Star says Austrac punishment would ‘kill’ casino operator as $400m penalty sought

Star Entertainment says liquidity modelling shows the $400m penalty sought by the financial crimes watchdog for breaches of anti-money laundering laws would ‘kill’ the troubled casino operator.

Star says Austrac fine could wipe it out.

Star Entertainment says liquidity modelling shows the $400m penalty sought by the financial crimes watchdog for breaches of anti-money laundering laws would “kill” the casino operator.

Steven Finch SC, appearing for Star, told Federal Court judge Cameron Moore on Wednesday that while the casino operator admitted contraventions of anti-money laundering laws, financial analysis revealed the penalty sought by Austrac would make the company insolvent.

Star is claiming it should pay substantially less than $400m, and ideally less than $100m given its dire financial straits and efforts at remediation since Austrac launched its prosecution in 2022.

“Star will become insolvent, should a penalty in the magnitude sought by Austrac, and certainly an amount which significantly exceeds the $100m, occurs,” said Mr Finch.

“As the amount which your Honour imposes exceeds the amount that we have suggested, that possibility of insolvency approaches certainty.”

Mr Finch said Star would struggle to pay even a $100m penalty, calling the $400m sought by Austrac as a “killing fine.”

Austrac has denied its proposed penalty would bankrupt the company given a $300m rescue offer from US-based Bally’s Corp and pubs baron Bruce Mathieson’s Investment Holdings along with the expectation it would receive more funding from those investors.

But Mr Finch said there was no suggestion that Bally’s or Investment Holdings would contribute any further monies, whether in the form of equity or debt, particularly if it was used to pay a fine. “It is simply conjecture at this point,” he said.

Mr Finch said evidence given by Star’s chief financial officer Frank Krile last week showed there had been no conversations about either investor putting in further funds beyond the $300m already promised.

Chips are down for Star as Austrac penalty looms.

“The suggestion is that an investor of that sort would be likely to put in more money in circumstances where it would be blindingly clear that that money would not go to capitalising the company or financing any of the activities, but go to finance a fine,” Mr Finch told the court. “What investor is going to do that?”

Star was facing an increasingly competitive landscape in the gaming sector, with pubs and clubs not having the same regulatory costs as casinos.

“Your Honour has seen the cash flow with obvious demands on the company’s finances,” he said. “There is actually no support even for a fine of $100m, let alone $400m, without borrowing, not only for current purposes but for future funding.”

Star has admitted it was reckless in breaching anti-money laundering regulations over a number of years, but did not know criminal activity was actually occurring.

Austrac has accused Star of failing to enforce anti-money laundering and counter-terrorism laws by funnelling hundreds of millions of dollars from Asian junket operators with links to organised crimes into its casinos.

Star says Austrac fine could wipe it out.

Mr Finch said while the company admitted contraventions, Austrac had not established that Star actually knew that money laundering was in fact occurring at its casinos, which he said would involve a higher culpability.

Nicholas Bender SC, counsel for Star, said that since the contraventions outlined by Austrac, the company had introduced a comprehensive remediation plan aimed at stamping out previous practices. Mr Bender said that this included the introduction of mandatory carded play, cash limits of $5000 per day for customers and prohibitions on third-party money transfers. Star also had a new senior management team in place to manage the remediation. Judgment has been reserved in the case, which wrapped up Wednesday.

The Austrac action comes two weeks after ASIC completed its marathon case in the Federal Court against former executives and directors of Star Entertainment over alleged breaches of their duties to implement money laundering controls.

Federal Court judge Michael Lee has reserved his judgment in that case with ASIC seeking millions of dollars in pecuniary penalties against former Star chief executive Matt Bekier, company secretary Paula Martin, former chairs John O’Neill and Benjamin Heap, as well as former high-profile directors Sally-Anne Pitkin, Kathleen Lahey, Gerard Bradley, Wallace Sheppard and Zlatko Todorcevski.

Originally published as Star says Austrac punishment would ‘kill’ casino operator as $400m penalty sought