Star CEO ‘rejected review findings’: bid to alter KPMG report

Star Entertainment chief executive Matt Bekier rejected KPMG’s independent review into Star’s money-laundering risk management, an inquiry has heard.

Star Entertainment Group CEO Matt Bekier has slammed KPMG’s independent report in the money laundering. Picture: Richard Walker

Star Entertainment chief executive Matt Bekier dismissed an independent review from KPMG that exposed “fundamental deficiencies” in the company’s anti-money laundering program, and a director asked if the consulting giant’s findings could be changed, an inquiry has heard.

The KPMG review, delivered to Star’s audit committee in May 2018, revealed Star failed to check the source of wealth of cashed-up Chinese gamblers participating in junkets at its flagship Sydney ­casino in a “timely manner”, and not at all in Queensland.

The independent review – which must be completed under anti-money laundering and counter-terrorism financing laws – found that Star also had a default low-risk rating for customers even if they brought hundreds of thousands of dollars into the casino.

The royal commission-style inquiry launched by the Independent Liquor and Gaming Authority in NSW heard the casino operator deliberately concealed more than $1bn worth of highly suspicious banking transactions, breaking anti-money laundering laws.

The company’s chief risk officer, Paul McWilliams, told the inquiry that Mr Bekier arrived at a “tense” audit committee meeting on May 23, 2018 where the KPMG review was discussed.

“It started with Mr Bekier arriving, he was last into the room, making a show and throwing onto the table what I assume to be this report – or the extract or an executive summary of this report – and saying ‘I haven’t seen this’,” Mr McWilliams said.

“And then the discussion was along the lines of … ‘how could the report be prepared in this way?’

“(Mr Bekier said) it contained multiple errors, that KPMG didn’t know what they were doing. (The meeting) was very tense. I certainly felt like I was under a lot of pressure … for putting up a report directors took such exception to.”

Mr McWilliams said Star non-executive director Richard Sheppard asked if the KPMG review – which included two reports, parts A and B – had been finalised and whether it was too late for it to be amended.

“Do you recall being aware around this time of criticism that was levelled at AMP during the Hayne royal commission for allegedly trying to have an independent report amended on the issue of fees for no service,” counsel assisting Caspar Conde asked Mr McWilliams. “And is it correct that you did not want to run the risk of similar criticism being levelled at you or anyone else at Star Entertainment?”

Mr McWilliams agreed that was correct. “We just confirmed the report was final and it was not open to be amended,” he said.

The inquiry heard KPMG submitted draft reports to Star in May 2018 and met with the company’s executive shortly after – but before the audit committee meeting – to discuss the review’s factual accuracy. It delivered its final reports two days later.

KPMG partners Jeff O’Sullivan and Alexander Graham were called to Star to be available to discuss their findings at the audit committee meeting. But they remained in a waiting room, Mr McWilliams said, with the chair deciding not to call the pair into the meeting.

At a subsequent meeting with KPMG, Mr McWilliams said Mr Bekier “wasn’t at his best”.

“It proved to be a difficult meeting. And it just presented as quite an unprofessional demeanour, of having brought in people from outside to try and address the specific concerns,” he said.

Mr Graham told the inquiry that Mr Bekier “berated” Mr O’Sullivan at that meeting. “I recall the CEO turning over pages (in the report) pointing to things saying, ‘this is wrong’, turning the page, doing that for a sustained period of time, and we try to understand what the specific points of what the CEO believed was wrong, and we just weren’t getting the details,” he said.

Mr O’Sullivan said: “The purpose of that meeting was for Mr Bekier … to provide us with feedback on the final reports that we had issued.”

“I recall the observations were of a general nature in relation to language usage in the reports. Mr Bekier made several references to not agreeing with elements of the reports.”

It was one of three meetings that KPMG had with Star management after it finalised its report to “clarify 22 specific aspects of the final report”.

Among other things, Star said its customers were junket operators – not the participants – and if a gambler brought a “very large amount of money” into the casino “that in and of itself doesn’t raise any special concern regarding money laundering”.

Star’s former head of internal audit Tanya O’Neil said: “We needed to address it in a way that protected the independence of KPMG. That was my primary concern.”

KPMG wrote to Star that it “can confirm that the findings and recommendations contained in both final reports remain valid”. It did not change its review.

Mr Graham described the client relationship with Star as “challenging”.

“We finalised reports and actually there are a number of issues which were raised, and there was a lot of challenge, provided by obviously a number of people on those issues,” he said.

“I’ve never been in a situation where we finalised reports and we’ve had to relook at issues.”

Star’s lawyer Kate Richardson SC highlighted an email Mr Graham sent to Star on July 25, 2018 in which he described meeting with the company’s management as “positive”.

“I didn’t have any positive meetings with the CEO,” Mr Graham said.

“But I had a positive meeting with the chair of the audit committee. And I think the context is probably important, given the fact that we had been through a very challenging situation … under extreme pressure on the 22 issues, which we have worked through.”

In a file note Mr O’Sullivan wrote: “Following the conclusion of the additional work undertaken to respond to areas of clarification, management demon­strated a strong appetite and commitment for the ongoing enhancement of the program.”

Mr McWilliams said Star began implementing KPMG’s recommendation and when he left Star in July 2019 he was not concerned that they would not be fully adopted. The inquiry continues on Wednesday.