News for Crown Resorts Ltd (5CW.MU)

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    Packer’s Casino Dream Dashed as Crown Seen Unfit for License

    (Bloomberg) -- Billionaire James Packer’s dream of opening a landmark casino in his home city of Sydney hangs in the balance after a damning report into money laundering and organized crime links found Crown Resorts Ltd. isn’t fit to hold a gaming license. The company’s stock fell.In an excoriating report released Tuesday, retired judge Patricia Bergin recommended that Packer, Crown’s largest shareholder with a 36% stake, be subject to a 10% ownership cap that requires special permission to be lifted. She called for the departure of the CEO and key directors and an overhaul of the firm’s culture and governance before the casino can open.“The scorching light of this inquiry has exposed a number of problems that would have otherwise remained unearthed and unresolved,” Bergin said in the 751-page report. Crown was currently “quite unsuitable” to hold a casino license in Sydney, she said.Bergin said it was clear Crown “enabled and facilitated” money laundering through bank accounts tied to its Perth and Melbourne casinos for at least five years before 2019. Crown had prioritized profits before the welfare of its staff, and worked with people connected to organized criminal gangs, she said.CEO Ken Barton “has demonstrated that he is no match for what is needed at the helm of a casino licensee,” Bergin said.Crown shares plunged as much as 8.9% before closing down 3.4% in Sydney. That valued the Melbourne-based company at A$6.6 billion. S&P Global Ratings placed its rating on Crown on CreditWatch, saying Bergin’s proposals “heighten the risk of permanent license loss for Crown Sydney and its operations.”Read: Crown Shares Likely Face Regulatory Overhang for MonthsThe report, one of the most damning indictments of an Australian company in recent memory, caps a torrid period for 53-year-old Packer, who’d envisaged the soaring A$2.2 billion ($1.7 billion) harborside hotel and gaming complex as his family’s legacy to Sydney. Any forced sale of his empire’s cornerstone investment would complete Packer’s retreat from Australia’s corporate landscape, which his media baron father Kerry dominated for decades.“If that’s enforced, Crown will be changed forever,” said Warren Staples, a lecturer at the University of Melbourne who focuses on business ethics and corporate governance, referring to Bergin’s proposed limit on individual shareholdings. “It’s a watershed day in terms of recommendations.”Still, her findings aren’t enforceable: The New South Wales state gaming authority will discuss her recommendations on Feb. 12, while regulators in neighboring Victoria state are considering Crown’s suitability to run its Melbourne casino.“They’ve got a lot of work to do to satisfy us,” Philip Crawford, chairman of the NSW gaming regulator, told reporters on Wednesday. “Things have got to change.”The overhaul started almost immediately. Crown directors and Packer nominees Guy Jalland and Michael Johnston quit early Wednesday. And Packer’s private investment company said it would have “no involvement” with the Crown board, giving directors “clear air” to work with the regulator on a plan to reform.Bergin’s report is a rare, unvarnished assessment of the way one of Australia’s most storied corporate dynasties -- the Packers -- does business. It also continues a drama-filled period that stretches back to 2016, when Chinese authorities rounded up Crown staff on the mainland, before a court convicted 19 current and former employees of illegally promoting gambling. Packer has since tried to sell some or all of his stake in Crown to at least two buyers, including Wynn Resorts Ltd.Packer “almost certainly will sell down” his stake, said Charles Livingstone, an associate professor at Melbourne’s Monash University who specializes in gambling policy and regulation. But he said an overhaul of Crown’s board, management and culture will take time.It’s “hard to see how Crown is going to get in a position where it can open this new casino anytime soon,” Livingstone said.Read more: Billionaire Packer’s Sydney Casino Opens With Empire in TurmoilBergin’s inquiry was triggered by a series of media articles in 2019 that alleged money laundering took place at Crown’s casinos and the company used junket companies with ties to criminal gangs.It’s now unclear when the gaming tables at Crown’s Sydney resort might open. While retail operations at the site are underway, the start of gambling has been on hold since December. Tuesday’s findings also put a cloud over Crown’s other casinos in Australia.Victoria’s state gaming regulator, which has already brought forward a review of Crown’s license in Melbourne, said Bergin’s report “would be of strong interest” and “will inform any regulatory action which may be required.” In Western Australia, home to Crown’s Perth casino, Premier Mark McGowan said the state government will review the report and stamp out any unlawful conduct.The report heaped criticism on the relationship between Crown and Packer’s investment company, Consolidated Press Holdings, which manages the billionaire’s assets.Lines of reporting lines were blurred, risks weren’t properly identified, conflicts or potential conflicts were not recognized, and Crown’s corporate needs weren’t given precedence over those of Packer’s investment company, she said.Packer’s influence on Crown and its operations, even when he wasn’t a board member, had “rather disastrous consequences for the company” Bergin said.(Adds closing stock price in the sixth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
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