Crown: Behind the race to save James Packer’s casino empire
As the company she chairs grew increasingly besieged, by Thursday afternoon, the normally collaborative Helen Coonan needed to change her tone.
Melbourne’s trademark hot north wind was whistling through the streets of leafy Toorak late on Thursday afternoon when Andrew Demetriou’s phone lit up with a text message.
It was from Perpetual’s head of equities, Paul Skamvougeras. The two men have never met and when Demetriou soon returned the call, after a polite conversation, the message from the heavyweight fund manager and the biggest institutional shareholder in Crown Resorts was clear.
He informed the former AFL boss that an hour earlier he had publicly called for Demetriou’s resignation from the board of the James Packer-backed company. The time had come for him to go.
Three hours earlier Demetriou was standing firm, telling confidantes that he had not done anything wrong and he was playing down the bombshell letter he and Crown chief executive Ken Barton were set to receive from the Victorian gaming regulator effectively calling for their heads.
But Demetriou, a former AFL footballer, has been around long enough to know that the umpire’s decision is all that matters both in sport and business.
He’d been given a red card by Bergin. Earlier on Thursday he’d been advised by a legal adviser that he had no choice but to step down and to start preparing a resignation statement, which he did.
By 8pm the man some call “Mr Melbourne” had tendered his resignation to Crown chair Helen Coonan but vowed to defend his reputation, describing the pointed criticism of him in the bombshell Bergin report on Crown’s suitability to retain its Sydney casino licence as “unfair and unjust”.
But to many, his intransigence for the 48 hours following commissioner Patricia Bergin’s damning findings — where she described his evidence as “quite bizarre” reflecting “badly on his judgment” — highlighted the ongoing arrogance of Crown and the cultural problems within the company.
As Bergin put it: “There is a big difference between acceptance of the existence of problems that beset Crown when confronted with them in a process such as this and having the culture and open-mindedness to detect the problems for oneself and remedy them”.
That was further epitomised in Barton’s decision to hire his own legal counsel — believed to be K&L Gates partner Mark Dobbie — and dig in for a fight, despite Bergin’s damning findings that he was “no match for what is needed at the helm of a casino” and that he failed the prevent money laundering occurring through Crown’s bank accounts.
The Sydney-based Barton, who commutes to Crown Melbourne each week, flew into Melbourne on Sunday ahead of the release of the Bergin report.
He bunkered down in Crown Melbourne’s suave third-floor executive offices for the release of the findings late on Tuesday, and all of Wednesday is believed to have declared his determination to stay put. Some called him “deluded”.
He flew to Sydney on Thursday morning for a meeting with Coonan where he is believed to have agreed to resign, subject to discussion of his severance package and transitional arrangements.
Barton’s critics would say it was a negotiation about how many millions he would pocket when he left, when Coonan had bigger problems such as ensuring Crown’s suitability to hold a casino licence and how thousands of its staff will fare when JobKeeper payments end late next month.
Barton would argue that, like many departing Crown executives before him, he was only doing what he was legally entitled to do.
Coonan has never been one to thump the table. Her style of leadership has always been collaborative, and she is believed to have continued that tone in her discussions with Barton.
By Thursday afternoon, however, the tone needed to be taken up a notch.
The head of the Victorian Commission for Gambling and Liquor Regulation, Catherine Myers, had declared it would write to Barton and Demetriou to demand that they explain how they could remain suitable associates of Crown given the criticisms of them in the Bergin report.
And earlier NSW Independent Liquor and Gaming Authority chairman Philip Crawford also declared unequivocally that the pair must step down from their roles.
Perpetual was also supported in its position on Barton and Demetriou by Anton Tagliaferro from fund manager Investors Mutual, which owns just over 2 per cent of Crown.
Demetriou is believed to be angered by the advice he received from Crown’s lawyers Minter Ellison during his appearance before Bergin, where he was heavily criticised for reading from prepared undeclared notes.
Minter Ellison also came under fire in the inquiry for advising Crown that it should not conduct a review of its suspect bank accounts and that it undertake no root and cause analysis of the failures that led to the arrest of its staff in China because of a class action.
So it is no surprise that rival law firm Allens is now doing work for Crown.
But a big part of Demetriou’s initial dogged determination to stay on at Crown was ensuring that Victoria — the state he loves — still had representation on the company’s board. He and advertising legend Harold Mitchell were the only Victorians on Crown’s 10-seat board.
And Mitchell’s future as a director was also tenuous. Bergin also recommended he step down if a civil penalty or declaration is made against him in relation to the “minor breaches” he was found to have made as director of Tennis Australia.
Myers was also heaping pressure on Mitchell.
“There is also an ongoing VCGLR investigation regarding Crown Resorts, Harold Mitchell, who has also been asked to explain how he is a suitable person to be an associate of Crown Melbourne,” she said on Thursday.
Weighing on Demetriou was the question that if he and Mitchell left, who would be left to be Victoria’s voice on Crown’s board — and this is not a parochial Sydney vs Melbourne spat.
Crown’s flagship Melbourne casino — a sprawling 27-year-old complex that might not be as shiny as its new $2.2bn Barangaroo site — is Victoria’s biggest single site employer.
“Given the size of Crown’s operations in Victoria, I hope Crown ensures there’s a Victorian appointed to the board of unimpeachable record who is prepared to enact the cultural changes recommended by the Bergin inquiry,” Victorian opposition gaming spokeswoman Steph Ryan said on Friday.
Those close to Coonan say, however, one of her strengths is being able to read the room and play the long-term game. It is believed she is already talking to two potential independent directors who are interested in joining the board.
Coonan was certainly given unexpected clear air this week by James Packer’s decision to cut all ties with the Crown board in the wake of Bergin’s damning findings about the negative impacts of his influence on Crown.
Packer made the call from the 18th century-inspired West Buttermilk Estate he jointly owns with his second wife, Erica, in Aspen, in the heart of Colorado snow country.
His private company Consolidated Press Holdings, which owns 37 per cent of Crown, announced that CPH’s nominee directors on the board Guy Jalland and Michael Johnston would be stepping down.
A third nominee, John Poynton, resigned his consultancy with CPH and is now an independent director, which has been criticised by some.
One observer called it like “Pontius Pilate washing his hands”.
But Poynton is determined to now closely align himself with Coonan and cleanskin directors Jane Halton, Toni Korsanos and the newly appointed former Sky City CEO Nigel Morrison.
While Johnston’s resignation from Crown board was a fait accompli after negative findings against him by Bergin, the decision of Jalland to resign was surprising given Bergin had supported him remaining as a Crown director.
But Jalland’s move highlighted the change in thinking of the Packer camp — that protecting CPH’s economic interest in the company had to be considered separately to rehabilitating Crown. In other words, CPH had to separate itself from Crown.
While Bergin proposed that the NSW government impose a 10 per cent shareholding cap on any single investor in Crown, she also offered Packer an unexpected olive branch — that he could apply to the casino regulator for probity approval to maintain his holding.
ILGA chair Crawford also stressed that the regulator would not seek to “boot” Mr Packer “off the share register”. He said: “We will find a commercial way forward, but things will have to happen, things will have to change. It is pretty obvious.”
This is significant, it means Packer is not a forced seller of his Crown shares and, if the company can rehabilitate itself and make Barangaroo a success, he can rebuild his investment and exit at a more attractive position than where Crown’s share price is today. And months before Bergin handed down report, Packer has been making sure he appears genuinely contrite.
At his request Crown had already last year scrapped special agreements with CPH which gave the billionaire confidential information about its operations and allowed CPH executives to be paid to provide services to Crown. This move was roundly welcomed by Bergin.
But at the end of the day, she said Crown was currently not suitable to hold a casino licence in NSW, a move that is set to send reverberations across Crown’s $6.6bn empire.
Myers is not willing to sit back and do nothing in the wake of such damning findings about Crown from its northern neighbour.
She said VCGLR had a number of investigations underway, which began “before and during the Bergin Inquiry”.
“In some instances, our investigations relate to matters that were also examined by the Bergin Inquiry, and I am pleased VCGLR was able to provide the inquiry with valuable intelligence, as recognised by the numerous references to our investigations in the Bergin report,” she said.
And Crown’s Perth licence is under increased scrutiny after the WA government labelled the Bergin report as “deeply concerning”.
Fortunately for Crown, it has Coonan in charge — the only person to emerge positively from the report and has vowed to implement “root and branch” change at the embattled gaming company.
“The review of the chairman‘s evidence demonstrates that her character, honesty and integrity has not been and could not be called into question,” Bergin said.
“The authority would be justified in accepting any commitment or undertaking given personally and/or on behalf of Crown that may be proffered by the chairman in respect of the future operations of Crown and/or the licensee taking into account the other matters of significance to which reference is made elsewhere in the report.”
Adding to that endorsement is NSW Independent Liquor and Gaming Authority chair Crawford saying he was “quietly confident” Coonan could reform Crown by April, paving the way for a full opening of Barangaroo.
“I saw her give evidence and she was impressive,” he said, adding she is the “one person who could pull it off”.
