Odinian Beta

Earlier this week Counsel Assisting the Victorian Royal Commission into Crown Resorts made its closing submissions regarding whether Crown Melbourne and its associates (including Crown Resorts, the parent company) will be allowed to keep its Melbourne casino licence.

The Royal Commission is not a court and so instead of prosecution and defence, we have Counsel Assisting the Commission and various counsel representing Crown and other parties such as CPH.

And regardless of the Commissioner’s recommendations, it will be up to the Victorian authorities to ultimately decide whether Crown Melbourne is allowed to keep its licence.

Licence cancelled?

Broadly, Counsel Assisting suggests the evidence before the Commission means Crown Melbourne is presently unsuitable and that it is no longer in the public interest for it to keep its Melbourne casino licence.

And that even considering Crown’s reform programme, it is “open for the Commission to recommend that the licence be cancelled.”

CEO Steve McCann and the other directors and are in the clear but Counsel Assisting also suggested Chair Helen Coonan and Crown Melbourne CEO Xavier Walsh weren’t suitable people to be leading Crown’s reform programme.

Counsel Assisting raised the following issues in support of its submissions:

1.     That between 2012 and 2016 Crown allowed VIPs to circumvent Chinese currency controls by using a debit or credit card at its hotel to access casino chips, which is a breach of section 68 of the Casino Control Act. And that, further, Crown was aware that this activity broke Victorian law.

2.     That Crown illegally subtracted certain deductions in relation to bonus jackpots from gross gaming revenue when determining its pokie tax liabilities owing to Victoria. And that even after the Commission had started, Crown was not as forthcoming as it should have been over these tax liabilities. Crown has agreed to pay $50m (which includes penalty interest) but Counsel Assisting suggests the amount owing could be up to $480m and that this in itself shows that Crown is still unsuitable.

3.     That Crown’s Responsible Service of Gaming (RSG) efforts were lacking and potentially breached its requirements under the law and regulations. According to Counsel Assisting, Crown’s code of conduct with regards RSG was insufficient given the academic research on the issue and Crown often didn’t follow the code (and hence the law) by not intervening when patrons were gambling for very long periods of time without a break. Counsel Assisting points to the urgent changes Crown made to its RSG policies once the company realised it was going to be an issue at the Commission as an admission by Crown of the Commission’s concerns.

4.     That Crown’s anti-money laundering controls were and still are deficient. This covers not only the obvious failures in the Riverbank and Southbank accounts but also potential money laundering in other accounts.

We’ll have to wait until 2 August for Crown to defend these allegations but a few points are in order.

Going to far

Broadly speaking, I don’t believe a reasonable person would suggest that the first three issues are grounds to cancel Crown’s Melbourne casino licence.

The use of credit cards to circumvent Chinese capital controls says more about China’s stupid foreign exchange controls than it does about Crown. And while there are also potential money laundering issues here, the procedure was stopped in 2016 in any case.

As for the Victorian pokie tax issue, the fact that Crown obtained various legal advice over the years that took different views over the proper treatment of a variety of deductions shows the inherent uncertainty of this issue.

Should a company lose its casino licence because it sensibly tried to legally avoid taxes? As to Crown potentially illegally avoiding taxes, the company has fessed up and the people responsible for this are either gone or on their way out.

With regards to RSG, this issue arose from left field at the start of the Commission.

No doubt more can be done in this area but with Crown’s facilities hosting thousands of guests at busy times, concentrating on a very small minority of these who are problem gamblers and then using this to recommend Crown lose its licence is unreasonable in my view.

Finally we come to the most serious issue: the failure of Crown’s anti-money laundering controls.

Even here, though, the two more egregious examples – the Riverbank and Southbank accounts – were closed a few years back.

And while there is potential money laundering in other accounts, again it is somewhat extreme to justify cancelling the licence in response to this given the company has acknowledged the issue and is trying to fix it by dramatically expanding its resources in this area, including appointing an expert in Financial Crime.

Cultural issues

The underlying argument of Counsel Assisting’s submissions is that the abovementioned issues show that Crown’s culture is so bad that it is unlikely to change quickly enough to allow Crown to again become suitable. Hence its Melbourne licence should be cancelled.

But I disagree.

While I am not defending Crown’s actions, ultimately it, like any company, is made up of people. And it’s those people – especially those at the top of the chain of command – who determine a company’s culture.

The simple solution is to remove the bad eggs and reform its systems and controls – as Crown has done and will no doubt continue to do in reaction to any recommendations from the Commission – and sooner or later its culture will change for the better.

If the big banks can reform after the findings of the Financial Services Royal Commission, then so can Crown.

Chance to redeem

And, to be fair, Counsel Assisting does suggest this is an option for the Commissioner if he finds that Crown Melbourne is unsuitable and that it is not in the public interest for the company to keep its licence.

If the Commission chooses not to recommend that Crown’s licence be cancelled but instead recommends that it be given a chance to redeem itself, Counsel Assisting sensibly suggests that it should do so under close regulatory supervision.

In summary, Counsel Assisting was essentially required to act as the prosecution at this Commission and, as such, has done a fine job tearing into Crown.

We await Crown’s submissions in response on 2 August.