As commissioner Patricia Bergin SC begins what appears to be the final week of her hearings into the suitability of Crown Resorts to hold a casino licence in NSW, she faces major challenges.
Despite the revelations of board members who appeared to be more answerable to major shareholder James Packer than the board itself, who claimed to know little about some key events in the company, who clearly had no concern about Packer’s plan to sell shares to Lawrence Ho and potential money laundering, Bergin is critically aware of the constraints on her inquiry despite months of uncomfortable revelations.
As she spelled out on Thursday when talking with Packer, who was beamed in from his luxury yacht in the Pacific, Crown has a unique casino licence in NSW which gives it extraordinary powers in relation to the casino regulator in the state, dating back to very different times in 2013.
As Bergin told Packer, the deal that Crown negotiated with the NSW government under former Liberal premier Barry O’Farrell as a result of an “unsolicited proposal” by Crown was one which “could only be seen from your company’s point of view as an extraordinarily successful outcome for the company”.
Under the deal, as the former NSW Supreme Court judge told the inquiry, the only way to change any of the terms and conditions of the licence is with the express consent of Crown itself.
Just in case he didn’t pick up her line of questioning, she followed up, spelling out that “the legislation that was enacted at the time you were the successful applicant or bidder, imposed a restriction on the regulator that the regulator could not amend the licence without the agreement of the licensee.
“Have you ever experienced such a legislative provision anywhere else in the world?” she asked.
Packer replied that such an agreement was aimed at giving Crown certainty about the tax rates it would need to pay before it spent large sums of money building the hotel/casino complex at Barangaroo, which is still due to be open in December.
But what Bergin has been homing in on is ways to amend the licence to provide conditions about the influence of major shareholder Packer (or any other ones) on the company’s actions, the continuation of Packer’s controlling shareholder agreement with the board, controls on money laundering at the casino — including potentially reporting money laundering concerns to the regulator as well as Austrac — controls on associations with junket operators and unscrupulous people and other measures needed to ensure the strengthening of Crown’s corporate governance.
Bergin could be free to find that governance issues around Crown as evidenced by past behaviour — and the lack of concern over one key part of the licence about associations with the late Stanley Ho — means that the company itself was simply not suitable to hold a casino licence in NSW.
But there are also reportedly strict conditions in the licence which could see Crown liable for significant compensation if NSW changes the conditions of the licence.
Chances are that Bergin will recommend conditions to the licence that will make the company change its ways and comply with certain conditions which could make it suitable.
She could name certain people associated with Crown including some executives as unsuitable to associates of the Sydney casino.
Bergin clearly wants to see much better and more open direct conversations between Crown and the NSW casino regulator over money laundering, including having a process whereby its anti-money laundering compliance activities, as she said, “would be separate from the profit-driving or profit-making aspects of the company”.
It looks as if she will also recommend stricter regulations over the operations of junket operators in NSW.
She could go as far as recommending they be banned in the state.
While Bergin looks set to deliver a report which provides a damning indictment of many Crown practices, including questioning the independence of some directors and its seriousness about going ahead with new internal controls in areas such as money laundering, the question is how free — legally — the state is to impose any new conditions on the licence.
It is one thing for Packer to try to flatter Bergin by saying that he and Crown are paying close attention to the concerns of the inquiry and its comments and potential recommendations.
It’s a “sorry and we’ll never do it again, Ma’am” argument.
But while Packer could agree to sell down his 36 per cent shareholding in Crown, he cannot bind the company itself.
Even with the company professing contrition and claiming that it is changing its ways, Bergin knows that her inquiry will be worthless unless the Crown of the future can be held to new conditions by the regulator, and in a transparent way.
The assurances that can be expected from chairman Helen Coonan during what could be the final days of the hearings — that the company has changed its ways and will dutifully respond to the concerns raised in the inquiry — will not be good enough, given Crown’s behaviour over the past few years under review.
Even if Packer himself sells down, what is to say that some future major shareholder including private equity investors will not pressure the board to do whatever it takes in future to maximise Crown’s profits from Barangaroo with minimal concession to the state’s regulations?
The inquiry is already highlighting major failures of culture in broader corporate Australia, including independent directors who apparently don’t know what is going on in their company and a directorship culture that can see some non-executive directors spend only two or three days on an ASX-listed company, including when they are chairing some key committees.
Monday will hear from Crown director and former AFL chief executive Andrew Demetriou, to be followed through the week by Crown director Antonia Korsanos, former Crown director and Qantas chief executive Geoff Dixon (still listed on the ASX website site as a director of Crown), current Crown director and former secretary of the federal Department of Health, Jane Halton and director John Horvath.
But while these will provide some good media copy, the key and potentially final witness will be Coonan herself, an experienced lawyer, a former NSW senator and federal minister who took over as chair of Crown in January.
If her history with Packer is any guide, Bergin will use her role on the bench to get Coonan herself to spell out her suggestions for restructuring Crown and possibly go as far as getting her to commit while under oath to actually agree to make changes to Crown’s practices and the conditions of the licence.
Some listening into the hearing in recent days wondered why Bergin raised the issue of Crown’s special conditions in its licence to allow smoking in some sections of the Barangaroo casino.
Why indeed?
Seven years on from the agreement, the idea of gambling dens full of smoke-filled rooms is no longer a good look, despite the assurances by Packer that the casino has state-of-the-art airconditioning systems.
“This was negotiated seven years ago and things have changed in NSW,” Bergin noted.
So they have for Crown.
It was seven years ago that Packer appeared to be telling the NSW government that his unique ties with Asia could bring in millions of dollars in extra revenue from high-rolling Asian gamblers — dollars which would be in addition to those brought in by existing casino operator Star.
As it emerged from Packer’s testimony, even back then Crown was actually only planning on getting a third of its earnings before tax from Barangaroo from international VIP gamblers.
With new concerns over money laundering, dealing with junket operators, no further ties between Crown with Melco’s operations in Macau and increasing sensitivity in China about gambling, Barangaroo’s rivers of gold for the NSW government now look questionable to say the least.
Just as times were very different seven years ago in NSW around smoking, times are different today around many other issues surrounding the Barangaroo casino, including concerns over money laundering and corporate governance and revenues from international high rollers.
Time to amend the agreement itself, is it not?
Bergin has already succeeded in lifting the lid on Crown’s internal processes and Packer’s influence on the company.
But strong words and recommendations for change in a report to be delivered after Crown opens its doors won’t be enough.
Bergin’s efforts will be for nought unless she can get Coonan herself — on the video link stand — to agree to amend the licence.
Packer is sailing away from Crown, but Coonan is the one who needs to be held to account for its future behaviour.
The final week will make compelling watching, and you can do it for free from the comfort of your own home.
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