It’s said ‘no news is good news.’ Well, perhaps someone should tell that to The Star Entertainment Group, as over the past few months, the Australian casino operator has been in more hot water than passes through British kettles on a yearly basis.
It all started with allegations of money-laundering and social responsibility failures. It ended with a report by Adam Bell revealing several ties to organised crime, Chinese UnionPay payments being accepted – despite being banned – and several interim CEOs coming and going, unable to fix the ever-deepening issues.
Through the litany of issues that Bell found to be rife within The Star’s Sydney resort & casino, his report concluded by simply – yet strongly – stating that The Star Entertainment Group was unfit to hold a licence in New South Wales. Then came the response from the regulator, which was under intense pressure to act on Bell’s findings. A pattern had started to develop that the Australian gaming industry is all too familiar with, following similar stories with Crown Resorts.
New South Wales Gambling Commission’s (NICC) Chief Commissioner Philip Crawford, after reading Bell’s review of the casino’s operations, revealed his disbelief at the findings, saying in a statement: “The report is, quite frankly, shocking. It provides evidence of an extensive compliance breakdown in key areas of The Star’s business. Not only were huge amounts of money disguised by the casino as hotel expenses, but vast sums of cash evaded anti-money laundering protocols in numerous situations.”
After the Head of the NICC made such a strong statement, it looked as though the NICC was about to bring down the hammer on The Star, leaving the operator dead in the dirt – this was it, the last supper, the final call for The Star.
Yet, through it all, the operator didn’t lose its licence. In fact, it seems the state regulator did everything in its power to punish The Star Entertainment without revoking the licence under which it operates. In Australia, there is no national regulator; instead, the state has individual regulators that manage all gambling within by region (like in the US). So, with a significant amount of The Star’s problems coming from the Sydney resort, the NICC had the unenviable position of taking action against one of its biggest tax revenue cash cows. Even though The Star was hiding taxable revenue from the state in the first place.
“It looked as though the NICC was about to bring down the hammer on The Star, leaving the operator dead in the dirt – this was it, the last supper, the final call for The Star”
The punitive action was heavy, there’s no doubting that. A mammoth AUS$100m (US$62m) fine was handed down to The Star, while Nick Weeks was appointed as an external manager to operate the casino for an initial 90-day period, with an extension expected.
Even Australia’s top politicians got involved. Andrew Wilkie, MP, went on record as saying state regulators were too scared of revoking licences, due to the fact it would cut the tax income they receive. However, despite the ever-deepening scandal, calls for a national regulator were tossed aside by Prime Minister Anthony Albanese, who seemingly obliviously commented: “It’s pretty obvious the state regulators are doing a pretty good job of holding the casino operators to account. I’m not in favour of regulation for the sake of it. It’s pretty hard for anyone to argue that either Crown or Star are not being held to account at the moment.”
DELVING DEEPER
To get a little more Down Under with this topic, Gambling Insider spoke exclusively to NICC Commissioner Crawford, who discussed the decisions the NICC took, the impact removing The Star’s licence would have had, and the future of Australian regulation.
How shocking was Adam Bell’s report for you?
Much of the evidence in the Bell Inquiry was reported extensively in the media, so we knew some of what was coming. Nonetheless it was shocking to read Bell’s frank summary of the governance and compliance breakdown at The Star. A detailed analysis of the evidence contained in the Bell report provided a sad indictment of The Star’s failure to manage the risks associated with its casino operations.
In key areas of its business, The Star did not act within the spirit of the law, and in a number of areas, it did not even act within the letter of the law. Mr Bell described the culture as dysfunctional, both in the board’s lack of awareness and the organisation’s relationship with the banks. He said The Star treated the Authority with disdain, as an impediment to be worked around. The report detailed systemic governance, risk and cultural failures and a situation where non-executive board members were oblivious to the way the business was being conducted by senior management.
The personal accounts from vulnerable gamblers were particularly confronting and bleakly demonstrated a culture where it became normal to turn a blind eye when what was needed was intervention from staff. The report demonstrated the normalisation of illegal gambling inducements, of patrons playing continuously for more than 24 hours at a time and of people who had self-excluded being readmitted.
What do you think will change going forward after The Star’s controversy?
The Star review came after the Bergin Inquiry, at a time when we had begun the implementation of the Bergin recommendations. It had become apparent to the Authority that The Star required similar scrutiny.
The Bergin Inquiry led to the reform of our regulatory framework for casinos and the creation of a new independent regulator. So, I would say that much has already changed, with more to follow. The NICC had only been established for two weeks when it announced the finding of the Bell Inquiry that The Star had been found unsuitable to hold a casino licence.
In the aftermath of the Bell Inquiry, most of The Star board has retired and many senior executives have left the company. With a new board, a new senior executive team and a NICC-appointed manager, there is an opportunity for The Star to satisfy the NICC that it is capable of entering into a meaningful remediation plan. NICC is of the view that this cannot happen until a root cause analysis has been undertaken, and further work has been done in identifying the concerns around The Star’s culture and governance.
How do you see Australian regulations, as well as your role as a regulator, changing over the next decade?
“With the spotlight well and truly on gambling, and many of these conversations happening in the public arena, I think more regulatory change is inevitable”
Not only have the risks of criminal infiltration been exposed by the various casino inquiries and the NSW Crime Commission Report, but also the harms associated with gambling have been more clearly identified. We need regulation to keep pace with changes in behaviours, to monitor emerging risks and to ensure casinos operate in a way that meets community expectations. That is the challenge. With the spotlight well and truly on gambling, and many of these conversations happening in the public arena, I think more regulatory change is inevitable.
As a result of the bad behaviour identified in the public inquiries into casinos, it is clear that the casino industry in Australia has breached its social contract and suffered significant reputational damage. Public confidence in the casino industry is at an all-time low. The casinos have a lot of work to do to restore that confidence.
What aims does the NICC have for the immediate future in terms of dealing with operators?
We are working closely with Liquor & Gaming NSW, the Manager of The Star, the independent monitor of Crown, and other regulators to closely observe the implementation of change programmes by both casinos. We will be imposing Internal Control Measures on both NSW casinos, which are designed to provide clear direction in a number of key areas of their operations. We will be watching the implementation of these measures carefully. They include compliance with robust policies on responsible gambling and anti-money laundering systems. We will also be monitoring the development of cultural reforms, aimed at ensuring the creation and maintenance of a safe and supportive workplace for staff at all levels.
Why did you reject calls for The Star to have its licence taken away?
Cancelling The Star’s casino licence was carefully considered in view of the serious governance failures identified by the Bell Inquiry. Ultimately, the NICC determined to suspend the licence.
An important factor in our deliberations was that The Star had recognised its failings in a statement to the ASX by its Chairman. This statement included a clear assurance that The Star would work openly and transparently with the Authority and other regulators going forward. We were also aware that to cancel the licence would have put the jobs of around 10,000 people into immediate peril.
The Authority was also impressed by the person who had been appointed as CEO of The Star, Robbie Cooke. His arrival at The Star gave the Authority a degree of confidence that the necessary reforms to The Star’s compliance and governance operations could be achieved. Without acceptance by The Star of its significant failings outlined by Bell, and its express willingness to reform its business operations, and had not Robbie Cooke arrived when he did, the outcome for The Star might well have been different.
THE END RESULT
Crawford’s detailed answers as to why he and the NICC refused to take away The Star’s licence is considered and measured; he reminds everybody that the regulator has a duty of care to every aspect of the system it oversees. So, by protecting the jobs of 10,000 workers, it had to make a decision that would have drawn criticism either way.
So, while Prime Ministers and politicians all seem ready to get involved in the conversation during a cost-of-living crisis, hearing that Crawford has protected jobs by taking a decision that he knew would draw criticism feels like a move that may not have been what was best for the industry, but it was what was best for the people in it by and large.
