A government-commissioned inquiry has slammed Crown Resorts as not fit to operate its newly built A$2.2bn ($1.7bn) Sydney casino, dealing a blow to the ambitions of billionaire mogul and largest shareholder James Packer.
The final report published on Tuesday blasted the poor corporate governance, risk management and arrogance shown by Crown, which has admitted it unwittingly facilitated money laundering at its casinos last year.
“The very serious problems of the infiltration of Crown subsidiaries’ accounts by organised criminals should send a shiver down the spine not only of any casino regulator but also the community generally,” said the report, written by Patricia Bergin, a former judge.
However, it recommended reforms that could render the ASX-listed company a “suitable” holder of a licence. That potentially opens a pathway for Crown to salvage its flagship Sydney casino resort, which commands sweeping views of the city’s harbour.
The inquiry commissioned by the New South Wales Independent Liquor and Gaming Authority (ILGA) recommended a big overhaul of the company’s board, noting that regulators would retain “serious doubts” about the company as long as it retained three directors criticised in the report — Ken Barton, Michael Johnston and Andrew Demetriou.
It concluded that the influence of Packer — Crown’s largest shareholder with a 37 per cent stake — to “remotely manoeuvre” operations must be cease for the health of the company.
Trading of shares in Crown, in which US private equity giant Blackstone holds a 10 per cent stake, was suspended on Tuesday. The stock fell as much as 8.9 per cent on Wednesday morning when trading resumed.
The report detailed how Packer, despite having resigned from the board due to health reasons, was able to exercise power over the board due to the force of “his personality and also the somewhat supine attitude adopted by Crown’s operatives”.
It recommended empowering a new casino regulator to approve any transaction involving an interest of 10 per cent or more in a casino licensee. Transitional provisions would allow Packer a reasonable period of time to obtain approval from the regulator to either sell down some or all of his holdings in Crown or to obtain fresh prospective approval to retain that interest, it said.
Australian gaming authorities are scheduled to consider the report later this week.
Crown said it was studying the report and would work with the ILGA in relation to the findings and recommendations.
Elizabeth Sheedy, professor of applied finance at Macquarie University, said the determination that Crown was not a suitable licensee was justified by evidence to the inquiry.
“Crown governance was shown to be well short of the standard required to manage these risks. Hopefully the ILGA will follow through on the recommendation and refuse to issue a licence,” she said. “Australian governments are, however, shockingly reliant on the revenue stream that flows from the gambling industry so we can’t be certain that this will occur.”
The report is a blow to Packer, who has long held ambitions to operate a casino in Sydney, where he was born. Australian authorities barred Crown from opening its casino in the city in December pending completion of the inquiry.
The probe followed media reports alleging that organised crime gangs had laundered money through bank accounts at the company’s Melbourne casino set up to facilitate high-roller gamblers.
Crown initially denied the reports, including taking full-page media adverts alleging a deceitful campaign against it. But after several weeks of public hearings produced searing criticism of its corporate culture and governance, chairman Helen Coonan admitted the company had inadvertently facilitated money laundering.