The involvement of James Packer and his operatives in Crown Resorts must have contributed to a “blurring” of reporting lines in the lead-up to the China arrests, but the billionaire and his private investment company should not be blamed, an inquiry has heard.
A major focus in final submissions for the NSW Independent Liquor and Gaming Authority inquiry on Thursday was the dramatic arrest of 19 Crown staff in China in 2016 as the nation cracked down on gambling, which is illegal on the mainland.
The probe has previously heard Australian Resorts chief executive Barry Felstead was in 2015 warned by then president of international marketing Michael Chen about staff being concerned for their safety and living in “constant fear of getting tapped on the shoulder” as they sought to lure Chinese high rollers to Crown’s Australian casinos.
But that information never made it through to the board or risk management committee, and 16 of the employees ended up serving jail time.
Noel Hutley, acting for Mr Packer’s Consolidated Press Holdings, said at least two other executives – Rowen Craigie and Jason O’Connor – were aware of matters that were never escalated to the board.
“There has obviously been a breakdown in reporting,” Mr Hutley said.
“Mr Chen was aware of matters, many matters, which don’t seem to ever have gotten to Mr Felstead.”
The barrister rejected any suggestion the arrests were the fault of the VIP working group, which the inquiry has heard was led by CPH executive and Crown director Michael Johnston – a man hand-picked by Mr Packer.
“The fault is sought to be laid at CPH and Mr Johnston’s feet,” Mr Hutley said.
“I’m not disputing there were flaws, there were failures, there were faults.
“I can’t speak for Crown.
“What I am addressing is the submission that the VIP working group undermined these structures. These structures failed without any assistance from the VIP working group.”
Commissioner Patricia Bergin indicated she believed the group had an impact on the reporting failures.
“What you had was a totally dysfunctional reporting arrangement, which didn’t work,” she said.
“And when you have the establishment of a separate group that did operate separately, the significance of that overlay or concurrent operation is bound to have, as it did in Mr Felstead’s mind, I believe, from what he told me, a blurring of the lines.
“It’s not suggested that Mr Johnston intentionally intervened with the reporting structures.
“But the very existence of the VIP structure and its nice group telling people how to go about things to make it more effective, without having the reporting structure between them, was a problem that contributed to a lot of the information not getting to where it should have gone, as I see it at the moment.”
As he began on Thursday, Mr Hutley submitted: “There is no basis for findings by the inquiry that governance structures at Crown Resorts were compromised by the influence of CPH or CPH parties in a way that resulted in a failure to recognise and report escalating risk.”
“There is no evidence that any of the CPH parties encouraged the pursuit of financial outcomes while disregarding non-financial risks.”
Those were among eight points he delved into, another being a warning against the high risk of “hindsight bias in a context such as this, particularly in an environment that might be described as charged as this inquiry”.
The inquiry is seeking to determine if Crown should retain the gaming licence for its $2 billion-plus new development in Sydney, poised to open next month.
Separately, the arrests are the subject of a shareholder class action based on the share price plunge that followed the news, with plaintiff law firm Maurice Blackburn alleging Crown engaged in misleading or deceptive conduct and/or breached its continuous disclosure obligations regarding its China operations.
Mr Packer is Crown’s major shareholder but no longer a director.