NSW casino inquiry: Crown chief Ken Barton ‘lacks reform will’

Crown chief executive Ken Barton is under intense pressure to resign, while Crown could be forced to sell its new Sydney resort.

Crown Resorts chair Helen Coonan and CEO Ken Barton. Picture: David Geraghty.

Crown chief executive Ken Barton is under intense pressure to resign, while Crown could be forced to sell its new Sydney resort and billionaire James Packer dramatically sell down his stake in the gaming giant after a damning report found the company is not currently suitable to operate its $2.2bn casino at Barangaroo.

In a report that could send significant reverberations to Crown’s flagship casino in Melbourne – the biggest single site employer in Victoria – Commissioner Patricia Bergin SC has recommended an overhaul of the company’s board and management, among other measures, if it wants to hold onto its Barangaroo dream.

“If Crown is to survive this turmoil and convert itself into a company that can be regarded as a suitable person and achieve the same for the licensee, there is little doubt that it could achieve a fresh start and emerge a very much stronger and better organisation,” Ms Bergin said in her report.

“The Authority would understand that many of the problems that rendered the Licensee and Crown as unsuitable, stem from poor corporate governance, deficient risk management structures and processes and a poor corporate culture.”

That revival will hinge on a clean out of Crown’s management, starting with Mr Barton, with Ms Bergin declaring that the NSW Independent Liquor and Gaming Authority (ILGA) “cannot have any confidence in dealing” with him.

She said Mr Barton maintained a “totally inexplicable” approach towards money laundering risks and ILGA would be “justified” in declaring it had no confidence in him as chief executive.

“Mr Barton has demonstrated that he is no match for what is needed at the helm of a casino Licensee or a close associate of the Licensee. His problems will not be cured by the appointment of people expert in the field who report to him,” she said.

Other directors who should resign if Crown is to have any chance of becoming suitable, according to Ms Bergin, include nominee director Michael Johnston and independent director, former AFL chief executive, Andrew Demetriou.

She also recommended Harold Mitchell also step down as a director if a civil penalty or declaration is made against him in relation to the “minor breaches” he was found to have made as director of Tennis Australia.

All remaining directors should undergo appropriate anti money laundering training every year.

Ms Bergin also recommended Crown undertake a full and wide-ranging forensic audit of all accounts for signs of money laundering, and called for the end of Mr Packer and his executives’ control of the company - or “remote manoeuvring”

She said these efforts should be tracked through the appointment of an independent agent retained by the authority at Crown’s cost.

In a short four-sentence statement released late on Tuesday afternoon, Crown’s board said it was “considering the inquiry report” and “will work with ILGA in relation to the findings and recommendations”.

Crown may be forced to sell its harbourside site in Sydney. Picture: Flavio Brancaleone

Victorian regulators have been watching the NSW inquiry closely. At stake is also Crown’s Melbourne licence after the Victorian Commission for Gambling and Liquor Regulation announced in December it was bringing forward its review into Crown’s Southbank casino forward by three years, citing the explosive revelations around the NSW Bergin inquiry, including evidence of money laundering.

Ms Bergin recommended a shakeup of the NSW gaming industry via the formation of an Independent Casino Commission (ICC), which would have the powers of a royal commission, and the Casino Control act be amended to limit people owning more than 10 per cent of a casino operator in NSW.

This would mean Mr Packer would be forced to sell down his 36.7 per cent stake in the company unless he receives approval from the new casino regulatory body.

The finding represents a heavy business and personal blow to Mr Packer, who had conceptualised the Barangaroo casino as a capstone achievement for his company and the realisation of a decades-long ambition.

At Crown Resorts’ current market capitalisation, which has been depressed by COVID-19 related interruptions to its operations, Mr Packer’s stake is worth around $2.3bn.

While Ms Bergin was damning of Mr Barton and his predecessor John Alexander, who was also the company’s chairman, she was more upbeat on current chair Helen Coonan, who was appointed in January last year.

She said Ms Coonan “has demonstrated the qualities that are necessary to have taken her into the leadership role of Crown and is exquisitely aware of the depths of the problems within the company of which she is now chairman”.

James Packer may have to sell down his stake in Crown. Picture: Aaron Francis

“The review of the chairman‘s evidence demonstrates that her character, honesty and integrity has not been and could not be called into question.”

“Ms Coonan accepted the serious corporate failings of Crown and notwithstanding those corporate failings is willing to, as she put it, stay the course. That commitment in the circumstances of the evidence that was exposed during the course of this Inquiry is no small matter. The burden of reformation will be great.”

Ms Bergin also recommended that each casino in NSW should be barred from dealing with gambling promoters - or junkets - and should have an ICC approved auditor perform annual compliance reports.

Ms Bergin’s report marks the close of a gruelling 18-month inquiry that began following media reports that alleged Crown turned a blind eye to money laundering and ignored risks posed to staff in China who were later arrested for breaching local gambling promotion laws.

The inquiry was also prompted by Mr Packer’s attempted sale of 19.9 per cent of his shareholding in Crown to Macau gaming magnate Lawrence Ho’s Melco Resorts.

Half the sale was completed before it was discovered that Mr Ho’s late father Dr Stanley Ho - who was forbidden from taking an interest in Crown under its restricted gaming licence in NSW - held an interest in Melco through a complex trust arrangement.

Ms Bergin ultimately determined that the sale did not breach the conditions of the restricted gaming licence.

Melco later sold its 9.99 per cent interest in Crown to private equity group Blackstone.

Over the course of 2020 Ms Bergin interviewed more than a dozen witnesses, including Mr Packer as well as current and former board members and executives.

The often contradictory and off-beat evidence given by some witnesses turned the inquiry into a media spectacle.

At the close of the inquiry, counsel assisting had recommended Ms Bergin find Crown Resorts to be an unsuitable associate or licensee of the Barangaroo casino due to a “culture of denial and arrogant indifference to regulator compliance.”

It was argued this applied to the fields of money laundering, risk reporting, and through association with international gambling promoters – or junkets – with known organised crime links.

It was also argued that Mr Packer was not suitable to be associated with Barangaroo Sydney, and that he acted as a “de facto director” of the company after leaving the board in 2018, with his “powerful personality”creating a profits-first culture that encouraged rule bending and had a “deleterious” impact on the company.

The inquiry’s revelation that Mr Packer sent serious threats to private equity figure Ben Gray in 2015, over a take-private plan that fell through, was also used to argue for his unsuitability.

The exact nature of the threats were not made public - as they were discussed during a closed session of the inquiry in October - but Mr Packer admitted his actions were “shameful” and “disgraceful.”

Counsel assisting recommended numerous remedies to Mr Packer’s influence, the most prominent being that Mr Packer not exercise more than 10 per cent of his voting power, and that his private company CPH only have one nominee director sit on Crown’s board instead of the current three.

Despite Mr Packer telling Ms Bergin “I think caps on shareholders may be something that you will think about,” Crown’s legal team pushed back against these recommendations.

The company did however concede to counsel assisting’s recommendations that it no longer share confidential financial information with CPH and Mr Packer under special protocols and to cease having CPH directors take on executive roles.

It also pledged to no longer deal with junkets that are not cleared by regulators where it operates, by overhauling its anti-money-laundering compliance system and by undergoing a process of board and executive renewal.

Australian Resorts CEO Barry Felstead has left the company, as has CLO and anti-money laundering officer Joshua Preston after damning evidence emerged regarding their approach to risk management in the field of China operations and money laundering respectively.

Independent director Professor John Horvath stepped down of his own accord after Mr Packer’s stake saved him from being voted off the board at the last AGM.

ILGA chair Philip Crawford said the authority would consider Ms Bergin’s report at a special meeting on Friday, and then at its regular monthly meeting next Wednesday.

Mr Crawford said it was “critical that the management and operation of casinos in NSW are free from criminal influence or exploitation”.

“The report is detailed and complex. It will take time for the Authority to give it proper consideration before determining the most appropriate course of action,” Mr Crawford said.

“It is not appropriate for the Authority to comment on any of the report’s findings or content until this process is completed.”