Packer’s man ‘talked up’ Crown Resorts forecasts before Melco sale

An executive of James Packer’s private company made suggestions to improve Crown’s financial forecasts less than two weeks before the gaming mogul sold 20%.

Mr Barton, who is now Crown CEO, earlier detailed the value he believed came from Mr Packer and CPH’s involvement with Crown as a justification for providing financial forecasts to them. Picture: AAP

An executive of James Packer’s private company made suggestions to the chief financial officer of Crown Resorts to improve the financial forecasts of the gaming company less than a fortnight before Mr Packer agreed to sell 20 per cent of Crown to Hong Kong group Melco for $1.8bn.

The revelation on Thursday came as Crown chief executive Ken Barton acknowledged the company’s International VIP business had previously struck the wrong balance between generating revenue and managing risk and compliance, blaming a lack of leadership in oversight of operation.

He also acknowledged at a public inquiry into the company that there was “more work to do” to engender a culture of compliance At Crown and revealed a range of steps were underway To improve its anti money laundering functions and relations with controversial junket operators, some of which have been linked to organised crime and money laundering.

Ken Barton. Picture: David Geraghty

The inquiry heard that Consolidated Press Holdings financial controller Michael Johnston, who is also a director of Crown, sent an email to Mr Barton - then the chief financial officer - on May 21 last year following a request by Mr Packer earlier that month for Mr Barton to produce a three year financial forecast for Crown to 2022.

Mr Johnston’s email made five suggestions about the forecasts, three of which Mr Barton said - if adopted - “would have resulted in a favourable increase in the financial projections.”

On May 30 CPH sold 19.99 per cent of its shareholding in Crown Resorts to Lawrence Ho’s Melco Resorts and Entertainment.

Mr Barton told the inquiry he could not recall if any or all of Mr Johnston’s recommendations were adopted and said he had no knowledge of the Melco deal till it was publicly announced on May 30.

Most of Mr Packer’s requests tend to be quite time critical

Questioned as to the apparent urgency of Mr Packer’s request for the information, Mr Barton replied: “Most of Mr Packer’s requests tend to be quite time critical.”

Mr Packer and CPH are provided with confidential information about Crown’s financial affairs under a special confidential controlling shareholder protocol approved by the Crown board.

Terms of the protocol produced at the inquiry revealed each director and officer of Crown had to act carefully before revealing information to CPH and were required to judge if it was in the best interests of Crown for the information to be disclosed.

Asked if he should have been advised about the impending CPH share sale to Melco before he provided the financial forecasts to Mr Packer and CPH in late May, Mr Barton replied:

“I would have needed to do analysis at the time as to whether the controlling shareholder protocol would still have been available to us to provide that information. I have not done that analysis.

Mr Barton was also asked by Commissioner Patricia Bergin about whether conflict of interest provisions in a seperate services agreement Crown has with CPH should have been triggered.

“If you have a director who is negotiating with a third party to sell a third party shares, you need to know about that to deal with any perceived or actual conflict, do you not?” She asked.

Mr Barton replied: “I agree.”

He said he had no discussions with Mr Packer or Mr Johnston following the Melco transaction about his provision of the financial forecasts. Mr Johnston will appear before the inquiry on Friday.

Ms Bergin later asked if the communications with Mr Packer on financial issues should be more formal that simply emails back and forth.

“When you do have price sensitive information, it would be a far better thing to have a formal arrangement?” She asked.

Mr Barton replied: “That would be a good discipline.”

Mr Barton, who is now Crown CEO, earlier detailed the value he believed came from Mr Packer and CPH’s involvement with Crown as a justification for providing financial forecasts to them.

“The value that comes from Mr Packer and CPH’s involvement in the company is across a range of things. The assessment I make is maintaining a strong and open relationship with CPH to get the benefits from CHP and James’ involvement in the business,’’ he said.

“We have over a long period of time had a lot of value that we have received as a group from James and CPH. He originally identified the opportunities in Macau for us, and the opportunity at Barangaroo. Both those transactions over time have proven to be extremely valuable for the company.”

Mr Barton also revealed Crown was undertaking an enhanced audit of its anti-money laundering processes, separating its AML function from operations and other compliance functions and hiring a new head of financial crimes and compliance executive.

The AML function will have a direct reporting line to the company’s board and the board’s risk management committee.

“The steps we are proposing or are in the process of taking are a real commitment to changing the emphasis as an organisation we put on compliance. We are making a fundamental change to the organisational structure to elevate all the compliance functions,’’ Mr Barton said.

Bank accounts that accept patron deposits will now only be in the accounts of its Melbourne and Perth properties following evidence presented to the inquiry of money laundering through two shelf companies named Southbank and Riverbank Investments, which have now been closed.

Mr Barton also revealed Crown has suspended dealing with controversial junket operators until June next year and was reviewing all of those operations.

Deloitte was commissioned to do a report on Crown’s junket approval process and made a number of recommendations in late August that are now being implanted. These including giving a right of veto to the AML team on the company’s junket relationships.

Crown also commissioned consultancy Berkeley Research Group to do investigations on some specific junket operators, which reported to the company earlier this month.

Commissioner Bergin suggested to Mr Barton that given junkets contribute less than 7 per cent of Crown’s annual profits that the company simply stop dealing with them.

“Yes that would certainly be an option,’’ he said.

“You would have a smaller business and it would be lower risk. A much simpler and probably higher margin business.”

We deal directly with individuals we know, with clear sources of wealth, clear reasons to come to Australia, we would pay lower commissions.