Crown Resorts ‘sensitive to conflicts of interest’
One of James Packer’s key lieutenants has vowed that he is always alert to conflicts of interest arising in his role as a director of Crown Resorts.
One of James Packer’s key lieutenants has vowed that he is always alert to conflicts of interest arising in his role as a director of Crown Resorts but acknowledged he did not know whether the company had a formal register to manage the issue.
Ahead of Mr Packer’s landmark appearance before a public inquiry into Crown this week, Consolidated Press Holdings finance director Michael Johnston said he was “quite sensitive to conflicts” that arose in fulfilling his dual role as a CPH executive and a Crown director.
“We clearly understand when there are issues when there are potential for conflicts,’’ Mr Johnston told the inquiry on Friday. But pressed by the inquiry commissioner Patrica Bergin on whether Crown and CPH had some sort of register to “tick off” conflicts as they arose, Mr Johnston replied: “Not to my knowledge.”
Mr Johnston — who will resume giving evidence on Monday morning — revealed last week he provided guidance on Crown’s financial forecasts to Lawrence Ho’s Melco Group last May before CPH agreed to sell a 19.9 per cent stake in Crown to Melco for $1.8bn.
While he denied the guidance was price-sensitive, he said it was informed by a discussion he had in his capacity as a CPH executive with Crown’s then chief financial officer Ken Barton following an urgent request by Mr Packer for Mr Barton to provide him with three years of financial forecasts three weeks before the share sale.
Mr Packer and CPH are provided with confidential information by Crown executives about the casino company’s financial affairs under a special confidential controlling-shareholder protocol approved by the Crown board.
CPH also has a separate services agreement with Crown under which it is paid for providing services to Crown, which covers Mr Johnston’s role as a CPH executive and Crown director.
Both the protocol and services agreement have conflict of interest provisions. The protocol also requires each director and officer of Crown to act carefully before revealing information to CPH and to judge whether it is in the best interests of Crown for the information to be disclosed.
Mr Johnston denied he had a duty to inform Mr Barton of the negotiations with Melco when he discussed Crown’s financial forecasts with him ahead of the share sale.
Mr Barton told the inquiry last week that if he had been informed about the sale, he would have needed to check whether he could rely on the controlling-shareholder protocol to provide the information.
Pressed by commissioner Bergin as to why he was not alert to the perception of a conflict of interest in the episode, Mr Johnston replied: “I suppose I was looking at whether there was an actual (conflict) as opposed to perception. I didn’t look at the perception at that point.”
The inquiry was also told about Mr Johnston attending a meeting of Crown’s remuneration and nomination committee last year to consider the terms of the controlling shareholder protocol and the services agreement with CPH.
While the minutes of the meeting did not document him leaving the room to avoid a conflict of interest in the discussion, Mr Johnston said he did.
“I would have excused myself from a discussion like that. I always do,’’ he said.
“It was an agreement between CPH and Crown so I didn’t think I should participate in the Crown deliberations. If it went through, it was dealing with a contract between CPH and Crown. Given I was a director of CPH I did not think it was appropriate I participated.”
At a subsequent October 31 Crown board meeting to discuss same issues, the minutes reported two CPH-appointed Crown directors — Guy Jalland and John Poynton — leaving the meeting at a point but not Mr Johnston. He again contested the minutes.
“There was no way they would have left and I would have stayed. It is inconceivable I was still in the meeting,” Mr Johnston said.
“We clearly understand where there are issues where there is potential for conflict.”
The issues arising from conflicts of interest between CPH and Crown look set to be a focus in Mr Packer’s interrogation by the inquiry, which is likely to be in the second half of this week.
Melco initially bought 9.9 per cent of Crown on May 30 last year but did not proceed with the rest of the purchase amid revelations about its association through its corporate structure with Lawrence Ho’s father Stanley, who had alleged links to organised crime before his passing earlier this year.
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 to be involved with 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.
Mr Packer and CPH chief executive Guy Jalland, who is also a Crown director and will appear as early as Monday before the inquiry, look set to be questioned on their knowledge of Great Respect’s shareholding in Melco before the share sale agreement with CPH was signed. Mr Johnston is also expected to face similar questions, as are Crown’s directors, who will appear later this week and next week.
Asked on Friday about the urgency to sign the deal with Melco, Mr Johnston replied:
“Mr Packer had wanted to reduce debt. I think that we also wanted to diversify our asset base. They were the two underlying commercial drivers. We were also aware, having looked at the likes of the Wynn transaction, a whole-of-company transaction or one that could require approvals could take an extraordinarily long time.” Mr Johnston was referring to the proposed takeover bid of Crown by US casino giant Wynn Resorts early last year, which was abandoned after the details of the talks were leaked.
It was also revealed on Friday that CPH considered controversial Hong Kong junket operator Suncity — which allegedly has links to organised crime and whose chairman Alvin Chau has been banned from entering Australia — as a potential buyer of part of its Crown shareholding before the sale to Melco.
“They had expressed an interest in investing in casinos,’’ Mr Johnston told the inquiry, but noted a transaction with the group was not formally considered.
“To my knowledge I have never met anyone from Suncity,” he said.
Mr Johnston also revealed on Friday that Mr Packer returned to the Crown board in 2017 after an 18 month absence because of the billionaire’s concerns about the arrest of Crown’s staff in China in October 2016, which damaged its reputation globally.
“Given what had happened in China, it was considered Mr Packer come back on the board to have an appropriate degree of influence,” Mr Johnston said.
In March 2018 Mr Packer again resigned from the Crown board, citing mental health issues. In August that year he also resigned from the CPH board, and over the coming months stepped aside from a raft of CPH-linked companies.
“Given that he had been living outside of Australia for quite a long time, it didn’t make sense to have him on the boards of the Australian companies,’’ Mr Johnston told the inquiry. “Mr Jalland and myself, we thought it was appropriate to try and reduce Mr Packer’s workload and this was a way of doing it in CPH.”
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