The Australian casino industry was thrust into the unwanted regulatory spotlight in 2021 when James Packer’s glittering Crown was scorched by the Bergin Inquiry, which uncovered a business model based on Chinese junkets, predatory business planning, money laundering and links to organised crime.
The inquiry contagion quickly spread to Packer’s only mainland rival, Star Entertainment Group, which has casinos in Gadigal Country/Sydney, Magan-djin/Brisbane and Kombumerri/Gold Coast.
The casino regulator, NSW Independent Casino Commission (NICC), announced in September 2021 it would conduct a review of The Star and its Sydney operation.
The review, activated under sections 30 and 143 of the Casino Control Act 1992, began in November 2021, under Adam Bell SC.
The first Bell report, in August 2022, found The Star, Sydney was also unsuitable to hold a casino licence in NSW, parading a line-up of all the usual suspects, revealing egregious violations of the Anti Money Laundering and Counter Terrorism Financing (AML/CTF) Act, disregard of responsible gambling and high risk vulnerable customer controls and was scathing of the corporate culture of open disdain for rules and regulations.
Consequently, on October 17, 2022, the NICC announced it had suspended The Star, Sydney’s licence indefinitely, issued a fine of $100 million and appointed Nicholas Weeks as manager for 90 days, later extended to January 2024, allowing the operation to stay open.
Previously Chief Operating Officer of the National Rugby League, Weeks took a redundancy in 2021 and was immediately hired by Crown to manage its regulatory response to the Bergin Inquiry.
The Star, Sydney then endured two years of upheaval, yet despite extensive remediation plans, progress was so slow that, last February a second Bell Inquiry was announced.
The Bell Two report was released on August 30.
Bell Two found The Star, Sydney still unfit to hold a casino licence and identified additional serious compliance breaches.
The NICC issued it with a “show cause” notice, giving it 14 days to explain why its casino licence should not be torn up.
The Commission said: “The notice relates to four significant breaches … including … a cash fraud against The Star, a failure to run source of wealth checks on hundreds of members flagged as high risk, and fraudulent guest welfare entries that put already vulnerable customers at higher risk of harm.”
There were serious breaches of three-hour limits on patrons gambling without a break, as well as the cash fraud worth $3.2 million relating to a “ticket in, cash out” software glitch that allowed Star clients to claim funds they had not won.
It became obvious in a public hearing on April 15 why rehabilitation had been so slow.
Prosecutors presented communications between then Star Chairman David Foster and former CEO Robbie Cooke outlining their desire to oust Weeks, who the NICC had appointed manager in 2022 to oversee The Star, Sydney’s redemption.
Discussions on how to get rid of him, included possible legal action against Weeks personally and against the NICC, canvassing options for shareholder class actions over the inevitable revenue write downs.
It was a Bergin-like bombshell which, Weeks said, took him “by surprise”.
Foster and Cooke were quickly dumped but it was too little, too late.
Win some, lose (way) more
It was starting to look like, this time, The Star, Sydney, might not get away with it. By September 27, its share price had slumped by more than 50% to a record low as it resumed trading the day after posting a second straight multi-billion-dollar annual loss, wiping $1.4 billion from the value its three casinos.
Now in serious financial trouble, the company blamed “challenging trading conditions” and regulatory changes — including mandatory cashless gambling.
The Star, Sydney is also facing similar suspensions and fines in Queensland, with AUSTRAC launching Federal Court proceedings over its connection to Chinese junket operators.
Star told the ASX it would continue to work with stakeholder and advisers about its financial condition. “These discussions are ongoing and involve, among others, state governments, regulators and the company’s lenders,” it said.
On October 10, the NICC announced the outcome of those discussions and its decision on Star’s show cause notice and licence suspension.
With a now or never opportunity to force real reform of great community benefit, the NICC decided not to suspend Star’s licence, citing a potential 9000 job losses across three venues and damage to associated businesses if Star went under. The NICC ruled that keeping Star operating was “in the public interest”.
NICC Chief Commissioner Crawford said, without a hint of irony, “It would be a very, very final act to take the licence away, particularly given the current economic times”.
While The Star, Sydney’s licence remains suspended, the fine was reduced to a small change $15 million (with nine months to pay). It has been given another extension to operate until next March 31, coinciding with the end of Weeks’ current term.
The NICC response indicates that these parasitic operations will never be shut down, the regulator having squandered the single, fleeting opportunity to force real reform.
The whole affair has again shown corporate criminals just how much they can get away with and how little governments and regulators really care about the ordinary people, whose communities continue to pay the price.
[Suzanne James is a policy, governance, risk management and compliance consultant.]
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