Crown exec John Alexander admits ‘multiple failures’ led to staff arrests in China

Former Crown executive chairman John Alexander has admitted multiple failures in the company’s risk management processes.

Crown director John Alexander gives testimony at the NSW casino inquiry.

Former Crown Resorts executive chairman John Alexander has admitted multiple failures in the company’s risk management processes and corporate governance in the lead-up to the arrest of its staff in China in 2016.

Mr Alexander on Thursday faced an inquiry into Crown’s suitability to hold a casino licence in NSW. Questioned about his knowledge of a range of events, including fears expressed by Crown’s China staff following a Chinese government crackdown on gambling in foreign casinos, he said the board was not informed about their fears or even the crackdown.

“I can’t explain how it occurred,’’ he said.

“It is clearly a failure of information flow upwards. I cannot explain why the information was not passed on.”

Mr Alexander, who told the inquiry about his longtime loyalty to James Packer, said he was “surprised” email exchanges between Crown executives about the risks on the ground in China were “not communicated to a wider group”.

The inquiry has previously heard that two Crown staff in China were questioned by Chinese police in July 2015, where one was accused of organising people to gamble in Australia.

Crown then authorised a letter to be sent to Chinese authorities confirming the staff member worked for the Australian group, but the letter made no mention of Crown being a gaming company.  

Mr Alexander, who was executive chairman of Crown from 2017 to January this year and deputy chairman when the arrests occurred, said the board had no knowledge of the incident or the letter.

The inquiry has previously been told Crown director Michael Johnston was informed about the issue but did not communicate it to his fellow directors.

Crown has also denied any of its staff breached Chinese laws before they were arrested in October 2016 and subsequently ­jailed for alleged gambling crimes and it has denied suggestions it knowingly exposed its staff to the risk of detention.

The comments by Mr Alexander came after another Crown director, John Poynton, told the inquiry that he did not feel it was necessary to tell his fellow directors of a call from James Packer in May last year telling him he was about to sell a 19.9 per cent stake in Crown, hours before it was announced in a deal worth $1.8bn.

Mr Poynton, who is also chairman of Crown Perth, said he received a phone call from Mr Packer on the morning of May 30 telling him he was planning to sell the shares in Crown to Hong Kong billionaire Lawrence Ho’s Melco Resorts for $13 a share.

Crown’s licence for its Barangaroo casino, which is due to open in December, specifically bans any links between Crown and former Macau casino magnate, Stanley Ho, who died in May this year.

The inquiry has heard that a company associated with Stanley Ho, Great Respect, was a shareholder in Melco Resorts’ controlling shareholder company, Melco International, at the time of Mr Packer’s share sale.

The proposed sale was one of the triggers for the establishment of the inquiry.

While Mr Poynton was told by Mr Packer at 9.30am Perth time, the contracts for the deal were not signed until 6pm Sydney time, after which a release was made to the ASX. Questions have been raised about whether the Crown board was informed of the sale ahead of time and whether it should have taken action to question the deal because of the clause in its NSW casino licence.

John Poynton at a Crown AGM. Picture: Aaron Francis

Mr Poynton said he did not feel the need to call other directors of Crown to discuss the share sale with them or to inquire whether the deal might compromise its NSW casino licence.

He said he believed at the time that Stanley Ho did not have any financial links with Melco International.

Mr Poynton said he did not know the status of the deal when he was phoned by Mr Packer and did not know who else he would be telling about it.

“I had no insight into who else he was going to tell or when,” he said.

“I didn’t believe it would have any specific ramifications with regard to any specific agreement with regard to Stanley Ho.”

Mr Poynton was asked by counsel assisting the inquiry, Adam Bell SC, whether he thought it was a good idea to tell other board directors of the news, given its significance. “I didn’t believe it was my responsibility to talk about a matter Mr Packer was advising me about. I was assuming he would tell other people in a timely manner.

“I had no understanding of the status of the agreement (for the share sale) or whether the chair of the company was going to take up the matter with Mr Packer.”

Mr Poynton has been a director of Crown Perth since 2004 and a director of Crown Resorts since November 2018.

He said he did not agree that with the benefit of hindsight, he should have told other members of the report about his conversation with Mr Packer about the proposed share sale.

He did not believe it was his responsibility to tell other members of the board given that there were two directors on the Crown board who were also directors of Mr Packer’s private company, Consolidated Press Holdings.

“There were other people involved in Crown who had closer links with Mr Packer who would have been the ones charged with informing the rest of the board.”

His comments were a reference to the fact that two Crown directors, Michael Johnston and Guy Jalland, were also directors of Consolidated Press which holds Mr Packer’s stake in Crown Resorts.

He said he had attempted to call then executive chairman John Alexander to discuss the share sale, but he was unable to make contact with him.

He said believed that Mr Alexander was on a flight at the time and did not return his call.

The second tranche of the share sale has since been cancelled and Lawrence Ho sold out of his Crown holding earlier this year.

The proposed share sale would have significantly reduced Mr Packer’s holding in Crown from 46 per cent.

Mr Poynton said he was pleased for Mr Packer when he heard about the deal with Melco as he knew he had been looking to reduce his shareholding.

The Melco deal followed reports earlier in 2019 of a possible bid by Wynn Resorts that ultimately did not proceed.

Mr Alexander continues giving evidence on Friday.