‘Dysfunctional’: The Star found unsuitable again as money woes deepen

A second probe into the culture of Star Entertainment Group has found the company is unsuitable to hold a casino licence and slammed previous management as “dysfunctional”, as the group’s executives scramble to keep the casino business financially viable.

Adam Bell, SC, was commissioned by the NSW casino regulator to launch a second probe into The Star following concerns it had not adequately committed to cultural reform since it was exposed for extensive anti-money laundering and counter-terrorism failings in 2021.

The regulator issued a copy of the report to The Star on Friday and said it was not yet ready to make its decision about the future of the Sydney precinct. The Star was due to issue its full-year results on Friday but has postponed the result and entered a trading halt.

The Star was due to issue its full-year results on Friday but entered a trading halt after receiving a copy of the report.Credit: Louise Kennerley

In the report, Bell determined that The Star had breached casino law and was unsuitable to hold its casino licence for a second time in two years, but he did not recommend that the casino shut down.

“The contention by The Star Entities that they should be assessed as “conditionally” suitable is not accepted,” the report reads.

Bell found The Star was without “appropriate leadership” for 10 months over the past year, with the company’s management in a “dysfunctional state”. The report found The Star’s board had competing priorities and could not juggle keeping the company fiscally afloat and keeping up with the remediation demands. The board also failed to appropriately engage with the company’s executives.

The report also noted the group had overhauled its board and executives since its probe commenced. It said the new appointments, including Steve McCann, who formerly led Crown Resorts ahead of its Blackstone takeover, brought necessary regulatory expertise to the group.

The three weeks of hearings exposed four compliance breaches. These related to the loss of $3.2 million over six weeks due to a broken machine, falsified welfare checks on customers and the bulk approval of source of wealth checks.

Bell said the NSW Independent Casino Commission (NICC) should take action against Star Sydney for the breaches and impose independent requirements on its board as well as tighten the rules around meetings and duties.

The NICC is not expected to shut down the group’s flagship Pyrmont casino despite the findings, as it recently moved to extend the term of its special manager until March. The Star was due to reveal what’s expected to be dismal results for the 2024 financial year on Friday, with The Australian Financial Review reporting it may even issue a $1.4 billion writedown.

Bell’s inquiry considered whether The Star can properly fund its operations. He said his findings were “not altered” by sealed evidence presented to the inquiry about the group’s financial position.

NICC chief commissioner Philip Crawford said on Friday that Bell’s findings had validated the regulator’s concerns, but he needed more time to decide whether to shut it down. The commission published the first two volumes of Bell’s findings on Friday.

“The Bell report reveals a company that had not moved quickly enough to address the governance and cultural concerns raised in the first Bell report. It has only very recently turned its attention to dealing with challenges that should have been prioritised earlier,” Crawford said.

The Star received a copy of the report on Friday, one month after Bell issued it to the regulator. The regulator moved to extend the tenure of Nick Weeks, The Star’s special manager and current casino licence holder, until March after receiving the report.

NSW Independent Casino Commission chief commissioner Philip Crawford.Credit: Jessica Hromas

The Star will be forced to pay for the $3 million inquiry in addition to Weeks’ ongoing monthly salary of $75,000.

The licence decision does not matter if the group cannot find a way to continue operating solvently. The Star’s share price has halved over the past year and its leaders have already had to approach investors for equity twice. The company is $450 million in debt.

The Australian Financial Review reported the group’s newly minted boss, Steve McCann, will write down its assets, including the new casino precinct Queen’s Wharf Brisbane which opened on Thursday, as part of a mammoth cost-cutting exercise after poor trading and increased regulatory costs blew out its bottom line.

The $3.6 billion Queen’s Wharf precinct is a joint venture with Chow Tai Fook Enterprises and Far East Consortium. Investment sources who were not authorised to speak publicly said The Star would write off all its equity in the long-awaited precinct in a last-ditch attempt to right its books.

This masthead revealed this month that the NSW government had pushed back its mandatory carded play deadline by one month to give the struggling casino time to ready for the complicated transition, which would have prevented gamblers from using more than $1000 cash. Instead, The Star has until October 19 to upgrade its machines and will be able to accept $5000 in daily cash transactions for another year.

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