This week has been one of the most humiliating in the life of casino mogul James Packer and could result in him dumping his stake in Crown.
A washed-out looking Mr Packer has suffered a long Zoom grilling at the hands of counsel for the NSW Independent Liquor and Gaming Authority, which is investigating his probity to hold the licence for the massive $2.2 billion Barangaroo casino complex currently under construction on Sydney Harbour.
Giving testimony from his luxury yacht harboured in Tahiti, Mr Packer confirmed he had had to step down from board positions at Crown and his private company, Consolidated Press Holdings, because of mental health issues.
He said the problems led him to behave in a “shameful” and “disgraceful” manner in communications with a Melbourne businessman.
“I am being treated for my bipolar disease … I was sick at the time,” Mr Packer told the inquiry. Details of the content of Mr Packer’s emails to the man, believed to be private equity heavyweight Ben Gray, were not released.
Crown’s dealings with junket organisers who targeted Chinese punters to send to Crown properties caused Chinese authorities to jail 19 of the company’s employees in 2016. Authorities believed the operators were connected with Chinese triad gangs.
— Reuters (@Reuters) October 6, 2020
When the inquiry probed why staff and the board were not kept informed about rising dangers in China resulting from a government crackdown, Mr Packer blamed former executives Rowen Craigie and Robert Rankin.
When asked whether he had given enough consideration to the standing of people with which the company did business in China, Mr Packer admitted: “Not with the benefit of hindsight.”
The inquiry accentuates the way in which Mr Packer finds himself between a rock and a hard place over his ownership of 36 per cent of Crown. If he is found to be not a fit and proper person to hold a casino licence, then he would be forced to sell his stake down to less than 10 per cent.
He agreed that the company’s behaviour was found seriously wanting. The inquiry had been “a terribly painful and terribly shocking experience for the board, as it has been for me”.
“I think that the Crown board has a lot to think about in terms of who the right people are for the right jobs,” he said. “I think caps on shareholders may be something that you will think about.”
That was a huge admission, as the capped shareholder to whom he referred was himself. In other words, he implied that he would reduce his stake even without an adverse finding.
That would be a significant personal move, as Mr Packer tied his star to gambling following the death of his father, Kerry, who famously owned Channel Nine alongside a print-media empire.
After Kerry’s death in 2005, James sold the media interests and moved into gambling in the US, Macau and Australia.
But it’s a move he has been trying to undo without success since his mental health issues emerged. A prospective $10 billion sale to US gambling giant Wynn Resorts collapsed in early 2019, apparently because the group discovered Macau gambling authorities had barred Crown.
Then an attempt to sell a 20 per cent stake to the Chinese Ho gambling family’s Melco group in 2019 failed after Lawrence Ho dumped the 9.9 per cent he had bought earlier this year amid pressure from NSW authorities.
The current inquiry was triggered because of suspicions that Mr Ho’s late father, Stanley, barred from casino involvement in Australia, may have been involved in operations.
Crown has negotiated its path through business and politics in part through a large and high profile board that has in the past included ex-Qantas CEO Geoff Dixon.
Although the board members may be high powered they have not covered themselves in glory during the inquiry.
“The inquiry has revealed that no-one appears to be in charge at Crown,” said Dr Charles Livingstone, associate professor of Public Heath and Preventative Medicine at Monash University.
“There is a high powered board but they don’t appear to have any idea what’s going on. Mr Packer [who is no longer an executive or director] was getting information on the company sometimes on a daily basis without giving it to the board.”
Where’s the exit?
Given the failed sales to Wynn and Melco, Mr Packer would have a difficult time selling his holding, valued on Friday at $3.9 billion.
“He’s obviously had his own struggles for some time,” said Stuart Jackson, an analyst with Montgomery Investment Management.
“Wynn showed interest in the past, but if they aren’t there, then he could be forced to sell down into the market,” Mr Jackson said.
That could be a difficult task, given the havoc COVID-19 has played with the industry which depends heavily on travel.