Star Entertainment hit with second investor class action after $1bn blasted off market value
Shareholders in Star Entertainment allege the company engaged in misleading and deceptive conduct about its anti-money laundering program.
Shareholders of Star Entertainment have launched a second class action against the group, alleging misleading and deceptive conduct about its anti-money laundering program and after almost $1bn was wiped off the company’s market value in a single day.
The claim – filed by law firm Maurice Blackburn in the Victorian Supreme Court – centres on a 2018 audit report from KPMG, which identified several “deficiencies” in Star’s compliance process. The report stated there was “inadequate resourcing in place to operate the AML/CTF Program” and that its risk assessment system “does not consider terrorism financing as required by the AML/CTF Act”.
In March the Bell inquiry heard it was the same report that former chief executive Matt Bekier rejected at a “hostile meeting”.
After the allegations were made public in October last year, Star’s shares dived about 23 per cent, wiping almost $1bn of its market value.
“The proposed class action will allege that Star engaged in misleading and deceptive conduct; breached its continuous disclosure obligations; and conducted its affairs contrary to the interests of members as a whole in the period,” Maurice Blackburn said.
Star shares fell 2.7 per cent to $2.90 on Monday. This compared with a 0.6 per cent gain across the broader sharemarket.
Star chairman Ben Heap said the company will defend the lawsuit. “The claim is substantially similar to the separate securities class action filed by Slater & Gordon announced on March 30, 2022,” he said.
Star is fighting to maintain its NSW casino licence, which the state regulator suspended last month after an inquiry headed by Adam Bell SC found it flouted money laundering laws and disguised almost $1bn of gambling transactions on Chinese debit cards as hotel charges. It has also been fined $100m.
The inquiry also heard one Chinese junket, SunCity, was caught exchanging bundles of cash from backpacks for gambling chips in a gaming room known as Salon 95 at Star’s Pyrmont casino, breaching state casino and money laundering laws. But instead of banning SunCity, management moved them to a “secret” room.
In a bid to placate the NSW Independent Casino Commission, Star hired law firm Allen & Overy as a monitor to oversee its remediation. The NICC separately appointed Nicholas Weeks as Star’s manager to oversee operations during its licence suspension.
The company’s new chief executive Robbie Cooke also started at Star last month.
In its first report, Allen & Overy noted the remediation would need “significant investment of resources and funding”.
“Careful consideration should be given to the governance of funding prioritisation decisions; the use of external resources, and the need to build internal capabilities; and the organisational capacity to deliver and absorb change to mitigate the risk of burnout/turnover in key program and business roles,” the report reads.
Star has not disclosed the cost of implementing its 130-point plan to regain suitability, which includes hiring 53 staff in its “safer gambling, financial crime, risk and compliance” functions. That would take on 25 external financial crime specialists – lifting staff in that team to 56 people.
Despite querying several areas of Star’s remediation, Allen & Overy said “the program is sufficiently developed for the … board to consider commencing the execution phase”.
More Coverage
Revenue hits $2.5bn but Canva in no hurry to float
Visual communications company Canva has topped $2.5bn in annual revenue and has 200 million users but co-founder Cliff Obrecht says that doesn’t mean there’s any hurry for an IPO.
Whyalla steelworks losing $1m a day but Gupta’s defiant
Sanjeev Gupta says his broader business has been propping up the Whyalla operations to the tune of $1m a day which is a sign of the commitment he has to the South Australian steel town.