Shares in Star Entertainment Group rose more than 4% yesterday after investors expressed relief that the company had not lost its licence to run the Star Casino in Sydney.
The relief bounce came despite the company being found unfit to hold its Sydney casino licence following a damning inquiry into its suitability earlier this year exposed all manner of breaches of regulations, especially money laundering and state laws.
The NSW Independent Casino Commission (NICC) published Adam Bell SC’s report on Tuesday, which found The Star unsuitable to hold a casino licence in NSW. The finding has been rumoured for a while.
“The NICC has issued The Star with a show cause notice and is considering its options for disciplinary action in response to Bell’s findings and recommendations.”
Star has 14 days to reply and is expected to argue that it has changed the board and senior management. It is also expected to play the employment card with 8,000 people employed by the company in Sydney, the Gold Coast and Brisbane.
Investors expect Star to get similar treatment to what Crown Resorts received for its multiple breaches of rules in Melbourne, NSW and WA exposed in similar inquiries in those states.
Crown is still in business and was allowed to open its Sydney casino on a provisional basis.
Crown was criticised, told it wasn’t suitable but in the end got to keep its casino licences, though with significant changes to state regulations.
Crown also lost its independence and was taken over by a US company, Blackrock, the world’s biggest asset manager and no stranger to bottom fishing in difficult markets.
In the case of Star (which still is subject to an inquiry in Queensland by the state government), investors expect a similar fate – punishment, tougher rules, new management and board and life goes on.
That’s why Star shares ended up 4.5% at $2.78 on Tuesday.
The Sydney and Brisbane casino operator had asked for a trading halt on the ASX on Monday because of the imminent release of the report and its findings.
The Bell report was handed to the NSW government at the beginning of this month after 36 online hearings and testimonies from more than 30 witnesses.
The inquiry which probed allegations made in Nine/Fairfax newspapers as well as 60 Minutes (which also investigated and reported on numerous breaches by Crown) led to the resignations of Star executives, including former boss Matt Bekier and chairman John O’Neill.
Star had claimed to the inquiry that the significant overhaul of its senior ranks made it suitable to continue holding its casino licence but that has not been supported by the final report.
“The report is, quite frankly, shocking. It provides evidence of an extensive compliance breakdown in key areas of The Star’s business,” NSW Independent Casino Commission chief commissioner Philip Crawford said.
”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, most alarmingly through Salon 95 – the secret room with a second cash cage.”
The Bell Report did not make adverse findings against the Star board but Mr Crawford argued they “failed to do their job” by having “no clue” what was going on in their own company.
Mr Crawford said the inquiry didn’t find “one individual masterminding the conduct” but a deep-rooted cultural issue permeating through the entire business.
“This dubious conduct has been continuing even as long as when we set up the Bergin inquiry [which investigated rival Crown Resorts] and some conduct has continued post setting up the Bell inquiry,” he continued.
“In addition to Bell’s analysis of the very real risks of criminal infiltration and the concealment with which senior staff conducted business, the report details cases of individual patrons exposed to gambling harms,” he said.
“Once we have given The Star the opportunity to respond to the notice, we will be in a position to determine an appropriate disciplinary approach.”
The belated review in Queensland is to assess Star’s suitability to continue holding its licences in that state where it runs three casinos.
In June, The Star announced Tyro Payments CEO Robbie Cooke would be its next chief executive. Cooke finishes up at Tyro in December and his appointment at The Star is still subject to regulatory approval.
