James Packer admits to ‘failure in compliance’ at Crown

James Packer has admitted Crown’s decision to run an unlicensed business in China out of an unofficial office was ‘a significant failure in compliance’.

James Packer gives evidence before the NSW Casino Inquiry via video link. Picture: Supplied

James Packer has admitted Crown Resorts’ decision to run an unlicensed business in China out of an unofficial office — of which he had no knowledge ahead of the ­arrest of its staff there in October 2016 — was “a significant failure in compliance”.

Appearing at a public inquiry into Crown being conducted by the NSW gaming regulator, Mr Packer said he was unaware that Crown was running an unofficial office for its staff in Guangzhou.

Former Crown chief executive Rowan Craigie has previously told the inquiry the “unofficial” office was an attempt to disguise Crown’s presence in mainland China, where gaming is illegal.

At the time, the Beijing government was cracking down on foreign casino operators looking to lure its mainland citizens offshore to gamble.

Mr Packer admitted the operation of the unofficial office was “a significant failure in compliance”. But the inquiry’s commissioner Patricia Bergin went further, suggesting it went to the ethical failure of the public company, to which Mr Packer accepted “that it’s a ­serious failure”.

But the billionaire denied any knowledge of legal advice received by Crown that was interpreted by management to mean they would not be breaching any laws if they conducted business in the region but did not “conduct an office”.

When asked if it was his understanding that in the period to ­December 2015 Crown did not have any offices in China, Packer said: “I can’t recall”.

But Mr Packer later noted: “I believed that Crown had legal advice that what the were doing was legal.”

Crown has previously denied that any of its staff breached Chinese laws before they were arrested for alleged gambling crimes and it has rejected any suggestion it had knowingly exposed its staff to the risk of detention.

Noel Hutley SC speaks during the NSW Casino Inquiry.

The gambling giant is still facing a class action in relation to the Chinese arrests, which resulted in its share price diving almost 14 per cent, wiping more than $1.3bn from the company’s market value.

The arrests and Crown’s business strategies in China have been considered by the inquiry as having relevance to its fitness to retain its Sydney licence, especially if the company knowingly broke Chinese laws, or was reckless or indifferent about the issue.

Emails tabled at the inquiry, sent to senior Crown executives by the company’s staff in China, described them as “living in constant fear” of being arrested there.

The inquiry has also heard that senior executives in Crown’s VIP team and Crown director Michael Johnston, who is also a director of James Packer’s private company Consolidated Press Holdings, decided not to tell Mr Craigie and the board that the Chinese government had launched a crackdown on foreign casinos in early 2015.

It has also been revealed that two Crown staff in China were questioned by Chinese police in July 2015, when one was accused of organising people to gamble in Australia.

Crown’s Australian Resorts chief executive, Barry Felstead, then authorised the Chinese authorities to be sent a letter confirming the staff member worked for Crown, but the letter made no mention of Crown being a gaming company.

Mr Felstead admitted that neither Mr Craigie or the risk ­management committee of the Crown board was told about the interrogation of Crown’s staff or the letter provided to the authorities. He only informed Mr Johnston about the issue and was unaware if Mr Johnston told his fellow directors.

The inquiry has also been told about a proposal in 2015 for Crown to apply for Hong Kong and Singapore work permits for all of its Chinese staff who did not hold foreign passports.

The rationale was that it would allow them to evade the local authorities by saying they were working out of an overseas location and on business travel in China.

In his evidence to the inquiry last week, Crown director Guy ­Jalland described such a proposal as “stupid”.