Crown Resorts inquiry: Melco deal should have been checked for Ho link

Packer lieutenant admits he should have checked if casino boss Stanley Ho had an interest in Melco before it bought a Crown stake.

Melco chief Lawrence Ho with James Packer in Macau in 2015. Picture: Bloomberg

One of James Packer’s key lieutenants has admitted he should have checked whether the late Hong Kong casino magnate Stanley Ho had an interest in Lawrence Ho’s Melco Resorts before he signed off on a deal to sell it a strategic shareholding in Crown Resorts last year.

Michael Johnston, the finance director of Mr Packer’s private company Consolidated Press Holdings and a long-serving director of Crown, was given authority by Mr Packer to sign the deal with Melco after terms for the transaction were negotiated by CPH chief executive Guy Jalland.

Crown’s licence for its Sydney casino included a specific clause that banned it from allowing Stanley Ho and a raft of companies associated with him from having involvement in the licence.

British Virgin Islands company Great Respect, Melco’s largest shareholder, is on the secret “banned” list contained in Crown’s Sydney licence agreement.

A public inquiry considering whether Crown is fit to retain its Sydney licence was told on Monday that a draft Hong Kong Stock Exchange announcement for the deal by Melco Resorts noted Great Respect’s shareholding in Lawrence Ho’s company. But Mr Johnston said he could not recall reading it.

Crown long held a strategic position in Melco Resorts, when Mr Johnston was aware of Stanley Ho’s interest in the Melco Group of companies. But Crown sold out in 2017, meaning it lost visibility as to the shareholding structure of the Hong Kong group.

Asked by Inquiry Commissioner Patricia Bergin whether given that lack of visibility, he should have at least checked if Great Respect had an interest in Melco Resorts before signing the deal, Mr Johnston replied: “We thought we took the right advice at the time. With the benefit of hindsight perhaps we should have looked more deeply, yes.”

But he said he had always believed Stanley Ho had no interest in Melco Resorts.

“We had dealt with Melco for many years as part of the joint venture and there was no suggestion Stanley Ho had an interest or involvement in Melco Resorts. Melco had been approved as a partner with Crown by a range of regulators, including ILGA (the NSW Independent Liquor and Gaming Authority),” Mr Johnston said.

“There was nothing putting me on notice there were issues there.”

Mr Johnston denied he should have informed Crown of the Melco share sale before it was signed to allow the casino giant to ensure the deal would not breach the terms of its Sydney licence.

“The party we were dealing with was Melco Resorts. I was not aware Stanley Ho or any entities associated with him had an interest in Melco Resorts,” Mr Johnston said.

“We took advice on what approvals, if any, were required in order for this transaction to be consummated. The advice was there were no approvals required and we didn’t have to disclose it to Crown Resorts.”

Mr Johnston said he spoke to several of Crown’s independent directors after the deal was signed at the end of May, ahead of the next scheduled board meeting of the company on June 12, and none of them asked why Crown had not been informed about the deal.

Melco initially bought 9.9 per cent of Crown on May 30 last year but did not proceed with the rest of the purchase. It sold its shareholding earlier this year to US private equity giant Blackstone.

It was revealed on Friday that CPH also contemplated a plan to sell its interest to Hong Kong junket operator SunCity, whose chairman Alvin Chau has been linked to organised crime and money laundering and banned from entering Australia.

The inquiry was told on Monday that the SunCity idea was still being circulated within CPH before a meeting on May 23 between Mr Johnston and Mr Packer, but that the billionaire had decided he wanted to sell to Melco.

“Sure Mike but it’s my life and I am going to overrule you,’’ Mr Packer texted Mr Johnston the same day, before telephoning Mr Ho to say he was proceeding with the Melco sale.

Mr Johnston was also further questioned about his decision to provide guidance on Crown’s financial forecasts to Melco before the share sale was announced. The guidance was informed by information he obtained as an employee of CPH providing services to Crown.

Pressed by Ms Bergin whether the company could benefit from having a formal register of conflicts to deal with the CPH-Crown relationship and the “many hats” worn by Mr Johnston, he replied: “A register could be a fruitful way of making it obvious.”

On Monday Mr Johnston was also quizzed about his role in supporting Crown’s controversial VIP business and its associations with junket operators.

He agreed with a suggestion by Commissioner Bergin that future approvals for Crown’s dealings with junket operators needed to go to the company’s full board and said the board would be reviewing in the coming months whether to deal with junkets at all in the future.

“I think it could be worth it in an environment where you got much more comfortable with the probity processes. Whether we can do that I am not 100 per cent sure at this point,’’ he said.

Mr Johnston will continue giving evidence on Tuesday before Mr Jalland, former Crown executive chairman John Alexander and Mr Packer will take the stand.