International edition
September 26, 2021

Minter Ellison firm

Crown engages legal team to probe China gambling case

Crown engages legal team to probe China gambling case
James Packer's Crown Resorts has assembled a "war room" of highly paid lawyers and advisers as the casino giant prepares for the legal fallout of having 18 of its staff detained in China for breaching the country's strict gambling laws.
China | 11/30/2016

James Packer's Crown Resorts has assembled a "war room" of highly paid lawyers and advisers as the casino giant prepares for the legal fallout of having 18 of its staff detained in China for breaching the country's strict gambling laws.


rown has engaged top-tier legal firm Minter Ellison to investigate the potential culpability of its own management team after staff were raided by Chinese authorities last month. Asked what the review was for, one senior Crown figure said: "I would typify it as an act of corporate, legal and reputational arse-covering of the first order."

Fairfax Media has been told Minter Ellison will determine what potential exposure Crown has to lawsuits or class actions from the families of arrested staff or disgruntled shareholders, who have seen Crown's share price tumble in the wake of the crisis.

The review will also examine allegations that Crown had persisted with its sales and marketing activities within mainland China despite being warned explicitly by local authorities to stop."There is a view that once the families of the employees detained come to a realisation that Crown has failed massively in its duty of care, there will be conflicts of interests," another source familiar with the internal review told Fairfax Media.

"They [Crown directors and management] are all obviously worried about their own personal liability. That is, paper trails that prove they knew China had warned them not to market into China"

All three Australian nationals among the 18 Crown staff detained in co-ordinated nationwide raids last month – head of international VIP operations Jason O'Connor, Beijing-based director of international VIP marketing Jerry Xuan and Pan Dan – were formally arrested this week, signalling the full intention of Chinese authorities to lay charges and move to trial.

China's government-controlled judiciary has a notoriously high conviction rate of more than 99 per cent, once charges are laid.

The review of potential corporate governance and risk management failures in the lead-up to the arrests is being overseen by Crown's general counsel and company secretary Michael Neilsen, with day-to-day operation of the review led by Debra Tegoni, Crown's executive general manager of legal and regulatory services.

Leading the review at Minter Ellison are partners Michelle Power and Glen Ward. Both played a central role in Crown's protracted legal battle with high-roller Harry Kakavas, which Crown eventually won on appeal in the High Court.

Mr O'Connor is well regarded among his colleagues and anger has steadily mounted within Crown over the company's handling of the affair, with particular questions being asked of the manner of Crown's aggressive pursuit of lucrative high rollers in mainland China. The promotion and organisation of gambling activities is illegal in China.

"There has been heavy internal pressure to focus on international VIP gaming," the senior Crown figure told Fairfax Media

"VIP international is the gold standard within Crown, it is the performance staff are judged on, and we have been warned for several years that we have been sailing too close to the wind in China."

The strategy, helmed by major shareholder James Packer, chief executive Rowen Craigie and Australian Resorts chief Barry Felstead, was seen as particularly crucial given a decline in profits in Crown's heavily invested Macau joint ventures, and for the viability of VIP-tailored facilities at Crown Melbourne, Perth and the planned casino in Sydney's Barangaroo.

The prevalent view among Crown insiders is that the company also made powerful enemies by attempting to cut out and poach customers from established Asian-based junket operators, in order to avoid paying them commissions. These established operators, who recommend high-net-worth gamblers from the mainland to Macau and foreign casinos, openly concede they operate in a "grey zone" of Chinese law, and rely on carefully cultivated personal connections to avoid trouble.

"As professional junkets we will not violate Chinese law, we will perform our business in the grey zone of the Chinese law," U Io Hung, chairman of the CC UE VIP Club junket, said.

"[Crown] went over themselves to look for clients, I already told them they should be careful … [but] they just wanted revenue"

A Crown spokesperson declined to respond to a detailed list of questions put to the company by Fairfax Media.

Chinese officials had issued clear public warnings as early as February last year that it would stamp out attempts by foreign casinos to lure its citizens abroad.

"Some foreign countries see our nation as an enormous market, and we have investigated a series of cases," Hua Jingfeng, a deputy director of the Ministry of Public Security said at the time, according to official state media transcripts.

"A fair number of neighbouring countries have casinos, and they have set up offices in China to attract and drum up interest from Chinese citizens to go abroad and gamble. This will also be an area that we will crack down on."

Crown's share price fell from $12.95 to $10.40 in the days after the news broke. It has since recovered, but is still trading below $12 per share.

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