Talk about timing.
Just as Star Entertainment’s executive chairman, David Foster, was in the witness stand facing heat about his text messages to his former CEO, the powerful NSW casino cop fronted the media across town to drop another bomb. Rival casino Crown Resorts had just been given a clean bill of health.
The contrast couldn’t be starker.
The future of Star’s gaming licence is hanging by a fraction of a thread, while Crown – the new kid on the block in Sydney – was declared by NSW Independent Casino Commissioner Philip Crawford to be a “vastly different business” from the troubled casino uncovered three years ago. Importantly, Crown knew how to deal with the regulator, Crawford observed.
This is a significant moment for the Blackstone-owned Crown. As it has shown, it can again be a responsible corporate citizen with its new $2bn casino in Barangaroo.
Unfortunately, Tuesday’s announcement was never about Crown and its massive efforts to rebuild itself over the past few years.
It was all about the power wielded by the state’s independent casino cop as he seeks to stamp his authority on Star.
Crawford’s NICC is currently running another public and damaging probe into Star over whether he should strip its casino licence for good. The royal commission-style hearings come just 18 months after the first investigation into Star, whereby Adam Bell, SC, declared that the smaller casino had serious governance, risk management and cultural failures. There is real doubt whether Star will be able to survive in its current form following the hearings again being overseen by Bell.
While the inquiry is into the slow start by Star over its reform efforts, it has focused attention on the increasingly fractured relationship between the casino’s top staff and the regulator.
What is increasingly clear is Star’s decision from the boardroom and CEO to defend itself in the face of perceived regulatory overreach has blown up spectacularly. Now Star’s future is in serious doubt.
Indeed, the so-called Bell Mark II inquiry was called in February following former Star chief executive Robbie Cooke pushing back on the NICC with pointed criticism about its special manager’s assessment of its reform efforts.
Foster had approved Cooke’s decision. On Tuesday Foster said: “We knew it would be at the time a challenging document to be received by the commission”.
Cooke resigned last month, citing ongoing challenges with the regulator.
The inquiry has also uncovered Star’s own serious struggles to get traction on cultural reform efforts in Sydney.
But the optics of Crawford’s announcement approving Crown were obvious.
Crawford held a press conference to talk up Crown and its senior executives as a model of reform. It was timed to overshadow the evidence of the two people from Star who were likely to delivered the most pointed criticism of the NICC.
Foster’s questioning went for six hours on Tuesday. And Cooke is scheduled to follow on Wednesday morning.
Crawford has had weeks to make his call over approving Crown. This includes any time in recent days when a string of witnesses were directing their criticism at Cooke and Star’s reform efforts.
NSW’s decision followed Crown’s home regulator in Victoria issuing it a clean bill of health in March after a two-year probation.
Part of the grilling of Foster earlier Tuesday involved a private text exchange between him and Cooke discussing wanting to “abolish” the NICC and “preparing for war” against the regulator.
Foster also acknowledged he discussed with Cooke seeking legal advice about a possible shareholder class action against the regulator at the suggestion of some institutional shareholders. This quickly went nowhere.
Foster spoke of complaints about Star’s independent manager, Nicholas Weeks, relating to “psychosocial safety” of staff, as well conversations with the NICC’s Crawford whereby in December the regulator had lost confidence in Cooke and tried to force his exit.
The direction of Foster’s unfolding evidence show a rapidly deteriorating relationship with the NICC. And this does need to be examined – but from all sides, not just looking at Star.
Foster conceded under questioning that he should have taken a “different approach” with Crawford and with the benefit of hindsight some things were said “in the heat of the moment”.
While Foster’s evidence continued, Crawford spoke for nearly 40 minutes about Crown’s effort working on the relationship with the casino regulator. There he declared that Crown understood the relationship and had got it right from the very beginning.
Importantly he talked up Crown owner and global asset manager Blackstone’s experience operating casinos around the world.
“Crown Sydney is the safest place to gamble in the state,” Crawford told reporters.
Lines like this only add to fuel to the persistent – but unproven – narrative inside Star’s boardroom that Crawford is laying the groundwork to offer Star’s full service casino licence to Blackstone.
Remember, in Sydney Crown operates under a limited licence of table gambling only. Star’s licence also includes pokies and these deliver the real casino cashflow in times of need.
Crawford was careful not to mention Foster or Cooke at all, but the messaging was all about the gulf that exists between the regulator and the wayward Star. In many ways it was all about him.
Having called an expensive taxpayer-backed inquiry into Star as well as setting the terms of the probe, Crawford would be best advised to stay out of the spotlight and let Bell Two run its course.
Leading from the top
After a gruelling day giving evidence, Foster was asked a pointed question by the inquiry’s chair, Adam Bell: “Do you think you’re the right person to lead the necessary cultural transformation of Star Entertainment?”
Foster, who has stepped in as executive chair following the exit of chief executive Robbie Cooke, replied that he believed he was. It’s a precarious moment for Foster, who has stood aside in his other role as Bendigo Bank chairman to focus on the demands of Star.
There are at least five top executive roles sitting vacant, including a full-time CEO, head of Star Brisbane, a chief legal officer and key finance roles.
Foster, the one-time boss of Suncorp’s bank, is viewed with deep suspicion by the regulator for being too closely aligned with Cooke. Indeed Foster co-signed the damning criticism of the assessment into Star, he stood by his CEO while the regulator was trying to force Cooke out and exchanged spicy text messages about the regulator with the same CEO.
Foster said that with the benefit of time “I wished I’d put my phone down or not responded as quickly”.
But with Cooke gone – Foster terminated his former CEO’s six month consultancy last week – the executive chairman is walking a delicate path. He needs to be able to defend the interests of Star on behalf of investors while charming Crawford.
This is already off to a rocky start given the disconnect with what Foster has said in public about supporting the regulator, compared with privately talking about blowing up the NICC.
It is clear the decision now is not Foster’s nor Bell’s, but it’s all down to Crawford whether the chairman should stay on.
Foster told Bell he was keen to keep going in the role, was very focused and he believed he has a good relationship with Crawford as well as Star’s special manager, Nicholas Weeks. Importantly Foster said he needed to give Star a period of management stability.
Recruitment has begun, although uncertainty on the future for Star has slowed the process. Talks are under way with a potential CEO replacement and it is hoped this will come together quickly.
“I have seen how this journey needs to play out and I believe that I have a good handle on the business,” Foster told the inquiry. However at the same time he conceded the company is a long way from being considered suitable, with an extension likely needed to the appointment of special manager beyond the already extended deadline of September 30.
“I do obviously, regret and apologise for my comments and narrative and personal statements in the heat of the moment, but they certainly don’t represent my professional approach to this, which I’ve always maintained and believe in going forward.”
Cooke is due to appear on Wednesday.
johnstone@theaustralian.com.au
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