ASIC sues Star Entertainment and names 11 former and current execs over junket, criminal risk failures
Star Entertainment chairman Ben Heap and director Katie Lahey will depart after ASIC accused them, and nine others, of failures to control money laundering and criminal risk.
Star Entertainment chairman Ben Heap and a second director, Katie Lahey, will exit the board in weeks after the corporate regulator accused them, and nine others, of significant money laundering and criminal risk failures.
The Australian Securities and Investments Commission commenced legal action against group’s current and former directors and executives in the Federal Court on Tuesday, alleging they oversaw a major expansion in the relationship with figures that had criminal links without addressing money laundering concerns.
Those allegations have already been explored in two state inquiries – one led by Adam Bell SC in NSW and the other by Robert Gotterson KC in Queensland.
Of the 11 named in ASIC’s action, which includes Star’s former chief executive Matt Bekier, only Mr Heap and Ms Lahey remain on the company’s board.
In a statement late on Tuesday, Star said both would step down in the early part of 2023 once “additional directors are appointed, and appropriate transition arrangements are in place”.
“This process … is designed to ensure the company maintains a sufficient number of independent directors at this critical juncture,” the company told investors.
“ I committed to provide stability during a period of significant leadership change and to ensure the company is firmly on the path back to suitability,” said Mr Heap.
“That journey to become a better, more robust and more sustainable company is in progress as necessary improvements continue to be embedded across systems, processes and culture.”
ASIC alleges Mr Heap and Ms Lahey, along with M Bekier and former executive chairman
John O’Neill, breached their directors’ duties by failing “to give sufficient focus to the risk of money laundering and criminal associations”.
The corporate regulator’s case names other directors between 2017 to 2019 including Richard Sheppard, Gerard Bradley, Sally Pitkin and Zlatko Todorcevski.
ASIC, according to documents filed with the Federal Court, alleges directors, when being made aware of money laundering risks affecting Star, “did not take steps to make further inquiries of management about those critical risks and that this was a breach of their director duty obligations”.
ASIC further alleges Mr Bekier, former company secretary and group counsel Paula Martin and former chief casino officer Greg Hawkins breached their duties by failing to address money laundering risks arising from dealings with Asian gambling junket SunCity and continuing to deal with them despite becoming aware of reports of criminal links.
SunCity, organiser of international high-rollers visiting Star casinos, delivered $12bn in turnover over the 2017 to 2019 financial years. Documents filed by ASIC noted foreign junkets contributed 27 per cent of Star’s revenue by June 2019. By 2017, SunCity was Star’s largest customer, generating turnover of $2.1bn.
ASIC also alleges Star leaders ignored an independent KPMG report which detailed the risk of engaging with junkets.
Star’s defendants face a multimillion-dollar penalty with each breach of director’s duties attracting of up to $1.05m. ASIC is also seeking to have those named disqualified from directorships.
Ms Martin and former Star chief financial officer Harry Theodore are alleged to have “knowingly permitted misleading statements being provided to National Australia Bank” about the use of debit cards issued by China Union Pay at NAB ATMs located on Star’s properties. “Those statements disguised the fact that Star was permitting CUP cards to be used for gambling, which was prohibited by CUP,” documents filed at the Federal Court read.
ASIC alleges some $900m was obtained by Star customers in this way from 2013 to 2019. The regulator has also alleged Ms Martin, Mr Theodore and Mr Bekier also failed to report these matters to Star’s board. The company on Tuesday distanced itself from the proceedings, noting it was “not parties to the proceedings”.
Sources said the defendants’ legal costs would likely be covered by Star’s insurance policy.
Mr Bekier, Ms Lahey, Mr Heap, Mr O’Neill and Ms Pitkin were contacted for comment while Mr Bradley, Mr Sheppard, Mr Hawkins and Ms Martin could not be reached.
Mr Todorcevski told The Australian: “I deny breaching the law and I intend to defend myself when proceedings commence”.
In Star’s statement, Mr Heap, – who joined the company in 2018 after a lengthy career at UBS and became its chair in 2022, said he and Ms Lahey intended to contest the Federal Court allegations. “To remain on the board beyond the transitional period would be a distraction to the company when remediation needs to be our unwavering focus,” he added.
“I am proud and privileged to have had the opportunity to lead The Star during a difficult and important time in the company’s history, and will continue to do so until an appropriate handover is complete,” Mr Heap said.
“I would like to take this opportunity to thank the board and management for their support since becoming chairman.”
ASIC’s deputy chair, Sarah Court, said it was a “significant action” for the regulator to sue an entire board and executives of a top 200 ASX company.
“There is an elevated risk of criminal activity in casinos – the board should have been focused on these risks as part of their day-to-day practices,” she said. “This action that ASIC is taking is the only action that is focused on the individuals that were sitting at the top of this company – including the most senior executives.
“This does send a signal to directors,” Ms Court added.
Star’s Queensland and NSW operations have been put under the control of administrator Nick Weeks following the two conclusion of the inquiries into the company’s conduct. The Queensland government on Friday handed Star with a $100m fine and threatened to suspend its licence if it fails to reform within 12 months.
Austrac, the financial crimes regulator, has also exposed the seamy underbelly of Australia’s second biggest casino operator through its Federal Court action.
Austrac claims accused sex slave traders, a murderer for hire, loan sharks and drug traffickers were allowed to gamble billions of dollars at Star for years, despite details of their crimes being publicly available.
In a statement of claim, totalling more than 2000 pages, Austrac alleged “widespread noncompliance”, which led to the Sydney and Queensland casinos being exposed to infiltration from organised crime gangs.
Star shares closed down 1c, or 0.4 per cent, at $2.57.
More Coverage
Whyalla steelworks losing $1m a day but Gupta’s defiant
Sanjeev Gupta says his broader business has been propping up the Whyalla operations to the tune of $1m a day which is a sign of the commitment he has to the South Australian steel town.
Why an Aussie banker landed a key role in this succession drama
This former Melbourne boy and Wall Street boss is now in charge of steering Disney through one of the toughest succession stories in corporate America.