Board shakeup looms for Star Entertainment’s casino arms

The head of a royal commission-style inquiry into the gambling giant has raises the prospect of ‘compliance committees’ overseeing the company’s casinos.

Star director Gerard Bradley says the company’s practice of disguising almost $1bn worth of dodgy Chinese debit card transactions raised “serious questions around ethical issues”.

The independence of Star Entertainment’s subsidiaries that control its casinos in NSW and Queensland have been questioned after executives failed to escalate money laundering risks and other “unethical” and “dishonest” behaviour.

Adam Bell SC – heading a royal commission-style inquiry into Star – said the structure of the company, in which senior executives sit on the boards of subsidiaries that hold its casino licences “plainly has not worked”.

And in the first indication of what he might recommend in his final report, Mr Bell raised the prospect of having an independent compliance committee oversee Star’s casino subsidiaries, saying the board “must bear some responsibility for the fact that information it needed was not being provided” by management.

“The problems that emerged in this review can‘t be reduced to individual’s misbehaviour, but in terms of systemic problems,” Mr Bell said. “It‘s occurred to me that some of the problems that have occurred are due to the fact that the executives who are reporting to the board of Star Entertainment are the executives who are the members of the board of the subsidiary and plainly it hasn’t worked.”

Such “problems” included Star disguising almost $1bn worth of suspicious gambling transactions on Chinese debit cards as hotel charges, a practice Star director Gerard Bradley said was misleading and raised “serious questions around ethical issues”.

Former chief executive Matt Bekier and chief financial officer Harry Theodore, who resigned last Friday, are directors of the subsidiary that holds the licence for Star’s Pyrmont casino. Meanwhile, Paula Martin, who resigned last week as chief legal and risk officer, is company secretary.

Star is currently making “interim arrangements” following the departures of those executives. But Mr Bell asked Ben Heap – another director of Star’s parent company Star Entertainment – if it would make a “positive difference” if the directors of the casino licensee companies were independent of management.

“Obviously there are six independent directors at the Star Entertainment Group and feel … like me an acute responsibility to both of our licensed entities,” Mr Heap said. “And so in that sense, I think the independent directors at the level of the licensee, I‘m not sure that will change that dimension.”

Mr Bell asked Mr Heap if he thought of a compliance committee overseeing Star’s casino arms would be beneficial.

“You‘d be aware that there is a provision in the Corporations Act that provides that if a responsible entity doesn’t have independent directors, it’s required to have a compliance committee?” Mr Bell said.

Mr Heap said UBS had a compliance committee when he was managing director for UBS Global Asset Management, Australasia and it worked “effectively”.

“That compliance committee back then had two independent members on it, and so it was a majority independent compliance committee and did that work well. It provided a couple of sets of eyes just making sure that matters specific to that company were properly seen.”

The inquiry heard Star Entertainment’s board approved two ASX announcements last October that rejected media articles – which alleged among other things that a damning report from KPMG into Star’s anti-money laundering program was “kept secret” – was misleading and not accurate.

This is despite Mr Heap, and fellow director Richard Sheppard, telling the inquiry that they were not aware that Ms Martin had repeatedly rebuffed Austrac’s requests for a copy of the report – incorrectly claiming legal privilege – over a 16 month period.

“I expect we would have had a different form of words,” Mr Heap said if he knew Ms Martin had repeatedly refused Austrac’s requests.

“We ultimately did (give Austrac a copy of the KPMG report) and far too late and quite likely damaged our relationship with Austrac, which is why I take the view that we should provide this information to regulators.”

The inquiry heard that Star may have underpaid the NSW government $2.5m in taxes after former chief casino officer Greg Hawkins – who also resigned last week – did not adjust the amount of duty needed to be paid after incorrectly classifying local patrons as international high rollers.

Star this week suspended its rebate programs – which casinos often use to attract cashed-up gamblers by offering resort perks and other benefits – for international and domestic patrons.

Mr Heap said the decision “didn’t relate to tax payable” and it was more about the board ensuring its processes, particularly around “know your client” were right.