Packer team distances itself from Crown’s failings

By William Brown Updated
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Crown Resorts’ governance failings have been blamed on its senior executives, according to James Packer’s right-hand man.

The Guardian reports that key Packer confidante Michael Johnston has blamed others for the problems unearthed at the organisation during a NSW government inquiry into its suitability to hold a casino licence in the state.

Johnston, who is one of Packer’s nominees on the Crown board, acted appropriately and should be spared any adverse findings, his lawyer, Noel Hutley, told the inquiry’s head last week.

Hutley said it was not his client’s job to pass reports of a crackdown on the promotion of gambling by Chinese authorities with the rest of the board.

Instead, this should have been done by Crown’s chief executive, Rowen Craigie, Hutley said.

He said Johnston had no reason to suspect that reports he was receiving about the situation in China weren’t also being passed on to the correct executives within Crown and being dealt with.

“Good corporate management doesn’t necessitate that one treats the structures as not operating appropriately,” Hutley said.

“I accept that all failed, I accept that.

“But the question here is the judgement of Mr Johnston.”

He denied a VIP gaming working group of which Johnston was a member was an alternative governance structure within Crown that operated outside of the usual chain of command.

Counsel assisting the inquiry have alleged the existence of the group helped compromise reporting lines within Crown, contributing to the arrest of 19 Crown workers in China in 2016 for illegally promoting gambling.

Hutley said the working group was merely an advisory board and had nothing to do with Crown’s failings in regards to the arrests.

Another member of the group, Australian resorts boss Barry Felstead, has admitted failing to report problems to Craigie, but Hutley said this had nothing to do with Felstead’s membership of the group.

He said Packer asked Craigie to “drill down” into the VIP business and see what was going wrong.

“It appears he failed to do so,” Hutley said.

Hutley also represents Packer, who counsel assisting the inquiry have also recommended be barred from being associated with the casino, in part due to a threat the billionaire made to a businessman in 2015.

In evidence to the inquiry Packer admitted the threat was “shameful” and “disgraceful”, but Hutley said it was made when his client was affected by “a profound psychiatric illness.”

Hutley said the episode should not be enough to bar Packer from involvement with Crown.

“There is no evidence to suggest that any such conduct would be repeated,” he said.

Crown’s lawyers are expected to respond to the inquiry’s recommendation that it be found not fit to hold a casino licence next week.

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.

Court documents from 2018 show that Crown paid at least $1 billion in commissions and rebates to junkets operating in Crown Perth and Crown Melbourne between 2007 and 2015.

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