a watershed day in terms of recommendations.”

Still, her findings aren’t enforceable. The New South Wales state gaming authority will discuss her recommendations on February 12, while regulators in neighbouring Victoria state are considering Crown’s suitability to run its Melbourne casino.

“They’ve got a lot of work to do to satisfy us,” Philip Crawford, chair of the New South Wales gaming regulator, told reporters on Wednesday. “Things have got to change.”

The overhaul started almost immediately. Crown directors and Packer nominees Guy Jalland and Michael Johnston quit early on Wednesday. And Packer’s private investment company said it would have “no involvement” with the Crown board, giving directors “clear air” to work with the regulator on a plan to reform.

Corporate dynasties

Bergin’s report is a rare, unvarnished assessment of the way one of Australia’s most storied corporate dynasties — the Packers — does business. It also continues a drama-filled period that stretches back to 2016, when Chinese authorities rounded up Crown staff on the mainland, before a court convicted 19 current and former employees of illegally promoting gambling. Packer has since tried to sell some or all of his stake in Crown to at least two buyers.

Packer “almost certainly will sell down” his stake, said Charles Livingstone, an associate professor at Melbourne’s Monash University who specialises in gambling policy and regulation. But he said an overhaul of Crown’s board, management and culture will take time.

It’s “hard to see how Crown is going to get in a position where it can open this new casino any time soon”, Livingstone said.

Bergin’s inquiry was triggered by a series of media articles in 2019 that alleged money laundering took place at Crown’s casinos and the company used junket companies with ties to criminal gangs.

It’s now unclear when the gaming tables at Crown’s Sydney resort might open. While retail operations at the site are under way, the start of gambling has been on hold since December. Tuesday’s findings also put a cloud over Crown’s other casinos in Australia.

Victoria’s state gaming regulator, which has already brought forward a review of Crown’s licence in Melbourne, said Bergin’s report “would be of strong interest” and “will inform any regulatory action which may be required”. In Western Australia, home to Crown’s Perth casino, premier Mark McGowan said the state government will review the report and stamp out any unlawful conduct.

The report heaped criticism on the relationship between Crown and Packer’s investment company, Consolidated Press Holdings, which manages the billionaire’s assets. Lines of reporting lines were blurred, risks weren’t properly identified, conflicts or potential conflicts were not recognised and Crown’s corporate needs weren’t given precedence over those of Packer’s investment company, she said.

Packer’s influence on Crown and its operations, even when he wasn’t a board member, had “rather disastrous consequences for the company”, Bergin said.

Bloomberg