5 March 2021
5 March 2021
27 February 2021
Former Supreme Court judge Patricia Bergin has made a referral to the Australian Federal Police following her inquiry into Crown Casino.
Bergin, whose inquiry found Crown Resorts unfit to hold a casino licence in New South Wales, made the referral at least three weeks ago.
While the AFP has declined to name the subject of its inquiry, a spokesperson said: “The AFP has received a report from Commissioner Bergin resulting from the Inquiry under the Casino Control Act 1992 (NSW). That report relates to potential telecommunications offences. While this report is investigated, it would not be appropriate to comment any further.”
Justice Bergin, who ran the 18-month independent inquiry that spectacularly halted the opening of the centrepiece high-roller floors in James Packer’s $2.2 billion Barangaroo development in Sydney, declined to comment.
The Saturday Paper can also reveal that the Australian Securities and Investments Commission is actively looking at current and former board appointees of Crown Resorts in relation to potential breaches of “care and diligence” requirements.
It is understood the corporate watchdog is aware of a number of “serious matters” raised in the Bergin report, which cut into the commission’s federal jurisdiction.
Crown Resorts and its current and former directors are now under scrutiny from inquiries and investigations in every Australian jurisdiction in which the company operates.
On Monday, Victorian Premier Daniel Andrews announced a royal commission into the suitability of Crown Melbourne Limited to hold its casino licence in that state. With more than 16,000 staff, Crown Melbourne is the largest private employer in Victoria.
That inquiry, led by Raymond Finkelstein, QC, will also examine the appropriateness of the parent company, Crown Resorts, and has been asked to report with recommendations by August 1.
That announcement came after the Gaming and Wagering Commission of
Western Australia announced on February 17 an independent inquiry at the direction of the state’s minister for Racing, Gaming and Liquor, Paul Papalia. It will have the same powers as a royal commission.
Crown only operates two casinos in Australia – at Melbourne’s Southbank and Perth’s Burwood – and had hoped to open a third in Sydney before Bergin’s inquiry. It is now up to the independent regulator in NSW to make a final decision about the fate of the company’s licence in that state.
There is nothing in the state legislation that insists the second casino licence in Sydney has to go to Crown.
In theory, at least, any suitable operator can be awarded permission to launch or run another casino in the city.
While the AFP did not name the specific telecommunications offence it is investigating under Commonwealth law, most of these relate to using a carriage service such as phone or internet connection to make threats, harass or menace others.
In her 800-page public inquiry report, Bergin uncovered a culture of cavalier decision-making at Crown Resorts, with company failures that resulted in the arrest of its own employees in China. She pointed to systems that should have identified money laundering involving criminal elements attached to junkets, but did not.
Junkets, in the gambling world, are third-party outfits that specialise in bringing high-net-worth individuals to casinos.
The junket owners typically take fees from casinos on a commission basis and also share the risk of losses made by their clients. Often, they also provide lines of credit to their clients.
As such, they are responsible for collecting their own debts and in some markets have turned to organised crime to achieve these ends. It was these close associations that spelled trouble for Crown.
Although Covid-19 has largely rendered junkets moot in Australia – their clients are mostly non-residents who have flown in for leisure and big bets – the WA regulator on Wednesday issued directions to Crown banning them from hosting junkets in Perth.
The mandate also stops Crown Perth from participating in “table games activity with patrons who are non-residents of Australia with whom Crown Perth has an arrangement to pay the patron a commission, or provide transport, accommodation, food, drink or entertainment, based on the patron’s turnover or otherwise calculated by reference to such play”.
Justice Bergin’s public report raised serious questions about the conduct of billionaire tycoon James Packer, whose private investment vehicle CPH remains the largest shareholder in Crown.
Packer resigned as chair of the publicly traded Crown in August 2015 but remained a director until December that year. Even after he left the company, however, his influence was repeatedly demonstrated in discussions he had with serving Crown directors who remained loyal to him, according to Bergin’s report.
At times, confidential information relating to business strategy and accounts was not only shared with Packer but also developed at his instruction.
Bergin also noted that confidential information was provided to Packer by John Alexander, who was Crown’s executive chairman; Ken Barton, chief financial officer; Barry Felstead, then chief executive of Australian Resorts; and Todd Nisbet, in his capacity as Crown’s executive vice-president of strategy and development.
Barton provided financial reports to Packer “on an almost daily basis”, Bergin noted, from the time the magnate executed a secret controlling shareholder protocol.
In late November 2018, Packer emailed Barton with curt instructions: “I know Mike has spoken to you about preparing a downside plan for me. I don’t believe your FYF [financial year forecast] and am sick of always missing budgets and being unlucky in VIP.”
Of that exchange, Bergin said in her report: “Mr Packer was issuing an instruction to Mr Barton to not only specially prepare that information, but also to do so in accordance with the conservative parameters he had specifically identified.”
These conversations occasionally became terse. On March 1, 2019, Packer again emailed Barton.
“Ken I think all of you have had your heads in the sand this year. We never meet our plans and I’m sick of it,” he wrote. “Make sure for your own sake that we achieve the FY 20 plan.”
The inquiry found the “language employed by Mr Packer reflects aggressive expectation and entitlement and properly characterises Mr Packer’s communications as instructions, not mere requests for information or the giving of ‘advice’ ”.
A far more serious exchange, which occurred in late 2015 as the billionaire contemplated privatising Crown Resorts, was partly suppressed by the Bergin inquiry, but nevertheless received special attention in the final public report.
Packer, attempting to raise capital from private equity firms for the buyback of Crown, had discussions with one such company in particular but, when it came time to commit, a businessman attached to the investment firm told Packer he could summon only $400 million.
“On 25 November 2015 in response to the advice that he had received from the firm, Mr Packer wrote an email containing a serious threat to one of the businessmen in the firm,” the Bergin report says.
“Mr Packer accepted that his conduct in making the threat was ‘shameful’ and ‘disgraceful’. He also accepted that the communications were ‘totally unsuitable for a director of a public company as a close associate of a licensee of a casino’.
“Mr Packer accepted that he understood that at the time of this conduct, he had obligations to Crown to act ethically and with the highest standards of integrity. He said that at the time that he wrote the email he had ‘clearly forgotten’ he had an obligation to Crown not to engage in conduct likely to bring discredit upon Crown.”
Packer made it clear during public testimony before the inquiry that he was experiencing a medical episode at the time relating to subsequently diagnosed bipolar disorder, for which he is now receiving treatment.
The Saturday Paper is not suggesting these emails are involved in the report referred by Justice Bergin to the AFP.
Former Howard government minister Helen Coonan is one of the few remaining directors at Crown, taking on the role of executive chairman on February 15 with an annual salary package worth $2.5 million.
One-time AFL boss Andrew Demetriou, Crown’s former chief executive Ken Barton and Packer right-hand man Michael Johnston have all resigned from the company. So, too, has Guy Jalland and advertising heavyweight Harold Mitchell. Company secretary and general counsel Mary Manos has also stepped down. Non-executive director John Poynton terminated a consultancy with Packer’s company CPH in the wake of the report’s findings, in a bid to sever the last link between Packer and Crown.
In a statement to the market last Monday, Coonan said she “welcomes the announcement from the Victorian Government” to hold a royal commission.
“It provides an opportunity to detail the reforms and changes to our business to deliver the highest standards of governance and compliance, and an organisational culture that meets community expectations,” she said.
With more than 16,000 staff, Crown Melbourne is the largest private employer in Victoria.
The outcome of the AFP investigation could determine whether its subject is banned from being a company director for acting in a manner that affects the reputation of a company or adversely affects shareholders. Given some of the Commonwealth telecommunications offences carry maximum penalties with jail time up to three years, this would also factor into ASIC’s decision-making about the appropriateness of a person being a company director in the future.
More broadly, ASIC can ban directors who fail their duties under section 180 of the Corporations Act, although such cases are notoriously difficult to stack up because a court must be persuaded such behaviour was detrimental to shareholders.
On February 18, Crown Resorts Limited released its half-year results, which were severely affected by Covid-19 restrictions and a “number of regulatory investigations”.
Statutory revenue was down 62 per cent to $581 million, while earnings before interest, taxes, depreciation and amortisation fell almost 100 per cent to just $4.4 million.
But, as ever in gambling, Crown is still hoping for a big win.
“Crown will work cooperatively with regulators as it seeks to restore public and regulatory confidence in its operations,” it said in the investor presentation.
“The [Bergin] Inquiry Report outlines a pathway towards suitability to allow Crown to give effect to the Restricted Gaming Licence.
“All gaming areas [at Barangaroo] are complete and ready for opening, subject to the receipt of all regulatory approvals.”
This article was first published in the print edition of The Saturday Paper on Feb 27, 2021 as “Exclusive: Crown report referred to the Federal Police”.