Crown directors lose ground during inquiry

Crown Resorts is facing the growing prospect of an investor revolt at its annual meeting.

John Horvath testifies at NSW inquiry into Crown Resorts

Crown Resorts is facing the growing prospect of an investor revolt at its annual meeting, as further governance failings emerged at the NSW Independent Liquor and Gaming Authority’s inquiry into its suitability to hold a gaming licence for its flagship Barangaroo casino.

Proxy advisers are toughening their stance against the proposed re-election of three directors, including James Packer’s CPH chief executive Guy Jalland, at Crown’s AGM later this month.

Mr Jalland, former public servant Jane Halton and one-time doctor to Kerry Packer, Professor John Horvath, have been opposed by proxy adviser Ownership Matters.

Another proxy house, ISS, has also issued an alert reversing its recommendation on the proposed re-election of Mr Jalland from a qualified “for” to “against”, citing evidence presented to the inquiry.

“This is made on the basis of governance concerns raised at the inquiry regarding the asymmetric information available to billionaire James Packer through his shareholding in Crown held by Packer’s Consolidated Press,” ISS said.

It supported the two other directors and proxy house CGI Glass Lewis is backing the re-election of all three directors.

Problems faced by the board were laid bare at Wednesday’s hearing as deputy chairman Professor Horvath returned to the stand and was presented with a strategic review of Crown’s VIP business completed in December last year.

The report, which Professor Horvath said he read at the time, showed Crown’s management considered anti-money-laundering actions by the government and banks a “threat” to its international VIP client business.

It outlined “threats” to the growth of the VIP business, including the difficulty of transferring funds into Australia and the “closure of bank accounts”, a reference to accounts linked to Crown subsidiaries closed by three different banks over the past decade due to money-laundering concerns.

Counsel assisting the inquiry Naomi Sharp asked Professor Horvath if this meant Crown management considered money laundering to be an impediment to business.

“What it looks like, Professor Horvath, is that management is telling the board in December of 2019 that tightening money-laundering regulations was actually a threat to the VIP business,” Ms Sharp said.

“That is one interpretation,” Professor Horvath replied. “My interpretation is this is one of the issues that may or may not make the business more difficult.”

Professor Horvath said when he read the report at the time he did not associate the “threat” of bank accounts being closed to the closure of accounts linked to Crown subsidiaries.

Professor Horvath said he only “relatively recently” became aware of the accounts even existing, despite media reports being published months prior noting the AFP suspected they had been used for money laundering.

“I am not sure at what time — I can’t give you a correct time as to when I knew about those accounts,” Professor Horvath said.

The inquiry also heard many other instances where Professor Horvath or other members of the board failed to be alerted to potential compliance issues.

In the afternoon session, Ms Halton was presented with events leading up to the 2016 arrest of Crown staff in China — which occurred before her appointment in 2018 — and quizzed as to whether Crown had started “root cause analysis” of the problems.

Ms Halton said no specific root-cause analysis had occurred, but said a process of renewal of company practices and procedures was well under way.

“I think we go back to the earlier question about root-cause analysis — again what I will say to you is there have been a number of changes made in respect of governance and processes, they are founded, I believe, on an understanding on some of the failings of the past,” Ms Halton said.

The inquiry continues.