Crown Resorts ‘victim’ of Chinese gambling crackdown

Crown Resorts believes it has been caught up in a fresh drive by the Chinese authorities to pursue gaming “whales”.

The Shanghai detention centre holding 18 Crown staff.

Crown Resorts believes it has been caught up in a fresh drive by the Chinese authorities to pursue gaming “whales’’ who gamble abroad, with some believed to have racked up debts of as much as $30 million.

As the company’s board prepares to front shareholders at its annual general meeting in Perth today, it is understood that Crown believes the detention of 18 of its employees in China relates to the authorities pursuing the names and financial details of so-called whales as part of a crackdown on consumption and capital flows.

When Crown employee Jiang Ling was arrested on Thursday night the police confiscated her phone, laptop, tablet and several hard drives. It is likely the same devices would have been sought from the other Crown employees in detention.

There is speculation that some Chinese ‘whales’ have racked up significant debts at the VIP area of Crown’s Australian casinos. One who is said to have racked up a $30m debt has not returned to Australia. But pressure is still mounting on the James Packer-backed company to explain why its ­employees continued to heavily promote its Australian resorts through its own staff in China ­despite an 18-month government crackdown on foreign casinos.

Crown shares fell another 3 per cent yesterday to close at $11, taking the losses since Monday to more than 15 per cent.

Crown is still seeking clarity on the allegations against its 18 staff in detention — including three Australians — beyond the speculation that they were organising “gatherings for gambling”.

Foreign Minister Julie Bishop said last night that Australia’s ­ambassador in Beijing had raised the issue “at the most senior levels of the Chinese government’’.

Crown board member Harold Mitchell in Perth yesterday. Picture: Bohdan Warchomij

Crown’s directors were told at its board meeting in Perth yesterday that its employees did nothing wrong in marketing their Australian properties in China.

But many are asking why Crown did not take greater heed of a general warning in February by a senior official of the Chinese Public Security Ministry of a crackdown on foreign casino ­operators “drumming up interest’’ from Chinese citizens.

The warning had prompted Steve Wynn — the chief executive of Wynn Resorts, which has casinos in Macau — to say: “I have learned in the last 12 years to behave in China, and that is to ­listen carefully to what the leadership says and to conform with the program as we are their guest.”

Several South Korean casino employees were arrested in October last year, ­although there is speculation they were doing much more than simply marketing and were running virtual underground casinos in China.

It has been speculated that Crown was among several companies that received warnings from Chinese authorities about its marketing activities in China after the South Korean arrests.

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.

But The Australian understands that neither Crown nor Star Entertainment was directly warned last year about their ­advertising breaching the strict prohibition against promotions attracting gamblers to offshore venues.

Crown’s Asian gaming joint venture partner Melco Crown also did not receive such warning.

All the companies concerned declined to comment yesterday.

Crown board member Rowena Danziger arrives in Perth. Picture: Daniel Wilkins

Crown has not been subject to formal warnings from Australian diplomats or trade officials in China about the risks it ran in ­promoting its business there, in part because it has largely operated “under the radar”.

It has no office in China, and is not a member of the Australian Chamber of Commerce in Beijing or in Shanghai.

Austrade’s Shanghai-based country manager for China, Mich­ael Clifton, said yesterday that “unequivocally, we have provided no explicit information to Crown”, whose only connection with Austrade had been through sponsoring lunches during the two Australia Weeks in China.

The Australian spoke yesterday with a former visa agent who had helped process the travel ­arrangements to Melbourne for high rollers, who said a colleague “left the company at the time ­because she was scared that one day there would be the kind of crackdown we have just seen”.

“It was also difficult to know where the money they said they were prepared to gamble was coming from,’’ he said.

“Often you couldn’t tell by their appearance that they might have been rich. After a while, I also decided I didn’t want to get caught up in it any more, because at some time the model would fall down.’’

The former agent said that “junket organisers” would ­arrange for groups to travel to Melbourne — sometimes, for ­instance, for a week of golf — with all their accommodation costs being met by Crown, where they were likely to gamble during the evenings.

“Gamblers are mostly impulsive, and they would make a sudden decision to fly to Crown, which would require considerable effort to get visas expedited,” he said.

Fitch Ratings warned yesterday that the arrest of the Crown staff in China had underscored the risk associated with global ­casino operators’ Chinese VIP businesses.

Additional reporting: Paul Garvey