Crown inquiry continues as resorts chief grilled

By Mia Chapman Updated
Blackstone’s bid for Crown still has hurdles to face

The New South Wales inquiry into Crown Resorts’ fitness to hold a casino licence in the state continued on Tuesday.

The Brisbane Times reports a senior Crown executive told one of James Packer’s key lieutenants that Chinese police had questioned staff over suspicions of illegally promoting gaming more than a year before 19 employees were arrested and charged.

Crown’s Australian resorts chief executive Barry Felstead told a NSW Independent Liquor and Gaming Authority inquiry that he never raised the issue with Crown’s chief executive, board or risk management committee.

The inquiry is examining whether Crown’s board and executives knew their staff were breaking the law in China as it considers whether it is a suitable holder of the licence for its new casino in Sydney, due to open early next year.

The arrest of 19 Crown staff in October 2016 sent shockwaves through the ASX-listed casino giant and a shareholder class action is currently seeking to claw back hundreds of millions of dollars they lost in a subsequent share price collapse.

On Tuesday, the inquiry heard Mr Felstead and other Crown executives were aware of a Chinese government crackdown on overseas casinos announced in 2015 and the arrest of staff from two South Korean casinos, when police detained and questioned a Crown employee in Wuhan in July that year.

Felstead takes responsibility for not using risk register

Mr Felstead said that in hindsight, he should have raised the development with Crown’s chief executive Rowen Craigie, its risk management committee and board, but at the time he did not think it was an “obvious escalation of risk.”

“I thought that the risks were being dealt with individually and they were separate circumstances not connected,” he said.

However, Mr Felstead did send information about the questioning of Crown’s employee to Crown director Michael Johnston, who represents the interests of major shareholder James Packer, with a note saying: “This is what we’ll be up against in China at the moment.”

Mr Felstead said he was not aware if Mr Johnston ever raised it with fellow directors.

The detention was raised during a meeting of the “CPH VIP Working Group” made up of Crown VIP business executives and representatives of Mr Packer’s private company, Consolidated Press Holdings, which advised on and approved elements of Crown’s high-roller strategy.

Counsel assisting Adam Bell suggested that showed that Mr Felstead provided more information about the Chinese high-roller business to the CPH VIP group than to his own CEO.

“Yes, on certain occasions that may be correct,” Mr Felstead said.

When pushed further, Mr Felstead insisted his obligation was always to the ASX-listed company’s board, rather than to Mr Packer, who owned just over half of the company’s share at the time.

“There were instances where I should have told him [Mr Craigie] things, I accept that, but I was under no illusion that Mr Craigie was my boss at all times,” Mr Felstead said.

Mr Felstead told the inquiry he took all the responsibility for Crown’s risk register not being updated to include the possibility of Crown staff being arrested in China, rejecting the suggestion from Mr Bell that it reflected a broader failure of Crown’s corporate governance.

“I was of the belief that we had the right process from a risk management perspective then and this one should have been on the risk register and it should have been escalated,” he said.

He added that Crown’s risk management processes had been improved significantly since the 2016 arrests.

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