Star, Crown inquiries: How Australia’s casino industry became so rotten
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But while The Star took a holier-than-thou approach to its James Packer-backed rival over the past two years – as three separate state inquiries found Crown unfit to hold casino licences in Sydney, Melbourne and Perth – the evidence heard by the NSW inquiry this past month has shown it was similarly dishonest.
The NSW probe, helmed by Adam Bell, SC, has heard The Star set up a secret gambling room for criminal gang-linked junket operator Suncity; hid Suncity’s illegal cash cage from the NSW casino regulator; sold the Chinese billionaire Huang Xiangmo $1.7 billion worth of chips over five years until 2018, making him a top-three debtor to the casino; and may have failed to pay state taxes.
Just this week, the inquiry heard Martin incorrectly claimed legal privilege to refuse requests from the financial crime watchdog, AUSTRAC, to provide a copy of a bombshell report on money laundering through its Sydney casino.
Underground cash
The inquiry has heard that hundreds of millions of dirty dollars flowed into The Star’s glitzy casino complexes without checks for signs of money laundering.
But to those who have watched the development of Australia’s casino scene since the early 1990s, when Victorian Labor premier Joan Kirner signed off on Crown’s development despite warnings of the money laundering risk, this was not a surprise.
Aided by light-touch oversight by state gambling regulators compromised by the streams of casino taxes running into their governments’ coffers and a financial crime watchdog more focussed on banks, Australia’s biggest casinos became a haven for money laundering.
Dr Charles Livingstone, a gambling regulation expert and academic at Monash University, says this misconduct was almost inevitable given gambling watchdogs’ meagre powers, which are designed to allow the casinos to “self-regulate”, and minimal funding.
“Once the casino operators discovered that – which didn’t take them very long because it was obvious – they just exploited it and exploited it and kept pushing the boundaries until we got to the point where it became impossible to keep ignoring,” Livingstone says.
The Australian system was “always deliberately intended to be the lightest possible touch of regulation”, he says, and “that evolved over time to become even lighter than it was at the outset”.
This is at odds with the rest of the world, he says, with watchdogs in Las Vegas, Europe and Britain taking an interventionist approach, including sending inspectors into casinos and pulling patrons aside to ask them to justify their source of funds if there are suspicions of money laundering.
Analysis by The Australian Financial Review of the 17 actions taken by the NSW Independent Liquor and Gaming Authority against Star since 2016 suggests this is true. Of those 17, all were self-reported, just three related to the gaming giant’s casino licence, and the total fines imposed were less than $200,000.
Deakin University professor in regulation Linda Hancock says this weakness came down to the inherent conflicts of interest for watchdogs appointed by state governments that enjoyed gambling tax revenue.
While the NSW and Victorian watchdogs were tougher in the 1990s when Crown and Star first opened, Hancock says “then they got complacent and captured” amid “strong guidance from the state that the revenue from casino tax was important”.
“They became light-touch and complicit … over the years, they were put aside, and they became blind to the risks [of casinos] and were almost co-producers of [the casinos’] behaviour.”
Hancock says that by shifting to a self-reporting approach to identify possible non-compliance, regulators also became reliant on how companies defined risk.
“Companies now manage risk as risk to their own reputation or to shareholder income, rather than a broader definition … that includes harm to customers or the public.” There is also little attention paid to the risk of tax avoidance via money laundering at casinos.
Federal watchdog
The NSW, Victorian and WA inquiries into Crown recommended revamped casino regulators with tougher powers and specialist remits limited to casino regulation, not liquor licensing. Victoria has already legislated these changes.
But for Hancock and Geoffrey Watson, SC, a director of the Centre for Public Integrity, truly stopping misconduct at casinos requires a federal approach.
“States have different degrees of capture, and vested interests in the revenue from casinos,” says Hancock, who wants a federal watchdog.
She points to the fact that casino operators in Australia often have sites in multiple states – Star has casinos in Brisbane and the Gold Coast as well as Sydney – and that “gambling tax is a state, not federal tax”.
She says the consumer protection and financial and money laundering risks associated with casinos – both federal responsibilities – would provide grounds for a national intervention.
“Of course, you’d have to appoint the right people, and you’d have to have a strict regulatory regime that identified the issues to be proactively investigated and to hold licensees to those regulations … but if you had a national regulator with a frank and fearless approach that was well-resourced, it would [help].”
Watson agrees, calling for “the [federal] government to step in” and force Star to clean up its act, with money laundering a national security issue.
Independent federal MP Andrew Wilkie also says individual states are “not up to the job” of casino regulation and has called for a national oversight body that was not conflicted by state reliance on gambling tax.
AUSTRAC began an investigation into The Star in 2019, after media inquiries revealing money laundering at Crown. It made the existence of the investigation public in 2021 but has not yet laid charges.
Profit at all costs
The question of who at Star knew what misconduct was occurring and when – or who ought to have known – is still being fleshed out.
The NSW probe has been extended from its original five-day timeline to run for at least six weeks, and will now grill senior executives and directors as well as the middle management initially ordered to appear.
Outgoing CEO Matt Bekier and chief financial officer Harry Theodore are scheduled to appear after Anzac Day. Chairman and acting Star CEO John O’Neill and directors Ben Heap, Sally Pitkin, Gerard Bradley, Katie Lahey and Richard Sheppard will give evidence after May 9.
But a “profit at all costs” culture has already been uncovered, as the inquiry hears a growing list of instances where Star overlooked money laundering or other risks for valuable clients.
It heard that Star is yet to decide whether to end its lucrative relationship with Suncity junket boss Alvin Chau, for example, despite his arrest last November and a wealth of other evidence before the company of his alleged criminal ties.
Several senior executives did not view Chau as a risk even after they were made aware that he was allegedly involved with triad gangs, money laundering, drug trafficking and organised crime.
Star also continued to deal with high roller Lee until the ATO started proceedings against him last year, despite Star’s group general counsel, Andrew Power, conceding that Lee was a “high-risk” customer who was at risk of using the China UnionPay system “as an ATM” instead of for gambling.
Star executives also admitted they misled NAB over the China UnionPay transactions – former group treasurer Sarah Scopel stepped down from her current role at Woolworths after the revelation last week – saying they felt pressure from the casino’s general counsel corporate, Oliver White, and CFO Theodore to do so.
Inquiry head Adam Bell asked White last week whether he “felt at the time that there was a culture where business goals took priority over compliance”.
The lawyer conceded: “It’s something I’ve reflected on … [and] I feel that was the case from time to time.”
But it was evidence about Star’s approach to a foreign gambler with a buy-in of just $100,000 – paltry compared to the millions offered by other high rollers – that best revealed this culture.
White testified that the patron, who had been advanced $100,000 via the China UnionPay scheme, was reportedly under investigation for money laundering when they visited Star in 2017.
He said he notified Bekier of the associated risk before the gambler’s arrival, but that the CEO “was of the view” that while their relatively small buy-in of $100,000 was “probably not worth the reputation risk”, they should be allowed to gamble anyway as the person was already en route to Australia.
This reinforces Hancock’s suggestion that these gambling companies are more focussed on reputation risks than other harms.
It also suggests that for the right price, any risk can be overlooked. The buy-in of $100,000 was “probably not worth” it, but perhaps a higher sum would have been.
But whatever Star’s top brass tell the inquiry in coming weeks, Hancock says they can no longer pretend that Crown’s wrongdoing, characterised by the Victorian royal commission as a “profit at all costs” culture, was not mirrored in their own corridors.
“Star was sitting back looking at Crown like they were a schoolkid that’s been caught cheating [during the Crown inquiries] and then they were cheating too.”
All three Crown inquiries found the gambling giant was unfit to hold casino licences and that state regulators were asleep at the wheel. All signs point to The Star suffering the same fate.
