‘Constructive engagement’ may save James Packer’s holding in Crown Resorts

The public inquiry has opened the door to the billionaire retaining his shareholding in the gaming company.

James Packer. Picture: Aaron Francis/The Australian

The public inquiry into the James Packer-backed Crown Resorts has opened the door to the billionaire retaining his shareholding in the gaming company following “constructive engagement” with the NSW gaming regulator on measures to avoid the loss of its Sydney casino licence, amid further damning evidence that Mr Packer and Crown should be deemed “unsuitable” to retain the licence.

The inquiry was told on Thursday that a series of threatening emails sent in 2015 by Mr Packer — reportedly to private equity executive Ben Gray — when the billionaire was given news “he did not want to hear” about a potential Crown privatisation deal should deem him unfit to be a close associate of the Sydney licensee.

In the second day of his closing submission to the NSW Independent Liquor and Gaming Authority‘s inquiry into Crown, counsel assisting Adam Bell claimed there had been “no medical evidence presented to this inquiry” that supported Mr Packer’s assertion that he was suffering from bipolar syndrome, for which he is now being treated, when he sent the emails.

Mr Bell also said the inquiry commissioner Patricia Bergin should find that Mr Packer was a de facto director of Crown between November 2018 and May 2019 due to the extent of his influence over key executives and some directors at Crown.

Under the Corporations Act de facto directors have the same statutory duties and liabilities as the appointed directors of a company, and can be held liable for breaches of directors’ duties.

Surprisingly, Mr Bell suggested Mr Packer could retain his interest in Crown if he agreed to an enforceable undertaking containing a number of conditions to reduce his influence over management and the board to address his “unsuitability“ to be associated with the Sydney licence.

He said that in the undertaking Mr Packer’s private company Consolidated Press Holdings, which owns 36.7 per cent of Crown, could agree not to exercise more than 10 per cent of its voting power in Crown.

It could also agree to have only one nominee director on the Crown board and no longer be provided with confidential information on Crown’s operations. Crown last month ceased agreements providing such information to Mr Packer.

Currently there are three CPH-aligned directors on the Crown board: Michael Johnston, Guy Jalland and John Poynton.

Mr Bell said Crown’s agreements with ILGA and the NSW government for the Sydney licence “contemplated a process of constructive engagement to occur” before any disciplinary action was taken.

This was partly due to the unusual terms of the licence that require Crown’s agreement and significant compensation to be payable by the NSW taxpayer if changes are made.

But Mr Bell said the licence could be “suspended” without triggering these conditions to allow Mr Packer and Crown to address its “unsuitability”. Crown shares closed 1.9 per cent higher at $8.58 on Thursday.

Mr Bell also suggested there could be “wisdom” in imposing shareholder caps on Crown similar to the 10 per cent restriction on any single investor in its rival Star Entertainment Group, which Mr Packer said during his evidence would also be an option to address CPH’s influence on Crown.

The inquiry on Thursday also addressed CPH’s sale of a 9.9 interest in Crown Resorts to Lawrence Ho’s Melco Resorts last year and the decision by CPH executive and Crown director Michael Johnston to share Crown’s confidential financial information with Mr Packer and Melco before the sale.

Mr Bell said that this placed Mr Johnston in a situation of conflict of interest which he did not disclose due to his loyalty to Mr Packer and CPH.

Picture: NCA NewsWire / Steven Saphore

He said Mr Johnston’s responses to questions about this event and a range of issues raised during the inquiry, including the arrest of Crown’s staff in China, reflected “adversely on his credit” and urged Ms Bergin to treat his previous evidence to the inquiry with “caution”

Mr Bell also said the negotiation of the Melco share sale agreement revealed a culture at Crown that led it to be dominated by a single interest and that the episode also reflected adversely on its suitability to retain the Sydney licence. He said if Mr Packer was found to be a de facto director of Crown, “it bears on the question of whether the Melco transaction put Crown Resorts in breach of its regulatory agreements” with ILGA, which banned Lawrence Ho’s father Stanley from having an indirect interest in Crown.

Mr Bell also returned to an incident at the 2019 Crown annual general meeting when current CEO Ken Barton was asked whether Mr Packer received more information than other shareholders about the company.

Mr Barton mentioned Crown’s service agreement with CPH, but not a confidential protocol with Mr Packer which allowed the billionaire to receive confidential information after he left the Crown board in 2018.

“In that event, we submit that the only conclusion that could be drawn is that Mr Barton, not accidentally but deliberately, misled Crown Resort shareholders in providing his answer or chose not to tell them the truth,” Mr Bell said. “It’s also remarkable according to the evidence given to this inquiry that every single member of the board of Crown Resorts present at the AGM apparently failed to appreciate that Mr Barton hadn’t answered the question correctly or accurately and did nothing to correct what Mr Barton had said.”

Mr Bell has told the inquiry that Mr Packer used the protocol to provide “instructions to board members or senior executives”, despite being a mere shareholder.

Mr Packer said he was just making “requests”.

“It’s the language of instruction, not requests,” Mr Bell said, while reading from emails where Mr Packer appeared to threaten executives including Mr Barton and Crown’s Australian Resorts boss Barry Felstead and implied their jobs were on the line if financial targets were not met.