GGRAsia – Crown inquiry reaches court after Melco challenge

Crown inquiry reaches court after Melco challenge

Feb 06, 2020 Newsdesk Latest News, Macau, Top of the deck, World

Part of a legal challenge against an inquiry into Australian casino operator Crown Resorts Ltd’s suitability to hold a gaming licence in New South Wales was held on Thursday morning in that state’s Supreme Court, confirmed to GGRAsia a spokesperson of the New South Wales Independent Liquor and Gaming Authority (ILGA).

Casino developer Melco Resorts and Entertainment Ltd, controlled by entrepreneur Lawrence Ho Yau Lung, launched the legal challenge after the opening hearing of the New South Wales casino probe on January 21.

The Australian Financial Review newspaper reported on Thursday that Melco Resorts was arguing – in its legal challenge – that the ILGA, the New South Wales gaming regulator, was exceeding its powers via the probe. This was on the basis that the inquiry had ordered Melco Resorts to produce documents that the firm claims are privileged.

Aside from probing whether Crown Resorts breached the terms of its gaming licence for its Barangaroo project in New South Wales, the gaming regulator is looking particularly at the decision of Crown Resorts’ largest shareholder to sell a 19.9 percent stake in the company to Melco Resorts.

On the same day, Melco Resorts announced that it was dropping a plan to acquire a further nearly 10-percent stake in Crown Resorts, citing the “impact of the coronavirus epidemic” and the need to use its capital on the firm’s “core assets”.

According to the Australian Financial Review, a lawyer representing Melco Resorts questioned on Thursday whether certain procedural rules – that might allow the New South Wales inquiry into Crown Resorts to ignore legal privilege, as allowed for in Australia’s federal Royal Commissions Act – should even apply to ILGA’s probe. While New South Wales’ Casino Control Act enables the ILGA to hold inquiries, the lawyer for Melco Resorts was quoted as saying that it “does not mention the Royal Commissions Act or privilege”.

During last month’s opening hearing into the New South Wales probe, Adam Bell, a counsel assisting it, said that a witness summonsed either to appear before the inquiry or to produce documents to it, was “not excused from answering a question or producing documents on the ground of legal professional or other privilege or self-incrimination or a duty of secrecy or other restriction or disclosure or any other ground”.

In Thursday’s court hearing, a lawyer appearing for the New South Wales regulator, argued that Melco Resorts’ understanding of how the Royal Commissions Act and New South Wales’ Casino Control Act interacted with each other was wrong and the inquiry was properly empowered to order legal privilege be breached. “The Casino Control Act establishes an entirely distinct regime by which inquiries are established,” said the lawyer as quoted by The Australian Financial Review.

He reportedly added: “They are established by the inquiry itself, and that inquiry has the power to decide how that person [the Commissioner] is appointed … and to decide if they will engage the special powers of part two of the Royal Commissions Act.”

The newspaper said Justice Christine Adamson reserved her judgment but acknowledged there was “some urgency” to reach a decision.

Next steps

In a written reply to GGRAsia’s enquiry on Thursday, the ILGA’s spokesperson said that the next steps regarding the inquiry “are for the Court to determine”. “It is not appropriate for the NSW Independent Liquor and Gaming Authority to make any comment,” the person added.

GGRAsia approached also Melco Resorts for a comment but received no reply before this story went online. The company said in August that it would participate “in any probity review process and cooperate with any inquiry” that was required in relation to its investment in Crown Resorts.

The first day of the regulator’s inquiry outlined a broad range of probity and legal issues relating to the Australian casino group that will be tackled in the coming months.

Melco Resorts’ Mr Ho, and James Packer – a founder and shareholder in Crown Resorts – were respectively due to give evidence when the inquiry resumes later this month.

During the opening hearing last month, Mr Bell said that aside from some Crown Resorts’ top executives, other witnesses to be called included Evan Winkler, president of Melco Resorts, and Geoffrey Davis, executive vice-president and chief financial officer for Melco Resorts. The two also serve as executives at Melco International Development Ltd, the parent company of Melco Resorts.

Melco Resorts announced in May that it was paying US$1.2 billion to acquire – in two instalments – a 19.99-percent stake in Crown Resorts. CPH Crown Holdings Pty Ltd – controlled by Mr Packer – is the seller. Under the original agreement, the closing of the first tranche – equivalent to a nearly 10 percent stake – of Crown Resorts occurred on June 6. The closing of the second tranche was scheduled to occur on or prior to September 30 last year, but the involved parties announced in August the deferral of the acquisition following the announcement of the regulator’s inquiry. The second part of the deal has now been terminated.

Crown Resorts runs a gaming resort in Melbourne, Victoria; one in Perth, Western Australia; and is developing a third at Barangaroo in Sydney, New South Wales.

The next hearing of ILGA’s inquiry is scheduled for February 24, with this first round focussed on the vulnerability of casinos to money laundering and organised crime. The topic of the Melco Resorts stake acquisition in Crown Resorts is slated for the inquiry’s second round of hearings. According to remarks during the opening hearing, it is expected that the second set of hearings will commence in March.

(Updated at 10pm, Feb 6)