This week’s hearing before Commissioner Patricia Bergin’s gaming inquiry in NSW into media allegations against Crown Resorts is providing painful fodder for a case study on how not to do business in China.
In a tough two days of questioning, Crown executive Jason O’Connor, who was jailed for ten months in Shanghai in 2016 and 2017, finished by admitting that he had taken a Western view of the law in China – that Crown was acting within its legal rights right up to the arrest of himself and 18 other staffers in October 2016 – which was clearly a huge mistake.
“I have a slightly different view of the world now, given the benefit of hindsight and the experiences I have endured since then,” he said in one of the only oblique references to his jail term.
O’Connor claimed he relied on legal advice and sections of Chinese law which appeared to say that promoting gambling in China became illegal once it involved groups of at least ten people or more.
Receiving kickbacks and commissions for promoting gambling in China, he said, was also illegal.
But other than that, he insisted, until his arrest, he believed that what Crown was doing in China was legal there.
But his views were formed despite public statements by Chinese authorities themselves as well as market intelligence in gaming industry media that China was conducting a crack down on foreign casinos touting for business within its borders.
It was also formed against legal advice that Crown would not be successful in obtaining a license to do business in China because of its association with gambling, even if it just tried to hold itself out as just promoting access to upmarket hotels in Australia.
Two members of Crown’s own staff in China had been called in for questioning in by the police about what they were doing in China.
Crown opted not to have any formal offices in China, preferring to have their staff work from home, with the overflow from its visa application business being handled from another apartment in Guangzhou.
The inquiry has also heard of references in several emails to concern by the staff themselves over their situation in China.
Why anyone with any knowledge of China would seriously believe its legal system is the same as Western legal systems – and that, given very clear statements by Chinese authorities that they were cracking down on foreign casino operating touting for business in China – a foreign company could justify its behaviour on a legal technicality is questionable to say the least.
It is not enough to say that O’Connor, who was Crown’s Melbourne-based head of international VIP operations from 2011 to his arrest in October 2016 paid the price for his own misjudgements with his own incarceration.
He has he still has a job with Crown working on its new casino at Sydney’s Barangaroo but what has happened to the 18 other Chinese who were also arrested, most of them whom also did jail time?
In his evidence, O’Connor also makes it clear that as he heard the news about the crackdown on foreign casino operators in China, one of his concerns was to send a message up the line that his team would not be able to meet the sales targets set for the international VIP by his bosses.
The issue highlighted by the inquiry is the culture within the organisation which was pushing so heavily on getting big results from Chinese gamblers which included the collection of outstanding gambling debts.
Again it is not enough to focus, as O’Connor did, on the high spirited salesman approach of former Hong Kong based American educated staffer Michael Chen who left the company in 2017.
The directives about the push for more high rollers from China to gamble at Crown’s casinos in Melbourne and Perth came from the top - or at the least - would have been approved or endorsed by the board.
Clear from the evidence
For whatever reason, the inquiry covered events in some detail through to 2015 but when it came to signals coming from China in the months leading up to the arrests in 2016, it just didn’t go there at all in questioning O’Connor.
But what is clear from the evidence is that there are some serious questions to be asked why those at the highest levels at Crown didn’t see the serious potential risks of its staff in China.
It is not just a case of people not or apparently not wanting to pass the bad news upwards.
Anyone in the gambling industry who read a basic industry media monitoring service or who was au fait with Asian gaming issues would have known of what was going on in China from at least the beginning of 2015.
Commissioner Bergin’s report is going to make vital reading for the gambling industry around the world and uncomfortable reading for Crown executives and shareholders.
Bergin has made several references directly to a “robust approach to sales” within Crown at the time.
She suggested directly on Thursday afternoon that the push for “ramping up sales and getting the platform junkets going” could have been a factor in the risks associated with having staff on the ground in China “could have been overlooked at the time.”
The transcript, which will be put on the inquiry’s website, will make for ugly reading.
Just what Commissioner Bergin recommends in her report could set the tone for the regulation of casinos in Australia and will also be watched closely by regulators and industry players around the world.
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