James Packer ‘not suitable’ for Sydney casino: gaming inquiry told

NSW Premier Gladys Berejiklian said she would seek “urgent and immediate advice” about the opening after the inquiry was urged to find Crown be stripped of the Sydney licence.

Crown Sydney casino and hotel in Barangaroo. Picture: NCA NewsWire / Steven Saphore

The James Packer-backed Crown Resorts is under mounting pressure to delay the opening of its Sydney casino after a public inquiry was told it should be declared “unsuitable” to hold the licence due to the “deleterious impact” of Mr Packer on the governance of the casino company.

As NSW Premier Gladys Berejiklian said she would seek “urgent and immediate advice” about the opening after the inquiry was urged to find Crown be stripped of the Sydney licence, it was also alleged that Crown’s handling of the arrests of its staff in China in 2016 revealed deep cultural issues which also made it unsuitable to retain the licence.

“The China arrests demonstrate a failure of culture and this is evident from every perspective . . . The saga of the China arrests can only conclude to a finding of unsuitability,” Counsel Assisting Adam Bell told the NSW Independent Liquor and Gaming Authority inquiry into Crown, being overseen by former NSW Supreme Court judge Patricia Bergin.

Ms Berejiklian said that she could not rule out delaying the opening of Crown’s Barangaroo Casino, which is set to proceed on December 14, six weeks before the February 1 deadline for Ms Bergin to hand down her findings.

There has been ongoing speculation Ms Bergin could issue an interim report, which could include recommendations on changes Crown needed to make to remain suitable to hold the Sydney licence, and that ILGA may delay the opening.

Mr Bell’s claim about Mr Packer and Crown’s unsuitability in Sydney could also put pressure on the Victorian and Western Australian gaming regulators, which regulate Crown’s properties in Melbourne and Perth, to act.

Crown shares closed 1.75 per cent lower at $8.42 on Wednesday after Mr Bell told the inquiry:

“We submit the evidence presented to this inquiry demonstrates that the licensee is not a suitable person to continue to give effect to the licence and that Crown Resorts is not a suitable person to be a close associate of the licensee.”

He told the inquiry that Mr Packer’s shareholding in the company - which is now 37 per cent - had a “deleterious impact” on the “corporate governance of Crown” with the influence of his holding company CPH compromising the reporting lines which ultimately led to the arrest of Crown’s staff in China.

He said the influence of CPH and Mr Packer had been “harmful to the public interest”.

Mr Bell highlighted Mr Packer’s support of a “VIP working group” within Crown prior to 2016 as a contributor to the company’s governance failings.

The group set the direction and the strategy of Crown’s international business outside of normal management structures and risk management systems, which led to the arrest of 19 Crown staff in China for illegally promoting gambling.

“In 2013, quite possibly at Mr Packer’s instigation but certainly with his approval, the VIP working group or CPH working group, was established,” Mr Bell told the inquiry, adding that the group “was comprised of VIP international executives and senior CPH personnel” including current director and CPH executive Michael Johnston, retiring Australian resorts CEO Barry Felstead and former VIP executive Michael Chen.

The VIP working group met monthly with CPH executives providing advice on how to grow the VIP business and further access the Chinese market.

“Most significantly Mr Felstead said that the VIP working group was working separately from the official reporting structure into the Crown Resorts’ CEO, Mr (Rowen) Craigie,” Mr Bell said.

“He also accepted that on occasion he provided more information about the international business to the VIP working group than to the Crown Resorts senior CEO meeting group.

“We submit that you should find that Mr Packer was central to the genesis and objectives of the VIP working group notwithstanding that Mr Packer himself was not an attendee.”

The inquiry heard how Mr Felstead, being aware of numerous risks to the staff in China, failed to escalate the risks outside of the VIP working group, while Michael Johnston failed to inform his fellow directors.

“The one member of the board who was aware of all of the escalating risk factors and who chose not to share it with the rest of the board was Mr Johnston,” Mr Bell said.

“We submit that it should be found that Mr Johnston must have appreciated that there was a risk of arrest, detention and conviction.”

When Mr Packer gave evidence at the inquiry last month he claimed that he was not aware of the full risk to the staff in China and said he would have moved them out of the country had he known.

But Mr Bell questioned Mr Packer’s ignorance, noting that Mr Johnston and Felstead – two men Mr Packer described as loyal – were fully aware of the China risks.

Describing their failure to share these risks with Mr Packer as “extraordinary”, Commissioner Patricia Bergin suggested it could have stemmed from a fear of sharing bad news with Mr Packer, who she has called a “powerful personality.”

“Perhaps it was the case that Mr Packer‘s powerful personality meant that managers at Crown Resorts didn’t want to bring bad news to his attention,” Mr Bell replied.

“It‘s either that or the evidence of Mr Packer can’t be accepted.”

Although Mr Bell said a “significant cause of the risk management and government failures” came about due to the dominance of CPH and the ”insertion by Mr Packer of informal reporting lines to Mr Johnston and his VIP working group,” he said a broader cultural deficiency existed at the company which made it unsuitable.

“The board of Crown resorts has admitted extensive risk management failures, corporate governance failures, cultural failures and ethical failures leading to the China arrests,” he said.

“Although the China arrests occurred four years ago, as I mentioned, the poor response by the board to the media allegations indicate the cultural issues giving rise to unsuitability are not really historical.”

The inquiry continues on Thursday.