Crown Resorts Deemed Unsuitable in Melbourne, But Avoids Worst-Case Scenario
Posted on: October 25, 2021, 06:49h.
Last updated on: October 26, 2021, 07:50h.
Crown Resorts is breathing a major sigh of relief after learning of its suitability outcome in the Australian state of Victoria.
After an eight-week probe into the inner workings of the Aussie casino giant, Victoria’s Royal Commission concluded that Crown Resorts is not currently suitable to operate its Crown Melbourne casino resort. However, in a major concession, the state will give the troubled company time to overhaul how it does business. It hopes to satisfy the many grave operational shortcomings found in the government probe.
Within a very short time, the Commission discovered that for many years Crown Melbourne had engaged in conduct that is, in a word, disgraceful,” the Royal Commission into the Casino Operator and License of Crown Resort report began. “This is a convenient shorthand for describing conduct that was variously illegal, dishonest, unethical, and exploitative.”
The royal inquiry, led by former federal judge Ray Finkelstein, submitted its 652-page report to the Victorian government on October 15. Its findings were only made public by the state on October 26 after an internal review.
Government Embraces Recommendations
The Victorian government said in its unveiling of the inquiry findings that it will implement Finkelstein’s recommendations.
Most critical is the judge’s proposal that instead of revoking Crown Melbourne’s casino license, the government should appoint a monitor to oversee and control the resort for the next two years. The hope is that the special manager will guide Crown towards becoming a company that Victoria will find suitable to continue operating its casino.
Finkelstein explained that the suitability recommendation “was a demanding task.” He said, on one hand, Victoria’s casino licensing laws hold operators to high standards, and as such, Crown’s gaming privileges should be immediately revoked. But on the other hand, such a determination “would cause considerable harm to the Victorian economy and innocent third parties.”
Finkelstein’s solution is to provide Crown Resorts with 24 months to clean up its act. That has since been embraced by the government,
The outcome was celebrated by investors. Crown Resorts shares jumped 11 percent on the disclosure. Crown Melbourne is the most important asset in the Crown Resorts domestic portfolio, which additionally includes Crown Perth and Crown Sydney.
At the end of the two-year period, the Special Manager will report what has occurred to the regulator. The regulator will then decide whether it is ‘clearly satisfied’ that Crown Melbourne has returned to suitability. This will be a tough test to satisfy,” Finkelstein concluded.
If the regulator — the Victoria Commission for Gambling and Liquor Regulation — isn’t satisfied, then the Crown Melbourne casino license will be immediately revoked.
Packer Sale Coming
Another headline-grabbing revelation in the Crown Resorts suitability report is that billionaire James Packer’s stake in the organization must be greatly reduced.
Packer is the founder and former chairman and CEO of Crown Resorts. He has since left the company, but retains a 36 percent ownership position. Finkelstein says that should be five percent or less.
That recommendation isn’t specific to Packer, who has admitted to numerous mental health issues in recent years. Finkelstein recommends that no individual have a five percent stake or more in the casino company.
Packer said earlier this year that he would sell his shares if it’s in the best interest of Crown Resorts.
Crown Resorts remains unsuitable to hold a casino license in New South Wales for Crown Sydney. A third royal inquiry is ongoing in Western Australia for Crown Perth.
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