Star Entertainment’s CFO Harry Theodore engaged in unethical and deceptive behaviour, misled Beijing
Harry Theodore admits to a failure in his leadership and ultimately misleading the Bank of China in dodgy debit card saga.
Star Entertainment’s chief financial officer Harry Theodore has conceded he engaged in unethical and deceptive behaviour – ultimately misleading the People’s Bank of China – over the use of Chinese debit cards at the casino group.
In his second day of giving evidence at a royal commission-style inquiry into Star’s fitness to hold a NSW casino licence, Mr Theodore admitted to a failure in his leadership over Star’s practice of disguising almost $1bn worth of gambling transactions on Chinese debit cards as hotel charges.
On Friday – Mr Theodore said he was “considering” his position at The Star after sources with direct knowledge of discussions told The Australian his resignation plans had been communicated internally – was accused of not being truthful and “making things up”.
On Monday, Mr Theodore said responses that Star sent to its bank, National Australia Bank, to forward to China Union Pay about the transactions – which used entertainment as a euphemism for gambling and “integrated resorts” for casinos – was “highly improper” and “should not have been sent”.
The responses concealed that the transactions were used to buy chips for gambling – which is illegal in China – and instead stated the funds were used on accommodation services and VIP activities such as jet travel, jewellery and cruises.
But Mr Theodore told on Monday that it was gambling that paid for those VIP services, given the cashed-up Chinese gamblers were on rebate programs.
And he said NAB knew the debit cards were being used for that purpose, despite the bank repeatedly asking Star for confirmation to forward to China Union Pay that the cards were not being used for gambling.
Inquiry head Adam Bell SC asked Mr Theodore if that meant that “officials at the National Australia Bank were co-operating” with Star to mislead the People’s Bank of China.
China’s central bank had become concerned the CUP cards were being used for gambling after observing some individuals had swiped up to $20m in one stint at Star’s Pyrmont casino.
“I didn’t think it was misleading the People’s Bank of China,” Mr Theodore said.
“This was a service that had been in place for six years and understood in the board industry context. I believe that there was knowledge it was being used for gaming.”
But Mr Theodore conceded he did not know for certain that China Union Pay knew that the cards were being used to fund gambling at The Star.
Mr Bell asked if the responses to NAB translated to a failure of leadership on Mr Theordore’s part. Mr Theodore agreed.
“(The response) was rushed, it was poorly considered. And I think that just contributed to a bad result in terms of what was sent.
“We should have ceased the (China Union Pay) service at this point.”
Mr Bell asked Mr Theodore – who is a close associate on The Star’s NSW casino licence – if he engaged in unethical behaviour.
“On reflection, yes,” Mr Theodore replied, agreeing it was also deceptive.
But counsel assisting the inquiry Naomi Sharp SC said how could the response to NAB have been “poorly considered” when Mr Theodore reviewed it with chief legal and risk officer Paula Martin and group counsel Oliver White.
“Yes, I agree. All three of us reviewed it.”
Ms Sharp said: “And it was not a one off instance of misconduct but rather a systemic attempt to mislead over a pattern of many months.”
Mr Theodore denied it was a systemic practice. He maintained there was a “tacit acceptance” from China Union Pay that the cards could be used for gambling. Ms Sharp said that was “a load of rubbish”.
“No, Ms Sharp, what I had observed in various international markets that it was well known that the cards are used in this way,” Mr Theodore said.
Ms Sharp accused Mr Theodore of having a “lack of judgment that continues to this day”, while Mr Bell said his conduct was not appropriate of a “close associate” of the casino licensee.
“Mr Bell, I accept my conduct is not appropriate,” Mr Theodore said.
The inquiry continues.
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