James Packer: Time to sacrifice the king to save the Crown
Packer is now a far cry from the man who charmed and bullied his way into corridors of power after his father’s passing. And he knows it.
“You only ever get one Alan Bond in your life and I’ve had mine,” the late Kerry Packer famously said of the late Perth tycoon, who bought his beloved Nine Network in 1987 for $1bn and sold it back to Packer three years later for one quarter of the price.
Twenty years later, his son James talked private equity giant CVC Asia Pacific into paying more than $5bn for Nine and ACP magazines, a deal now part of Australian business folklore.
In 2015, James Packer’s Alan Bond moment loomed when another private equity group, TPG Capital, was in talks to help privatise his 53 per cent-owned gaming company Crown Resorts.
The deal would have fulfilled Packer’s long-held dream to take his company off the sharemarket, out of the public spotlight.
Coupled with its shareholding at the time in Lawrence Ho’s Melco Crown Group, with its assets in Macau, The Philippines and its future in Japan, Crown would have been a global gaming powerhouse.
Packer met in November 2015 in Los Angeles with TPG’s global principal, David Bonderman, who he knew previously, including from his days on the board of Qantas when TPG backed a privatisation of the airline that ultimately failed. But the meeting did not go well.
TPG’s then Australian boss Ben Gray, who organised the meeting with Bonderman, was no Alan Bond.
Packer and his then chairman Robert Rankin wanted TPG to provide $1.5bn for the deal. Gray countered with a mere $400m pledge, subject to due diligence.
Packer, who was already on edge after a bitter battle with his sister Gretel over the family fortune and caught in a soon to be doomed romance with music diva Mariah Carey, lost it.
As was revealed in devastating detail before the NSW government’s inquiry into Crown this week, Packer sent Gray a series of emails that he will now regret writing for the rest of his life.
While they were never tendered before the inquiry, they boasted of Packer’s connection to Israel Prime Minister Benjamin Netanyahu and threatened to put Israeli intelligence unit Mossad — specifically its boss and then Packer’s friend Yossi Cohen — onto Gray.
The businessman was so concerned he hired former Australian Defence Force personnel for a time to watch over himself and his family.
Yet it was a mere shadow of the catatonic figure that fired off the threats to Gray back in 2015 who meekly admitted before the inquiry on Tuesday afternoon that they were shameful, disgraceful and totally unsuitable for a director of a casino company.
With every word Packer uttered you got the sense that he knew the company at the centre of his world for the past 22 years might have to go on without him. The reality for the 53-year-old James Douglas Packer is that after suffering three nervous breakdowns and what he acknowledged for the first time this week is bipolar disorder — for which he is being treated with powerful medication — he will now judged by the sins of his past and the brutal reality of the present.
Personal struggles
The lows of his current mental state were on raw display for the world to see on Tuesday when he beamed into the inquiry from an office onboard his luxury yacht. He was sweating, his eyes were glazed and he spoke slowly.
Such is the nature of his condition, the next two days he looked sharper, wore spectacles and showed more of the spirit he has long been known for.
But Packer is a far cry from the man who charmed and bullied his way into corridors of power around the globe in the decade after his father’s passing on Boxing Day 2005. And he knows it.
My biography of his life, “The Price of Fortune” — which Packer generously assisted with — detailed his many struggles when it was released in late 2018. He bravely told the world of his mental health battles.
Some key details in the book found their way into his evidence before the inquiry over three excruciating days this week, most notably his penchant for email.
When Packer is on song and happy, his written communications can be warm, heartfelt and charming.
When he feels wronged he hits back hard, highlighted in the hundreds of emails he has sent in anger, far and wide around the globe in recent years.
Many of the recipients of his worst communications in recent years have found Packer’s bullying unacceptable.
His father Kerry, who was famous for his sprays in person and down a phone line, used his temper as a weapon of competitive advantage.
For many years of his business life, his son followed the same tactical craft through the written word.
But after Packer moved offshore following the end of his second marriage to Erica Packer at the end of 2013, the threats got more personal, the language more aggressive and — as he would be the first to acknowledge, at times — totally out of control.
Conflicts of interest
Even through these mad years Crown remained the one constant in Packer’s life — especially on the element of the company’s business the billionaire had lived and breathed for two decades: the numbers.
Even when he was rarely in Australia and after his departure from the Crown board at the end of 2015, when he was right on the verge of his third breakdown as Hollywood, Israel, his sister and Mariah Carey closed in, his executives and directors kept him in the loop.
The emails and phone calls kept flowing during 2018 after he quit the board in March, when the Crown board agreed to a special deal to continue to provide him with confidential information about the company’s affairs.
This emerged over the past fortnight as perhaps Packer’s greatest crime in the eyes of Commissioner Patricia Bergin: to perpetuate a corporate structure riddled with conflicts of interest, full of executives too keen to please him and dominated by his omnipresent and powerful personality.
All with catastrophic consequences for Crown’s corporate governance.
It led to vital information being confined to a small group of executives and not being relayed to the board.
It was revealed this week that Packer was a key driving force in bringing a number of Macau junket operators to Australia, some of whom — without his knowledge — were linked to organised crime and engaged in money laundering at Crown’s casinos.
He also admitted he was partly to blame for the failures of ethics, risk management processes and corporate governance at Crown that led to the spectacular arrest of its staff in China in October 2016, which forced it to part company with Melco Crown.
Packer also blamed then chairman Robert Rankin and chief executive Rowen Craigie for the affair.
They, as well as Packer’s lieutenant and Crown director Michael Johnston, were informed about the growing danger for Crown’s staff on the ground in China before the arrests. But none of them informed their fellow directors.
“There was an understanding that if people reported to you — if people informed you — it was enough, because you were the head of things,’’ Bergin told Packer on Thursday.
He replied: “It was never my intention to stop information getting to the board.” But, for all his good intentions for Crown, this was the consequence.
Packer also conceded Bergin’s forthright position that Johnston’s role on the Crown board, while being the finance controller of Packer’s private company CPH and providing managerial services to Crown, represented a fundamental conflict.
In effect, the board was being required to make judgments about the performance of one of its directors who was not the chief executive of the company, yet seemed to be omnipresent in its affairs.
Off the throne
It all came to a head on Thursday afternoon when the king finally told the world that he was ready to abdicate.
Packer was prepared to jettison his special information sharing deal with the company, would sell down his 36 per cent interest if required and never return to the board again.
They were massive concessions from the 53-year-old, which could end the Packer family’s control of its public companies that has extended over three generations.
“I think caps on shareholders may be something that you will think about,’’ he told Bergin. “I think this has been a terribly painful and terribly shocking experience for the board. As it has been for me. I won’t be going on the board again. I think the board will be more independent than it was in the past.”
The end of Packer’s association with Crown or his move to sell down to a shareholding that prevents him from taking an active role in its affairs won’t necessarily help his mental state.
As legendary broadcaster Alan Jones remarked in “The Price of Fortune”, boredom has become a feature of his life in recent years as he has sold out of all his business interests other than Crown.
‘He needs battles. He needs something to fight for.’
“That is one of the problems with the current set-up. In a way, the projects are in place so there are no battles. He needs battles. He needs something to fight for,” Jones says.
But in reality Packer had been falling out of love with Crown for years, worried that he had “too many eggs” in the casino’s basket.
He’s consistently harangued his executives for not meeting their budgets. In one email he warned them to meet their plan “for your own sake”.
Packer denied this week he was threatening them but acknowledged he was growing tired of excuses. “I was frustrated, I was frustrated because I had been saying for the good part of the financial year that the executives were being too optimistic,’’ he told Bergin.
“If you look at our financial budgets and forecasts they never pleased me because we always missed. That was right up the top of my list of important things.”
For the past five years Packer has also been trying to restructure Crown’s ownership.
Some planned deals, like the aborted TPG deal in 2015 and the discussion of a similar plan for Crown’s Australian business with another private equity group, Hellman & Friedman, in early 2016, were designed to maximise the value of Crown’s assets.
But last year, as he took stock of his life after his mental health crisis of 2018, the focus turned to cashing in some chips.
The Melco deal
In April Packer looked to engineer a takeover for Crown by US casino operator Wynn Resorts that would have left him a passive 10 per cent shareholder and without a board seat.
But Wynn pulled out of the deal over concerns the Macau gaming regulator had banned Crown from the gaming mecca following the China arrests.
Packer then asked Melco Resorts boss and his former business partner Lawrence Ho to speak to the Macau regulatory authorities about a possible reinvigoration of the Wynn deal. Instead, by the end of May, it led to the two billionaires hatching a rival plan for Melco to buy 19.9 per cent of Crown.
Packer admitted this week he had forgotten about the NSW gambling regulator’s ban on Crown dealing with any companies related to the late Hong Kong casino magnate Stanley Ho when he did the deal with Ho’s son, which could yet have regulatory consequences.
Crown is now nothing like the company it was when Packer agreed to the Melco deal.
The COVID-19 pandemic closed its Melbourne and Perth casinos this year, slashing earnings by 80 per cent and forcing Packer to forfeit his juicy full-year dividend cheque.
COVID-19 and the scandal around Crown has also ended Packer’s dream of the cashed-up Chinese middle class bolstering the earnings of Crown Sydney.
The scenarios now likely to flow from the inquiry vary from Bergin recommending limiting Packer’s ownership of Crown and prohibiting his influence over management if she finds he is not fit and proper to remain an associate of the Sydney licensee company, to potentially finding Crown itself fails the same test.
Bergin gave Crown a glimmer of hope on Thursday afternoon when she told Packer that if a recommendation were made to the NSW gaming regulator that found “unsuitability”, the next question would be whether Crown could make its operations suitable. Some very serious changes needed to be made, she said.
The evidence next week of Crown’s first independent chairman Helen Coonan, and before that her independent directors, will be crucial in helping convince Bergin that Crown’s board is still capable of carrying out its fiduciary duties to her satisfaction and that the company’s failed internal systems are being fixed.
But they will now seemingly come too late to save Packer from becoming Crown’s ultimate sacrifice to save its Sydney dream.