By Philip Wen and Nick Toscano
Chinese authorities have detained 18 employees of billionaire James Packer's Crown Resorts, including three top Australian executives, in a co-ordinated police operation targeting the gaming giant's marketing activities in China.
Most senior among those detained was Jason O'Connor, the company's executive general manager in charge of international VIP services.
Mr O'Connor, who is among the casino company's top executives, heads up a program designed to lure "high roller" gamblers to Crown Casino in Melbourne.
Do you know more? email pwen@fairfaxmedia.com.au
The head of Crown's international VIP program, Jason O'Connor.
Fairfax Media understands the arrests, which took place on Thursday night, also include Crown's local employees based across several major Chinese cities including Beijing and Shanghai.
The three Australians are believed to have been detained while visiting China on business. It is not yet known why the Crown staff are being questioned or whether any charges have been laid.
"Crown believes that a number of our employees in China are being questioned by local authorities," a company spokeswoman said. "At this time we can provide no further details."
The arrests come amid a sweeping anti-corruption crackdown in mainland China that has targeted the illicit flow of capital overseas through underground banks and casinos, particularly in the gaming enclave of Macau. In the wake of that crackdown, overseas casinos have stepped in aggressively to court the lucrative business of high-worth Chinese gamblers – known as 'whales' in industry parlance – who now avoid Macau.
A Chinese Australian is suspected of money laundering after gambling $850 million at Crown Casino over eight years. Credit: Matthew Bayard
While casinos are not allowed to legally advertise in mainland China, most foreign operators sidestep the ban by promoting the resorts and cities where the casinos are located. But industry sources say the practice comes at great risk given public warnings from Chinese police, and the arrest of South Korean casino employees in China last year. A similar brush with police prompted Las Vegas casino giant MGM to quietly shut its marketing office in mainland China several years earlier.
"I mean I can't believe how dumb they [Crown] are to risk all these people," one industry insider with knowledge of the Crown arrests told Fairfax Media. "You've got to bear in mind China did the same to 13 Korean casino executives last year."
CrownCredit: Jessica Shapiro
The 13 South Korean nationals and 34 Chinese agents were employed by casinos operated by Grand Korea Leisure and Paradise Co Ltd. Chinese state media reported in October that police launched a probe in June into the Korean groups' marketing activities in China, including "enticing" gamblers with free tours, free hotels and sexual services. The employees are believed to remain in detention, nearly 18 months after their initial arrest.
"It almost feels like these types of arrests are 'business as usual' for casino companies that operate marketing teams within China," said Grant Govertsen, a Macau-based analyst at Union Gaming. "The Korean casino companies have had their China-based marketing teams arrested with some degree of frequency."
An influx of Chinese high-rollers appears to have buoyed Crown's operations in Australia. In its latest financial results, the gaming giant said its lucrative "international VIP" program had surged in 2014-15, to a turnover of $71 billion, largely due to increased overseas marketing.
"A stand-out was the strong growth in International VIP Program Play turnover across Crown's Australian resorts," the report said. "We have put additional resources into VIP international marketing over the last year and that has helped deliver strong growth in VIP program play turnover of 41.8 per cent."
As Crown's gambling revenue has been falling in Macau, its 2014-15 annual report said Crown Melbourne had benefited from "strong international VIP growth across both resorts".
China's Ministry of Public Security warned in February last year that it would fight attempts by foreign casinos to lure its citizens abroad.
"Some foreign countries see our nation as an enormous market, and we have investigated a series of cases," Hua Jingfeng, a deputy director at the ministry said at the time, according to official state media transcripts.
"A fair number of neighbouring countries have casinos, and they have set up offices in China to attract and drum up interest from Chinese citizens to go abroad and gamble. This will also be an area that we will crack down on."
It is industry practice for so-called marketing agents of Crown and foreign casinos to provide high-value gamblers with free accommodation and travel, as well as providing revolving credit when players lose their initial stake while at their casinos. This is despite China stepping up enforcement of capital controls which limit individuals to moving an equivalent of $US50,000 out of the country each year.
"Normally what they do on a marketing trip is apart from meeting up with players, they're just wining and dining the players at the same time if there's money outstanding they would ask their customers to repay their debt," the industry insider said. "Usually as part of their job they help them with the movement of funds, yes."
The Department of Foreign Affairs and Trade said consular officials are seeking to confirm the reports with the relevant Chinese authorities.
"The Australian Government is aware of reports of the possible detention of a number of Crown International Group employees across China, including three Australians," a spokesperson said.
Under the consular services charter between the two countries, China is required to inform Australia if they have detained one of its nationals within 72 hours.