Royal Commission into the Casino Operator and Licence

Chapter 10

Crown Melbourne and the regulator

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Crown Melbourne and the regulator

Introduction

  1. The Casino Control Act requires the regulator, the VCGLR, to monitor, investigate, audit and enforce compliance with the laws and regulations that govern the Melbourne Casino’s operations.
  2. This involves the VCGLR taking action including:
    • having a dedicated team that works from the Crown Casino Complex
    • having an audit and investigation team that regularly reviews and assesses the casino operator’s licence obligations
    • approving junket and premium player programs and ensuring the relevant approved systems of internal controls are in place and are being implemented
    • conducting joint operations with the AFP and Victoria Police in a variety of matters including at the Crown Casino Complex.
  3. The VCGLR is also required to carry out a comprehensive review of the casino’s operations at least every five years to determine whether Crown Melbourne is still a suitable person to hold its casino licence.1
  4. In performing its functions, the VCGLR expects Crown Melbourne to work with it in an open and cooperative manner and to disclose to it everything that it could reasonably need to be aware of in order to exercise its functions effectively and efficiently.2
  5. The community has the same expectations because that is appropriate behaviour for a casino operator.
  6. A failure by Crown Melbourne to meet those expectations is a critical factor in considering whether Crown Melbourne continues to be a suitable person to hold its casino licence. At the very least, a failure to be open and cooperative in its dealings with the regulator will provide insight into Crown Melbourne’s attitude to its obligations as a regulated entity.
  7. It may also provide some guidance into how Crown Melbourne will behave in the future. This will be relevant, in particular, in assessing whether Crown Melbourne’s reform program will bring about any real change in its behaviour.
  8. Crown Melbourne’s interactions with the VCGLR will be analysed through three case studies:
    • the investigation into the arrest of Crown workers in China
    • the Sixth Review
    • the examination of Crown Melbourne’s ICSs in dealing with the assessment of junket operators.

VCGLR supervisory role

  1. The VCGLR has a statutory obligation to maintain and administer the licensing, supervision and control of casinos.
  2. This will often require the VCGLR to conduct investigations:
    • into the suitability of the casino operator and its associates3
    • that can be self-initiated or commenced at the direction of the Minister for Gaming4
    • to determine whether disciplinary action should be taken against any person.5
  3. To conduct an investigation, the VCGLR can exercise its coercive powers to require a casino operator or a person associated with the casino operator to:
    • provide relevant information
    • produce specified records
    • attend before the regulator to answer questions.6
  4. A failure to comply can be punished as a contempt of the Supreme Court of Victoria.7
  5. The VCGLR also has power to direct a casino licensee to ‘adopt, vary, cease or refrain from any practice in respect of the conduct of casino operations’. Failure to comply with a direction is a criminal offence.8

Case study: China arrests

  1. The circumstances surrounding the arrests of 19 Crown employees have been recorded in detail in the Bergin Report and in the VCGLR’s China Report. There is a summary in Chapter 3. Though it will involve some repetition, it is convenient here to provide a brief recitation of the background leading to the arrests.9

Crown’s VIP Program and China

  1. Since its establishment, Crown Melbourne has actively sought to solicit VIP gamblers from overseas to play at its casinos.10 To support this effort, Crown has a VIP International department, which services Crown Melbourne and other Crown casinos.11
  2. The VIP International department has been essential to Crown Melbourne’s financial success. In the 2013 financial year turnover from overseas gamblers was around $38.9 billion, peaking at $52.3 billion in the 2015 financial year. Between 2014 and October 2016, when 19 members of Crown’s staff were arrested, Crown’s China operations had the strongest year-on-year growth of any market the department was involved in.12
  3. From 2000, Crown’s activities in China were conducted by staff stationed in Hong Kong and Macau.13 However, by 2012 Crown had a number of China-based staff who were employed by Crown Singapore.14
  4. This team was made up of administrative assistants and sales staff located in seven regions of China.15 Most worked out of their own homes due to concerns regarding the open promotion of gambling services in mainland China.
  5. In 2012 Crown established an ‘unofficial’ office in Guangzhou. The office dealt with visa applications for gamblers from Macau, Hong Kong and mainland China.16
  6. Crown’s China-based staff were overseen by two executives: Mr Michael Chen, President of International Marketing, who was based in Hong Kong, and Mr Jason O’Connor, then Group General Manager VIP International Crown Resorts. Mr Chen was the conduit between staff based in China and his direct report, Mr O’Connor. Mr O’Connor was responsible for the financial performance of domestic and international VIP business, and considered himself the ‘ultimate decision-maker’ in the VIP International department.17
  7. Two directors had oversight of Crown’s China operations: Mr Barry Felstead, the CEO of Crown Australian Resorts and director of Crown Melbourne and Crown Singapore, and Mr Rowan Craigie, the CEO and Managing Director of Crown Resorts and a director of Crown Melbourne.18

Crackdown in China

  1. On 6 February 2015, the Chinese Ministry of Public Security (MPS) announced that China was cracking down on the promotion of foreign casinos in mainland China. The statement from the Deputy Bureau Chief of the MPS stated:

    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.19

  1. The crackdown was reported in the media. A news article in Reuters published on 6 February 2015 and entitled ‘China’s President Just Declared War on Global Gambling’ (Reuters Article) observed:

    Chinese President Xi Jinping has officially declared war on the global gambling industry, warning foreign casinos that Chinese citizens will be gambling much less in China, neighbouring countries, and the US.20

  1. In June 2015, a number of employees from South Korean casino operators were arrested and detained by Chinese authorities.21 Following the arrests, two China-based Crown staff members were also detained and questioned by Chinese authorities.
  2. On 9 July 2015, a VIP International staff member based in Wuhan was questioned by Chinese authorities regarding his activities in China. The employee informed the Chinese authorities that he worked for Crown, that his role was to assist customers in their visa applications and that he did not know whether those customers gambled in Australia.22 At the Bergin Inquiry Mr O’Connor and Ms Jan Williamson (Senior Lawyer at Crown Melbourne) acknowledged that these were not truthful answers.23
  3. The employee was required to provide a ‘certificate of employment’ to the Chinese police by the next day. A letter recording his employment was authorised to be written by Mr Felstead and provided on Crown Singapore letterhead.24 The letter stated that the staff member was employed by Crown Singapore and that Crown Resorts was ‘one of the leading hotel, resort and entertainment companies in Australia …’.25
  4. A second Crown employee was also questioned by Chinese authorities in July 2015. According to the VCGLR’s China Report, the employee informed the regulator that he was questioned by police. No further action was taken against this employee, though the employee informed Mr Chen of the questioning.26

Arrests and convictions

  1. On 13 and 14 October 2016, Chinese police conducted a series of raids at the homes of Crown’s China-based staff, arresting 19 employees. Among them was Mr O’Connor, who was visiting China at the time as part of a VIP International roadshow. All 19 employees were charged with breaching Article 303 of the Chinese Criminal Law.27
  2. Article 303 provides that it is illegal that a person ‘for the purposes of profit [to gather] a crowd to gamble, or [undertake] gambling as a business …’. The Supreme People’s Court of China has ruled that this article applies to a person who organises 10 or more Chinese citizens to go abroad to gamble when kickbacks or referral fees are collected.28
  3. Ultimately the arrested employees pled guilty to the charges. Sixteen of the 19 employees were sentenced to terms of imprisonment and were fined the equivalent of $1.67 million, which Crown paid.29
  4. Upon their release, the employees and Crown entered into deeds of settlement pursuant to which they received some form of compensation.30 The Commission has not sought to obtain, nor is it aware of, the terms of those deeds. Most of the employees who were detained no longer work for Crown. Mr O’Connor, however, is currently the Director of Innovation and Strategy at Crown Melbourne.31

VCGLR investigation

  1. In July 2017, the VCGLR Compliance Division Probity Team opened an investigation into the arrests of the China-based staff.32 The purpose of the investigation was to examine the circumstances surrounding the detention and conviction of the employees, to determine whether there was any corporate governance failure arising out of those circumstances, and to collect information that may have been relevant to the assessment of the suitability of the employees (as some were subject to suitability requirements as Casino Special Employees under the Casino Control Act) in the event that they continued to be employed.33
  2. The investigation moved through four phases between its commencement in 2017 and the delivery of the Final Report to the Minister in February 2021.
Phase 1
  1. On 13 July 2017, Mr Jason Cremona (Manager of Licence Management and Audit (LMA) in the Licensing Division) notified Ms Michelle Fielding (Crown’s Group General Manager, Regulatory and Compliance) that the VCGLR would not take immediate action regarding the detention and conviction of the Crown employees but would review the matter and determine whether any action should be taken once the statement of reasons from the Chinese Court had been released.34
  2. On 31 August 2017, Mr Joshua Preston (Chief Legal Officer, Australian Resorts) attended the VCGLR’s offices and gave a presentation regarding the background to the China arrests (Crown China Presentation).
  3. Following the Crown China Presentation, on 25 September 2017, Mr Ben Considine, an investigator with the VCGLR’s Investigations Team, emailed Ms Fielding requesting various documents. The documents included minutes from Crown Resorts’ board and board subcommittees regarding Crown Resorts’ operations in China; Crown’s Risk Management Committee materials, such as charters, plans and policies; and communications between Crown and its international employees regarding the steps they should take in conducting their operations.35
  4. Mr Considine did not receive a response to his email. He sent a follow-up email to Ms Fielding on 5 October 2017, repeating his request and seeking further information, including copies of advices received from Crown’s legal advisors WilmerHale and its external risk advisors, the Mintz Group, and any other information that addressed Crown’s China operations, in particular any advice regarding the prohibitions on gambling in the Chinese Criminal Law.36
  5. Mr Considine’s requests did not specify a deadline for the production of the documents. Ms Fielding left a telephone message for Mr Considine saying that Crown Melbourne would provide the material ‘by the end of November or first week of December’. On 8 November 2017, Mr Considine emailed Ms Fielding and asked that the documents be provided by 4 December 2017.37
Phase 2
  1. The second phase began in November 2017, when Mr Timothy Bryant, a Team Leader (Investigations) in the Compliance Division assumed oversight of the investigation.38
  2. On 27 November 2017, Mr Preston sent Mr Considine material relating to Crown’s risk management systems and some communications between Crown and its China-based employees. In his covering letter, Mr Preston referred to the existence of, but claimed privilege over, legal advices received from WilmerHale. He did provide some advice received from the Mintz Group.39
  3. Upon reviewing the investigation file and a memorandum prepared by Mr Considine, Mr Bryant decided that he needed more information from Crown Melbourne. Mr Bryant was also concerned about the time Crown Melbourne had taken to provide documents that had been informally requested. Accordingly, he decided to issue formal notices under section 26 of the Casino Control Act to produce the documents he was after.40
  4. On 4 January 2018, the following section 26 notices were issued:
    • a notice requesting records of verdicts, decisions, pleas, findings and details of fines paid regarding the trial of the China-based staff; specific internal audit, financial and risk compliance documents; the letter provided by Crown Singapore regarding the Crown employee questioned by Chinese authorities; and correspondence between Crown Resorts or Crown Melbourne and the Mintz Group.41
    • a notice requesting unredacted versions of all documents provided to the VCGLR in November 2017.42
  5. Between 19 January and 1 February 2018, Mr Preston provided a number of documents to the VCGLR. They included communications between Crown entities and the Mintz Group.43
  6. On 2 February 2018 the VCGLR issued a further section 26 notice requesting the production of:

    Any other records which contain information regarding any identification, assessment or treatment of risks conducted by Crown Melbourne Limited and/or Crown Resorts Limited and/or Crown Resort Pte Ltd (Hong Kong) [Crown Singapore] regarding operations within mainland China from 1 January 2015 to the present, excepting any records or documents which have already been provided to the Commission.44

  1. In response, on 16 February 2018 Mr Preston wrote to the VCGLR stating that Crown had been unable to locate any documents that contained information about various Crown entities’ identification of risk regarding the conduct of their employees in China other than those already provided or that were subject to claims of privilege.45
  2. Critically, the letter written by Mr Preston identified, for the first time, the existence of backup tapes that Crown was restoring for the purpose of discovery in a class action that had been commenced against it relating to the China arrests and their effect on the price of Crown shares (Crown Class Action).46 Mr Preston indicated that in the course of reviewing those tapes, further documents might come to light.
  3. Mr Bryant did not want to wait months to receive further documents. So, between 21 February and 14 March 2018, notices to attend for examination were served on several Crown employees, including Mr Craigie, Mr O’Connor, Mr Felstead and Mr Chen.47
  4. Mr Bryant conducted the examinations between March and May 2018. During the examinations each witness was accompanied by Mr Preston and Mr Richard Murphy, a senior partner of Crown’s external lawyers MinterEllison.
  5. The examinations will be discussed in more detail later in this chapter. At this point it is only necessary to mention that during Mr Craigie’s and Mr O’Connor’s examinations, it became apparent that there existed VIP department plans (VIP Presentations) that contained an analysis of the risks of Crown’s operations in China. During Mr O’Connor’s examination, the VCGLR requested that Crown Melbourne produce the plans.48
  6. Following the examinations, the VCGLR issued a further section 26 notice seeking information about the letter provided by Crown Singapore to the Chinese police. It also sought documents that identified who prepared the letter and any documents relating to the letter or similar letters provided in relation to Crown employees.49
  7. On 27 March 2018, Mr Murphy provided the VIP Presentations. Mr Murphy advised that the documents had been redacted to ‘mask information of Crown that is not relevant to the matters the subject of the VCGLR’s China investigation’, though he offered the VCGLR the opportunity to review the unredacted documents at Crown’s premises.50
  8. The VIP Presentations included the ‘F16–F20 Strategic Business Plan Executive Review VIP International’. That plan contained the following statement:

    The most recent development was an announcement that authorities are taking a stand against foreign casinos seeking to attract business out of China. This announcement was made about 1 month ago (and likely contributed to the softer than expected CNY period).51

  1. Mr Bryant told this Commission that, in his view, Crown Melbourne should have provided the VIP Presentations either in response to Mr Considine’s request for information on 5 October 2017 or in response to the section 26 notice issued on 2 February 2018.52
  2. On 14 May 2018, the VCGLR wrote to Crown Melbourne referring to its failure to produce the VIP Presentations in response to the February notice. It sought reasons why it should not conclude that Crown failed to comply with the notice without reasonable excuse.53
  3. Mr Preston responded by letter dated 23 May 2018. He submitted that the documents did not fall under the February notice. In particular, Mr Preston wrote:

    Crown Melbourne did not produce the Presentations because they are relevantly concerned with market outlook, and do not record risks that were identified as attaching to or arising in connection with activity on the ground in China, or the conduct of any risk assessment in relation to those operations.54

  1. Mr Preston also provided an update on the restoration of tapes as part of the discovery process in the Crown Class Action.
  2. A short time later, MinterEllison wrote to the VCGLR advising that a small number of additional documents had been identified as falling within the section 26 notices. On 7 and 8 June 2018 those documents were provided to the VCGLR (June 2018 Materials).
  3. Prior to receiving the June 2018 Materials, the VCGLR had finalised a summary report of its investigation. The Summary Report was provided to Crown Melbourne for comment on 8 June 2018.55
  4. The Summary Report recorded that Crown Melbourne’s corporate governance and risk assessments failed to identify and assess the risks associated with the crackdown in China. It noted a number of failings on Crown Melbourne’s part, including an overreliance on Mr Chen and a failure to escalate key incidents and risks to the Crown board.56
  5. On 26 June 2018, Mr John Alexander (Chairman of Crown Melbourne) wrote to the VCGLR’s CEO, Ms Catherine Myers, with Crown Melbourne’s response to the Summary Report. In his letter, Mr Alexander rejected any suggestion of wrongdoing, writing: ‘To the extent that the Summary Report contains purported findings and conclusions of VCGLR Compliance Division staff which are adverse to Crown Melbourne, they are strongly disputed’.57
Phase 3
  1. This phase involved consolidating the work previously done and ensuring that Crown Melbourne had produced all documents that fell within the section 26 notices.
  2. On 23 August 2018, a further section 26 notice was served. Among the documents requested were those that had been the subject of previous notices but had not been produced and those that had previously been redacted for confidentiality purposes.58
  3. On 21 September 2018, MinterEllison produced four lever arch folders of documents.59 On the same day, Mr Murphy wrote to the VCGLR stating that ‘the whole episode of the detention and conviction of Crown Group staff does not warrant any regulatory action’ and urged the VCGLR to close its investigation. Mr Murphy also advised that additional documents may be made available as the discovery process in the Crown Class Action was ongoing.60
  4. Mr Bryant was frustrated with Crown Melbourne’s approach to document production. He was particularly offended that Crown Melbourne took its discovery obligations more seriously than its obligation to produce documents under the Casino Control Act.61
  5. On 14 November 2018, the VCGLR wrote to Crown Melbourne advising that the obligation to provide documents pursuant to the section 26 notices was wholly separate from the discovery process in the Crown Class Action. The letter stated that the VCGLR expected Crown Melbourne to fully comply with all notices and requests for information by 5 December 2018.62 Crown Melbourne did provide additional materials on 5 December 2018 and again on 18 March 2019.63
  6. After reviewing the additional material, the VCGLR finalised a draft report of its investigation and sent it to Crown Melbourne on 19 May 2019. The Draft Report concluded:

    [T]he risk management systems and processes that form the [risk management] framework were never engaged to assess the warning signs and address the risk of Crown staff being detained in China.64

  1. The Draft Report stated that despite the risk management failures and, in particular, the failure of senior management to appreciate and address the changing regulatory environment in China, Crown Melbourne was still a suitable person to hold a casino licence. The Draft Report also contained a number of recommendations for Crown to adopt.
  2. On 26 June 2019, MinterEllison informed the VCGLR that Crown Melbourne accepted in principle the conclusion as to its suitability. Critically, and in a departure from the tone of its previous communications, MinterEllison wrote that Crown Melbourne ‘accepted in principle that their risk management framework could deal more directly with the risk of adverse legal action in a foreign jurisdiction, and appropriate mitigation strategies’.65
Phase 4
  1. On 28 July 2019, Channel 9 aired a segment on 60 Minutes that brought to light new information relevant to the China investigation. The segment included an interview with Ms Jenny Jiang, one of the China-based staff who had been convicted and imprisoned.66 Ms Jiang made a number of allegations, including that:
    • Crown had assisted Chinese nationals to obtain visas
    • consulate officers in China had helped rubber stamp the visa applications
    • despite the crackdown, Crown directed its employees to promote the business
    • Crown directed its employees not to cooperate with authorities in the event they were detained.67
  2. Following the airing of the program, on 23 September 2019, the VCGLR wrote to MinterEllison informing it that due to the new allegations it was not in a position to finalise its report. It sought the contact details of the China-based staff members to determine whether they would be willing to provide information to the VCGLR.68
  3. MinterEllison ignored the letter.
  4. On 9 October 2019, the VCGLR issued a section 26 notice seeking production of documents relating to China-based staff.69
  5. On 16 October 2019, MinterEllison provided the requested documents, though it noted the duty of confidentiality that each employee owed to Crown and stated that Crown was prepared to waive compliance with that duty on condition that it be involved in any interviews with the employees.70
  6. On 15 January 2020, after filing witness statements in the Crown Class Action, MinterEllison wrote to the VCGLR informing it that by filing the statements, it had waived legal privilege regarding the advices Crown received from WilmerHale.71 The VCGLR then issued a section 26 notice requesting the production of the witness statements.72
  7. Between August and September 2020, several Crown executives gave evidence at the Bergin Inquiry. The VCGLR reviewed that evidence and the material tendered and issued the following further section 26 notices:
    • on 1 October 2020, a notice seeking certain exhibits and documents referred to during the hearing
    • on 24 November 2020, a notice seeking the Statement of Issues and Contentions and the closing submissions of Crown Resorts and CPH
    • on 26 November 2020, a notice seeking the closing submission of Counsel Assisting the Bergin Inquiry.73
  8. Crown’s closing submissions made several concessions regarding the arrests of staff in China, including that:
    • Crown’s risk management structures and processes were not utilised
    • key developments in the operating environment in China were not escalated to either board-level committees or the wider board
    • a small group of executives, rather than the board, set the risk appetite of Crown in relation to China.74
  9. On 22 December 2020, the VCGLR wrote to Crown Melbourne asking for acknowledgement of certain propositions, including that:
    • the totality of the events that occurred in China constituted a failure of Crown’s risk management, corporate governance, ethics and culture
    • most executives and directors employed or involved in the events that culminated in the arrests, convictions and sentencing in China remained at Crown
    • not all directors in the period between 2010 and 2016 were aware, prior to the arrests, that Crown employed staff who lived and worked in China
    • the risk appetite of the board would have been zero had the board been informed of certain escalation events, including the crackdown, arrest of South Korean casino staff and questioning of China-based Crown staff by police
    • copies of legal advice obtained by Mr Chen or by internal lawyers at Crown Melbourne were not made available to the board prior to the arrests, were not considered as part of Crown’s risk management structures and had never been provided to the VCGLR.75
  10. Further, the VCGLR noted that having reviewed material from the Bergin Inquiry and the material provided by Crown Melbourne, it was ‘concerned about the degree of candour that Crown had displayed in its dealings with the VCGLR’.76
  11. Following Crown Melbourne’s response to the propositions put to it, the VCGLR finalised its report and on 19 February 2021 delivered it to the Minister.77

Crown Melbourne’s behaviour during the China investigation

  1. The investigation was hampered by a deliberate lack of cooperation and candour on the part of Crown Melbourne and its senior executives. The failures were:
    • providing incorrect or inaccurate information to the VCGLR
    • failing to produce documents when required
    • the unnecessary redaction of information
    • belatedly conceding matters that should not have been in dispute.

Inaccurate or incorrect information

  1. On several occasions during the investigation, Mr Preston, Mr O’Connor and Mr Felstead provided incorrect or inaccurate information to the VCGLR and its investigators.
Crown China Presentation
  1. Prior to the commencement of the formal investigation, Crown sought to downplay its knowledge of the risks associated with the crackdown against gambling in China. This was done in two ways. First, in the Crown China Presentation given by Mr Preston to the VCGLR on 31 August 2017 it was asserted that Crown had sought advice from the Mintz Group regarding the risks associated with operating in China and that the advice given did not indicate there were any substantial risks regarding the activities of Crown’s employees.
  2. The Crown China Presentation omitted key information from the Mintz Group advice. For example, the Mintz Group had warned Crown that the Public Security Bureau (PSB) was monitoring people working in the gaming business. Crown’s presentation suggested that the monitoring was focused only on those engaged in gambling. The presentation and the advice are set out below side by side:

Crown China Presentation78
Mintz Group advice79

According to sources working in the Public Security Bureau (PSB) in China, most provincial levels of the PSB had intelligence units that routinely monitored people engaged in gambling (emphasis added).

According to sources working in the Public Security Bureau (PSB) system … most provincial levels of the PSB had intelligence units that routinely monitor people who work in the gambling business (emphasis added).

  1. The Crown China Presentation omitted other information from the Mintz Group advice. One omitted portion read:

    In essence, we learned that the Guangdong PSB had recently received instructions from central PSB to step up monitoring of foreign gambling companies marketing activities throughout China ...80

  1. The selective use of the Mintz Group advice has not been explained. Perhaps there was no intention to mislead the regulator, as Crown Melbourne submits.81 Whether intended or not, does not matter. Mr Bryant believed that the PSB was monitoring people who gambled, not people who worked in the gambling business. He would not have been under that mistaken belief if the Mintz Group advice had been accurately presented.
  2. Second, the Crown China Presentation suggested that Crown had taken active steps to ensure that it was not in breach of Article 303 of the Chinese Criminal Law. One slide in the Crown China Presentation stated:

    Crown instructed its staff to conduct themselves in China in a manner which it understood would not involve breaching Article 303.

    Crown staff were instructed to:

    …

    Not hand out promotional materials that referred to gaming facilities or terms of play (Crown did not produce such materials for distribution in China) ...82

  1. The statement that Crown did not produce promotional materials for distribution in China and that staff in China were instructed not to hand out promotional materials was false. In March 2019, the VCGLR received material that included an email from the Group Marketing Executive at VIP International to members of the VIP International Team, including those based in Hong Kong and China. The email described the gambling promotional material that Crown had shipped to its international offices, and included instructions for the distribution of that material in mainland China.83 The promotional material included material inviting patrons to attend Crown Casino and participate in competitions, including one with $1 million prize money.84
  2. It is possible that Mr Preston was not aware that promotional material was being provided for use in China.85 Certainly that is how Crown Melbourne puts the position. Nonetheless, if Mr Preston was unaware of the true facts he should have made proper enquiries to ensure that misleading information was not given to the regulator.
  3. Plainly, the Crown China Presentation gave the false impression that Crown had done all it could to not contravene Article 303 of the Chinese Criminal Law.
VCGLR interviews
  1. Between 7 March and 10 May 2018, Mr Bryant conducted the examinations of Crown executives including Mr Felstead and Mr O’Connor.86 During each interview Mr Preston and Mr Murphy were present.
  2. Mr O’Connor’s examination took place on 8 March 2018. He was asked about the arrests of Crown’s employees in China. During the questioning, Mr Bryant showed Mr O’Connor the Reuters Article. The following exchange then took place:

    Q: Okay. And what was your business strategy at the time that article came out?

    A: I wasn’t aware of that, that’s what I’m saying.

    Q: Okay, but you’re aware that a crackdown occurred about that time in China, a general anti-corruption crackdown?

    A: Yes. A specific crackdown on the casino industry, no.

    …

    Q: Okay, and who would—as your direct report would have you discussed with your direct report?

    A: Yes. Yes, at the time discussed it with my direct reports and probably other senior people in the organisation as well. Can I stress, though, at the time it was understood to be a crackdown on corruption generally. I don’t recall any discussions about crackdowns specifically on casinos or gambling operators.87

  3. Mr O’Connor’s answers are inconsistent with the contemporaneous communications between himself and other Crown executives about what was occurring in China in 2015. The answers are also different from the evidence Mr O’Connor gave at the Bergin Inquiry.
  4. On 7 February 2015, the day after the Reuters Article was published, Mr O’Connor had received several emails about the crackdown. The emails make it clear that Mr O’Connor knew about the crackdown and that it was concerned with the activities of foreign casinos.
  5. For example, on 7 February 2015, Mr Howard Aldridge (Managing Director at Crown Aspinalls) sent the Reuters Article to Mr O’Connor and asked:

    Are you guys in Melbourne making any adjustments to the FY16 business plan based upon what is happening across China. Also, is there any concerns for the Crown staff working in China. Maybe we can add this to the topics for discussion when I am in Melbourne.88

  1. Mr O’Connor responded:

    These issues will, undoubtedly bring considerable discussion during the planning process (which is yet to commence).

    …

    As for the staff, we are always very concerned for their wellbeing and Michael is consulting our lawyers to get a clearer view of what this really means. In the meantime, we all need to take extra care.89

  1. The effect of the crackdown had also been discussed by Mr O’Connor and other Crown executives. On 7 February 2015, Mr Chen sent an email to Mr Felstead, copying in Mr O’Connor, that referred to a different Reuters article about the crackdown. Mr Felstead responded that it was ‘another good challenge for you both’. Mr Chen wrote:

    For us.

    This suggests we may need to delay our plans on establishing physical office presence in China.

    Also, this raises the alert level on the safety of our staff.90

  1. Concerns about the events in China were also raised at a meeting between several Crown executives, including Mr O’Connor, Mr Felstead and Mr Chen, on 11 February 2015. An agenda for the meeting was distributed by Mr O’Connor. The following was an agenda item:

    2. Industry chatter re marketing crackdown

    Avoid travel to Mainland [China] for a while ...91

  1. Mr O’Connor gave the following evidence at the Bergin Inquiry about the crackdown:

    Q: Now, in early February 2015 did you become aware of an announcement by the Chinese authorities that they were cracking down on foreign casinos recruiting Chinese citizens to gamble in other countries?

    A: Yes, I was aware of that announcement.

    …

    Q: So you appreciated, I assume, that this announcement by the Chinese authorities had the potential to create a risk to Crown’s existing business operations in China?

    A: Yes, I ... I interpreted this to represent a risk to our business, that’s right.

    Q: Yes. And it was a matter that you needed to treat seriously as a senior executive responsible for the VIP international business, I’m sure.

    A: Yes.92

  2. It is clear that what Mr O’Connor said during his examination by Mr Bryant was not correct.
  3. Mr O’Connor now says that at the time of his examination he was suffering from emotional trauma following his arrest and detention in China. He was also suffering from an unspecified ‘serious infectious disease’. This, he says, caused a memory lapse and he did not intentionally provide false information to Mr Bryant.93
  4. It is worth pointing out that Mr O’Connor had been asked by Mr Bryant whether he had a medical clearance for his examination and replied that he had. Nonetheless, it may be accepted that the factors that Mr O’Connor identified may have affected his memory.94
  5. That, however, does not absolve Mr O’Connor of blame. He did not, when he recovered his memory, attempt to correct the false statements he made during his examination. Nor, for that matter, did the lawyers, Mr Preston or Mr Murphy, who were present at both examinations.
  6. Mr Felstead also provided answers to questions put by Mr Bryant about his knowledge of the crackdown that were inconsistent with the evidence he gave at the Bergin Inquiry. During his examination, Mr Felstead said:

    My recollection from the time, and this is in relation to what information’s come from talking to the customers and the like, was that there was certainly a ... certainly a move from the Chinese government to restrict some of the activities of its citizens in terms of ... and a lot of that ... well certainly my understanding was based about Macau, which was evidenced in the drop off in the business in Macau. And a lot of it was and this is once again information from customers and what you hear in the industry, a lot of it was a crackdown on government officials engaging in gambling, which was ... always seemed a bit of a sore point for the Chinese government. That was certainly made loud and clear to us from customers who we would converse with and talk to, and there was certainly a large degree of trepidation about business in Macau for some of our customers, because a lot of the crackdowns were occurring around that. So that was probably the ... that was probably the key thrust that I took from that period.95

  1. Mr Felstead gave this evidence notwithstanding that he had received emails regarding the crackdown and how that might affect the VIP business.
  2. Mr Felstead was more forthcoming in his evidence to the Bergin Inquiry:

    Q: Now, would you agree that the Chinese government crackdown on foreign casinos seeking Chinese gamblers seems to have been widely published in the media and in industry publications in February 2015?

    A: I would agree with that, Mr Bell.

    …

    Q: And you would agree, would you not, that this announcement, appearing to come from the Chinese government, had the potential to create a serious risk to Crown’s existing operations in China; correct?

    A: I think it had the ability to do that if it wasn’t managed correctly.96

  3. During his examination by Mr Bryant, Mr Felstead was also asked about the questioning by the Chinese authorities of one China-based employee and the letter by Crown Singapore regarding the terms of that person’s employment. Mr Felstead said he could not recall the letter but observed that it ‘rings a bell’.97
  4. Mr Felstead said that he knew that staff had been questioned, but was under the impression that the questions concerned a customer rather the recruitment of gamblers in China:

    Q: Can you recall how that was relayed to you?

    A: Look, I think it was ... yeah, I think it was in relation to we’ve had a staff member who’s been ... who’s been questioned and my understanding, it was in relation to a particular ... it could have been in relation to a particular patron but I don’t recall a lot of details about it but I definitely remember there was an incident where a staff member was questioned by a government agency, whether it was the police, I can’t remember.

    Q: Can you recall it being in the context of a patron?

    A: That was my understanding.98

  5. Those answers are inconsistent with contemporaneous correspondence to which Mr Felstead was a party. On the day after the employee was questioned, Mr O’Connor emailed Mr Felstead explaining the reason for the questioning and the need for a letter from Crown. The email read:

    Hi Baz,

    FYI

    We had another employee questioned by the Chinese police yesterday.

    He seems to have been accused of organising gambling operations or something. He explained that he works for a hotel resort company and helps with visas and travel arrangements etc. They asked for a letter from his employer verifying this.99

  1. On the same day, Mr Felstead received from Ms Williamson a draft of the proposed letter. Mr Felstead responded ‘Fine by me thanks Jan.’100
  2. Mr Felstead’s answers to Mr Bryant are also inconsistent with the evidence he gave at the Bergin Inquiry.101 The following exchange highlights the difference:

Q: Were you aware, in July 2015, that the Chinese police had said to this person that they could not tell him who had informed them, but that the issue was that he had organised people to gamble in Australia?

A: I was aware of that.102

  1. Mr Felstead has proffered an explanation for the apparent inconsistency in his statements. He said he answered Mr Bryant’s questions to the best of his ability. However, by the time he gave evidence during the Bergin Inquiry, Mr Felstead had prepared himself properly and had a better grasp of the facts.103
  2. Assuming that to be so, Mr Felstead cannot be excused for failing to correct the inaccurate statements made to Mr Bryant. Mr Felstead knew that the investigation being undertaken by the VCGLR was important. It is reasonable to infer that he appreciated the importance of correcting the record.
  3. It is fair to say that in his evidence before the Commission Mr Bryant was reluctant to criticise Mr O’Connor or Mr Felstead. When asked to explain his reaction to Mr O’Connor’s evidence regarding the crackdown at the Bergin Inquiry, Mr Bryant said:

A: Mr O’Connor was being very forthright in his answers at the ILGA inquiry and at my interview with Mr O’Connor he hadn’t been as forthcoming. I was quite ... having said that, the interview I conducted with Mr O’Connor unfortunately I hadn’t been provided with a lot of material from Crown at that time which would have clearly showed his level of understanding I think of the crackdown.

Q: Mr Bryant, you are being charitable. I want to suggest to you that this was an email that you had shown Mr O’Connor at the interview in 2018, wasn’t it?

A: Yes, it was.

Q: And Mr O’Connor, through Crown, could have had access to all of the documents that you later came to see during the investigation; don’t you agree?

A: Yes, I do.

Q: And you were annoyed, weren’t you?

A: I was very frustrated with how the course of the investigation had played out based on Crown’s level of cooperation through the interviews and the provision of the material.104

  1. By contrast, in a memorandum to Mr Scott May, General Counsel of the VCGLR, Mr Bryant was less circumspect and described his concerns about ‘possible misleading statements at VCGLR interviews’ by Mr O’Connor and Mr Felstead.105
  2. While it is understandable that Mr Bryant did not wish to openly accuse Mr O’Connor or Mr Felstead of misleading the VCGLR, where there is a difference between Mr Bryant’s evidence to the Commission and the manner in which he expressed his concerns in his memorandum to Mr May, the latter is preferred.

The production of material

  1. The manner in which Crown provided documents to the VCGLR in response to informal requests and to section 26 notices deserves criticism. Mr Bryant told the Commission that Crown was ‘not forthcoming’ with disclosure and that when it did provide documents it did so in a piecemeal way.106 Not wishing to be unfair to Mr Bryant, this downplays the true position.
  2. It is clear from the sequence of events and the correspondence that Crown Melbourne took divergent approaches to the production of documents sought under section 26 notices and the production of documents in the Crown Class Action. As the MinterEllison correspondence shows, many documents were produced to the VCGLR simply because a search for their existence only took place to meet the discovery obligations in the litigation.
  3. Crown Melbourne did inform the VCGLR and this Commission that it took its obligations under section 26 seriously, and that it had ‘provided considerable focus and resources to respond to the VCGLR’s requests for documents and information’.107 Plainly the ‘focus and resources’ provided were insufficient.
  4. Not only was the search for documents deficient, but Crown Melbourne’s production of documents to the VCGLR was haphazard. On many occasions, it took Crown Melbourne months to respond to a section 26 notice. For example, documents produced in March 2019 were in response to section 26 notices served in February and August 2018.108 The explanation proffered was that the documents only came to light when meeting the Crown Class Action discovery obligations. Presumably if there had not been a class action the documents would never have been provided to the VCGLR.109
  5. To state the obvious, Crown Melbourne’s approach to meeting its statutory obligation to produce documents was unsatisfactory. It was particularly unsatisfactory given the important inquiry that was being undertaken by the VCGLR.
  6. Crown Melbourne puts the blame on Mr Preston, who was in charge of document production.110 No doubt particular individuals bear responsibility for the inadequate response to the section 26 notices. Mr Preston may be one of the individuals at fault. None of that really matters. The point is that it was Crown Melbourne to whom the notices were addressed and it was its responsibility to ensure there was proper compliance with those notices.
  7. Crown Melbourne also excuses its non-compliance by referring to delays caused by problems with the backup tapes where most of the documents were stored. The reality is that the backup tape searches were undertaken to meet Crown Melbourne’s discovery obligations in the Crown Class Action. Those searches were not carried out to satisfy the section 26 notices. Crown Melbourne had sufficient time to comply with those notices but did not do so.
  8. Further, representatives of Crown Melbourne and MinterEllison interviewed several staff members in Australia and overseas to find out what had happened in China. The VCGLR was not informed of those interviews. Nor was it provided with details of the information that had been obtained.111
  9. Crown Melbourne’s unsatisfactory approach gives some insight into the attitude of Crown to its regulatory responsibilities. It shows that those responsibilities were not taken particularly seriously.
  10. It is also appropriate to refer to the effect Crown Melbourne’s approach had on the VCGLR investigation. The delay in the production of documents had an adverse impact on the VCGLR’s resources. Its investigation took far longer than it should have and that, in turn, delayed the implementation of important remedial action.

Redactions

  1. Prior to August 2018, Crown Melbourne produced many documents to the VCGLR with redactions based on alleged lack of relevance or claims for legal privilege.
  2. This also frustrated the investigation. In due course the VCGLR insisted that the documents be provided without redaction. And, ultimately, they were.
  3. If Crown Melbourne had the mindset to cooperate with the VCGLR it would have taken a different approach. Perhaps some information might have been withheld on the basis of legal privilege. But, in most instances, Crown Melbourne would have provided the documents in unredacted form.
  4. It speaks ill of Crown Melbourne’s culture that it did not adopt that approach.

Crown Melbourne’s attitude to the investigation

  1. From the outset, Crown Melbourne positioned itself to advance the proposition that it had acted in accordance with its risk management protocols and done everything it could to ensure its staff observed Chinese law. The Crown China Presentation was only the first step. Crown continued to resist any suggestion that its systems failed to adequately assess the risk the crackdown posed to its staff in China.
  2. Crown Melbourne was explicit about this in its response to the VCGLR’s Summary Report. The main conclusion in the Summary Report was:

    Crown’s corporate governance and risk assessment failed to identify and assess risks stemming from a change in the Chinese government’s approach, in 2015 relating to Chinese citizens being enticed to gamble overseas.112

  1. The Summary Report also detailed Crown Melbourne’s delays in the provision of documents to the VCGLR and its preference to favour discovery in the Crown Class Action:

    The above matters suggest that Crown did not undertake a thorough and diligent search for documents matching the terms of the VCGLR’s notices until the discovery process required by the Federal Court. Crown ought have conducted a thorough and diligent search for documents earlier. This aspect is ongoing and will require a further detailed report however it is considered prudent to bring to the attention of the Commission at this stage.113

  1. Crown Melbourne’s response was swift and dismissive. In June 2018, Mr Preston instructed Mr Murphy to ‘push back hard on a range of comments, findings and conclusions in the extract and no doubt the report itself’.114 Mr Murphy obliged.
  2. Mr Murphy informed the VCGLR that Crown Melbourne ‘strongly disputed’ any adverse findings or conclusions. He submitted that there were ‘several fundamental errors which pervade the Report’, making the remarkable statement that the Summary Report failed to ‘identify any specific conduct of any of the detainees (prior to their detentions) which they knew or ought to have known was in breach of China law’.115
  3. This was simply an attempt to divert attention away from the facts. Those facts were that Crown Melbourne had significant concerns regarding the crackdown and the possibility that Crown’s China-based activities would attract the attention of the Chinese authorities. And it did nothing to protect its staff.
  4. Crown Melbourne rejected the VCGLR’s criticisms regarding its document production. It contended that Crown had sought to expedite the process where possible and had engaged in a ‘painstaking and expensive document retrieval process involving the restoration of backup tapes’.116 That process, however, was undertaken to meet Crown Melbourne’s discovery obligations in the Crown Class Action, not its statutory obligation to comply with the section 26 notices.
  5. Crown Melbourne also made efforts to resist further investigatory steps being taken. On 21 September 2018, Mr Murphy wrote to the VCGLR asserting that ‘the whole episode of the detention and conviction of Crown Group staff does not warrant any regulatory action’. He went on:

    Crown respectfully submits that it is appropriate in all the circumstances for the VCGLR to close its investigation on the basis that no disciplinary or other action is warranted.117

  1. The Crown Resorts board also considered a number of ways to prevent the Summary Report being provided to the Minister or being made public. The minutes of its June 2018 meeting record:

    The Board discussed the draft China investigation report in detail and, having regard to the content of the draft report, endorsed the recommendation to seek to request that the VCGLR not provide the full report to the Minister, and instead provide a much shorter executive summary, together with a response from Crown Melbourne.

    The Board recommended that, if the VCGLR refused the Company’s request to provide a summary to the Minister, the matter be brought back to the Board for further consideration, including whether an injunction be sought.118

  1. Although there was no basis for any court intervention, either Mr Preston or Mr Murphy contemplated bringing proceedings against the VCGLR. There may have been a meeting where this was discussed. That is not clear. What is clear is that notes were prepared for a possible meeting. Those notes indicate that either Mr Preston or Mr Murphy should implore the VCGLR not to finalise its report or provide a draft to the Minister in order to avoid a public fight between Crown Melbourne and the regulator and avoid:

    …

    the risk of court action to restrain finalisation or publication of the report, including the possibility of Michael Chen taking such action, either in Victoria or the US, to protect his reputation

    …

    any challenge to the power of the VCGLR to promulgate a gratuitously damaging report outside the statutory framework of its 5 yearly review reports ...119

  1. Crown Melbourne’s position softened after the VCGLR got its hands on incriminating documents. In response to the Draft Report, Crown Melbourne accepted that its risk management framework could have more directly dealt with the risk of adverse action against the China-based staff.120 By that time, however, Crown Melbourne had no alternative but to face the reality of the situation.

Conclusion

  1. In stark contrast to its approach to the VCGLR, Crown Melbourne did acknowledge its failings during the Bergin Inquiry. It accepted that:
    • ... failings occurred in relation to China. Risk management structures and processes were not utilised. Important developments in the operating environment in China were not escalated to board-level committees and to the wider board. They should have been. The failure to escalate those developments meant that a small group of individuals made the decision about how to respond to them. The board should have made those decisions. That small group, and not the board, set the risk appetite of Crown in relation to China. This should not have happened.
    • ... the management of the external advice obtained in connection with the China operations was inadequate. All of that advice should have been provided to and assessed by Crown’s internal lawyers. That Crown’s internal lawyers obtained copies of much of the advice only after the China arrests was a failing.121
  2. Crown Melbourne’s repeated insistence to the VCGLR that it had done nothing wrong was wholly unjustified. It was only when all the incriminating information was unearthed and Crown Melbourne became the subject of even more intense scrutiny that it had no other option than to concede that its processes were insufficient to meet the risks on the ground in China.
  3. If Crown Melbourne had properly appreciated its obligation to be cooperative and forthcoming, and acted in accordance with that obligation, the VCGLR’s investigation would have been over much sooner. Crown Melbourne’s failings would have been more quickly identified and repaired.
  4. Regrettably, Crown Melbourne’s culture did not allow it to take that course.

Case study: VCGLR Sixth Review implementation

  1. Pursuant to section 25 of the Casino Control Act, the VCGLR is obliged to conduct regular reviews to assess whether a casino operator remains a suitable person to hold its casino licence.
  2. The VCGLR conducted its Sixth Review of Crown Melbourne and released its report in June 2018. As a result of that review, the VCGLR found that Crown Melbourne continued to be a suitable person to hold its casino licence. Nonetheless, its Sixth Review made several recommendations for Crown Melbourne to adopt.
  3. There were 20 recommendations in all.122 One recommendation (Recommendation 17) concerned the risk of money laundering through the Melbourne Casino by junket operations. Another was in relation to a review of Crown Melbourne’s risk management (Recommendation 3). Crown Melbourne’s response to both recommendations will be discussed below.

Recommendation 17

  1. Recommendation 17 was made because the VCGLR was concerned that Crown Melbourne did not have sufficiently robust controls in place to reduce the risk of money laundering by junket players.
  2. Crown Melbourne was required to have, and did have in place, ICSs for junkets.
  3. The ICSs for junkets did not adequately deal with junket players. In particular, the ICSs did not require that Crown Melbourne determine what proportion of front money put up by the junket operator had been contributed by each junket player.123
  4. The Sixth Review picked up this point. It recorded:

    [T]he VCGLR observes that to assist in mitigating the risks associated with junkets, the current internal control statements for junkets could be strengthened with the inclusion of more robust controls in relation to the identification of individual junket players and their associated gaming transactions when participating in junkets.124

  1. Recommendation 17 was made to overcome this gap. The recommendation was:

    that, by 1 July 2019, Crown undertake a robust review (with external assistance) of relevant internal control statements, including input from AUSTRAC, to ensure that anti-money laundering risks are appropriately addressed.125

  1. Before finalising the Sixth Review, the VCGLR provided a draft (containing Recommendation 17) to Crown.126 Crown Melbourne responded to the draft. As regards Recommendation 17 the response simply noted: ‘Recommendation supported’.127
  2. Following the publication of the Sixth Review, Mr Alex Fitzpatrick, the VCGLR’s Director of Licensing, asked Mr Cremona to oversee the implementation of the recommendations.128
Crown Melbourne’s response to Recommendation 17
  1. Representatives of Crown Melbourne and the VCGLR met on a quarterly basis.129 The quarterly meeting held on 25 September 2018 was attended by Mr Cremona, Mr Rowan Harris (from the VCGLR), Mr Xavier Walsh of Crown Melbourne and Mr Preston. One of the agenda items was the report of the Sixth Review. The minutes record:

    Recommendation 17. Crown noted that it had spoken to senior managers from AUSTRAC regarding this recommendation. The VCGLR will provide greater clarity of the recommendation and consult with AUSTRAC.130

  1. Mr Cremona told the Commission that at the meeting the discussion centred around the reasons for the recommendation and how the VCGLR expected Crown Melbourne to satisfy the recommendation. The Crown Melbourne representatives said they were unclear what was required. Mr Cremona said that he informed those present he was surprised that Crown sought any ‘clarity’ as the matter had been clearly explained in the Sixth Review.131
  2. On 31 October 2018, there was another meeting between representatives of the VCGLR and Crown Melbourne to discuss the recommendation. Those present included Mr Harris, Mr Cremona, Ms Fielding and Ms Sonja Bauer (then Group General Manager Responsible Gaming, Crown Resorts). Ms Fielding wanted to know what the VCGLR expected by Recommendation 17. The minutes record the VCGLR’s unequivocal response:

    The VCGLR advised that in their view part of this recommendation is about ensuring greater visibility of individual junket players and their gaming activity to ensure that Anti Money Laundering risks are appropriately addressed. Therefore, it is expected that the review of the appropriate ICS, which will include the Junkets and Premium Player Programs ICS, will vary the applicable ICS to enable the same level of transparency for individual junket player activity as there is for premium players … In reviewing the ICS, Crown would need to seek input from the VCGLR in conjunction with AUSTRAC regarding record keeping in relation to individual junket players (which Crown noted is not required by the Recommendations) and this should inform reporting of any suspicious matters by Crown (which Crown notes is not required by the Recommendations).132

  1. On 9 November 2018, Mr Cremona wrote to Ms Fielding. He referred to the discussion at the meeting and asked that if Crown needed any further clarification, it inform the VCGLR as soon as possible.133
  2. Mr Cremona told the Commission that his purpose in writing was to ensure there was ‘clarity’ regarding the recommendations.134 No response was received.135
  3. On 18 January 2019, Crown Melbourne provided a table to the VCGLR outlining its progress on all the recommendations made in the Sixth Review. In relation to Recommendation 17, the table recorded:

    Crown has met with AUSTRAC to discuss this recommendation. A new joint AML Program across Crown’s Australian Resorts is being developed and will be reviewed by an external party. AUSTRAC is being kept informed of progress.

    Internal controls are being reviewed.136

  1. It would have been obvious to Crown Melbourne that a new AML program was not what was required by Recommendation 17.
  2. To check on Crown Melbourne’s progress on the implementation of Recommendation 17, representatives of the VCGLR, including Mr Cremona and Mr Harris, met with the Director of Regulator Operations and Acting Manager of Regulator Operations at AUSTRAC on 20 February 2019.
  3. The AUSTRAC representatives explained that there had been discussions with Crown Melbourne but they were not about AUSTRAC reviewing Crown Melbourne’s ICSs. Rather, Crown had ‘raised [with AUSTRAC an alleged] “uncertainty” in relation to the recommendation’.137
  4. On 12 March 2019, representatives of Crown Melbourne and the VCGLR again met to discuss the progress of implementing the recommendations in the Sixth Review. In relation to Recommendation 17, the minutes record:

    ...

    1. JP [Joshua Preston] advised that the joint (Crown Perth/Crown Melbourne) AML program will be reviewed by an external party and is a ‘significant piece of work’ which may not be completed by 1 July 2019. The VCGLR believes that the joint AML program is not linked to recommendation 17.
    2. JP advised that Crown consults with AUSTRAC on its ICSs and that the strongest control is the joint AML program. In addition, the strengthening of internal controls would be somewhat limited to the AML internal program/processes and ‘framework documents’. JP believes the fundamental issue re AML/CTF is the internal AML/CTF program, not the ICSs.138

  1. Mr Cremona told the Commission that he viewed Mr Preston’s statements as an attempt to persuade the VCGLR that Recommendation 17 would be satisfied if Crown’s joint AML/CTF Program appropriately ensured AML risks were addressed.139
  2. The minutes show that Mr Cremona and/or Mr Harris made it clear that this was not acceptable:

...

  1. ... JC advised that although the AML/CTF program was important, it was not the key consideration in line with the recommendation.
  2. JC advised that the ICSs should support the AML program, and the ICS review as required by the recommendation, in particular the Junkets and Premium Players ICS, needed to be subject to Crown’s review and AUSTRAC’s input re its suitability.
  3. RH [Rowan Harris] referred to the central issue of lack of transparency of individual junket players and referred to page 138 of the Sixth Casino Review report which states ‘mitigating the risks associated with junkets could be strengthened with the inclusion of more robust controls in relation to the identification of individual junket players and their associated gaming transactions when participating in junkets’. JP noted that this was an observation and would not ‘drive’ the recommendation review outcomes.
  4. The VCGLR made clear its expectations re consultation with AUSTRAC and the review of the ICS for junkets.
  5. JC advised of his concern that Crown’s response and the discussion in the meeting does not appear to specifically address the recommendation.140
  1. As the VCGLR had repeatedly pointed out, the AML/CTF Program was not the object of their concern. The ICSs needed reform so that the VCGLR (as opposed to AUSTRAC) had ‘visibility’ regarding junket front money and who contributed to it. That would then satisfy the VCGLR that the casino was taking necessary steps to be operating free from criminal influence.141
  2. On 23 May 2019, Mr Fitzpatrick wrote to Mr Preston advising that the VCGLR was of the view that Crown may not meet Recommendation 17. In the letter he wrote:

    Recommendation 17 requires Crown, by 1 July 2019, to undertake a robust review (with external assistance) of relevant internal control statements (ICSs), including input from AUSTRAC, to ensure that anti-money laundering risks are appropriately addressed. Based on discussions with Commission staff and Crown’s written updates, Crown appears reluctant to undertake a review of any relevant internal control statements (ICSs) with input from AUSTRAC.

    At a minimum, to implement this recommendation, the Commission expects that Crown provides AUSTRAC with the relevant ICSs, including the Junkets and Premium Player Programs ICS, to inform the review and assist Crown in ensuring that AML risks are appropriately addressed through its AML program as well as the ICSs.142

  3. Later the same day Ms Fielding called Mr Cremona. She told him she thought the letter misrepresented Crown Melbourne’s position. She said Crown Melbourne had not indicated it would not seek input from AUSTRAC. She said Mr Preston was furious and would most likely call the Minister.143 Ms Fielding told the Commission she passed on this threat at the direction of Mr Chris Reilly (Director of Corporate Affairs, Crown Resorts). She did say she was uncomfortable doing so.144
  4. There is no evidence that the threat to call the Minister was carried out. However, Mr Fitzpatrick’s letter did have the effect of forcing Crown Melbourne to engage with Recommendation 17.
  5. On 14 June 2019, Mr Preston wrote to Mr Fitzpatrick. He refuted several observations made in the letter of 23 May 2019. He then set out the steps Crown Melbourne had taken to comply with the recommendation. They were that Crown Melbourne had:
    • reviewed all the ICSs
    • identified the ICSs with potential relevance to AML risks
    • considered those ICSs against the backdrop of Crown Melbourne’s existing AML/CTF Compliance Framework
    • prepared proposed amendments to those ICSs, where appropriate
    • recently submitted those ICSs, and the proposed changes, to AUSTRAC, and requested that AUSTRAC provide:
      • its view on the changes proposed by Crown
      • any other input or commentary from AUSTRAC regarding the relevant ICS
    • also recently submitted these ICSs, and the proposed changes, to an independent AML/CTF expert, and asked the expert to provide:
      • his view on the changes proposed by Crown Melbourne
      • any other input or commentary he had regarding the relevant ICSs.145
  6. It later transpired that Crown Melbourne had only provided the draft ICSs to AUSTRAC on 30 May 2019—that is, the week after the VCGLR’s letter of complaint to Crown.146
  7. The independent expert was Mr Neil Jeans of Initialism. The letter requesting Initialism to act was sent on 4 June 2019.147 This was approximately three weeks before the deadline for implementation of the recommendation and some 11 months after the recommendation was made.
  8. On 1 July 2019, Mr Felstead wrote to the VCGLR asserting that Crown Melbourne had implemented Recommendation 17. The letter stated that:
    • Crown Melbourne had completed a robust review of the ICSs
    • Crown Melbourne had made changes to its ICS and engaged Initialism and AUSTRAC to review the changes
    • AUSTRAC had declined to comment on the changes.148
  9. Crown Melbourne also advised that it had amended the relevant ICSs by:
    • including Crown’s AML/CTF Program as a control in the ‘Minimum Standards and Controls’ section of each relevant ICS
    • including a specific risk of ‘Criminal influence and exploitation’ (which captures potential money laundering or terrorism financing activities) in each relevant ICS Risk Assessment where that risk is not already directly or indirectly included.149
The true position
  1. Recommendation 17 required Crown Melbourne to:
    • conduct a robust review of existing ICSs
    • to do so with external assistance
    • to do so with input from AUSTRAC to ensure that AML risks were appropriately addressed.
  2. Not one requirement was met by Crown Melbourne.
  3. As to the first requirement, although Crown Melbourne asserted that it conducted a ‘robust review’, if it conducted any review at all (which it may have) it was not the review required by the recommendation.150
  4. As to the second requirement, Initialism was engaged by Crown Melbourne to perform a limited task that was premised on Crown Melbourne itself having undertaken a thorough review of all ICSs. The relevant portion of Initialism’s engagement letter reads:

    Crown has thoroughly reviewed all ICSs to assess:

  1. which ICSs are potentially relevant to the assessment and management of money laundering risks (specifically, those ICSs of Business Units directly or indirectly involved in the provision of designated services to patrons); and
  2. with reference to these relevant ICSs, whether any amendments are appropriate to reflect how Crown identifies, mitigates and manages its money laundering risks under its AML/CTF Program. In so doing, Crown had reference to relevant Internal Control Manuals considered and approved by the NSW Regulator (Liquor and Gaming NSW).151
  1. It is clear that this is not the work that was required by Recommendation 17.
  2. The second requirement was that the review be conducted with external assistance. Crown Melbourne said that this assistance was provided by Mr Jeans. However, Crown Melbourne had only sought a limited review by Mr Jeans. The following exchange during Mr Jeans' evidence is illustrative:

    Q: The approach you took to Recommendation 17 was the subject to criticism last week in the Commission by Mr Cremona of the VCGLR. In particular, he said that your opinion letter was not a proper response to Recommendation 17 and did not address the substance of Recommendation 17. Is there any response you would like to make to that?

    A: Mr Cremona is correct. That was not the scope of the work I was asked to do. I was asked to simply do a limited review of documents provided to me, to then provide an opinion to Crown. That review was limited in the fact that I actually did not provide a statement of work, I did not issue a proposal in relation to this piece of work and actually did not charge Crown for this piece of work. That is because the work was very limited. This was literally less than half a day’s work that I undertook for them to produce this letter.152

  3. Crown Melbourne went on to say that this is all that was required of it.153 This is not so. Recommendation 17 required more, as is plain from the wording of the recommendation itself. Contrary to Crown Melbourne’s assertion, the second requirement had not been met.154
  4. The third requirement was for AUSTRAC to be involved. Crown Melbourne did not provide the ICSs to AUSTRAC until 30 May 2019. Previously Crown Melbourne had informed the VCGLR that it had sought AUSTRAC’s assistance much earlier. For example, Crown Melbourne’s update of 18 January 2019 recorded:

Crown has met with AUSTRAC to discuss this recommendation. A new joint AML Program across Crown’s Australian Resorts is being developed and will be reviewed by an external party. AUSTRAC is being kept informed of progress.155

  1. The update of 2 May 2019 repeated this and added that the ICSs had been reviewed and that ‘preliminary discussions with AUSTRAC have taken place’.156
  2. That was misleading. Contrary to the submission by Crown Melbourne that the statement simply meant that a meeting had taken place between it and AUSTRAC, when read in context, the statement clearly implied that AUSTRAC was playing a role in reviewing the junket ICSs. That was not correct. The best that can be said is that there had been a brief discussion with AUSTRAC about the ICSs. But nothing AUSTRAC said to Crown Melbourne indicated it would review the ICSs.
  3. In any event, AUSTRAC decided that it was not appropriate for it to comment on the ICSs.157
Finalisation of Recommendation 17
  1. On 1 July 2019 the VCGLR considered whether Crown Melbourne had complied with Recommendation 17.
  2. Mr Cremona told the Commission that the VCGLR had three options:
    • accept that Crown Melbourne had satisfied the recommendation without qualification
    • accept that Crown Melbourne had satisfied the recommendation, but with the qualification that the VCGLR was not happy with the outcome and would conduct its own review
    • find that Crown Melbourne had not met the recommendation and require it to further review the ICSs under guidance.158
  3. Mr Cremona was of the view that Crown Melbourne had not satisfied the substance of Recommendation 17. Nevertheless, he said that the second option was the best way to proceed. He explained:

    [T]he issue we had was if we determined ‘had not met the recommendation’ that would have required Crown to conduct a further review. And that’s where we had a little bit of a sticking point, because in discussions with my team we agreed that that wasn’t an acceptable outcome. We had made Crown fully aware as to what we expected to be the outcome of that review, which comes across through my whole statement, and I didn’t think it was an acceptable outcome, and I don’t believe I could put faith in Crown to deliver the outcomes if we were to require a second review.159

  1. Mr Harris sent a memorandum to Mr Fitzpatrick outlining Crown Melbourne’s implementation of Recommendation 17. It concluded:

    In summary, LMA staff are of the view that Crown has met the specific requirements of recommendation 17. However, the shortcomings in Crown’s proposed amendments to ICSs do not go far enough to provide the sort of transparency to the Commission of individual junket participants and their gaming transactions as intended by the Sixth Casino Review report.160

  1. In his memorandum Mr Harris recommended that the VCGLR accept Mr Cremona’s second option. The VCGLR adopted the recommendation.
  2. Crown Melbourne contends that it did comply with Recommendation 17, notwithstanding Mr Cremona’s doubts. It contends that it complied with the recommendation, first, by focusing on its AML/CTF Program, which was the primary mechanism by which money laundering risks were addressed. The second basis for compliance was that, in the end, it stopped dealing with junket operators.
  3. The problem with each contention is that it fails to grapple with what was required by the recommendation. A particular ICS needed investigation. Crown Melbourne resisted that task.
  4. The VCGLR was perhaps wrong to find that Crown Melbourne had satisfied Recommendation 17. On the other hand, the approach that it adopted led to a satisfactory outcome.
  5. Following its decision, the VCGLR obtained a report from Senet Legal.
  6. The report stated that Crown Melbourne’s suggested changes were high level and raised concerns that they did not adequately address all of the key risks and other areas of concern.161
  7. The report went on to recommend several changes to the ICSs, which satisfied the regulator’s concern. The changes included a requirement that Crown Melbourne introduce enhanced due diligence measures on an initial and an ongoing basis in respect of junket players.162
  8. The suggested changes were put in place by Crown Melbourne. Shortly thereafter, Crown announced its intention to suspend junket operations.

Recommendation 3

  1. The VCGLR’s third recommendation was:

    that, by 1 July 2019, Crown assess the robustness and effectiveness of its risk framework and systems, including reporting lines in the chain of command, and upgrade them where required. This assessment should be assisted by external advice.

  1. As discussed in Chapter 5, in order to satisfy this recommendation, Crown Melbourne engaged Deloitte to ‘review Crown’s risk management program and provide observations and where appropriate, recommendations for improvement’.163
  2. The engagement did not require Deloitte to assess whether Crown Melbourne’s risk framework was embedded into the organisation, whether it was operating correctly or even whether it was appropriate for Crown Melbourne’s operations.164 Deloitte was only requested to conduct a ‘desktop review’. Deloitte did not interview any relevant members of staff such as the Chair of the RMC or persons responsible for the external audit.165
  3. Deloitte prepared a report and provided it to Crown Melbourne. The report noted that Crown Melbourne’s risk management framework was consistent with accepted risk management standards and set out certain recommendations regarding future areas of development.166
  4. Ms Cara Hartnett, who led the review team from Deloitte, acknowledged that the review did not determine or assess the robustness or effectiveness of Crown Melbourne’s risk management framework.167
  5. On 1 July 2019, Mr Felstead wrote to Ms Myers at the VCGLR stating that Crown Melbourne had complied with Recommendation 3. In his letter, Mr Felstead noted that a number of internal steps had been taken by Crown Melbourne in relation to its risk management systems, including action taken in response to an assessment conducted by PwC Australia that the VCGLR had initiated. The letter also noted that Crown Melbourne was satisfied that its systems were effective and properly embedded into the business following a review of its framework.168
  6. In relation to the external assistance required by the recommendation, Mr Felstead’s letter stated:

    To further ensure the robustness of the enhancements being introduced within the risk management framework, Crown Melbourne sought advice from an external advisory firm on the major elements of the program. The third party review considered that ‘Crown’s risk management framework and its design is consistent with the risk management standard ISO 31000:2018 Risk Management’ and that ‘Crown has a risk management program with the key elements for effective risk management either in place or under development.’ A number of their recommendations were incorporated into the Risk Management Strategy document that was presented to the Crown Resorts Board and approved in June 2019.169

  1. Ms Anne Siegers is the Chief Risk Officer at Crown Resorts. She was responsible for dealing with Recommendation 3. It was Ms Siegers who determined the nature and scope of Deloitte’s engagement. Ms Siegers was also involved in settling the letter Mr Felstead sent to the regulator.
  2. Ms Siegers explained why she had not engaged Deloitte to carry out a full and comprehensive assessment of the robustness and effectiveness of Crown Melbourne’s risk management framework. The reason she gave was that ‘a lot of the elements were not in place yet, so doing an assessment of how well it was implemented would not have been done … able [sic] at that stage’. Ms Siegers added that, in any event, ‘the risk management strategy document itself had not yet been approved by the board’.170
  3. Ms Siegers was asked why the VCGLR was told that the review undertaken by Crown Melbourne had involved ‘an extensive assessment of the depth of understanding and management of risk across the operation’ and that steps were being taken to ensure ‘the robustness of the enhancements being introduced within the risk management framework’.171
  4. Ms Siegers responded that she was able to assess the robustness of the risk management design.172 She could not explain how that could be done when not all the relevant ‘elements’ were in place to enable Deloitte to assess the robustness of the design. Nor did Ms Siegers keep any record of her work. In these circumstances, it is unlikely that she carried out the robust assessment that was called for.
  5. It follows that the information Mr Felstead provided in his letter to the VCGLR was incorrect. Perhaps he was given the incorrect information by Ms Siegers. Perhaps he failed to make appropriate enquiries to find out the true position. Whatever be the reason, it does not justify giving inaccurate information to the regulator.

Conclusion

  1. Crown Melbourne’s approach to the implementation of Recommendation 17 reflects a dismissive and uncooperative attitude towards the VCGLR. A review conducted under section 25 of the Casino Control Act is a serious process. Recommendations made following a review are matters the VCGLR considers important in order to ensure that the casino operations are conducted appropriately.
  2. Recommendation 17 was driven by a concern about criminal influences and possible money laundering by junket players. The VCGLR was of the view that junket players should be treated in the same way as junket operators and premium players. Crown Melbourne knew this but adopted an approach that was designed to avoid imposing transparency over junket players.
  3. It is not difficult to discern its reasons. Requiring junket players to provide their personal details and details about the source of their funds would likely see some take their business elsewhere. This was a risk that Crown Melbourne was not prepared to run. Instead, it accepted the risk of money laundering taking place at the casino rather than lose business.
  4. Recommendation 3 resulted from the VCGLR’s view that Crown Melbourne had failed in relation to risk management. Those failings included non-compliance with its junket internal control requirements and varying the operation of several EGMs without consent.
  5. That Crown Melbourne falsely claimed compliance with such an important recommendation is extremely troubling.

Case study: Junket ICS investigation

Background

  1. An approved ICS with which Crown Melbourne was required to comply concerned how it should deal with junket operators, junket players and premium players. The Junket ICS obliged Crown to conduct appropriate probity checks of those persons.
  2. On 2 October 2020, the VCGLR served a notice on Crown Melbourne under section 20(2) of the Casino Control Act requiring it to show cause why disciplinary action should not be taken against it. The notice alleged that Crown Melbourne had breached the Casino Control Act by not dealing with three junket agents or operators in accordance with the Junket ICS.173 This was later amended to four agents or operators.
  3. In summary, it was alleged that:
    • Crown Melbourne had failed to identify issues relating to Mr Pan (a junket agent). It was alleged that Mr Pan was associated with a legal brothel that had been prosecuted for breach of Victoria’s sex worker laws and that Mr Pan was involved in serious criminal activity with suspected links to organised crime. Crown Melbourne had been advised by the AFP and Victoria Police about Mr Pan’s possible links to human trafficking, illegal brothels and money laundering.
    • Crown Melbourne failed to verify open-source media reports that Mr Song (a junket operator) had been convicted of being part of a large illegal gambling syndicate and that it failed to have proper regard to Mr Song’s involvement in a proceeds of crime case that was before the Supreme Court of Victoria.
    • Mr Wong (a junket player who was also known as Mr Prawira) had been subject to United Nations imposed travel bans and had his assets frozen because of his links to the former President of Liberia. He was allowed to gamble at Crown Melbourne under the name Yoseph Prawira until 2 March 2015 when his licence to enter the casino was withdrawn. It was alleged that by allowing Mr Wong to gamble, Crown Melbourne failed to conduct sufficient probity checks of Mr Wong, including into his conviction for his failure to disclose asset information in Singapore, which led to his imprisonment for six months in 2005.
    • Crown Melbourne failed to have proper regard to certain matters relating to Mr Chau (a junket operator) and his Suncity junket. Those matters included Mr Chau’s connections to the 14K Triad, AUSTRAC inquiries regarding large cash transactions involving Mr Chau and Suncity, and Suncity’s non-compliance with cash controls imposed by Crown Melbourne, which led to the discovery of $5.3 million in cash in Mr Chau’s junket operation desk and a further $300,000 in cupboards in the junket operation room.174
  4. When the show cause notice was served, Crown Melbourne was aware of several deficiencies in its process of checking the background of junket operators. In August 2019, Crown Melbourne (through MinterEllison) had engaged FTI to conduct a review into its junket program.175 The draft FTI report identified deficiencies in the program. They included that the quality of the staff who conducted the due diligence should be improved, that the staff should be appropriately trained and that the due diligence process should be enhanced.176
  5. On 11 September 2019, Mr Preston received the draft FTI report from MinterEllison.177
  6. On 17 December 2020, Ms Helen Coonan (former Executive Chairman of Crown Melbourne and Crown Resorts), Mr Walsh and other Crown executives met with VCGLR representatives. During that meeting, Ms Coonan expressed a desire to work collaboratively with the regulator, saying:

    I think it’s absolutely critical that we have lines of communication open and that as we negotiate what I would call perhaps some of our shortcomings we’re able to work through them together so that we do get a good outcome.178

  1. Mr Walsh spoke about Crown Melbourne’s dealings with ‘top’ local and domestic patrons, stating that Crown Melbourne intended to have direct communications with those patrons to ensure they provided details of matters such as their source of wealth. He said that the onus was now on patrons who had been excluded from the casino to demonstrate why Crown Melbourne should reconsider their exclusion.179
  2. The impression sought to be given was that Crown Melbourne was now willing to adopt a more cooperative approach with the regulator. Mr Walsh’s comments also suggested that Crown Melbourne appreciated that its previous practices (at least in relation to premium players) were deficient.
  3. However, this is not how Crown dealt with the show cause notice. Crown Melbourne’s approach was to differentiate between its decision to allow the four individuals to operate or play at the casino, which it conceded should not have been allowed, and the probity processes it had in place, which it asserted were ‘robust’.
  4. There was a hearing on the show cause proceeding on 21 January 2021. Mr Walsh, Mr Murphy and counsel all addressed the VCGLR on behalf of Crown Melbourne.180
  5. During the course of the hearing Mr Walsh had accepted ‘that we [Crown] should not be dealing with the four persons noted in the particulars’, having noted ‘Crown does not concede that we have breached our ICSs as articulated in the show cause notice’.181
  6. Mr Walsh argued that the allegation concerning Mr Pan did not constitute a breach of section 121(4) of the Casino Control Act because Mr Pan was a junket agent and the Junket ICS only applied to junket operators.182
  7. Mr Walsh said that Crown Melbourne’s probity processes conformed to industry standards and community expectations at the time of the alleged breaches and that Crown Melbourne had adhered to those standards. He provided no evidence to support this claim.183
  8. Mr Walsh submitted that Crown Melbourne’s probity processes were robust, and that Crown Melbourne reviewed probity information that it obtained from third parties.184 His submission ignored Crown Melbourne’s critical failure, which was that it had not sought any probity information directly from the persons concerned.
  9. Importantly, the submission was inconsistent with the draft FTI report. It was also inconsistent with the review undertaken by Deloitte into Crown Melbourne’s Due Diligence and Persons of Interest processes. While it is unclear whether Mr Walsh had reviewed the draft FTI report, both reviews identified significant flaws in the probity assessment process for junkets and were provided to executives at Crown Melbourne.185
  10. Not only was the submission inconsistent with the draft FTI report and the Deloitte review, but Mr Walsh and Crown Melbourne’s legal representatives made no mention of either document.186
  11. Crown Melbourne argued that its approval process was sound because it was based on decisions made by senior managers such as Mr Preston and Mr Felstead. For example, it was put that Mr Preston had been provided with detailed material about Mr Chau (a politically exposed person) and assessed him to be a suitable person to operate junkets.187
  12. On 27 April 2021, the VCGLR handed down its decision. It found that Crown Melbourne had breached section 121(4) of the Casino Control Act and imposed a fine of $1 million. It directed that Crown Melbourne refrain from conducting junket operations until it received permission from the VCGLR to do so.188
  13. The VCGLR said there was real uncertainty about who was responsible for assessing probity information. The VCGLR formed the view that the decision-making process was ad-hoc. It also found that Crown Melbourne’s arguments were inconsistent with the evidence given to the Bergin Inquiry that Crown Melbourne had a Persons of Interest Committee that determined whether a politically exposed person should be allowed into the casino.189
  14. Finally, despite Crown Melbourne’s assertion that an applicable probity assessment had been made, the VCGLR found that there was no record of the basis upon which probity decisions were made. As noted in its decision:

    The evidence and submissions Crown made to the [VCGLR] are bereft of any suggestion that Crown’s relevant probity processes included contemporaneously recording the reasons why probity decisions were made, or the basis upon which they were made.190

Conclusion

  1. Crown Melbourne’s approach to the disciplinary proceeding can be described as obstructionist, aggressive and involving submissions that had little or no evidentiary support or were inconsistent with positions taken elsewhere.
  2. Mr Walsh agreed that Crown Melbourne’s approach to the disciplinary hearing was inappropriate. He said:

    If we had our time again, I’m not sure we would have adopted that position … We took a position, we had legal advice on that position, and I argued that position. It didn’t serve us very well. In fact, if anything, all it did was raise the ire of the Commission.191

  1. The directors of Crown Melbourne also accept that the company’s approach was inappropriate. Ms Halton described the approach as ‘deeply regrettable’.192 Ms Coonan said that the correspondence sent in relation to the disciplinary proceeding was ‘very regrettable’.193
  2. Crown Melbourne and Ms Coonan both said that Crown Melbourne’s approach was that mandated by the then board, which was still dominated by CPH appointees. Ms Coonan went so far as to say that at board meetings she disagreed with that approach.194 She said that it was also the approach recommended by MinterEllison.
  3. It may well be—indeed, it is likely—that the Crown Melbourne board and Crown Melbourne’s lawyers were responsible for the manner in which the show cause notice was handled. That is not an excuse. It merely identifies the persons for whose conduct Crown Melbourne is responsible. At least in the case of the lawyers, the company was not obliged to go along with their approach. It does seem that it willingly did so.

What should be done

  1. While Crown Melbourne submitted to this Commission that its relationship with the regulator is now in the hands of new personnel who are committed to a new and transparent relationship,195 the conduct described in this chapter is unacceptable. It is unacceptable for several reasons. If it is allowed to continue:
    • the regulator will be unable to properly and efficiently carry out its duties, particularly when confronted with an uncooperative casino operator
    • the regulator’s task of overseeing casino operations will be impeded when the casino operator does not make a full and frank disclosure of the information the regulator requires to carry out its functions.
  2. Chapter 16 recommends a number of reforms to the Casino Control Act. Some of those recommendations are designed to deal with the problems identified in this chapter.

Endnotes

1 Casino Control Act 1991 (Vic) s 25.

2 Responsive submission VCGLR, 2 August 2021, [64].

3 Casino Control Act 1991 (Vic) s 25.

4 Casino Control Act 1991 (Vic) s 24.

5 Casino Control Act 1991 (Vic) s 20.

6 Casino Control Act 1991 (Vic) s 26.

7 Casino Control Act 1991 (Vic) s 27.

8 Casino Control Act 1991 (Vic) s 23.

9 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 239–97; Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the CasinoControlAct1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d.

10 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 21 [73].

11 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 241.

12 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 22 [77].

13 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 252.

14 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 252.

15 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 253. According to the Bergin Report, at September 2014, approximately 20 staff lived and worked in mainland China.

16 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 253–4.

17 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 25 [101]–[102].

18 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 26 [107]–[109], 27 [114]–[115].

19 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 55 [306].

20 Exhibit RC1578, Article: China’s President Just Declared War on Global Gambling, 6 February 2015.

21 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 261 [127].

22 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 283–4, 286.

23 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 286; Bergin Inquiry Transcript (O’Connor), 3 September 2020, 2031 [42]–[46]; Bergin Inquiry Transcript (Williamson), 9 September 2020, 2222 [1]–[4].

24 Exhibit RC0007 Email chain between Barry Felstead and Jan Williamson, 10 July 2015.

25 Exhibit RC1549 Letter from Crown Resorts to whom it may concern, re employee in Hong Kong, 9 July 2015.

26 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 73 [424]–[425].

27 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 291.

28 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 255–6.

29 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 291–2; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure j, [7].

30 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 19 [55]–[56].

31 Exhibit RC1512 Statement of Jason O’Connor, 15 June 2021, 1 [1].

32 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 5 [18]; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure b.

33 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 5 [19].

34 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure b.

35 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure e.

36 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure f.

37 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure h.

38 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 1 [1], 2 [8], 10 [34].

39 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure i.

40 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 10–11 [37]–[38]; Transcript of Timothy Bryant, 17 May 2021, 52–3.

41 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure k.

42 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure l.

43 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure m; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure n.

44 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure o, 2.

45 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure p.

46 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure p.

47 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 13–14 [44].

48 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure cc [18]–[19].

49 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure aa.

50 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure bb.

51 Exhibit RC1579 Crown F16–F20 Strategic Business Plan Executive Review, VIP International, n.d., 4.

52 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure cc.

53 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure dd.

54 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ff, 2.

55 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure kk.

56 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ll.

57 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure rr, 2 [5].

58 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ss.

59 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure tt.

60 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure uu.

61 Transcript of Timothy Bryant, 17 May 2021, 92, 95.

62 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ww.

63 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure xx; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure aaa; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure bbb.

64 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure eee, 9 [26].

65 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure hhh, 4 [26].

66 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 34 [96]–[97].

67 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 34–5 [97].

68 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure kkk.

69 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure lll.

70 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure mmm.

71 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure sss.

72 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure uuu.

73 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure www; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure bbbb; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure cccc.

74 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure dddd, 17 [59], 19 [69].

75 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure eeee.

76 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure eeee.

77 Exhibit RC0003 VCGLR Report regarding an investigation conducted pursuant to sub-sections 24(1)–(2) of the Casino Control Act 1991 (Vic) into the conviction and sentencing of Crown employees for gambling-related offences in the People’s Republic of China, in June 2017 (redacted), n.d., 2.

78 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure d, 6.

79 Exhibit RC0004 Email from Michael Chen to Jason O’Connor, 26 March 2015, 2.

80 Exhibit RC0004 Email from Michael Chen to Jason O’Connor, 26 March 2015, 2.

81 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 293 [I.17].

82 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure d, 12.

83 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 31–2 [88(d)]; Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure bbb, [23(B)].

84 Exhibit RC1559 Crown Resorts Explore VIP Magazine Issue 14, Melbourne, Perth & London, July–September 2016, 8.

85 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 293–4 [I.18]. Joshua Preston filed a submission to the Commission, but did not address this issue. See Responsive submission Joshua Preston, 2 August 2021.

86 Mr Bryant was assisted by other members of the VCGLR, including Mr Jarrod Wolf and Mr Stephen Brown.

87 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure w, 55.

88 Exhibit RC1550 Email chain between Jason O’Connor, Michael Chen and Howard Aldridge, 10 February 2015.

89 Exhibit RC1550 Email chain between Jason O’Connor, Michael Chen and Howard Aldridge, 10 February 2015.

90 Exhibit RC1551 Email chain between Michael Chen, Barry Felstead and Jason O’Connor, 7 February 2015.

91 Exhibit RC1580 Email chain between Jason O’Connor, Barry Felstead et al, 11 February 2015.

92 Exhibit RC0005 Bergin Inquiry Transcript (O’Connor), 3 September 2020, 2011–13.

93 Exhibit RC1512 Statement of Jason O’Connor, 15 June 2021, 3 [22]; Responsive submission Jason O’Connor, 2 August 2021, 2–3 [9]–[11].

94 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure w, 3–4.

95 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure y, 15–16.

96 Bergin Inquiry Transcript (Felstead), 17 August 2020, 1166–8.

97 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure y, 33.

98 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure y, 32.

99 Exhibit RC0006 Email chain between Jason O’Connor and Barry Felstead, 10 July 2015.

100 Exhibit RC0007 Email chain between Barry Felstead and Jane Williamson, 10 July 2015.

101 Bergin Inquiry Transcript (Felstead), 18 August 2020, 1215.

102 Bergin Inquiry Transcript (Felstead), 18 August 2020, 1217.

103 Exhibit RC1581 Supplementary Statement of Barry Felstead, 26 July 2021, [4]–[6], [8], [12]–[16], [35]–[37], [39]–[41], [43]–[44].

104 Transcript of Timothy Bryant, 17 May 2021, 73.

105 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure aaaa, 1.

106 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 47 [138(b)]; Transcript of Timothy Bryant, 17 May 2021, 83.

107 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure xx, 8; see also Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 294–5 [I.24].

108 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, 31 [87]; see also Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure bbb, 1.

109 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure aaa.

110 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 295 [I.25].

111 Transcript of Richard Murphy, 29 June 2021, 2767, 2795.

112 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ll, 4.

113 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure ll, 21 [9.2].

114 Exhibit RC0273 Email from Joshua Preston to Barry Felstead et al, 8 June 2018.

115 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure rr, 3.

116 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure rr, 7.

117 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure uu.

118 Exhibit RC0278 Crown Resorts Limited board meeting minutes, 12 June 2019, 7.

119 Exhibit RC0279 File Note regarding meeting with the VCGLR, 19 June 2019, 4.

120 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure hhh.

121 Exhibit RC0001 Statement of Timothy Bryant, 15 April 2021, Annexure dddd, 17 [59]–[60].

122 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018.

123 Transcript of Jason Cremona, 18 May 2021, 132.

124 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 138.

125 Exhibit RC0002 VCGLR Sixth Review of the Casino Operator and Licence, June 2018, 138.

126 Exhibit RC1582 Confidential Draft of VCGLR Sixth Review of the Casino Operator and Licence, Version to Crown for Comment, 21 May 2018.

127 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure b, 10.

128 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 9 [28]; Transcript of Jason Cremona, 18 May 2021, 139.

129 Transcript of Jason Cremona, 18 May 2021, 139.

130 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure d, 3.

131 Transcript of Jason Cremona, 18 May 2021, 141.

132 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure f, 3.

133 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure i.

134 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 17 [57].

135 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 17 [59].

136 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure n, 8.

137 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 21–2 [65]–[67].

138 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure y, 4.

139 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 25 [81].

140 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure y, 5.

141 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 25 [81]; Transcript of Jason Cremona, 18 May 2021, 164.

142 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure mm, 1.

143 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 36 [106]; Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure nn, 1.

144 Transcript of Michelle Fielding, 28 June 2021, 2665.

145 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure pp, 2.

146 Exhibit RC0008 Statement of Jason Cremona, 15 April 2021, 37–8 [107]; Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure qq.

147 Exhibit RC0071 Letter from Louise Lane to Neil Jeans, n.d.; the letter is undated but Neil Jeans’ evidence noted the date he received it as 4 June 2019: Transcript of Neil Jeans, 25 May 2021, 804.

148 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure tt, 1–2.

149 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure tt, 3–4.

150 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 308 [I.75(a)] (n 1796); RC0009 Statement of Jason Cremona, 15 April 2021, Annexure tt, 1.

151 Exhibit RC0071 Letter from Louise Lane to Neil Jeans, n.d., 3; the letter is undated but Neil Jeans’ evidence noted the date he received it as 4 June: Transcript of Neil Jeans, 25 May 2021, 804.

152 Transcript of Neil Jeans, 25 May 2021, 807–8.

153 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 307–9 [I.74]–[I.75].

154 Transcript of Neil Jeans, 25 May 2021, 809.

155 Exhibit RC0109 Statement of Sonja Bauer, 5 May 2021, Annexure zzz, 8.

156 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure gg, 9.

157 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure rr.

158 Exhibit RC0011 Email from Jason Cremona to Steve Thurston, 2 August 2019.

159 Transcript of Jason Cremona, 18 May 2021, 195.

160 Exhibit RC0009 Statement of Jason Cremona, 15 April 2021, Annexure vv, 4.

161 Exhibit RC0463 Letter from DLA Piper to Solicitors Assisting, 31 May 2021, Annexure j, 9.

162 Exhibit RC0463 Letter from DLA Piper to Solicitors Assisting, 31 May 2021, Annexure j.

163 Exhibit RC0183 Statement of Cara Hartnett, 16 April 2021, Annexure h, 1.

164 Exhibit RC0183 Statement of Cara Hartnett, 16 April 2021, 1 [4]; Transcript of Cara Hartnett, 9 June 2021, 1881–2.

165 Exhibit RC0183 Statement of Cara Hartnett, 16 April 2021, 1 [5]; Transcript of Cara Hartnett, 9 June 2021, 1879.

166 Exhibit RC0183 Statement of Cara Hartnett, 16 April 2021, 3 [16]–[18].

167 Transcript of Cara Hartnett, 9 June 2021, 1883.

168 Exhibit RC0189 Letter from Barry Felstead to Catherine Myers, 1 July 2019, 3.

169 Exhibit RC0189 Letter from Barry Felstead to Catherine Myers, 1 July 2019, 3.

170 Transcript of Anne Siegers, 9 June 2021, 1979.

171 Transcript of Anne Siegers, 9 June 2021, 1984, 1986.

172 Transcript of Anne Siegers, 9 June 2021, 1988.

173 Exhibit RC1523 Letter from VCGLR to Barry Felstead, 2 October 2020.

174 Exhibit RC1552 Letter from Ross Kennedy to Ken Barton, 17 November 2020.

175 Exhibit RC0430 Crown Resorts Brand Committee meeting minutes, 22 August 2019, 2; Transcript of Anne Siegers, 10 June 2020, 2009–10.

176 Exhibit RC0192 FTI Consulting Review of Due Diligence Procedures for Operators and Premium Players Crown Resorts Ltd Report, 10 September 2019.

177 Exhibit RC1619 Letter from Richard Murphy to Joshua Preston, 11 September 2019.

178 Exhibit RC0438 Transcript of Proceedings—VCGLR Record of Meeting, 17 December 2020, 2.

179 Exhibit RC0438 Transcript of Proceedings—VCGLR Record of Meeting, 17 December 2020, 11–12.

180 Exhibit RC0366 VCGLR Transcript of Proceedings in the matter of Crown Melbourne, 21 January 2021.

181 Exhibit RC0366 VCGLR Transcript of Proceedings in the matter of Crown Melbourne, 21 January 2021, 5, 6.

182 Exhibit RC1525 Letter from Ken Barton to Cameron Warfe, 30 October 2020, 8.

183 Exhibit RC0366 VCGLR Transcript of Proceedings in the matter of Crown Melbourne, 21 January 2021, 5, 12.

184 See, eg, in relation to Mr Song, Exhibit RC1526 Letter from Ken Barton and Xavier Walsh to Scott May and Cameron Warfe, 5 February 2021, 5.

185 Exhibit RC0192 FTI Consulting Review of Due Diligence Procedures for Operators and Premium Players Crown Resorts Ltd Report, 10 September 2019.

186 Exhibit RC0366 VCGLR Transcript of Proceedings in the matter of Crown Melbourne, 21 January 2021.

187 Exhibit RC1553 Letter from Ken Barton to Cameron Warfe, 4 December 2020, 7–8; Exhibit RC0366 VCGLR Transcript of Proceedings in the matter of Crown Melbourne, 21 January 2021, 38.

188 Exhibit RC0292 VCGLR Decision and Confidential Reasons for Decision, 27 April 2021, 2.

189 Exhibit RC0292 VCGLR Decision and Confidential Reasons for Decision, 27 April 2021, 15–16.

190 Exhibit RC0292 VCGLR Decision and Confidential Reasons for Decision, 27 April 2021, 17.

191 Transcript of Xavier Walsh, 5 July 2021, 3333.

192 Transcript of Jane Halton, 7 July 2021, 3586.

193 Transcript of Helen Coonan, 8 July 2021, 3766.

194 Responsive submission Helen Coonan, 2 August 2021, 19 [93].

195 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 290, 314–15 [I.102]–[I.106].

Reviewed 25 October 2021

Volume 2