Crown Resorts Created Code to Avoid Detection of Illegal Chinese VIP Ops, Claims Lawsuit
Posted on: March 23, 2021, 11:20h.
Last updated on: April 7, 2021, 08:20h.
Blackstone’s $6.2 billion bid for Crown Resorts is a rare dose of positive news for the company’s billionaire founder, James Packer. At the absolute minimum, it pushes some of the less-than-complimentary stories about Crown further down the Google News search rankings, at least temporarily.
Those stories include new revelations about the company’s now infamous Chinese operations, which were busted by authorities in China in 2017, resulting in the arrests of 19 Crown members of staff for “gambling crimes.”
Crown is still facing lawsuits from disgruntled investors who blame the entire disastrous, stock-devaluing episode on inadequate corporate governance on behalf of the board.
A New South Wales suitability hearing that ultimately decided the company was unfit to hold a casino license in Sydney agreed with this assessment.
Last November, Crown lawyers told that hearing it believed its Chinese VIP marketing business had been legal, and that a 2005 ruling by China’s highest court protected it from prosecution.
‘Crown Knew Risks’
But according to new allegations filed in an Australian federal court by lawyers for the shareholders, Crown behaved like it was well aware of the risks it was running with its Chinese ops. The China segment was tasked with recruiting high rollers to gamble at the company’s properties in Australia.
According to the filings, Crown’s employees in China were instructed to use code words when communicating with one another to hide the true nature of their business.
The filings also allege that Crown deliberately misled Chinese aviation authorities by “stating, on permits for flights in and out of China by Crown’s private jets, that the flights were for the purpose of Crown executives attending and returning from meetings in China, when those flights also, or instead, were for the purpose of transporting Chinese VIP gamblers to and from Crown Melbourne and Crown Perth.”
Three days after Chinese authorities announced a crackdown on cross-border gambling in February 2015, Crown removed all company branding from its fleet of jets.
It is also alleged Crown established “an unofficial and clandestine office in Guangzhou in China … which was used by Crown staff to perform administrative functions relating to processing visa applications.”
Internal Investigation Didn’t Happen
Incredibly, Crown executives admitted to the NSW suitability hearing that it had not conducted an internal review into the China arrests. The executives said that was because they feared the results might weaken its case against the shareholders.
Sixteen of the 19 staff members were jailed for nine or ten months in a Shanghai prison, including the company’s then-executive vice president of its VIP International division, Jason O’Connor.
In the immediate aftermath of the arrests, shares in Crown plummeted 15 percent in value. Shareholders are suing the company for $100 million.
On Wednesday, a new inquiry gets underway in Melbourne to examine Crown’s licensing suitability in the state of Victoria, potentially compounding the company’s misery.
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