All bets off for Crown’s jewel

Crown Resorts and its largest shareholder — billionaire James Packer — has been forced to prove it should be allowed to operate the flagship $2.2bn Sydney casino.

’Powerful personality’: Crown Resorts owner James Packer in Melbourne last year. Aaron Francis/The Australian

Crown Resorts has been found ­unsuitable to hold a gaming ­licence, forcing the company and its largest shareholder — billionaire James Packer — to prove it should be allowed to operate its flagship $2.2bn Sydney casino.

In a scathing report, former NSW Supreme Court judge Patricia Bergin found serious corporate failings and made adverse findings against key directors.

The long-running Independent Liquor & Gaming Authority review said evidence presented by Crown director Andrew Demetriou, a former AFL executive, was “quite bizarre” and “(reflected) very badly on his judgment”.

Andrew Demetriou. Picture: Aaron Francis

Former Crown chairman John Alexander’s loyalty to the Packer family left him “either blind to the reality or lacking in candour” in confronting serious problems ­including the “infiltration of criminal elements”, Ms Bergin found.

“Mr Alexander’s stewardship led Crown to disastrous consequences,” she wrote.

Crown chief executive Ken Barton was “unimpressive” and the ILGA “would be justified in concluding that it cannot have any confidence in dealing” with him, the 800-page report found.

However, Mr Packer, who maintains a 37 per cent stake in Crown, has been given a reprieve despite Ms Bergin describing him as a “deeply flawed” close associate of the company.

Mr Packer’s appropriateness to be a major shareholder will be considered by the ILGA, which will make a decision in light of threats he made to Melbourne businessman Ben Gray in 2015.

The inquiry, which was called after it emerged Mr Packer was ­attempting to sell part of the business to Hong Kong magnate ­Stanley Ho, heard the billionaire acted as a de facto Crown director despite not being on the board and continued to receive information, giving him extraordinary influence on the company.

“It would appear that Mr Alexander gave no thought to the propriety of such a process or whether it was in the interests of Crown that the result of confidential discussions with independent directors should be communicated to Mr Packer,” the report reads.

Mr Ho had been forbidden from taking an interest in Crown under its restricted licence, and his company, Melco, later sold its 9.99 per cent interest to private equity group Blackstone.

While the hotel and restaurants at Crown's Barangaroo ­casino have opened, the company has been unable to begin operating its gaming floors.

Helen Coonan. Picture: John Feder

Despite deep criticisms of the board and corporate culture, Ms Bergin found more positively toward current Crown chairwoman Helen Coonan, a former minister in the Howard government.

“Ms Coonan accepted the serious corporate failings of Crown and notwithstanding those corporate failings is willing to, as she put it, stay the course,” the report read.

It noted her “character, honesty and integrity (have) not been and could not be called into question”. “The burden of reformation will be great,” Ms Bergin wrote.

The ILGA will consider Ms Bergin’s findings on Friday and at a further meeting on February 17.

The process is being watched closely by the Victorian Commission for Gaming and Liquor Regulation and the WA gaming regulator, as well as the financial crimes regulator Austrac and the Australian Securities & Investments Commission.

In December, the VCGLR brought its review into Crown’s Melbourne entertainment complex forward by three years, citing the explosive revelations around the Bergin inquiry, including evidence of money laundering.

Austrac is formally investigating Crown for potential breaches of anti-money-laundering laws at its Melbourne casino.

“We will carefully examine the report’s findings, the recommendations and how they relate to the operations and regulation of Crown Melbourne and provide an update when appropriate,” VCGLR chairwoman Catherine Myers said on Tuesday.

“This will inform any ­regulatory action which may be required.”

Crown management released a statement on Monday ahead of a special board meeting saying it would work with the ILGA in relation to the recommendations.

There is growing speculation Mr Barton could be replaced on an interim basis by former Sky City chief executive Nigel ­Morrison, a former Crown Melbourne executive who was appointed to the company’s board last week.

The ILGA report also recommends the establishment of an Independent Casino Commission, which would act as a regulator with royal commission powers.

The NSW government said it would consider the report’s recommendations before providing a formal response. “Among other things, the report raises serious issues relating to organised crime and money laundering in our community,” said Customer Service Minister Victor Dominello, who oversees the authority.

Ms Bergin levelled numerous findings at Crown, highlighting the company’s its “corporate ­arrogance”, “unjustified belief in itself”, and its repeated dismissal of concerns that were raised around its use of junket operators with links to organised crime.

She said the company would need to undergo a “conversation to suitability” requiring a “full and wide-ranging forensic” audit of its accounts and an overhaul of its corporate culture.

This was needed, she found, to ensure “the criminal elements” had been expunged from the company’s operations.

Crown management would be required to undertake annual courses to educate themselves on anti-money-laundering and counter-terrorism financing laws.

“If Crown is to survive this turmoil and convert itself into a company that can be regarded as a suitable person and achieve the same for the licensee, there is little doubt that it could achieve a fresh start and emerge a very much stronger and better organisation,” Ms Bergin wrote.

The report’s most trenchant criticism was saved for select members of the company’s 11-person board. “Some observers may expect the authority to require the purging of the whole Crown Board before it would be in a position to regard Crown as a “suitable” person under the Casino Control Act,” Ms Bergin wrote.

“However such an approach would be inappropriate if there is an available realistic alternative to accommodate due regard to the commercial imperative of the ­viability of a public company while achieving such conversion.”