Beneath all the criticism in the final report on the Victorian royal commission into Crown Resorts one fact dominates – Crown is not only too big to fail, the revenue it generates is too big for the government to let it suffer permanent financial harm by having its licence taken away.
And don’t think the result from the royal commission in WA into the affairs of the Crown casino in that state will be any different to what we saw from Victoria on Tuesday.
There will be criticisms, but take away the licence because of breaches of money laundering or other rules and laws? – forget it.
And it is very likely that Crown will end up with its Sydney casino licence now that the Victorian government has created a precedent with concept of a two-year good behaviour period.
So it is no wonder Crown shares jumped 11.2% at the open to $10.74. They later eased to end the day at $10.44, for a relief gain of 8.7%.
James Packer’s net worth rose by around $300 million for his 37% stake in Crown at the open – it was up $200 million or so at the close. At the moment that stake is helping prevent Crown from getting its Barangaroo casino licence.
The Victorian government has decided that Packer has until 2024 to reduce his stake in Crown to 5% – that might give the NSW government the route to get Packer’s stake down as recommended by the special Bergin Inquiry earlier this year.
From media reports, Packer is now resisting attempts to force him to sell or reduce his stake and that could become the next flashpoint for the company and its regulatory overlords.
The bounce yesterday could very well be wiped out in coming weeks as investors focus on the Perth inquiry which won’t report until early 2022.
Focus now moves to NSW and a decision from the government there but the way forward has been cleared by the Victorian findings and the Andrews government’s decisions.
The Inquiry’s report found Crown unfit to hold the lucrative Melbourne license, and labelled Crown’s conduct disgraceful, and callous to a level that is hard to comprehend.
The eight-month royal commission found Crown Resorts is unfit to run its flagship Melbourne casino after exposing a long list of legal and ethical breaches at the company.
However, Commissioner Ray Finkelstein’s final report did not recommend that Crown be stripped of its casino licence. Instead, he has called for a “special manager” to be appointed to oversee an extensive reform process underway at the James Packer-backed group.
“The Commission discovered that for many years Crown Melbourne had engaged in conduct that is, in a word, disgraceful,” Commissioner Finkelstein’s report wrote.
“It is difficult to grade the seriousness of the misconduct. Some was so callous that it is hard to imagine it could be engaged in by such a well-known corporation whose Melbourne Casino Complex is visited by millions annually”
“When these facts came to light, it was inevitable that Crown Melbourne would be found unsuitable to hold its casino licence. No other finding was open.”
Commissioner Finkelstein has not recommended that Crown be stripped of its licence, saying that the company had engaged in an extensive reform process to address its shortcomings.
He says a “special manager” should be appointed to “oversee all aspects of the casino’s operations” for the next two years.
“If the recommendations are accepted, Crown Melbourne will not be in control of its own destiny,” the report says.
“It will keep a watchful eye on the progress of reform. It will make sure that all rules and regulations are complied with.”
The Victorian government accepted that and the special manager will be the first head of the statement’s anti corruption commission who will be asked to report on Crown’s rehabilitation over the two years.
Premier Dan Andrews said Crown has two years to clean its act up and the government will examine the question of the licence at the end of the period.
The government will also lift the size of the penalties by Crown of its licence to $100 million.
The government will also legislate to take away the secret compensation deal done with Crown that would have allowed it to claim up to $200 million from the government had the licence been revoked or diminished.
The two-year probation period though takes a Crown licence decision past the 2022 Victorian election next November and well into 2023 and early in the term of the first government.
The inquiry heard how Crown illegally accepted credit card payments in exchange for chips through its hotel desk, in a fraud designed to enable Chinese high rollers to get around China’s tight capital controls.
And it was also revealed in the inquiry that Crown had underpaid tax on its poker machine winnings to the Victorian government by making illegal deductions, potentially shortchanging the state by up to $272 million.
And separate to these reports, Crown (and Star and Sky City) face further action from AUSTRAC, the financial intelligence regulator, which in June revealed a stepped-up pace of inquiry into anti-money laundering rules, especially at Crown where an earlier probe was intensified.
That will produce massive fines, especially for Crown.