Crown’s China operators were risky, inquiry hears

By Charlotte Lee Updated
Crown’s willingness to ban junkets called into question at Victorian royal commission

The inquiry into Crown Resort’s suitability to hold a casino licence in New South Wales continued on Monday.

Brisbane Times reports the inquiry heard a senior Crown executive was told the casino giant’s China-based staff had grave fears the work they were doing was illegal and put their safety at risk before 19 were arrested and jailed in 2016.

Former president of international marketing, Michael Chen, wrote to Australian resorts chief executive Barry Felstead in March 2015 updating him about a Chinese government crackdown on foreign casino operators.

While he assured his boss that their 20 or so staff were not breaking Chinese law, he said it was a risky place for them to be, with one of their high-roller customers recently being detained by authorities for three months without charge.

“This is one thing that is important to understand when it comes to the China team: they are living in constant fear or getting tapped on the shoulder,” Mr Chen wrote.

“In a country where due process is inconsistently applied, it’s a risky place to be for all our team.”

Under questioning by counsel assisting Adam Bell, Mr Felstead, who remains the top Crown executive responsible for international VIP business, agreed the email was an important warning.

However it, along with the widespread media reports about the government crackdown, did not prompt him to raise the issue with Crown’s risk management committees, which in hindsight he said he should have.

“I was of the view that the risks were being managed adequately in China,” Mr Felstead said.

“I was satisfied that it was on the risk register and it was already there – I didn’t feel the need to do it again.”

Chinese officials arrested 19 Crown staff in October 2016 and charged them with promoting gambling, in breach of local law.

Sixteen of the senior management and sales team members spent between nine and 10 months in jail.

Mr Bell told the inquiry that although the arrests happened four years ago, it was relevant to the inquiry’s assessment of whether Crown is a suitable holder of the licence for its new casino in Sydney’s Barangaroo, due to open early next year.

In doing so, the inquiry should consider whether Crown board members and executives believed its staff were breaking Chinese laws, if its business model put staff at risk, whether it ignored warnings about its Chinese operations and how its risk management policies operated, Mr Bell said.

Other emails also showed that Mr Chen operated a high-pressure sales culture among Chinese staff, telling them in a 2016 email it was “essential” that they exceed last year’s turnover targets so they received their annual bonuses and to make a “hard push” collecting debts from Chinese customers, some of whom owed Crown more than $5 million.

Mr Felstead said evidence presented to the inquiry showed that some of their activities in China were not consistent with Crown’s code of conduct requiring all business be done “legally, ethically and with the strict observance of the highest standards of integrity.”

That included Crown’s accounts payable department being instructed to label all transfers to China as “services consulting fees”, which Mr Bell said appeared to be an attempt to disguise the nature of the payments.

“This is unusual behaviour,” Mr Felstead said.

“This is not consistent with what we do.”

The inquiry continued public hearings on Tuesday.

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