Ray Finkelstein’s royal commission key for Crown shareholders

Ray Finkelstein QC will head up the Victorian royal commission into Crown. Picture: Ray Strange

As Crown shareholders consider an $8bn, “indicative, non-binding proposal” from US investor Blackstone, a key determinant of their future will be laid out on Wednesday morning, when former Federal Court judge Ray Finkelstein QC begins his royal commission into the suitability of the company to hold a casino ­licence.

Despite its grand title, the Victorian state-based royal commission has a tight timeline of August 1 to report on what could potentially be a wide range of issues.

If, as some have estimated, it could take two months for the royal commissioner to write up his findings, then Australia could be headed for one of its shortest royal commissions in recent decades, with hearings of only just over two months.

Expectations are that Wednesday’s hearing will see Finkelstein, a Federal Court judge between 1997 to 2011, and an experienced commercial lawyer, outline how he plans to conduct his inquiry.

Witnesses are not expected to appear before it for at least another week or two.

It could mean only eight weeks of hearings all up for a company that has been doing business in Melbourne since the early 1990s.

That said, the real issue to be outlined on Wednesday will be how wide a net Finkelstein plans to cast.

Does he stick to the main issues reviewed in detail by former NSW Supreme Court judge Patricia Bergin, who made her report on February 1 after an inquiry that began more than a year before?

Or will he open the inquiry to all-comers including, say, anti-gambling lobby groups, disgruntled former employees, the public with random thoughts on the matter and others with an axe to grind against Crown or casinos in general?

The terms of reference are broader than those given to Bergin in NSW. Not only is Finkelstein charged with looking at whether Crown Melbourne and associates have complied with the law and are suitable to hold a ­casino licence in Victoria, he also has the much wider remit of deciding “whether it is in the public interest” for the company to hold a casino licence in the state.

That aspect could potentially take some time to review, depending on the royal commissioner’s openness to outside submissions and how high he sets the bar of “public interest”.

How long does he plan to go back in history determining this, and what criteria will he use to ­determine “public interest”?

As Bergin remarked a few times in her hearings, one of the reasons to legalise casinos and gambling is to prevent organised crime overseeing the process.

Those with long memories in NSW can remember the days of illegal gambling casinos in Sydney and their associated colourful characters, and rumours of politicians on the take.

Even for those who don’t like gambling, one could argue that legalising casinos is in the public interest given that it allows for regulation and state revenue generation from what would probably occur anyway in some illegal shape or form.

There is no question of the fact that Crown is an experienced ­operator in running gaming facilities, as well as the associated hotels and hospitality venues.

So any review of whether it is in the “public interest” must come down to what sort of governance and practices there are around Crown and whether it is deemed to be a law-abiding and responsible corporate citizen that will continue to abide by state law.

Commissioner Patricia Bergin made her report on Crown last month, over a year since proceedings began.

After the Bergin review, which questioned most directors and many senior executives, Crown is now arguably one of the most scrutinised of any of the ASX-listed companies

Under its chairman, former NSW barrister and federal minister Helen Coonan, Crown also seems to be bending over backwards to accommodate concerns outlined by Bergin and the NSW Independent Liquor and Gaming Authority to become suitable to operate in the state — having seen mass departures from its board, as well as executive departures, the introduction of stricter anti-money-laundering controls and the end of controlling shareholder agreements with James Packer.

Crown has not yet been deemed to be a suitable casino ­operator in NSW, but all indications are that that is well on the way — barring the emergence of any new, unforeseen negative revelations.

What is clear from the NSW inquiry is that changes will need to be made to the law on regulating casinos, including potentially banning junket operators and stricter reporting lines to the state regulator including on potential money laundering.

What is also clear is that some sort of regular oversight process will need to be put in place to ensure that the company — and indeed any casino operator in the state — will continue to do what it has promised regulators it will do, with regular and strict reporting requirements.

By all accounts, Finkelstein has the practical commercial law experience to deliver some insightful recommendations for law reform.

The Bergin inquiry highlighted that the management of any casino company must be able to fend off pressures from shareholders to cut corners in the push for increasing profits, with the threat of a big stick to be wielded by the regulator.

Casino regulators must not only be setting the speed limits of operation, but must also be actively enforcing them.

This will no doubt emerge in the inquiries in Victoria and in Western Australia, which has announced two separate inquiries.

Victoria also has to deal with suggestions that flow from the NSW inquiry that its casino regulator, if not asleep at the wheel, was seen not willing or able to take on the Crown management with any concerns, and particularly was reluctant to take on the company in public.

This could be responsible for the broader term of reference in Victoria and may pressure Finkelstein to take a tough, high-profile approach to his role.

Finkelstein will need to oversee an inquiry that is robust enough, with strong enough recommendations for change, that Victorians can have ongoing confidence in their casino regulator.

Meanwhile the question is how long NSW regulators will take to make a decision on Crown’s suitability to hold a licence.

Indications are that it won’t wait for outcomes in Victoria and WA, but could eventually allow the company to open the doors to its gambling floors possibly subject to review if any unexpected negative news emerges from the inquiries Victoria or WA.

ILGA has declined to comment on the proposal by Blackstone to make a bid for Crown and what this means in terms of Crown’s suitability to hold a casino licence in the state.

One factor driving Blackstone, which has a 9.9 per cent of Crown, could be to get in before any stricter limits on shareholdings or transfer of shareholdings in casino companies are imposed in the state.

If the Bergin inquiry is any guide, there will be a lot more action around casinos to be seen in court hearings by video than there will be on the gaming floors around the country.