Crown to face special measures after being deemed “unsuitable” for Victoria casino licence

| By Robert Fletcher
Crown Resorts has been deemed “unsuitable” to operate a casino in Victoria by the state’s Royal Commission - but will not immediately lose its licence, over concerns the impact this would have on the local economy.
Victorian Government announces Crown extension

Published today (26 October), the report is the result of an inquiry by the Royal Commission into Crown’s Casino Operator Licence in Victoria, concluding that failings at the operator meant it is not suitable to hold such a permit in the state.

The Commission said that Crown engaged in conduct that was “illegal, dishonest, unethical and exploitative”, adding that the scale of the wrongdoing was so widespread and egregious that “no other finding was open”.

The report also built on findings uncovered during the Bergin Report in New South Wales, in which widespread failings were identified at Crown and was, as a result, also deemed as being “unsuitable” to operate a casino in Sydney’s Barangaroo region.

More failures were identified across governance, risk management and responsible service of gaming in the Victoria Royal Commission, including “grave, ongoing legal breaches” and misconduct that contravened Australian laws and the laws of other countries often with the knowledge of Crown executives.

The Commission also uncovered consistent patterns of non-cooperation with the regulator, including bullying, providing it with false or misleading information, delaying the investigatory process and frustrating the regulator’s investigations.

Evidence was also found related to tax breaches that were instigated by or undertaken with the knowledge of multiple senior staff, which were then intentionally concealed from the regulator for fear of being caught out.

In addition, the Commission cited cases of “serious, systemic breaches” of responsible gaming obligations, including the way in which Crown dealt with vulnerable people who experienced gambling harm.

“The Royal Commission finds that Crown’s board failed to carry out its responsibilities to ensure that the organisation satisfied its legal and regulatory obligations,” the report said. “It also finds many senior executives involved in the misconduct were indifferent to their ethical, moral and sometimes legal obligations. 

“The Packer/CPH influence which the Bergin Inquiry found ‘encouraged Crown to put profit ahead of other motives for action’ was confirmed in this Royal Commission.”

However, the report went on to say that weighing up the importance of maintaining the integrity of the licensing system, an immediate cancellation of the licence would not be in the interests of the Victorian community.

This, the Commission said, was due to a risk of significant harm to the Victorian economy and to innocent third, as well as the Commission’s belief that Crown Melbourne has the will and the capacity to reform and become suitable to hold a casino licence again.

As such, the Commission recommended Crown be permitted to continue operating under the oversight of a special manager for two years, while undertaking comprehensive reforms to make it suitable to hold a licence independently. 

This must address a total of 33 recommendations made by the Commission, including in relation to the powers of the regulator and its inspectors, the obligations and structure of the casino operator, the prevention of money laundering at the casino, unpaid casino tax, penalties and the responsible service of gaming.

Victoria’s government accepted the findings but said that while it would implement the priority recommendations of the Commission, it would go further in a number of areas, including imposing “tough new measures and stringent oversight” on Crown to avoid any similar failures in the future.

As part of this, the government today introduced the Casino and Gambling Legislation Amendment Bill 2021, which will implement the nine priority recommendations of the Commission, with further legislation planned for next year.

The bill also establishes the special manager who will have “unprecedented powers” to oversee Crown, veto decisions of the board and have unfettered access to all areas of the casino, its books and records. Crown will cover all costs related to the special manager.

Subject to passage of the new bill, it is proposed Stephen O’Bryan QC be appointed as the special manager. O’Bryan was Victoria’s first independent broad-based anti-corruption commissioner and will bring integrity and accountability to the casino’s operations.

Other restrictions set out in the bill include that Crown would be prohibited from dealing with junket operators, as well as required to remove any restrictive provisions that stop the state from making changes to the regulatory arrangements for the casino without having to pay compensation.

Should Crown not make enough progress during the two-year period, then its licence would be automatically cancelled 

“The onus will be on Crown to clearly demonstrate through its operations and the progress on its reforms why its licence should not be cancelled,” the government said. “Unlike the Royal Commission’s recommendation, Crown’s licence will be presumed cancelled unless there is a decision otherwise.”

The bill will also have a wider impact on land-based casinos in Victoria, including that the maximum penalty under the Casino Control Act 1991 would be increased from AUS$1m (£545,857/€647,292/US$751,045) to $100m to ensure meaningful consequences for breaches of the law. This reflects the Commission’s recommendations that penalties under the Act was inadequate, having called for the fine to be increased to at least $10m.

In addition, the bill would establish the Victorian Gambling and Casino Control Commission to provide dedicated focus on the casino, as well as strengthen and expand the powers of the regulator to hold the casino operator to account.

“We welcome the remaining recommendations and recognise their breadth and complexity in relation to minimising gambling harm, structural reforms to the casino operator, and addressing anti-money laundering risks,” the government said. 

“The government supports these recommendations in-principle subject to further detailed analysis and consultation being undertaken. A second tranche of legislation next year will acquit actions arising from these recommendations.

“Our government is taking action right now to hold Crown to account and is committed to further reform next year to address the findings of the Royal Commission.”

Crown is yet to issue a detailed response to the report, saying only that it was currently reviewing the fundings and the Victorian Government’s response.

“Crown will work cooperatively and constructively with the Victorian Government in relation to the findings and recommendations of the report and their response,” it said.

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