Billionaire James Packer’s Crown Keeps Melbourne Casino License As Regulator Oversees Reforms
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Australian regulators are allowing Crown Resorts—controlled by billionaire James Packer—to keep its license to operate its flagship Melbourne casino under the supervision of a government-appointed special manager who will ensure reforms are undertaken to address money laundering risks at the casino.
While an independent inquiry by Victoria’s Royal Commission found Crown unsuitable to hold a casino license, the government decided to allow Crown to operate under the oversight and direction of a special manager for two years while the company implements comprehensive reforms, the government said in a statement on Tuesday.
“The special manager will have unprecedented powers to oversee Crown, veto decisions of the board, and have unfettered access to all areas of the casino and its books and records,” it said. “This is an unprecedented step in Australian corporate oversight.”
Crown shares rallied as much as 13% in Sydney trading Tuesday before closing up 8.7% at A$10.50 as the company avoided the worst possible outcome of an immediate cancellation of its Melbourne casino license.
The company isn’t out the woods yet. The regulator may automatically cancel the license at the end of the two-year oversight if Crown fails to implement satisfactory reforms. “The onus will be on Crown to clearly demonstrate through its operations and the progress on its reforms why its license should not be cancelled.”
Losing the Melbourne casino license would be a major blow to Crown, which has already failed to get the permit to run its brand new casino in Sydney. Regulators have said that Crown is unfit to run its Melbourne casino after the company failed to address money-laundering risks and concealed potential tax underpayment.
“We are embracing the challenges ahead of us as we work to restore our reputation and we are determined to get this right,” Crown CEO Steve McCann said in a statement. “We are embracing the challenges ahead of us as we work to restore our reputation and we are determined to get this right. We will be a better Crown.”
Apart from uncertainties arising from ongoing regulatory probes in Australia, Crown said its earnings outlook will continue to be clouded by pandemic-induced travel restrictions and lockdowns.
Packer is the largest shareholder of Crown, which owns casinos in Australia and London, after taking over the empire of his late father, Kerry. He stepped down from the company’s board in March 2018 and resigned from the board of his family’s holding company Consolidated Press four months later. Packer, 54, had a net worth of $3.2 billion, according to the World Billionaire’s List
While Packer currently owns 36% of Crown, he will have to reduce his stake to about 5% by September 2024 based on the commission’s recommendations. Limiting the ownership of casinos will prevent undue outside influence, while ensuring the independence of the casino operator’s board and senior management, the commission said in its 652-page report.
The commission also recommended raising the maximum penalty for breaching casino legislation to A$100 million ($101 million) from just A$1 million. The new legislation also establishes the Victorian Gambling and Casino Control Commission to regulate the Melbourne casino.
“We are working cooperatively and constructively with the regulatory processes that are underway in Victoria, New South Wales and Western Australia, and firmly believe these processes are accelerating our reform program and helping Crown emerge as a stronger and more transparent company,” McCann said.
