Star inquiry to tackle chairman John O’Neill’s stewardship of casino
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In its eighth week of hearings, the NSW inquiry into Star’s suitability to run its flagship casino in Sydney is investigating how rigorously board directors and senior executives carried out their duties to the company.
Suncity’s money cage
Star also allowed Suncity to open a secret, unbranded VIP room after telling the media it was ending their relationship. It also continued dealing with the junket and its boss, Alvin Chau, despite internal and external investigations suggesting they were linked to organised crime and money laundering.
The inquiry will probably question Mr O’Neill on what he knew of the cage and whether he accessed any of the reports into the group.
Other directors have said management told them that “present functions at the service desk [were] limited” inside Salon 95 and “monitoring” was under way.
The other directors to appear before the inquiry conceded they should have asked more questions of management when Mr Bekier briefed them about “concerns around certain activities”.
The inquiry may also look into Mr O’Neill’s knowledge of Star’s controversial use of China Union Pay cards and its decision to mislead NAB about the true nature of the transactions.
The CUP transactions included $11 million worth of payments on a single day in 2015, all by billionaire property developer Phillip Dong Fang Lee.
Under the scheme, which was also used by rival Crown Resorts, Star categorised high rollers’ transactions on CUP cards as “hotel expenses” rather than gambling costs. This was a “workaround” of NAB’s internal policies that barred the cards’ use for gambling and of Beijing’s foreign currency controls.
Director Richard Sheppard told the inquiry – in comments echoed by other directors – that he did not have “any real sense” of the extent of the scheme but accepted responsibility for the CUP failures as a board member.
The inquiry also heard that Mr Lee bought $2.7 billion worth of chips from the casino over 15 years – at least $100 million of which was done using CUP cards – while high roller Huang Xiangmo bought $2.7 billion in chips over five years.
Mr O’Neill’s knowledge of these customers’ dealings is not yet known, but a Star executive told the inquiry in March that Mr Huang was a top-three debtor at the casino and he would expect the board to have read CEO reports detailing this.
Misleading banks
Four Star executives admitted during the public hearings to misleading NAB over the CUP scheme when they were asked by the bank in 2019 to explain $900 million in “suspicious” transactions made on NAB machines at Star venues.
How much the board knew about this has not been made clear, but director Sally Pitkin told the inquiry the board only learnt of it in October last year.
The inquiry also heard Star misled the People’s Bank of China by issuing misleading source-of-funds letters to make deposits by high rollers appear to have been earned by gambling.
The inquiry heard conflicting accounts of when the board knew about this, and it is not clear whether Mr O’Neill was aware of the practice.
Director Ben Heap said he only learnt of the misleading letters when it was uncovered by the inquiry, while another board member, Gerard Bradley, said he already knew Star was investigating the issue.
Mr O’Neill will probably also be questioned on his reaction to KPMG telling Star in 2018 that it may not be complying with anti-money laundering laws. The inquiry has heard that Mr Bekier said the consultants’ findings were “wrong” and Mr O’Neill “found [KPMG’s] tone, the style of language used ... offensive”.
Mr Bekier later gave evidence that he “got frustrated” with KPMG for “what I perceived to be poor client service”, but denied challenging the findings. Mr O’Neill is yet to speak publicly about his reaction.
Ms Pitkin also told the inquiry that the company’s executives “came close to challenging the independence of KPMG” and showed “a lack of maturity” about money laundering risks when they challenged the bombshell report.
ASX notices
The chairman may also be questioned on why the board signed off on two ASX statements saying that media reports on criminal infiltration and money laundering at Star were “misleading” despite knowing elements were true.
This included an ASX notice on October 12, 2021 denying that Star had kept the KPMG report secret, even though the company had incorrectly claimed legal privilege over the work to keep it from AUSTRAC.
When other Star directors were questioned about this, Mr Sheppard said he was unaware of the privilege claims when he signed off on the notice and Ms Pitkin and Katie Lahey said they would word the notice differently now.
The directors who have already faced the inquiry also all conceded they signed off on an October 11, 2021 ASX statement rejecting media reports that cast doubt over Star’s probity and integrity, which triggered the NSW inquiry, even though parts were true.
But they denied the board misled the market in saying Star was “concerned by a number of assertions within the media reports that it considers misleading”.
Mr Sheppard was the only director to concede he might have been “careless” in approving the announcement.
The inquiry has also investigated whether Star’s board held informal, “off the books” board meetings after media allegations about Suncity’s criminal links in 2019 or during the inquiry.
Executives have told the inquiry the board had “information calls” that were not minuted during the first crisis period and appear to have done the same during the present inquiry.
As board chairman, Mr O’Neill may be asked about the alleged practice.
The inquiry has also questioned whether Star executives or directors have been briefing the media during the inquiry, which Mr O’Neill again may be asked about after his name came up in chief financial officer Harry Theodore’s testimony.
Mr Theodore was questioned on claims made in The Australian that he was leaving Star “within weeks” on April 1 – more than a month before he announced his departure.
The Australian cited “sources with direct knowledge of discussions” about Mr Theodore’s tenure as saying he planned to resign. But the CFO said this was “wrong” and that he had only discussed his plans with Mr O’Neill.
The inquiry also questioned Mr Bekier about whether he briefed journalist Elizabeth Knight about his departure during the inquiry.
What comes next
Inquiry chairman Adam Bell, SC, may also ask Mr O’Neill – as he has of every director to appear before the inquiry – where he thought the company went wrong and his departure plan from the company.
“Mr O’Neill will transition his chair and executive responsibilities in an orderly manner,” Star told the ASX on Friday. “Interim arrangements will be announced once finalised.
“A search for a permanent CEO was commenced last month.”
Ms Pitkin said when she was asked that she would be gone from Star by the end of June, while director Mr Bradley said he would leave “in coming months” and Ms Lahey also committed to leave.
Mr Theodore, chief legal officer Paula Martin and NSW casino boss Greg Hawkins resigned after giving evidence earlier this month. Mr Bekier, general counsel corporate Oliver White and general manager, finance and commercial Michael Whytcross have already left.
