Melco won’t have to produce some documents to NSW inquiry

By William Brown Updated
Melco won’t have to produce some documents to NSW inquiry

Asian casino giant Melco Resorts will not have to produce certain documents to the New South Wales Independent Liquor and Gaming inquiry into its purchase of a stake in Crown Resorts, after the New South Wales Supreme Court found the probe does not have the power of a royal commission.

The Australian Financial Review reports that Melco, which last week said it would not proceed with buying a second tranche of shares in Crown from billionaire James Packer, took the ILGA to court after the authority rejected Melco’s contention it did not have to produce certain documents it said were protected by legal professional privilege.

The ILGA’s probe is examining whether it is appropriate that Melco, which is run by billionaire Lawrence Ho, becomes a close associate of Crown.

Mr Ho’s father, Stanley, who indirectly owns a stake in Melco, is effectively blackballed from New South Wales because of his alleged links to organised crime.

Stanley has always denied those links and Lawrence has long argued he is completely independent of his father.

Supreme Court judge Justice Christine Adamson found that the New South Wales Royal Commission Act “has not come into effect for the purposes of the inquiry” and Melco’s “privileges including legal professional privilege, are not abrogated for the purposes of an inquiry.”

Justice Adamson found the New South Wales Parliament had not made it clear enough that the inquiry, constituted under the Casino Control Act, was entitled to engage the special powers of parts of the Royal Commission Act that would have entitled the probe to order legal privilege be breached.

“It is not for this Court, by a process of construction which relies on implied correlative powers and authorities, to enable Parliament to avoid confronting the inevitably controversial question whether, in inquires held by the authority under the Casino Control Act, it is desirable to abrogate fundamental privileges and rights of witnesses and persons required to produce documents.”

The decision could mean further changes to the direction of the inquiry, which is headed by Patricia Bergin SC.

Melco’s decision to abandon its $900 million purchase of a second tranche of Crown shares and abandon its push for seats on Crown’s board will mean that some of its executives, who it put forward as potential Crown directors, will no longer need to be cleared by the probe.

An ILGA spokesman said it was “considering today’s court judgment and how it may impact the running of the inquiry. Any decision on whether to appeal against the judgment would be a matter for the New South Wales Attorney-General.”

While the Court’s decision is a win for Melco, Mr Ho’s attention is firmly focused on the company’s biggest market, the gambling hotspot of Macau, where it runs two giant casino resorts.

Macau’s entire casino industry, a total of 41 properties, has been shut by government officials because of the coronavirus outbreak for 15 days until February 20.

Melco said last week the shutdown and resultant hit to its earnings means that all non-core investment had been suspended.

It will retain its existing 9.9 per cent stake in Crown, but any further share purchases will be on hold.

Shares in Macau casinos dip

Shares of Las Vegas Sands, Wynn Resorts and Melco Resorts & Entertainment all fell more than 10 per cent at the open last Monday and traded down more than five per cent throughout the afternoon.

Nasdaq reported last month that all three companies have significant exposure to Macau, a casino hotbed that is feeling the brunt of China’s efforts to contain the coronavirus outbreak.

In the middle of China’s Lunar New Year, this time is traditionally a time of increased travel and crowds at Macau’s casinos.

The number of mainland Chinese visitors to Macau reportedly fell by 80 per cent on Sunday, compared to the equivalent day of last year’s holiday, and for the first three days of the holiday, arrivals are down more than 60 per cent.

The coronavirus, which is so far blamed for more than 80 deaths, and China’s efforts to contain it spooked markets on Monday, with the S&P 500 down more than 1.2 per cent and a number of travel stocks off by considerably more.

The Macau casinos went into 2020 hoping that a strong Lunar New Year holiday would start them on a positive trajectory after a difficult 2019, but the outbreak has all but ruined those hopes.

Overall, Macau gross gaming revenue fell 3.6 per cent in 2019 compared to 2018, the first annual decline since 2015, according to data provider Trefis.

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