Crown Resorts in crisis talks over China casino arrests

Crown Resorts directors look set to be reassured that its 18 employees arrested in China were not doing anything illegal.

 

The board of Crown Resorts will meet in Perth today where its ­directors look set to be reassured that its 18 staff arrested in China were not doing anything illegal when they were swept up in an ­apparent crackdown on gambling promotions.

As shares in the company ­rebounded after suffering their biggest one-day fall on Monday, it emerged yesterday that the chief executive of Crown’s Australian resort properties, Barry Felstead, was in China last week on business before the arrests.

He is said to have visited China as many as 30 times since being promoted to the role three years ago, but has escaped any sanction, in contrast to Crown’s senior international VIP manager, Jason O’Connor, who remains in detention in Shanghai after being ­arrested during a routine business visit to China.

Crown’s 48 per cent shareholder, James Packer, made his first public comments on the affair yesterday, saying he was “deeply concerned” for the welfare of his staff, with scant information ­offered by authorities.

The arrested workers were visited by consular officials yesterday, but Crown has still not been able to contact them.

“I am respectful that these ­detentions have occurred in another country and are therefore subject to their sovereign rules and investigative processes,” Mr ­Packer said in a statement.

But former treasurer Peter Costello told a lunch yesterday that the Crown affair was another reminder of the dangers of doing business with China.

“When you invest in China, when you trade with China, you think that you know how it operates and you do — right up until the time there’s a corruption ­investigation or there’s a power shift and things can turn on you very quickly,’’ he said.

“What’s happening in China is that there’s a concerted campaign against corruption and nobody’s entirely sure what the ground rules are.’’

An emergency Crown board meeting convened from Singapore by chairman Robert Rankin on Monday night as he was on his way to Australia for the company’s annual general meeting in Perth tomorrow was given a full briefing on the welfare of the Crown staff and their families.

But there was no broader discussion of the company’s risk management practices which some have claimed were inadequate because they exposed Crown staff to the Chinese crackdown on the marketing of offshore casinos within China.

In the middle of last year the Chinese government launched Operation Chain Break, intended to break the connection between Chinese money flows and foreign casinos.

But governance experts said yesterday it was too early to conclude that the company’s risk management processes had failed.

It is understood Crown believes its workers were conducting routine and legal marketing ­activities of Crown’s Australian resorts when they were arrested.

The company has deliberately increased the number of staff it has on the ground in China in ­recent years despite the government’s anti-corruption drive.

While it has been speculated Mr O’Connor had been specifically targeted by the Chinese authorities, there has been no ­explanation as to why Mr Felstead was also not in their sights.

Mr Felstead has had a far more significant role in marketing Crown’s Australian properties to Chinese customers. Some suggested Mr O’Connor had simply been in the wrong place at the wrong time.

Bloomberg reported last night that Crown was among several companies that received warnings from Chinese authorities about their marketing activities in China after the arrest last year of workers at South Korean casino operators Paradise and Grand Korea ­Leisure. After the warning, ­Chinese authorities observed that Crown had senior executives make short business trips to China instead of spending long periods in the country, Bloomberg said, quoting a person familiar with the Crown arrests.

The person also claimed the authorities noted that the company shifted its marketing activities to focus more on resorts instead of casinos but that they now didn’t perceive those actions amounted to a material change in Crown’s activities.

All the major casino operators in Australia — Crown, The Star and SkyCity — employ staff or contractors in China to encourage high rollers to play, whether via “junkets”, packaged visits by gamblers in which the organisers wear some of the risk of default, or via individual players. The biggest challenge for the casino staff or agents is to arrange credit terms for high rollers, often involving 60 days for repayment.

There was speculation yesterday that the arrests were not ­related to the Crown employees’ marketing activities, but instead revolved around credit and money-flow issues. China also forbids the collection of gaming debts in China, so players need to satisfy casinos that they can meet any debts from ­financial sources outside the country.

Crown has rejected speculation Mr O’Connor was in China seeking to collect outstanding gambling debts.

Sources described him yesterday as ‘’totally straight, not some racy gaming executive’’.

Casino company Sky City Entertainment said yesterday it was monitoring the situation in China.