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Crown Resorts will keep its Melbourne casino licence for now, despite a Victorian royal commission finding that its conduct was "disgraceful".
Key points:
- Crown will keep its licence for now, but must prove that it has reformed itself or lose its licence in two years' time
- Royal commissioner Ray Finkelstein described Crown's behaviour as "disgraceful"
- The government will ban junket trips by overseas VIP gamblers and increase maximum penalties for breaching gaming laws
The final report by commissioner Ray Finkelstein recommended Crown Melbourne should be given a two-year grace period under the control of a "special manager" to correct an "alarming catalogue of wrongdoing".
The Victorian Royal Commission into the Casino Operator and Licence found evidence of links to criminal gangs and repeated breaches of money laundering laws and the casino's contract with the state.
That contract will not be ripped up despite Crown breaching the law — including hiding spurious state tax deductions from the regulator and dudding Victoria out of a potential $200 million in tax.
However, at the end of the grace period, the special manager will recommend to the regulator whether Crown should keep its Victorian casino licence.
The regulator will then have to decide whether it is "clearly satisfied" that Crown Melbourne has returned to suitability.
Mr Finkelstein warned that "this will be a tough test to satisfy".
'Alarming catalogue of wrongdoing'
The report stated that "not only was Crown Melbourne content to breach local laws", between 2012 and 2016 it helped Chinese customers transfer up to $160 million from accounts in China to the Crown Towers Hotel for "services", contravening local laws and allowing "money laundering to take place".
"The commission discovered that for many years Crown Melbourne had engaged in conduct that is, in a word, disgraceful.
"This is a convenient shorthand for describing conduct that was variously illegal, dishonest, unethical and exploitative."
Despite declining to recommend that Crown's licence be immediately revoked, Mr Finkelstein was scathing in his assessment of the company's breach of trust.
"The catalogue of wrongdoing is alarming, all the more so because it was engaged in by a regulated entity whose privilege to hold a casino licence is dependent upon it being, at all times, a person of good character, honesty and integrity.
"It is difficult to grade the seriousness of the misconduct. Some was so callous that it is hard to imagine it could be engaged in by such a well-known corporation whose Melbourne Casino Complex is visited by millions annually."
Bipartisan support
Victorian Gaming Minister Melissa Horne said the default position would be that Crown would lose its licence unless it could demonstrate it had changed for the better.
"What we're doing is taking the recommendation and saying, at the end of those two years, the government will automatically assume that Crown's licence has been cancelled unless they demonstrate otherwise," she said.
In addition, Victoria will ban foreign junkets under new laws tabled in Parliament this morning.
The government is also beefing up the maximum fine for breaching the state's gaming act to $100 million — it was just $1 million.
Victorian Opposition Leader Matthew Guy said he backed the royal commission's recommendations.
He said if the Coalition won the next election, it would support the commission's recommendation that Crown's licence should be presumed cancelled after the two-year special manager period unless it could satisfy the regulator that it was fit to continue operating the Melbourne casino.
Asked if any other businesses would be told to shut up shop if they had been found to have broken laws, Mr Guy said "probably, yes".
But he said the process laid out by the commission was aimed at "appropriate steps to discipline them, and that's what we're looking at and that's what we support today".
However, Victorian Greens leader Samantha Ratnam said even tougher regulatory changes were needed, noting her party had put forward a bill encompassing such measures in the last sitting week.
"This is the biggest scandal in Victoria's corporate history and yet its culprit is living to see another day," she said.
"The government has set Crown up as too big to fail, and then failed themselves to stop the corruption and gambling harms."
'Special manager'
Key among the recommendations of the 652-page report is changing casino laws to appoint a "special manager" to keep an eye on Crown Melbourne.
Mr Finkelstein recommended that the special manager should "oversee the affairs of the casino operator including the casino operations" as well as "carry out investigations" and report to the regulator on any matter it has investigated.
The manager would have the privileges of a director of the casino's board, but not the right to vote. Despite that, the monitor — either a company or a person — would have the power to direct the board to do or not do something.
The manager could attend board meetings, management meetings, inspect the books and compel people inside the company to give them information. A copy of any reports from the manager would also be sent to the gaming minister.
The report recommended for the manager to be appointed for two years, culminating in a final report to the gaming regulator and, within 90 days of receiving that report, the regulator must decide if Crown Melbourne is a "suitable person" to hold a casino licence.
Investors are clearly optimistic that Crown will pass the test, and relieved that it did not have its licence revoked immediately.
Crown's stock soared on the market's open. At 10:30am AEDT, it was up 11.2 per cent to $10.74.
However, Crown remains under intense scrutiny in NSW and has yet to be awarded its licence to commence gaming operations at its new casino in Sydney's Barangaroo district.
It is also the subject of a West Australian royal commission that is due to deliver its final report in March next year.
Packer may be forced out of Crown
James Packer and two of the world's largest fund managers would have to largely get out of Crown if the commission's recommendations were adopted in full.
Packer's private investment company, Consolidated Press Holdings (CPH), owns about 37 per cent of Crown Resorts. Fund managers Blackstone and Perpetual hold just under 10 per cent each.
But that will likely change because it is recommended that no-one should have more than 5 per cent of the company's shares without regulatory approval.
The NSW inquiry made clear Mr Packer would not clear the bar as a "suitable person" due to a threat he emailed to a businessman involved in a potential deal.
Having anyone hold 5 per cent without approval would be deemed a breach of the licence under the proposal.
The report gives two reasons: "to prevent outside influence" and to "secure the independence of the board and the senior management".
Mr Packer has tried on multiple occasions to sell his stake in Crown.
His attempt to offload it to Macau casino entrepreneur Lawrence Ho triggered an investigation into his suitability that ended with NSW so far denying Crown a gaming licence for its Barangaroo venue.
Inspectors added
More scrutiny would also come from inspectors.
The report recommends additional powers and a new focus, to find out:
- Whether money laundering is taking place;
- Whether loan-sharking is taking place; and
- Whether illicit drugs are being sold.
Inspectors will now get access to security resources Crown has had, but not previously shared with regulators.
Recommendation 18 is that "inspectors have free and unfettered access to all parts of the casino, all the surveillance equipment used by the casino operator, and all the books and records of the casino wherever they be located".