‘Potential conflict’ between states in Crown Resorts’ corporate structure
Crown Resorts’ formal legal chief has told a royal commission that state-based casino agreements can ‘potentially’ create a conflict of interest for the company.
The former Chief Legal Officer of Crown Resorts has told a royal commission there is a “potential” conflict of interest within the corporate structure of the James Packer-backed company due to the competing agreements it has with the WA and Victorian governments.
Perth-based Joshua Preston - who also held anti money laundering compliance roles across the group - also told the WA royal commission into Crown Resorts on Monday that Crown Perth’s local independent directors had no practical ability to block decisions pushed by the parent company.
The commission heard that a clause in the agreement between the WA government and local Crown casino licence holder Burswood Nominees required the company’s “head office” to “always be located in Western Australia”.
It defines “head office” as “the place of business of the Company where central management and control are exercised” – but counsel assisting Michael Feutrill SC noted that Burswood Nominee’s directors mostly had executive management positions at the broader Crown company.
“In your view, was central management and control of Burswood limited exercised in Western Australia?” Mr Feutrill asked Mr Preston.
“Yes,” Mr Preston replied.
“There are group roles that cross the borders and others are domiciled over east, but from my perspective central management of Crown Perth is from Perth.”
However, Mr Feutrill said Crown Resorts’ casino agreement with the state of Victoria also requires it to locate the head of its gaming business in Melbourne.
It also stipulates Crown’s casinos, no matter where in Australia they are located, “promotes tourism, employment and economic development generally” in Victoria.
“Did it occur to you after you … that there was a potential for there to be a conflict between the interests of Burswood Limited on the one hand and the interests of Crown Melbourne on the other?” Mr Feutrill asked.
“Potentially,” Mr Preston replied.
“If Crown Perth was to become a larger, higher-scale property than Crown Melbourne, that would be something that had potential of being an issue.”
Crown’s agreement with the state of Victoria has been a major issue for a Victorian royal commission into the group.
Its commissioner, Raymond Finkelstein, has indicated it might not be possible for the owner of Crown Melbourne to own competing gaming assets in Australia – raising the prospect of a forced break-up.
Last week counsel assisting the WA commission said it would examine whether the Victorian agreement functions to the disadvantage of the state.
On Monday Mr Feutrill implied that Crown Perth’s byzantine corporate structure compromised its ability to work for the benefit of WA as the casino’s independent directors had little power.
Decisions concerning Burswood Nominees are made by the board of the superior company, Burswood Limited, which has always had two independent directors and three Crown-aligned directors.
Additionally, decisions were legally implemented on the Burswood Nominees level, which was controlled by Crown-aligned officers, meaning it could in theory legally act independently of the higher board.
“If the two independent directors disagree on a particular cause of action, it will not prevent Burswood Nominees from undertaking that activity,” Mr Feutrill said.
“What say, really, did the independent directors actually have in the operation of Crown Perth?”
“In theory, they were involved in all of the discussions, but technically speaking if the Burswood Nominees directors did not wish to adopt a position that Burswood limited had, they were entitled to. That could happen” Mr Preston said.
It was also heard that Mr Preston was not aware of a stipulation that Burswood limited extend invitations of board meetings to the WA state regulator, the Gaming and Wagering Commission.
Mr Preston departed Crown after 14 years of service at the end of last year after the NSW Bergin Inquiry criticised him for not doing enough to tackle indications of money laundering occurring through company accounts.
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