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Crown Resorts’ major shareholder James Packer had a “rare and superficial” relationship with Asian junket operators.

That is what the New South Wales Independent Liquor and Gaming Authority probe heard last Friday during closing submissions.

Australian billionaire James Packer was all smiles as he walked the red carpet tonight, hand in hand with his singing sensation girlfriend Mariah Carey at the official opening of his new $US3.2 billion casino resort in Macau. James Packer and Mariah Carey walk the red carpet. James Packer has sold almost half his stake in Crown Resorts for $1.76 billion to a Macau-based entertainment company. Today, we’re focusing on James Packer’s casino business, mainly the recent inquiry into Crown Resorts (where he was a former chairman and majority shareholder) and accusations of money laundering through the company. Packer resigned from the company in 2018 due to his mental health, but remains a majority shareholder. Packer and Lawrence had been joint venture partners in MRE’s predecessor Melco Crown Entertainment – which operated casinos in Macau – before Crown ditched its stake in 2017 to focus on its.

Barrister Noel Hutley, acting for Mr Packer and his private investment company Consolidated Press Holdings, said the billionaire’s dealings with junket operators were only to build rapport to help C brown increase its market share in the high roller gaming sector.

It has been suggested Crown’s junket partners had links to organised crime in Hong Kong and Macau and laundered huge amounts of money at its Melbourne and Perth casinos.

It has also been suggested by Commissioner Patricia Bergin that Mr Packer, despite resigning from the Crown board in 2018, was the driving force behind the company’s push to lure more VIP gamblers to the venues.

“The contention that Mr Packer and CPH had some overbearing influence over the affairs of Crown Resorts is simply not supported by the evidence,” Mr Hutley said.

He asserted it could not be said that any influence Mr Packer had on the company rendered Crown unsuitable to hold the licence for its new $2.2 billion development in Sydney’s harbourside, which is slated to open next month but could be delayed, with Ms Bergin to hand down her decision in February.

“In addition, there is no evidence that Mr Packer had any adverse impact on Crown Resorts or the public interest, and in fact…Crown and its shareholders had benefited from the involvement of Mr Packer and CPH over many years,” Mr Hutley said.

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Counsel assisting Adam Bell has previously urged the commissioner to recommend to ILGA that it reconsiders its approval of Mr Packer as a “close associate of the licensee,” having regard to threatening emails he sent to an unnamed businessman in 2015 around privatising Crown.

When Mr Packer testified at the inquiry, he labelled the conduct “shameful” but said his behaviour was a direct result of his battle with bipolar disorder.

Ms Berginn questioned why Mr Packer’s mental health issues were not disclosed to the board and senior management after he stepped down as a director.

Mr Hutley said: “He left quite appropriately at that stage when he realised he wasn’t up to the job.”

The reclusive billionaire remains Crown’s biggest investor and the inquiry has heard he was given special treatment over others through a “controlling shareholder agreement” under which he and CPH were handed sensitive and confidential information.

Crown Wins Battle at Federal Court Against Junket Taxes

Crown Resorts’ battle at an NSW government inquiry remains ongoing but it is now entering into a legal battle with the Australia Taxation Office over $100 million in GST from dealings with junkets.

The Australian Financial Review reported in early November that the ATO lodged an appeal against a decision of the Federal Court that sided with Crown on whether commissions and rebates paid to junkets should fall under normal GST rules or special rules for gambling revenue.

Junkets refer to gambling promoters who organise tours for international high rollers to Crown casinos in Australia.

The legal stoush started in 2018 when Crown Resorts contested the GST rulings made by the ATo for its Melbourne and Perth casinos over several years.

In September, Justice Jennifer Davies ruled in favour of Crown, but the ATO now says her judgment should be put aside.

The ATO said Justice Davies erred in her judgment that the relationships between junkets and casinos were “one integrated and indivisible transaction” and that the “commissions and rebates” should be considered a separate contract unrelated to gambling.

The issue turned on the interpretation of how the revenue stream between Crown and junkets – external companies that provide trips for international high rollers to casinos in exchange for commissions and rebates from wins and losses – should be constructed.

Crown said its use of junket operators should be taxed under a section of GST legislation that applies a tax to the margin of the operator of gambling services to avoid the complexity of calculating the GST liability for every bet wagered minus what is paid out.

But the ATO contended that as Crown paid commissions and rebates to junkets which were in turn used for promotional activities, the transaction could not be considered a typical gambling activity and fell under normal GST rules.

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James Packer has forgotten much about his involvement in or influence on the development and operations of the Crown Casino group, of the shares in which he still owns 36% and of which he was chairman for eight years until 2015.

That’s the summary of his evidence to the inquiry being conducted by Patricia Bergin QC into whether Crown should still be considered fit and proper to operate Sydney’s second casino, currently rising up on the western foreshore of the city’s CBD.

The NSW government, which handed Crown its casino licence in 2014 in an opaque, behind-closed-doors process so deeply venal that words fail to describe it, was forced into this inquiry with all the enthusiasm of a three-year-old eating greens.

However, it had no choice, after the media went big with strongly-evidenced allegations that Crown had been engaging in money laundering, breached gambling laws and partnered with “junket” operators with links to drug syndicates, human trafficking and organised crime. That language, by the way, comes from the inquiry’s terms of reference, so I’m not being hyperbolic.

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NSW’s casinos are regulated by the Liquor and Gaming Authority, which is tasked by the governing legislation with, among other things, “ensuring that the management and operations of the casino remains free from criminal influence or exploitation”.

Globally, the regulation of casino licences typically hangs on that central concern: that they be kept out of the hands of organised crime. The background to that is the historical fact that the first US casinos were conceived, built and for decades operated by the Mafia, in both Las Vegas and Atlantic City. The model was replicated in Asia’s gambling mecca Macau.

The biggest shark in the Macau casino pool was, for a long time, Stanley Ho. His notoriety, and US regulators’ warnings about his connections, had caused the NSW government to insert special conditions in Crown’s Sydney casino licence prohibiting Ho from ever getting his fingers near it.

When Packer announced in May 2019 that he was selling 19.9% of Crown to Ho’s son Lawrence, via his vehicle Melco International, the fun really began. Stanley had an indirect interest in Melco via a family trust. From a probity perspective, the deal stank. (Ultimately, Melco backed out.)

Meanwhile, Crown had been merrily pursuing the great gambling whales of China, openly running a representative office there staffed by Australian employees whose job was to entice the high rollers to Crown’s casino in Melbourne, in clear contravention of Chinese law which prohibits exactly that activity. In 2016, 19 Crown staff were arrested and jailed as the Chinese authorities cracked down.

As for the “junkets”, well, basically they’re a bunch of criminal syndicates whose profession is combining high roller recruitment with the facilitation of money laundering and every other form of sophisticated cross-border criminal activity imaginable. Crown was in bed with a bunch of them and its due diligence processes were a poorly concealed joke.

It has to be said that Crown has passed six probity reviews by Victorian casino regulators since it began operations there, as well as the NSW government’s initial investigation into its suitability to hold the second Sydney licence. According to the regulators, it’s been a model casino operator.

In a sense, that’s true. Casinos the world over have always performed two social functions: the wholesale redistribution of wealth from addicted gamblers to casino owners (with a healthy clip going to the governments who license them); and making life easier for organised crime. The last emotion we should feel about the revelations pouring out in the current inquiry is surprise.

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Secret deals, mysterious financiers: welcome to the world of James Packer

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Bergin’s task is to determine whether Crown is a “suitable person” to hold a casino licence. One could ask the rhetorical question, is anyone? Even so, the baseline for suitability surely is that Crown can be trusted to ensure that organised crime is kept outside the shiny revolving doors, and that the casino does nothing worse than relieve people of their savings.

Packer’s evidence to the inquiry should at least reassure us of three things. First, when he decided to sell 20% of Crown to Melco, although he knew about Stanley Ho’s indirect interest and the conditions prohibiting Ho from being associated with Crown in any way, he “just didn’t give the matter any thought. I had forgotten it”.

Second, although he was chairman of Crown while it was busily building up its illegal operations in China, he had no knowledge of any of that or the fears the China-based employees had been voicing for some time before they were arrested. Apparently, that was all kept from him.

Finally, after he stepped down from the board, he continued to have constant direct contact with Crown’s senior executives, receiving daily financial updates from the finance director and making regular “requests” on operational matters. Most unusual for a mere shareholder in a public company.

Packer finished up his three-day grilling yesterday by conceding he may be forced to sell down his stake in Crown to secure the casino’s license to operate in Sydney. He also said he would not return to the Crown board or continue to receive background information on the company’s financial performance.

Will that be enough to save the license?

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Packer says his bipolar disorder is the cause of his memory loss, which can be accepted and protect him from criticism to a sensible degree. However, casino licence suitability, like being an airline pilot, is a public trust with a necessarily harsh standard (at least, in theory).

Bergin will have to pick through the evidence to work out who is really running Crown; whether its board and executive team are genuinely performing their functions or doing someone else’s bidding; whether Crown’s direct acts of criminality, and its lax allowance of itself to be co-opted by organised crime in entirely predictable ways, render it unsuitable to hold a casino licence at all.

It’s an unsavoury spectacle — and very, very Sydney.

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