‘Too big to fail’ – Crown steps up warnings of ‘catastrophic consequences’ if it loses its casino licence

The head of the Victorian inquiry into Crown has rejected concerns jobs would be lost if it loses control of its Melbourne casino.

The Victorian royal commission is hearing Crown’s closing submissions. Picture: David Crosling

Crown Resorts has stepped up its warnings of a catastrophic default on a near $1bn debt, leading to potentially thousands of job losses, if it loses the licence for its flagship Melbourne casino.

Crown’s lawyer, Michael Borsky SC, said even if its licence was handed to another operator there was no way to guarantee the jobs of the company’s 12,000 Melbourne workers.

It rounded off a high stakes day for Crown, which included the sacking of Crown Melbourne chief executive Xavier Walsh, executive chair Helen Coonan flagging her retirement and the Victorian government blowing up the state’s gaming regulator in an attempt to seize control of the sprawling Southbank casino complex.

Echoing the too big to fail theory, Mr Borsky highlighted Crown’s importance to the state’s economy, to which it contributes $1.2bn a year, and warned taking away its licence would negate the “public benefits” the company delivers.

His warning came after counsel assisting the royal commission recommended Commissioner Ray Finkelstein find Crown unsuitable to hold Victoria’s only casino licence – ending the James Packer-backed group’s 27-year reign of the Melbourne casino.

“Cancellation or even suspension of Crown’s licence would have the very real potential to trigger events of default, that will put in jeopardy the significant public benefits that Crown would otherwise continue to provide this state,” Mr Borsky said.

“More than 20,000 people work across Crown Resorts. Over 11,600 of those work in Melbourne. The vast majority of them were of course not complicit in the evidence in the misconduct, evidenced in this commission. Thousands of them, for example, working food and beverage.

“Crown does a lot of work with government and industry to support … major events in Melbourne, that at least before Covid contributed $1.2bn to the Victorian economy every year.”

Royal commissioner Ray Finkelstein presiding over the inquiry. Picture: David Crosling

The possibility of Crown defaulting on its debts, totalling almost $1bn, was revealed in a letter sent by Crown’s lawyer Leon Zwier, an Arnold Bloch Leibler partner, to Victorian ugaming Minister Melissa Horne on behalf of Crown on July 2.

The direct appeal to the government raised the ire of Mr Finkelstein, who said the letter could be interpreted as Crown seeking to “stop the commission altogether”, a claim the company denied.

Mr Borsky added that Crown’s Southbank casino – Victoria’s biggest single site employer – accounted for 10 per cent of Melbourne’s hotel rooms, and it was more efficient to have an “integrated resort operator” running the state’s only casino.

But Mr Finkelstein dismissed Crown’s warning, saying he believed that none of its workers were at risk.

“The annual reports I’ve looked at demonstrate Crown Melbourne is a profitable concern, which is to say, and if I segment out by hotel and other businesses … it’s a very profitable business,” Mr Finkelstein said.

“If it’s a viable business and a profitable business, there’s always somebody to step in and take over a profitable business. So I don’t treat 12,000 employees at risk.

“They might change their employer, but they’re not at risk of losing their jobs. It would be different if it was a failing company in a financial sense.”

Mr Finkelstein said Crown could be made to give up its casino and potentially the Crown Towers Hotel as it is on crown land.

“I’m pretty sure both the casino and the hotel and shops and everything between the river and the street is crown land … state government land and under the lease at the expiry of the term – however it comes to an end – all the real estate vests in the crown.”

If Crown loses its licence, it may be entitled to $200m compensation from the Victorian government. But Mr Borsky accepted the company may lose that right if it loses its licence as a result of disciplinary action – such as it being found to be not a suitable casino operator after it facilitated money laundering and other criminal behaviour, plus delayed paying tens of million of dollars of taxes over eight years, among other wrongdoing.

The lawyer representing Mr Packer’s Consolidated Press Holdings, Noel Hutley SC, has a different view and said the royal commission should not be about disciplining Crown.

“Punishment is not a feature of the public interest with which one is concerned here. One is concerned with the future of a casino operation in this state of Victoria,” Mr Hutley said.

“It is easy because of one’s legitimate concern about what has transpired to convert that into a perceived need for (licence) removal, which in our respectful submission, unless one will satisfy that Crown is irredeemable, would not be to advance the public interest but to punish.”

Mr Hutley said Crown may be entitled to compensation of $200m – which incidentally was what one of the company’s own executives estimated how much it owed the Victorian government in unpaid taxes – if it lost its licence.

“CPH agrees with the state’s analysis and compensation provisions – it may be available to Resorts – unless the proper disciplinary process is followed.

“This is not a question of benefiting from one’s wrongs. All this provides is that should Crown Resorts’ licence be removed because of pure public policy change the compensation will result.”

Crown’s flagship Melbourne casino. Picture: David Crosling

Mr Hutley also rejected calls for a shareholder cap to rein in the influence of Mr Packer, who owns 37 per cent of the company. But he said if a cap was imposed, it should not be less than 20 per cent.

Mr Finkelstein said even a 10 per cent cap may still lead to undue influence being exerted on the company.

“The shares in Crown Resorts are quite dispersed. A 10 per cent shareholding could probably control a company meeting,” he said.

Helen Coonan delivered a separate closing submission via her lawyer John Sheahan QC. It followed Crown’s lawyer saying Ms Coonan – who assumed the chairman role in January 2020 – would retire at the end of August, earlier than expected.

Mr Sheahan said there was no evidence to support claims that Ms Coonan knew that the company had underpaid tens of millions of dollars of taxes to the Victorian government over an eight-year period before June this year.

“There is simply no evidence to support that premise, none,” he said.

Crown Melbourne CEO Xavier Walsh arrives to give evidence to the royal commission last month. Picture: Luis Ascui