The embattled casino operator Crown Resorts Ltd (ASX: CWN) share price is rising today after the business retained its Melbourne license for the next two years.
Currently, the Crown share price is up 9.32% to $10.55.
CWN share price
What were the findings of the Commission?
The Royal Commission into the Casino Operator and License, led by The Hon. Ray Finkelstein, AO, QC was tasked with establishing the suitability of Crown Melbourne to hold a casino license.
The report found multiple examples of wrongdoing.
Crown facilitated millions of dollars to be laundered through a subsidiary.
Additionally, Crown Melbourne allowed operators with links to organised crime to arrange for junket players to gamble at the casino.
Underpayment of casino tax demonstrated a disregard for the law. In 2011, Crown Melbourne attempted to minimise tax by claiming deductions both internal and external lawyers said were not, or probably not deductible.
Despite warnings from Chinese officials, it intended to crack down on the illegal promotion of gambling in Australia, Crown did nothing to protect its staff. Subsequently, 16 staff were arrested.
“…many senior executives involved in the misconduct were indifferent to their ethical, moral and sometimes legal obligations. Some were motivated by a drive for profit. Some simply did what they did because they could”.
In other nations such as Malaysia, Taiwan and Singapore, Crown let employees carry out promotional activities deeming the chance of them being charged was not significant.
It assisted Chinese patrons to breach Chinese law, by transferring money from China to Crown accounts under hotel expenses despite its intention to be spent gambling.
“Crown Melbourne’s board failed to carry out one of its prime responsibilities; namely, to ensure that the organisation satisfied its legal and regulatory obligations”.
In earlier investigations by the regulator, the Crown provided false or misleading information. It delayed the process. And it bullied the regulator.
Arguably, the most disheartening finding was Crown’s indifference to problem gambling.
“Crown Melbourne had for years held itself out as having a world’s best approach to problem gambling. Nothing can be further from the truth”.
The Commissioner summarised Crown’s conduct in one word as disgraceful, in addition to illegal, dishonest, unethical and exploitative.
As a result, Crown was deemed unsuitable to hold a Casino license.
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.
What’s next for the Crown share price?
Despite its unsuitability to hold a casino license, the Commissioner has recommended Crown retain its license for the next two years under a Special Manager.
Former founding commissioner of the Victorian corruption watchdog, Stephen O’Bryan, QC has been appointed as the Special Manager.
The Special Manager will have sweeping powers to inspect all records and documents, attend board meetings and veto decisions.
After the two-year period, the Special Manager will report what has occurred to the regulator. The regulator will need to be ‘clearly satisfied’ that Crown Melbourne has returned to suitability.
If after two years, Crown is still found unsuitable to hold a license, the license will be cancelled.
In making his decision, the Commissioner considered the need to maintain the integrity of the licensing system with the impact on third parties such as Crown’s 11,000 staff and Crown’s potential to reform itself.
“…what tipped the balance against the cancellation of its licence was that Crown Melbourne has, at great financial cost, embarked on a significant reform program led by people of good will and skill. The program is likely to succeed. If it does, that will be to the benefit of Victoria.
Lastly, majority shareholder and negative influence James Packer will be forced to reduce his holding in Crown from 37% to under 5%.
My take
A great day for Crown shareholders. A sad day for Victorians and more broadly Australia.
Despite the overwhelming evidence, and subsequent conclusion that Crown is not suitable to hold a license, Crown has managed to retain its license.
The bar has been set high for the Crown to reform, however, I don’t think Crown deserved such an outcome after its complete disregard for the community and law.
The Royal Commission was a chance to demonstrate the importance of social obligations of companies. If that contract is broken, you don’t get a second chance. Or a third. Or a fourth.
As investors, and as a society, we should expect better.
We must demand better.
