‘I always thought Stanley Ho was not involved in Melco’: Jalland

Crown exec relied on previous probity checks conducted by casino regulators in Australia and the US regarding Stanley Ho.

A key Packer lieutenant said that he relied on probity checks on conducted by casino regulators in Australia and America around Stanley Ho’s links to Melco. Picture: AFP

The chief executive of James Packer’s private company says he firmly believed the late Hong Kong casino magnate Stanley Ho did not have an interest in Melco Resorts but failed to check before selling it a strategic shareholding in Crown Resorts last year.

Consolidated Press Holdings chief executive Guy Jalland told a public inquiry on Tuesday that he relied on probity checks conducted by casino regulators in Australia and the US that approved Crown’s previous joint venture arrangements with Melco Resorts to satisfy himself that Stanley Ho had no connection to the company.

However, he acknowledged he was not aware of the status of Melco’s relationship with Mr Ho between 2014, when probity checks were conducted on the company in connection with the awarding of Crown’s licence to operate its Sydney casino, and May last year, when CPH sold a 19.9 per cent stake in Crown to Melco for $1.8bn.

He also said he did not check further on the issue.

“There was no risk in my mind. It was a belief that I had for some considerable period of time that Mr Stanley Ho had no interest in Melco or Melco Resorts,’’ Mr Jalland told the hearing being conducted by the NSW Independent Liquor and Gaming Authority, which is assessing whether Crown should be allowed to retain its Sydney casino licence.

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 was publicly revealed after the May transaction about its association through its corporate structure with Stanley Ho, who was allegedly linked to organised crime before his passing earlier this year.

British Virgin Islands company Great Respect Limited is on the secret “banned” list contained in the licence agreement for Crown’s Sydney casino.

Great Respect is Melco International’s largest shareholder, which in turn holds a 20 per cent interest in Melco Resorts, which bought the Crown shares.

Mr Jalland, who is also a director of Crown, was also pressed on his obligation to inform Crown about the CPH deal with Melco to ensure it would not be in breach of the terms of the Sydney licence.

“No, I don’t believe I had an obligation to notify Crown,’’ he said, noting that he did not believe Crown’s obligations under its ­licence were “in any way” being jeopardised by the transaction.

Mr Jalland was also 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 and CPH financial controller Michael Johnston obtained as employees of CPH providing services to Crown.

The inquiry was told on Tuesday that in addition to financial guidance, the disclosure to Melco included the estimated cost of building the Sydney casino, pricing information on the sales of luxury apartments in the complex and Crown’s view on a class action lawsuit launched following the arrest of its staff in China in 2016.

“I wanted them (Melco) to be aware of confidential information before they agreed to complete the transaction,’’ Mr Jalland said of his reasoning for providing the information.

“I didn’t believe this information was market price-sensitive. But we thought it was confidential information Melco should know. They were committing to spend a lot of money and I felt this information they should be aware of.”

Earlier on Tuesday Mr Johnston denied the information was sensitive enough to constitute insider trading. He said he sent the information to Melco only to avoid a perception that it had traded with insider information that Melco did not have.

Mr Johnston also reiterated his comments on Friday that he had excused himself from a meeting in September 2018 of Crown’s remuneration and nomination committee that considered the terms of a controlling shareholder protocol allowing confidential information to be provided by Crown to Mr Packer to avoid a conflict of interest.

However, the final minutes of the meeting produced to the inquiry, signed by committee chairman Geoff Dixon, did not record Mr Johnston leaving the meeting. Mr Johnston again disputed the minutes, prompting Counsel Assisting Adam Bell to assert: “You haven’t been truthful in your evidence to this inquiry when you’ve perceived the truth to be inconvenient, have you?”

Mr Johnston replied: “Yes, I have.”

Mr Johnston also on Tuesday became the first Crown director to acknowledge there was an error in a bombshell newspaper advertisement signed by all of Crown’s directors and provided to the Australian Securities Exchange last year rebutting serious media allegations against company.

Mr Johnston admitted there was a mistake in relation to its statement about Crown’s junket partner, the Hong Kong-based Suncity Group.

The advertisement stated Suncity was controlled by a Hong Kong Stock Exchange-listed company, when in fact the junket partnership was actually with Alvin Chau, who is the chairman of the listed company.

Mr Chau was blocked from entering Australia last year due to his suspected links to organised crime and money laundering.

The advertisement was released to rebut allegations that Crown’s licensed junket operators had links to organised crime, drug and sex trafficking and money laundering.

It was also released to the Australian Securities Exchange, opening Crown to potential regulatory action if any statements were incorrect.

“There was certainly an error with respect to the reference to Suncity. Otherwise at the time it was released, we certainly believed all the statements in (the advertisement) to be correct,’’ Mr Johnston said.

He defended the decision to release the advertisement because of the company’s then “perilous situation”.

“This was in response to statements that accused Crown and the board of knowingly dealing with criminals, breaking Australia’s border protection and facilitating espionage,’’ he said, noting it was important to safeguard stakeholder relationships.

“This was a response that was required to address a fairly immediate need to answer accusations that were going to the very heart of the organisation.”

He said statements in the advertisement about the company’s comprehensive anti-money laundering and counter-terrorism financing programs and its due diligence of junket operators were correct at the time.

“I still think the statements are not wrong. We have certainly learnt a lot in the course of this inquiry. We are going to do a fair bit of work in further improving some of our systems … The statements made in there I still stand by them other than the one I mentioned,” Mr Johnston said.

Mr Johnston was also pressed by the inquiry commissioner Patrica Bergin about the accuracy of other parts of the advertisement.

She said that contrary to the declaration in the advertisement, it had been shown some Crown junket operators were connected to criminal groups and that two Crown bank accounts used by high rollers had showed evidence of structured deposits to avoid reporting requirements.

Mr Johnston agreed.

He also admitted he never personally investigated the accounts, known as Riverbank and Southbank Investments, but instead relied on what has now been shown to have been inaccurate internal advice that the companies were complying with their reporting requirements.

He agreed that Crown did not have a proactive culture to deal with such issues. “Whilst there was a compliance culture, they may not have been a proactive culture, in terms of going the next step. That has certainly been the concern at the board,’’ he said.