NSW Inquiry: Crown Risked Staff Arrests Despite Sound Warning

Crown Resorts did nothing to protect their China-based members of staff from being arrested, despite being notified of the high risk and the fear its employees were living in, an ongoing investigation by the Independent Liquor and Gaming Authority (ILGA) in New South Wales (NSW) into the suitability of the ASX-listed company to hold a casino license revealed Monday.

Crown’s chief executive Barry Felstead received in March 2015 an e-mail from the company’s former president of international marketing, Michael Chen, in which the senior executive was informed about a crackdown on foreign gambling operators by the Chinese government.

Mr. Chen pointed out members of staff based in China were not breaking Chinese law, but, with regards to a recent arrest of one of their high-roller clients who was detained for 3 months by the authorities without charge, it was too risky for them to remain in the country.

“This is one thing that is important to understand when it comes to the China team: they are living in constant fear of getting tapped on the shoulder. In a country where due process is inconsistently applied, it’s a risky place to be for all our team.”

Michael Chen, former president, International Marketing, Crown Resorts

Despite the sound warning, Barry Felstead who is still Crown’s top executive responsible for the international VIP business did not raise the issue with the company’s risk management committee, a mistake that led to 19 people being arrested by Chinese officials in October 2016, for gambling promotion, in breach of local law. 16 of them, members of the senior management and sales teams, spent between 9 and 10 months in jail.

Was the Warning Ignored Due to the Business Model?

Besides the warning, there were other e-mails from Michael Chen, which displayed a high-pressure sales culture instilled among China-based employees, who were pushed to exceed targets and firm the approach for debt collection from Chinese customers, some of whom owed Crown more than $5 million.

All these facts were brought to the fore to enable the inquiry to find answers to serious questions relevant to the assessment of Crown’s suitability of a casino license for its new casino in Barangaroo, Sydney. It is important to ascertain whether Crown’s board members and executives believed China-based staff was breaking laws, or the company’s business model put them at risk, how the risk management policy operated and was the warning purposefully ignored.

Presented with the evidence, Mr. Felstead admitted some of the company’s activities in China were not consistent with how business should have been done, legally, ethically, and with integrity. He told the inquiry, though, he was not aware of any practice of labeling transfers to China as services consulting fees, nor about any proposal to deceive Chinese officials that Crown’s employees there were working overseas by obtaining Hong Kong and Singapore visas for them.

A strategy made up of Crown executives and reps from Consolidated Press Holdings, James Packer’s private company, aggressively pursued high-value Chinese clients with offers of gambling loans in 2014, promoting Australia as an alternative to Macau, the inquiry that will continue on Tuesday was told.