The cases relate to section 180(1) of the Corporations Act 2001 (Cth), which references the requirement for a company officeholder to “exercise their powers and discharge their duties with care and diligence”.
This, ASIC said, was also in relation to findings from investigations into Star’s activities in New South Wales and Queensland, two states in which Star has recently been deemed unsuitable to hold a casino operator licence and subsequently had its licences suspended.
Alongside Heap, who was appointed chairman in June this year after a spell as interim chair, ASIC confirmed Katie Lahey as the other current Star director who will face civil proceedings.
Transitional arrangements for Star
Star said both Heap and Lahey have supported the board renewal plans announced earlier this year, but will step down once additional directors are appointed and the appropriate transition arrangements are put in place.
This process, Star said, is expected to be finalised in early 2023 and will be designed to ensure the operator maintains a sufficient number of independent directors at this critical juncture.
“At the recent annual general meeting, I committed to provide stability during a period of significant leadership change and to ensure the company is firmly on the path back to suitability,” Heap said. “That journey to become a better, more robust and more sustainable company is in progress as necessary improvements continue to be embedded across systems, processes and culture.
“Ms Lahey and I intend to contest the ASIC allegations, but to remain on the board beyond the transitional period would be a distraction to the company when remediation needs to be our unwavering focus. A search is currently underway for new directors.
“I am proud and privileged to have had the opportunity to lead The Star during a difficult and important time in the company’s history and will continue to do so until an appropriate handover is complete. I would like to take this opportunity to thank the board and management for their support since becoming chairman earlier this year.”
Other executives facing civil proceedings
A total of 11 current and former directors and executives will face proceedings, including ex-chair John O’Neill, former CEO and managing director Matthias Bekier, as well as Richard Sheppard, Gerard Bradley, Sally Pitkin and Zlatko Todorcevski, all of whom are no longer with Star.
ASIC alleged the board members approved the expansion of Star’s relationship with certain individuals with reported criminal links, rather than addressing money laundering risk by enquiring whether Star should be dealing with them.
ASIC also alleged board members, when provided with information about money laundering risks affecting Star, did not take steps to make further enquiries of management about those risks, adding that this was a breach of their director duty obligations.
In addition, ASIC made further allegations that Bekier, as well as former company secretary and group general counsel, Paula Martin, and ex-chief casino officer, Greg Hawkins, breached their duties in a number of ways.
These included not adequately addressing money laundering risks that arose from dealing with Asian gambling junket Suncity and its funder, as well as continuing to deal with them despite becoming aware of reports of criminal links. ASIC also said the individuals did not appropriately escalate money laundering issues to the board.
In relation to Martin and also former chief financial officer Harry Theodore, ASIC alleged they knowingly permitted misleading statements being provided to National Australia Bank regarding the use of debit cards issued by China UnionPay International (CUP) at NAB ATMs located on Star’s premises.
According to ASIC, these statements disguised the fact that Star was permitting CUP cards to be used for gambling, which was prohibited by CUP. ASIC said it is aware over AU$900m was obtained by Star customers using CUP cards in NAB ATMs from 2013 to 2019, adding that Bekier failed to report these matters to Star’s board.
“As I’ve said on many occasions, directors and officers are a critical part of the conduct of business in Australia,” ASIC chair Joe Longo said. “Their duty is to understand the operations of the company over which they preside and the particular risks faced by the business. They are required to bring an inquiring mind to business operations. It is not ‘set and forget’.”
Star Queensland licence suspension
The announcement comes after Star had its licence suspended in Queensland and was ordered to pay a penalty of AU$100.0m due to a series of failings in the state.
In October, Star was found “unsuitable” to hold a licence in Queensland following an inquiry into its two casino operations in the state – Star Gold Coast and Treasury Brisbane.
The review, which was announced in June, examined a range of issues and unearthed a host of institutional failings. Many of these were broadly aligned with those uncovered by Adam Bell SC’s report into Star’s activities in New South Wales, where the operator was also found unsuitable to hold a licence.
Highlighted issues included Star’s “concerted effort” to deliberately mislead banks and regulators on the purpose of China UnionPay transactions, contravening Chinese capital flight laws. Star was also found to have sought out individuals linked to criminal organisations and encouraged them to gamble against the direct advice of police commissioners.
In addition, social responsibility failings and serious deficiencies in the company’s anti-money laundering and combating the financing of terrorism practices were uncovered, as well as serious concerns over the business’ historic dealings with junket operators.