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Packer's world: how a tower of dreams came crashing down
James Packer's Barangaroo casino dream has put him firmly in the firing line.Credit: Dionne Gain
James Packer's long-held dream of opening a towering casino and six-star hotel on the banks of Sydney Harbour was to be a crowning achievement in the billionaire's storied professional life.
Crown Sydney – now the Emerald City's tallest building as it looms 271 metres above Barangaroo –was his "chance to do something special", he said in 2012, and leave a legacy comparable to that of his media baron father.
James Packer faced a barrage of questions at the ILGA inquiry.
But this week the $2.2 billion gambling mecca instead triggered one of the reclusive billionare's lowest moments: a public reckoning, dragged out over three days and streamed live from his $200 million gigayacht moored in the South Pacific.
The 53-year-old appeared in a suit, tie and occasionally reading glasses, at times stressed and visibly sweating during an eight-hour grilling by the NSW probity inquiry into Crown Resorts.
What emerged was an unfiltered view of how one of Australia's richest and most closely watched men does business - and it wasn't pretty. It could have serious ramifications, from a management and board overhaul at the ASX-listed Crown to Packer being forced to sell his investment in the company he has dominated for almost two decades and personally ran from 2007 to 2017.
There was a sensational threat against a businessman over a deal gone wrong, made amid Packer's struggles with mental illness. His stranglehold on Crown's management could not have been clearer. And Packer, who places the utmost importance on loyalty, was ready to throw subordinates under a bus when asked to explain how things went so badly wrong at Crown.
The NSW Independent Liquor and Gaming Authority (ILGA) inquiry was called to investigate revelations by The Age, Sydney Morning Herald and 60 Minutes last year about Crown's partnerships with "junket" tour operators connected to organised crime; its failure to stop money laundering at its casinos; and the danger it exposed its staff to in China chasing high-roller profits.
Commissioner Patricia Bergin will recommend whether Crown should keep the licence for its new Sydney casino, controversially approved by the O'Farrell government in 2013 and which Crown intends to open in December.
Gambling regulators in Victoria and Western Australia are staying quiet for the time being, but a negative ruling in NSW will cast a question over Crown's casinos in Melbourne and Perth too.
Packer’s influence over Crown and his vision to bring wealthy Chinese gamblers to Australia and super-charge its profits were long credited with the company's success.
But the inquiry has revealed that in many ways, it was these things that put it on a course towards crisis.
'Disgraceful, shameful'
In an explosive and unexpected start to proceedings on Tuesday afternoon, the inquiry tabled "threatening" emails Packer sent to a private equity manager, referred to only as Mr X, in 2015 after discussions to privatise Crown soured.
"Do you accept that your conduct in these communications was shameful, do you?" asked counsel assisting Adam Bell.
"I do," a stony-faced Packer replied.
"You accept that your conduct in these emails was disgraceful, don’t you?" the senior counsel continued. "Yes," came the response.
But when Bell asked Packer if his emails reflected adversely on his character, the billionaire said "my medical state [at the time] is what it reflected most on".
Asked how the NSW casino regulator could have "any confidence" in his character or integrity, Packer said he was "sick at the time" and now being treated for bipolar disorder.
The strong medication Packer takes also apparently made it difficult to remember some events from his time as Crown's executive chairman (2007 to 2015) and director (2017 to 2018). He stepped back from corporate life in 2018 amid ill health.
The inquiry did not reveal what the threatening emails said. But this masthead has confirmed some of the details, including that they made reference to a person connected with the Israeli intelligence agency Mossad.
Mr X – confirmed to be a private equity executive – took the threat seriously enough to get legal advice and discuss hiring private security.
While Packer's public shaming may have seemed brutal, it had a purpose: to test whether he is fit to be a "close associate" of Crown owing to his large (36 per cent) shareholding, which requires him to be a person of "good repute".
By Thursday afternoon, a more lucid and conversational Packer acknowledged his hold over Crown would likely have to loosen and that he could be ordered to sell down his shareholding.
"I think caps on shareholdings may be something that you will think about," he told Bergin when she asked what could be done to fix Crown's "dysfunction". Packer has looked at several deals to reduce or exit his Crown investment over the past five years, and last year cut his stake from 46 per cent to 36 per cent.
"I think that the Crown board has a lot to think about in terms of who the right people are for the right jobs," Packer said, predicting he won't be the only one heading for the exit. "I think the board will be more independent than it was in the past.
"I think this has been a terribly painful and terribly shocking experience for the board, as it has been for me."
The quick-tempered son of the fearsome Kerry Packer agreed that what Bergin called his "powerful personality" may have contributed to a culture when he ran Crown where underlings did not share bad news and only wanted to please their boss.
"I’d never thought about it before," he told the commissioner. "Perhaps you're right."
The inquiry learnt how even after he stepped back from Crown, Packer had an open line to senior executives. He used it to demand confidential company information and appeared to instruct them on how to run the company.
As just one example, in November 2018, eight months after Packer had left the board, he chastised Crown's then executive chairman John Alexander for going "on a world trip looking at restaurants" and asking whether "we" needed to "immediately implement travel bans for our executives".
Packer told the inquiry that the secret agreement which enabled the flow of information with Crown management had to end. And while he admitted to personal failings in the midst of a mental health crisis, he was less willing to wear the responsibility for how Crown was run.
He was instead quick to pin blame on his underlings. Crown's former chief executive Rowen Craigie and Packer's replacement as chairman, Robert Rankin, "let the side down" by not knowing about the dangers Crown exposed its staff to when promoting its casinos in China, he said.
The arrest of 19 Crown employees in China in October 2016 on gambling crimes sent shockwaves through the company, caused Crown’s share price to plummet, triggered its exit from an Asian joint venture and sparked a shareholder class action seeking hundreds of millions of dollars.
Sixteen Crown staff spent nine to 10 months in jail after the arrests, which followed more than than 18 months of escalating signs China was cracking down hard on foreign casinos recruiting gamblers within its borders. Police even detained and questioned a Crown staff member on suspicion of organising gambling tours in mid-2015. But the inquiry has heard these warning signs never made it to Crown's board or top executives.
"Mr Craigie should have been on top of this information," Packer told the inquiry. "I don’t know how he could not have been aware of this if he was doing his job."
The inquiry has heard how Crown insiders closely aligned with Packer - including Michael Johnston, an executive at his private company and a representative on Crown's board, who Packer described as showing "complete loyalty to me and my family" - knew about the red flags. So did Barry Felstead, the executive in charge of Crown's VIP business, who Packer said in a 2015 email "runs the businesses with me" and who also showed him "complete loyalty".
Barry Felstead, seen here in 2016, was a loyal Packer lieutenant who was aware of the problems Crown had encountered in China.Credit: Philip Gostelow
"Are you sure it’s true that none of those men told you at the time?" Bell asked. "Is it likely that you were told about those matters but you’ve forgotten?"
"No," Packer responded.
The one-time executive chairman accepted "not all, but some" of the responsibility for Crown’s China disaster. But he rejected Bell’s suggestion that Crown's cavalier behaviour was due to "a corporate culture that focused excessively on profits".
This put him at odds with Crown’s current CEO Ken Barton, who took over in January and told the inquiry the VIP international business had the "wrong balance" between "profit and compliance".
Also giving a different view was Jason O’Connor, Crown’s former head of VIP international, who spent 10 months in a Shanghai jail. He told the inquiry the aggressive push for Chinese high-roller profits "may have blinkered" some at Crown.
Crown’s partnerships with "junket" tour operators linked to Asian criminal syndicates were made public by this masthead last year, triggering the Bergin inquiry and keeping Crown in the headlines ever since.
Packer revealed he was the one who first developed the strategy to work with junkets, after witnessing via Crown’s joint venture in Macau with Lawrence Ho’s Melco Resorts how successful they could be in helping wealthy Chinese punters get around China's strict capital controls and into overseas casinos.
Packer could only ever recall meeting two of Crown's junket partners: Suncity boss Alvin Chau, who is an alleged former triad member and money launderer who is banned from entering Australia; and Song Zezhai, who allegedly ran an organised crime racket in eastern China.
In an August 2017 email Packer told his "special assistant" Ishan Ratnam it would "be great if we could build a good new relationship" with the Suncity junket, the inquiry heard.
Packer said he was aware of "rumours" about junkets having links to triad gangs, but he didn’t have a good understanding of how Crown checked partners for unsavoury links.
"I do not and never had intimate relationships with junket operators and junkets," Packer said. "I had nothing to do with the management or the running of those relationships."
Bell asked Packer whether he placed enough importance on Crown only dealing with people of "good repute" when he ran the company. "Not with the benefit of hindsight," he said.
Another rod for Crown's back of Packer's making was his deal in May 2019 to sell a fifth of the shares in the company to Lawrence Ho's Melco Resorts for $1.7 billion, in potential violation of Crown's licence.
The NSW government had long been desperate to keep Ho's father, Macau casino kingpin Stanley Ho, out of the state. He was banned from bidding to operate a casino in Sydney in 1987 after the NSW Police Board found his consortium was associated with five triad gangs and was involved in "unsavoury practices" in Macau.
Crown's Sydney licence ordered the company to prevent Ho senior, who died in May this year aged 98, and a listed of associated entities and family members from taking any beneficial interest in the casino.
Packer told the inquiry he was at one time aware Melco was 20 per cent owned by a Ho family trust, of which Stanley Ho was a beneficiary. But he said he had forgotten that fact by the time he struck the Melco deal.
"I regarded Melco as Lawrence’s company rather than Stanley’s," Packer said. "I left it to my legal team and I gave it no thought."
Receding shore: Crown's Barangaroo development now seems a very different proposition to what was promised in 2013.Credit: Wolter Peeters
Packer gave up a $90 million contractual right when agreeing with his long-time friend and former business partner Lawrence Ho to cancel the second half of the transaction.
"I would never hold Lawrence to something that he didn’t want to do," Packer said.
(Ho sold the first 9.99 per cent parcel he acquired in Crown to private equity investor Blackstone earlier this year, saying Melco needed to focus on Macau during the COVID-19 pandemic. In doing so, he avoided being dragged into the ILGA inquiry too.)
Crown's 75-storey Sydney tower has clearly not worked out how Packer dreamed. And towards the end of his evidence, he admitted it will not be quite what the people of NSW expected either.
International VIP players were originally going to contribute a third of Crown Sydney's profits, driven by the very junket business which Crown could now be ordered to cease.
Packer's personal pitch to the NSW government in 2013 to open Sydney's second casino promised it would almost triple the city's share of international high rollers coming to the city (bringing millions in tax revenue with them).
"Well, clearly that’s wrong," Packer told the inquiry. "But that’s what I believed at the time."
with Sarah Danckert