Crown Resorts board breaks ranks as criticism builds

The Commissioner heading an inquiry into Crown Resorts has lashed the board of the James Packer-backed company for its failure to learn from its past mistakes.

NSW Casino Inquiry - Commissioner Patricia Bergin. Supplied

The Commissioner heading an inquiry into Crown Resorts has lashed the board of the James Packer-backed company for its failure to learn from its past mistakes and taken aim at director Michael Johnston for a potential breach of director’s duties during Mr Packer’s sale of shares to Melco Resorts.

During final submissions to the inquiry on Friday morning by Mr Packer’s private company Consolidated Press Holdings, an animated Commissioner Patricia Bergin questioned why the Crown board failed to take notice of warning signs contained in adverse publicity against the company for more than a decade.

“It doesn’t seem the focus went inwards. The board is where the buck stops. They didn’t look backwards. They don’t like to look backwards in this organisation,” she said.

“The absurdity of not learning from your past is really breathtaking.”

Her comments came as the Crown board broke ranks for the first time, with former director and Macquarie Group executive Ben Brazil requesting through his lawyer on Friday he be excluded from any negative findings against the board by the inquiry.

In a special submission to the investigation into Crown, Mr Packer and CPH’s suitability to retain the licence for its Sydney casino scheduled to open next month, Mr Brazil’s lawyer reiterated the banker had “thumped the table” demanding a full inquiry into the arrest of Crown’s staff in China in 2016 before he left the board in early 2017. The review was abandoned by his fellow directors after his departure.

It was also claimed that in November 2016 Mr Brazil asked the board that a legal review by Minter Ellison of the China arrests be expanded to look at Crown’s dealing with junket operators and the impact on its reputation.

The failure by the board to properly review the China arrests and Crown’s dealings with junket operators with links to organised crime and money laundering have been asserted by Counsels Assisting the inquiry to make it unsuitable to retain the Sydney licence.

While Ms Bergin has kept her counsel during submissions for CPH by its lawyer Noel Hutley over the past two days, she was visibly agitated on Friday following several debates with Mr Hutley, the first being over Counsel Assisting’s assertion that Crown’s governance failed because management did not want to give Mr Packer bad news.

Mr Hutley claimed there had been no evidence presented to the inquiry from anyone - a director, employee or otherwise - that he or she was reticent in providing bad news to Mr Packer.

“No one has said that or intimated it,’’ he said. “This simply can’t be right.”

But Ms Bergin again highlighted alternative reporting lines in the company directly to Mr Packer, including from Australian Resorts chief Barry Felstead, Mr Johnston and Mr Packer’s butler Ishan Ratnam.

Picture: AFP

She demanded an explanation from Mr Hutley as to why problems of Crown’s staff in China and news of the closure of Crown bank accounts over several years due to alleged money laundering did not reach the risk committee of the board.

“There has to be an explanation somewhere that these things are going on in a casino operator with operations in Melbourne, Perth and now Sydney. It is almost inexplicable,” she said.

She noted it was “unbelievable” that current Crown CEO Ken Barton would not have told former CEO Rowen Craigie or Mr Packer about three banks closing accounts with Crown because of alleged money laundering when he was previously chief financial officer.

“No one has told me for all the months I have been here. It is almost inexplicable that someone could not have told the functionaries in the committee what was going on,’’ she said.

Mr Hutley said the failures could be attributed to a general culture within Crown that “they just don’t want to tell bad news”, before adding: “Whatever these deficiencies were, it can’t be attributed to the presence of CPH or it nominees. It doesn’t make logical sense.”

Ms Bergin also engaged in an animated discussion with Mr Hutley over Mr Johnston’s alleged failure to perceive a conflict of interest during negotiations in May last year with Melco Resorts for the sale of part of CPH’s shareholding in Crown.

She expressed serious concern about Mr Johnston, CPH’s finance director and a Crown director, dealing with the financial forecasts of Crown in the company’s annual budgetary process at the same time as CPH was in negotiations to sell Crown shares.

“I do fail to see how it could be that a director could not immediately see the perception of a bystander that there could be a potential conflict of interest,’’ Ms Bergin asked.

“He should have virtually got up from the board table and said ‘I won’t help you on this occasion. It is not a good look for a public company I am a director of. I will go off and do my own business, I’ll be away from you and I’ll come back when it is done. Simple as that. Simple as that.”

While she acknowledged that Mr Johnston eventually conceded in his evidence of the perception of a conflict, she added: “The concern I have is it took him quite a deal of time for him to see it.”

But Mr Hutley said there was no breach of a fiduciary duty by Mr Johnston because he didn’t use Crown’s financial information to help set a price for the share sale to Melco, which was being negotiated separately by Mr Packer and CPH CEO Guy Jalland.

“Those numbers were never ever relevant to the sale. So you know as a fact Mr Johnston was wholly loyal to Crown Resorts in the advice he gave. Thus there was no breach of fiduciary duty,’’ he said.

Ms Bergin also challenged Mr Packer and former Crown chairman Robert Rankin’s decisions at the end of 2015 not to tell the Crown board about a serious threat the billionaire made against a businessman - said to be private equity executive Ben Gray - only weeks before Mr Packer resigned from the Crown board.

“Why would it not have been appropriate firstly for Mr Rankin to inform the board about the threat that was made. It concerns me it was kept from the board by Mr Rankin and Mr Packer,’’ she said.

Mr Packer admitted in his evidence that he left the board to deal with his mental health issues, but Ms Bergin questioned why that fact was also not disclosed to the board.

She also questioned why in early 2016 it was contemplated by the board that Mr Packer would take on a new global president role for Crown at a time he was being treated for his illness.

She also noted that when he returned to the board in 2017 there was again no disclosure to Crown’s directors about the 2015 threat or Mr Packer’s illness.

Mr Rankin has refused to give evidence before the inquiry.

But Mr Hutley said he expected the board was not told about the threat in 2015 or 2017 because it was totally out of character for Mr Packer. He also had a right to keep his personal issues private.

He reiterated in his closing arguments that every aspect of CPH’s conduct “speaks to an organisation that is an appropriate associate” of the Sydney casino licensee company.

He also noted the cessation last month of a long-standing services agreement between CPH and Crown and a special protocol giving Mr Packer confidential information about Crown while he was not a director was evidence that CPH would be treated in the future like any other Crown shareholder.

“The suggestion there should be any concern arising from Mr Packer of CPH’s influence on Crown resorts going forward is unsustainable,’’ he said.

Crown will begin making its submissions on Monday.