Crown Resorts: can a ‘special manager’ clean up Melbourne’s casino?

Royal commission’s problem gambling recommendations welcomed, but experts question governance regime

A royal commission proposal to install a special manager to make sure Crown Resorts’ Melbourne casino cleans up its act after years of misconduct will be difficult to implement, experts say.

While commissioner Ray Finkelstein’s recommendations to tackle problem gambling have been welcomed, governance and gaming experts have questioned the plan to appoint QC Stephen O’Bryan to oversee the casino, rather than strip the company of its licence.

And experts say a 2012 deal under which the Victorian government agreed to pay Crown up to $200m if it removed the company’s casino licence or imposed conditions on it must be scrapped before the majority of Finkelstein’s recommendations can be brought into force.

In his report, tabled in Victorian parliament on Tuesday, Finkelstein said the agreement violated a long-held legal principle that no one should be entitled to recover damages caused by their own wrongful conduct.

Finkelstein found Crown was not a suitable operator of the Melbourne casino, saying it had facilitated money laundering, failed to stop addicts from gambling excessively and underpaid state gambling taxes. Junket operators who brought high rollers to the Melbourne casino were also linked with organised crime, he said.

In New South Wales, Crown will not be given a licence to enable it to open its high roller casino in the $1.7bn Barangaroo tower in Sydney until it has satisfied an expert appointed by the state regulator that it has reformed itself, NSW estimates have been told.

However, Finkelstein said Crown should be allowed to continue operating the Melbourne casino because it had a willingness to reform itself and because closing its doors while a new licensee was found would be economically damaging to Victoria.

The outcome showed that Crown was probably too big to fail, according to Charles Livingstone, a public health expert and gambling researcher at Monash University.

“If you were in any other business and you’ve done this, you would expect to lose whatever rights you had had conferred on you by the status as a consequence of that poor action,” he said.

Problem gambling crackdown

Livingstone welcomed Finkelstein’s proposed crackdown on poker machine gambling, which he said could reduce revenue from the main gaming floor by as much as 20%.

Commissioner Ray Finkelstein
Commissioner Ray Finkelstein recommended a special manager be appointed to oversee the reform of Melbourne’s Crown Casino. Photograph: James Ross/AAP

Livingstone said Crown already had the technology to eliminate cash in poker machines, limit the time gamblers can spend at a machine and enforce breaks, as recommended by Finkelstein.

“It is completely feasible and it wouldn’t even cost that much given the software and hardware to do it is already in place,” he said.

Tony Robinson, who was Victoria’s minister for gaming in John Brumby’s Labor government between 2007 and 2010, predicted it would be tricky to get the laws needed to fully realise Finkelstein’s vision through a parliament where Labor lacks control of the upper house.

He said he thought Finkelstein had done a “really good job”, especially on tackling problem gaming – an area that was not considered in a NSW inquiry that reported in February, prompting Victoria’s royal commission.

“He cut through on the problem gambling front and simply came out and said this is what you have to do … you have to have mandatory breaks, time limits, limits on cash.

“That seems to me, will become the new standard of gaming across Australia.”

Robinson said he didn’t know if the special manager regime would work because it had never been tried before.

“My thinking is it will slow down the decision making, probably at the time when they need to speed it up.”

Andrew Linden, a governance expert and PhD candidate at RMIT University, said the governance model proposed by Finkelstein was a “dog’s breakfast”.

“It is not clear to me how the Victorian parliament can override the Corporations Act provisions on directors duties to give full effect to this recommendation,” he said.

Victoria could have suspended Crown’s licence and created a new public entity to be the licensee, he said.

“Not only would that approach be cleaner but it would signal that no company, not even Crown, is beyond the law.”

Experts also pointed to a 2012 management agreement – under which the Victorian state government agreed to pay Crown up to $200m if it removes the company’s casino licence or imposes conditions on it – as a major impediment to reform.

In his report, Finkelstein said the agreement violated a long-held legal principle that no one should be entitled to recover damages caused by their own wrongful conduct.

Finkelstein’s report has also reverberated in NSW, where similar clauses exist in deals between the state government and both Crown and its rival Star Entertainment Group.

The NSW Independent Liquor and Gaming Authority is now studying the more extensive Victorian report to determine what implications it has for NSW. The regulator was due to meet the overhauled Crown board on Wednesday night.

The hotel and restaurant complex at Barangaroo opened at Christmas, but so far the casino has not received its limited gaming licence that would enable it to begin operations.

Doubts about compensation

Meanwhile, the NSW minister for digital and customer service, Victor Dominello, has said he does not believe Crown’s generous compensation provisions will be upheld in court, in light of the Bergin report in NSW and subsequent findings in Victoria.

Under a deed signed with the NSW government, Crown is entitled to 10.5 times any financial loss if any actions of law changes by the NSW government impact Crown’s revenue.

The extraordinary compensation scheme was unveiled in September 2020 after the inquiry into Crown was first announced.

The full extent of the NSW government’s plans to change casino regulation in light of the Bergin report is still to be implemented. Dominello has said he will accept all 19 recommendations made by the inquiry’s commissioner Patricia Bergin.

Crown itself has responded by introducing new anti-money laundering systems as well as overhauling its board. But it remains to be seen how the company will react to some recommendations that will affect its revenues.

The most prominent of these is NSW’s plans for a cashless gaming card, which Dominello said was designed to address “the twin evils” of problem gambling and money laundering.

The NSW card will enable gaming limits to be set and stop cash being used to buy chips in casinos.

Victor Dominello
NSW MP Victor Dominello does not believe Crown’s generous compensation provisions will be upheld in court. Photograph: Adam Yip/AAP

NSW estimates also heard that despite the concerns about the compensation deal with Crown, the Star has been granted a similar compensation deal to Crown Resorts under a deed signed in May 2020 by Dominello.

During a testy exchange with Labor’s John Graham, Dominello said he had signed the similar deed with Star on the advice of NSW Treasury.

“There are obviously two players in the market and you would think arrangements would be similar,” Dominello said.

“It seems like quite extraordinary compensation,” Graham replied.” If the state takes your house, it pays compensation but not 10.5 times.”

“I am not Eddie Obeid or Ian Macdonald and I don’t sign things without advice. I followed the advice,” Dominello replied, referencing two former Labor politicians jailed last week for corruption.

Contributors

Ben Butler and Anne Davies

The GuardianTramp

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