Crown Resorts probe has high stakes

James Packer’s sale of shares in Crown Resorts to his former business associate, Lawrence Ho, last year has shone a broader spotlight on the sensitive issues around why 19 Crown casino executives were arrested in China in 2016, which could raise uncomfortable issues for the company.

In the bluntest possible terms, counsel assisting the inquiry Naomi Sharp QC said the inquiry under the NSW Casino Control Act, before former NSW Supreme Court judge Patricia Bergin, would be looking at “the circumstances around the October 2016 Chinese arrests” in its review into whether Crown is still a suitable entity to own a casino licence in NSW.

While the Victorian gaming regulator, which supervises the licence of Crown’s casino in Melbourne, has been making a similar investigation into the circumstances around their arrest of the Crown employees in China, its long-running review has been conducted in private with no indication on how detailed its review is being, when it will finish and what, if anything, it will make public when it is over.

Plenty of time has passed since the arrest, jail terms and release of the unfortunate Crown staff members who were released in July and August 2017 after pleading guilty to illegally promoting gambling in China.

It was clear from the opening statement of counsel assisting the inquiry on Tuesday that the scope of the review will be broader than many would have expected.

The big difference from closed inquiries by regulators in other states or even media allegations against Crown made last year that the company strenuously denies, is that this inquiry will be held in public with Commissioner Bergin given all the powers of a royal commissioner.

The inquiry will be calling on Packer, several Crown executives including Crown CEO John ­Alexander, as well as the Hong Kong-based Ho to give evidence in what could prove to be the most broad-ranging public review ever of the group’s operations.

What started out as a look into whether Ho is a fit person to own a stake in or be associated with Crown, under the terms of its restricted gaming licence in NSW for its high-roller casino in Sydney, given the long-running allegations that his 98-year-old father, Stanley Ho, has had links with triads, is now going to be roaming the globe.

It will look at the regulation around junket operators in Macau and Las Vegas and into some key events in Crown’s history, including how its employees came to ­violate the law in China where gambling has been banned for decades.

The NSW inquiry was officially triggered by the sale of shares in Crown last year by Packer’s family company, CPH Crown Holdings, to Ho’s Melco in a deal struck in May last year potentially worth $1.75bn for Melco to buy a 19.9 per cent of Crown.

The sale of the first tranche of shares, representing about 9.99 per cent of Crown, was done without the notification or approval of the NSW Liquor and Gaming Authority.

Ho has signalled he wants to buy the other 10 per cent of Crown and maybe more, as well as appointing directors to the Crown board, but he has held off pending the outcome of the inquiry.

The second major issue to be examined is the allegations made by Nine media outlets against Crown, including whether people had used Crown for money-laundering, and its links with junket operators in Macau.

But Sharp’s comments make it clear the inquiry will also be dialling back to events leading to the 2016 arrests in China.

In words that could be understood by any schoolchild, Sharp stepped through the series of events in China that led to their ­arrest, effectively raising the question that has been asked by many — why did Crown have staff in China promoting its facilities in Australia at a time when not only was gambling strictly banned in China, the new administration of President Xi Jinping, who took over in late 2012, was involved in a major crackdown on corruption?

As she pointed out, not only is gambling illegal in China, there were specific new laws banning the promotion of gambling in China. China’s Ministry of Public ­Security had held a press conference in February 2015 to announce a crackdown on the operations of overseas casino operators that had established representative offices in China, which she said Crown had admitted it knew of.

In June 2015, Chinese authorities made good on their threats, arresting several employees of South Korean casino interests who were working in China — again a fact that Crown has acknowledged it knew about.

As she went on to outline, Crown’s then head of international marketing, Michael Chen, responded to events by sending an email to some Crown employees, including those in China, that he had been given legal advice that Crown’s activities in China did not violate any known laws in the country as, among other things, the employees operating in China were not taking commissions.

Clearly, Chinese authorities thought differently, with dawn raids in four Chinese cities — Shanghai, Chengdu, Beijing and Guangzhou — in October 2016 that arrested the Crown staffers.

Those arrested included Melbourne-based Crown executive Jason O’Connor, who was in Shanghai on a business visit.

While three were released on bail and not fined, the other staffers ended up pleading guilty to ­violating Chinese anti-gambling laws before their release after nine months in jail (and 10 for O’Connor), with Crown agreeing to pay their fines worth more than $1.7m.

As Sharp asked pointedly: “One question is whether this (the work being done in China by Crown staffers) was done in known violation of Chinese law.”

She note that all the staff involved had since been laid off except for O’Connor.

This is a wholly different area of inquiry than the expected review of Ho’s potential financial links with his elderly father.

Crown activities in China were nothing to do with Ho, as they were aimed at attracting Chinese high-roller visits to Crown’s operations in Melbourne and Perth, and not to Packer’s then joint venture with Ho in casinos in Macau.

As Bergin said on Tuesday, the inquiry had already put together a data base of some 58,000 documents — another sign of its broad-ranging nature.

She also made it clear in her comments that she didn’t want the inquiry to get involved in any narrow legal debates around what may or may not constitute money-laundering in casinos.

The inquiry is set to take several months and, with an open call to the public for submissions, could cover other unexpected areas. It resumes on February 24.