Star Sydney licence suspended, external manager appointed

The gaming giant will have to pay a $100m fine, but the NSW casino commissioner says closing the venue altogether would have seen thousands of workers sacked overnight.

Star Entertainment will pay a $100m fine and have its Sydney casino licence suspended – but the venue will continue to operate with an external manager appointed.

Star shares entered a trading halt on Monday, with the NSW casino regulator, Philip Crawford, saying it was in “the public interest” for external management to be appointed.

Mr Crawford, the Independent Casino Commission chief, said the letter from Star chair Ben Heap likely saved the licence and said the casino “was aware of the gravity of the findings of the Bell review”. Mr Crawford said tearing up the licence altogether would have seen thousands of Star workers sacked overnight.

In September, an independent inquiry concluded that the gaming giant – with a string of casinos and a market value of more than $2.6bn – had set up an “inherently deceptive and unethical process” ­disguising more than $900m as hotel expenses to allow wealthy gamblers to bet at the ­venues, failed to check the source of the money ­– and knew for years it was in breach of the rules.

The investigation conducted for the NSW regulator by Adam Bell SC identified systemic governance, risk and cultural failures at the Sydney ­casino. It included 30 recommendations on how the operation should be reformed.

Star had been awaiting the final recommendation from the Independent Casino Commission, last week fast tracking the arrival of its new chief executive, Robbie Cooke.

Star Entertainment will pay a $100m fine and have its Sydney casino licence suspended, but the venue will continue to operate with an external manager appointed. Picture: NCA Newswire/Gaye Gerard

Investors expected the company – which opened its Pyrmont casino in 1995 and now employs 8000 staff there – to keep its operating licence.

Analysts at Macquarie, in September, told clients: “The outcome of unsuitability to hold a NSW casino licence is not a surprise, but we would have liked to have seen a clear pathway to meet suitability.” “We also suspect monetary penalties, up to $100m, and a special manager appointment,” the investment bank’s brokers wrote.

However, some of the company’s larger shareholders have become increasingly concerned about the size of a fine – and the impact of other conditions – to be handed to Star in exchange for allowing it to keep its casino licence.

In late September, Star’s auditors at Ernst & Young warned the company faced “material uncertainties” due to potential disciplinary action from the Independent Casino Commission.

The group also faces a potential large fine from the financial crimes regulator Austrac over ­“serious noncompliance” with anti-money-laundering and counter-terrorism financing laws.

Each breach attracts a penalty of up to $22.2m. Austrac has previously fined Westpac and Commonwealth Bank $1.3bn and $700m respectively over similar issues.

“Significant adverse outcomes in relation to these matters may result in the group not being able to continue as a going concern unless the group continues to have the support of its lenders,” wrote Ernst & Young partner Megan Wilson.

Star said it was in contact with its lenders and would “seek additional waivers or amendments if required”, like it did during the onset of the pandemic.

A Star spokesman declined to comment.

The company has already recorded a $162.5m write down off the value of its flagship Sydney casino, despite revenue rebounding to pre-pandemic levels in the past three months.

The writedown pushed Star to report a $198.6m statutory loss in the year to June 30.

Revenue dipped 1.2 per cent to $1.53bn as pandemic shutdowns earlier in the year hit operations in NSW and Queensland.