Crown’s sale to Melco not flagged and could be licence breach

Crown Resorts’ failure to alert authorities about a sale of shares to the Macau-based Melco International before the deal was announced publicly could be a breach of its casino licence and raises questions about Crown’s suitability as a casino operator, the counsel assisting a New South Wales inquiry into the casino giant, Adam Bell SC, has said.

The Guardian reports that the inquiry, which began on Tuesday, is expected to call the billionaire businessman James Packer and the Melco International chairman, Lawrence Ho.

It is also expected to hear from a raft of Crown and Melco executives as it seeks to probe whether both Crown and Melco are suitable to exercise control over the high-roller casino licence at Barangaroo in Sydney granted in 2014.

The inquiry was sparked by last year’s announcement that Melco plans to buy 19.9 per cent of Crown from Packer’s CPH Holdings and by allegations of money laundering and the involvement of organised crime in Crown’s Melbourne casino made in the Nine newspapers.

The former supreme court judge Patricia Bergin SC held an open hearing on Tuesday, but the inquiry gets under way in earnest on 24 February, when it will begin the first part of its investigation.

This will look into the vulnerability of casinos to money laundering and the role of junkets and links to organised crime.

A second tranche of hearings is scheduled for March and will look into the sale agreement with Melco and whether the transfer of shares would give rise to any breach of the licence.

A third set of hearings will look into allegations made in the Nine publications about Crown’s involvement with money laundering and organised crime, while two final blocks of the inquiry will look at Melco and the suitability of any close associates, and strengthening future regulation.

In his opening remarks, Bell said Crown had not alerted the casino authority about the CPH-Melco deal ahead of time in order to allow it to assess the suitability of the new shareholder.

Crown said it wasn’t aware of shareholding sale by CPH Holdings

Crown has said it was not aware of the share sale by its largest shareholder, CPH Holdings, to Melco until the sale was announced publicly.

This is despite CPH having four directors on the Crown board.

The NSW Casino Control Act requires a licence holder to alert state authorities ahead of time if a new person proposes to become a “close associate” of the holder of the licence so that authorities can assess whether they are of good repute and do not have any business associations that would raise issues.

Bell argued that the NSW act required commissioner Bergin to take a very wide view of who were close associates and that it was not limited to shareholding or directorships, but also financial power and influence over a casino’s operation.

Lawrence Ho’s Melco group raises particular questions because of his father, Stanley Ho, whose STDM group had a monopoly over gaming in Macau until 2000.

Stanley Ho has been linked by casino regulators in New Jersey to triads and organised crime, Bell said.

When the Barangaroo licence was granted, the concerns led to special conditions being included in Crown’s licence that prohibited Stanley Ho and 59 companies associated with him from being “close associates” of the Sydney casino.

Lawrence Ho, who had previously been in a joint venture with Crown in Macau, had been cleared in earlier inquiries as a suitable person.

But both Bell and his fellow counsel assisting, Naomi Sharp SC, outlined the limits of those investigations, and flagged that there would be a much more detailed investigation of the links between Melco group and the business interests of the father.

Bergin concluded the inquiry by asking the parties to cooperate.

She said the inquiry had already assembled 58,000 documents and was in ongoing consultation with state and federal regulators which were providing information.

“If it can be the case that the present structures and arrangements in place do not facilitate and enable effective control of the risks of casinos, then you will expect a robust and cutting-edge approach will need to be adopted to control those risks,” she said.