Run of Luck: systemic money-laundering, disgrace, then pay rises for Star casino directors

by Michael Sainsbury | Sep 30, 2022 | Government, Latest Posts

The directors of one of Sydney’s two Tweedledee and Tweedledum casinos are desperate to keep the roulette wheels spinning, the blackjack dice rolling, and the poker machines humming. In other words, to keep the money flowing to the decision-making tables of the discredited enterprise, writes Michael Sainsbury.

Star Entertainment has this week prostrated itself. The company grovelled to maintain its licence to operate its Sydney casino and with it, official permission to keep inflicting untold misery on the families of gambling addicts. This was after it was found unfit to hold a licence and asked to show cause why it should by Adam Bell, SC. Yet its directors and executives appear to be getting off not just scot free – but with the bank balances enhanced.

In its pleadings, released on Tuesday, Star’s interim executive chairman Ben Heap admitted “it is plain that we had not acted with the necessary urgency.” He dutifully “accepted the findings of the Bell report, including the finding of unsuitability” as he begged the chief commissioner of the new NSW Independent Casino Commission, Philip Crawford, to somehow let the casino continue operating. He promised to do “whatever necessary” to overhaul the group. And on and on.

But only a day after Heap’s Uriahesque hand-wringing, it was revealed that board of the disgraced casino group have given themselves a 3.5% pay rise for their superb efforts over the past year, a 40% fall in the share prices, and despite being the subject of an inquiry in Queensland that is likely add to the company’s pain. It’s worth noting, and this may be a surprise, that no Star directors have any executive experience in the gambling sector.

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The largesse of course doesn’t stop there, Star’s former CEO Matt Bekier, who departed the company in May after presiding over the fiasco, was handed almost $2 million by the board as he skipped off into the sunset. It’s down from last year’s $3.6 million and the last instalment of a lucrative eight years at the top of Star and its predecessor Echo Entertainment which has seen him bank tens of millions of dollars as well as $3 million or so “performance” rights valued, even at Star’s depressed price at almost $8 million. All this largesse for apparently being oblivious to the mire operating on his watch. It’s nice work, if you can get it. Shareholders should be asking for most of it back.

Not good enough

This board’s own pay rise – not quite as juicy as the 5% at Qantas but close – came despite the company announcing on May 13 that the board would undertake a “remediation process as it acknowledged the need for accelerated board change.” A tacit acknowledgement that things had not been good enough, yet still the pay rises keep coming. Crawford, the new casino regulator, has commented that Star directors “didn’t have a clue what was going on in their own casino”. Yet they continue on, paying themselves as if they do. Shareholders should be furious.

Directors of Star Entertainment, past and present, now led by Heap and his predecessor John O’Neill, have been paid millions of dollars in fees for presiding over illegal activities and still remain in other well-paid board jobs.

Yet they remain, in theory at least, under investigation by the Australian Securities and Investments Commission.

“ASIC can confirm an investigation into The Star and its Board commenced in March 2022,” an ASIC spokesman said. ”ASIC has been closely following the inquiry into The Star as well as carefully considering the evidence before it, its findings and The Star’s response to those findings. ASIC’s investigation into The Star continues, and therefore ASIC will not be commenting further on this matter at this time.”

The Bell Review into Star Sydney heard allegations over four months that Star hid a criminal gang linked cash cage from the regulator, allowing it to operate a secret gambling room.

Other evidence said that Star misled banks, breached money-laundering bans, may have evaded taxes and facilitated $900 million of banned gambling transactions through an “inherently deceptive and unethical process” using China’s Mastercard/Visa equivalent UnionPay.

Quite apart from why no criminal charges have been laid at executives further down the food chain who directly presided over money laundering and other criminal activities, ASIC’s investigation, unfortunately, is unlikely to take any of Star’s directors or executives to task.

The conga line

Exhibit A is its handling of the strikingly similar scandal at Crown, a scandal that eventually saw its sale to private equity interest. A conga line of Crown chairmen, including James Packer, John Alexander, Rob Rankin and Helen Coonan, and dozens of directors over the years, cashed in on the company’s success.

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“There was a thorough investigation, including extensive document review and director interviews, but following that investigation and the advice of senior counsel, it was determined that there wasn’t an actionable case based on the evidence, knowledge of the directors at the time and the age of the matter – the conduct happened outside the six-year limit for taking civil action under the Corporations,” the ASIC spokesman told MWM.

And indeed, natural justice may well concede that hands off one set of incompetent managers means the same treatment for the next in the same sector. There’s an easy get-out for ASIC right there.

While the board is being “renewed” and having its pay upgraded, Star has, perhaps understandably, struggled to retain senior executives, with acting CEO Geoff Hogg resigning on September 26 after only four months in the job. This short tenure, added to his previous role of Queensland casino chief has seen him bank “just” $843,359 for his 11 months work in the last financial year.

Bekier’s successor, then Star chairman John O’Neill, stepped in for just two months as executive chairman – after more than a decade in the job at Star and Echo, until May 31 when he quit both his executive and non-executive roles. For his excellent oversight he earned $857,199 including a stonking $375,000 for just two months in the CEO’s role. Regular directors earned a paltry $220,000 each on average for their part-time, no-risk, all-reward jobs, with Heap getting a $30,000 bump for his month as chair.

As ACTU secretary Sally McManus noted in her National Press Club address, the chief executives of Australia’s top 100 companies have seen a 17% pay rise last year. They now earn more than 134 times the average worker.

For sure, Star is cleaning out its board as fast as it can with O’Neill’s departure a major turning point. Heap was only appointed as interim chairman in June. Sally Pitkin, who remains the chair at Super Retail Group and a director at Link Group, has also stepped down from the board effective June 30, 2022, and Gerard Bradley will depart in the coming months. “It is expected that other changes will occur in due course,” the company’s audited financial statements said.

Tourism Australia Chairman, Michael Issenberg, was appointed to the board in July, while Anne Ward and David Foster were added as board observers with the intention of gaining the requisite approvals to be nominated for election at the upcoming annual general meeting.

A little double dealing

It’s always worth noting that the company’s auditor Ernst & Young has, as is increasingly the case in Australia, provided non-audit services to the company during the financial year ended June 30, 2022. Critics have long held that such double dealing can give rise to a conflict of interest and should be forbidden.

“The Directors are satisfied that the provision of non-audit services during this period was compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 (Cth),” the financial statements said. The same directors who completely missed a shed load of criminal activity on their watch.

All the new oversight and processes that Star has put in place poses the simple question: why didn’t the board do this earlier? It’s hardly a secret that casinos are used for  money laundering. Year on year out casinos around the world are found to have engaged in turned a “blind eye” to and facilitate criminal behavior. It’s worth remembering that America’s gambling meccas Las Vegas and Atlantic City were used by criminal enterprises for exactly the same reason that they are used by criminal enterprises today: laundering money.

Sheppard told the inquiry into Star that management was “rotten to the core” and that directors “possibly didn’t ask enough questions”. Yet somehow he, who was also on the board’s risk and governance committee, together with his fellow “highly experienced” directors, did not pick up even a whiff of this stench.

Surely the shareholders and board of other companies where Sheppard is a director would be taking a good hard look at his record at Star? Sheppard is also chair of property group Dexus and on the board of Snowy Hydro. He is a director of the Bradman Foundation. Ditto, for all the other companies on whose boards Star’s other directors past and present now sit.

Probably not. Neither the buck, nor the bucks seem to stop in the casino game where the house – and those that run it, always win.

Michael Sainsbury is a former China correspondent who has lived and worked across North, Southeast and South Asia for 11 years. Now based in regional Australia, he has more than 25 years’ experience writing about business, politics and human rights in Australia and the Indo-Pacific. He has worked for News Corp, Fairfax, Nikkei and a range of independent media outlets and has won multiple awards in Australia and Asia for his reporting. He is a fierce believer in the importance of independent media.

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