An unexpected turn in the Crown Resorts investigation gave the tarnished company two more years to address the series of wrongdoings and possibly save the Melbourne casino.
Former judge, Ray Finkelstein, led the inquiry into the Melbourne casino and recently found that the Crown cannot run its Melbourne location. After months of investigation, he composed a three-volume report that showcased months of misuse, predominantly having to do with exploiting problem gamblers but also underpaid taxes and facilitating money laundering. His description of the company’s behaviour used words like “unethical, dishonest, and illegal.”
After almost losing its Melbourne license after Finkelstein’s Royal Commission, Crown shares jumped 13%. Instead of losing the earnings of the whole group and leaving Crown’s future uncertain, Crown Melbourne gets another two years to clean up its act.
Namely, a specially appointed manager with restrictive powers will oversee Crown Melbourne for the next two years to supervise the company’s reform efforts. The manager will have unrestricted access to the casino, its records, and accounts and hold veto power over board decisions.
Although Crown Melbourne could lose its license after two years if it does not complete the requirements, this is highly unlikely. Finkelstein said the company would likely succeed in its efforts to clean up its act.
Head of Asian research at United First Partners in Singapore, Justin Tang, said the special manager would keep a close eye on casino runnings, helping it succeed entirely.
Crown Resorts’ shares were up 8.4%, increasing the Melbourne-based company’s market value to $7 billion. Interestingly, the share value rose even after Finkelstein’s report that detailed Crown’s misconduct. What’s more, he concluded that the Crown fed false information to the state gaming regulator, putting profit over obligations and morals.
The inquiry concluded that Crown Melbourne had been engaged in disgraceful conduct for many years, but possibly the most significant revelation was related to how Crown dealt with problem gamblers. Finkelstein said that the company’s so-called great approach to problem gambling was far from the truth.
Although such practices could have led to immediate license termination, Finkelstein concluded that a drastic action like that could cause harm to the Victorian economy. He pointed out that regardless of the ultimate decision, someone would be left unsatisfied.
On the other hand, professor of corporate governance at UTS Business School in Sydney, Thomas Clarke, said that the company has become too big to fail. He added that the attempts to make a better company would determine the rest.
Finkelstein’s report is also crucial for Crown Melbourne’s potential takeover. Star Entertainment Group Ltd. and Blackstone Group Inc. are Crown’s latest suitors, but a takeover now would be quite risky. Yet, Star shares increased by 8% a few days ago.
After Finkelstein’s report, the Victorian government raised the penalty for breaking casino legislation to $100 million from the previous $1 million. The new legislation also created the Victorian Gambling and Casino Control Commission, focusing solely on Crown Melbourne.