The chips are down as Crown chair Helen Coonan fights to save Sydney casino

Heavy lies the crown on Helen Coonan’s head. The former federal politician and government minister has one of the ugliest and toughest jobs in corporate Australia – and of her career – to clean up the disastrous failings of Crown Resorts.

As chair of Crown, Coonan presided over a company which this week was informed it was not fit to operate its casino licence in Sydney, following a series of shocking findings that it had facilitated money laundering and been infiltrated by organised crime in its Melbourne and Perth casinos.

Crown was the subject of an 18-month inquiry commissioned by the NSW casino regulator, the Independent Liquor and Gaming Authority. The inquiry, led by former Supreme Court judge Patricia Bergin, handed down an excoriating report on Tuesday that lifted the curtain on the dysfunction within Crown’s boardroom and management and how its largest shareholder, billionaire James Packer, wielded “real power” and influence on Crown’s operations across its casinos in Melbourne, Perth and Sydney, with “disastrous consequences for the company”.

The report has already claimed the scalp of three directors who stepped down from Crown’s board this week, with calls now coming from within the business community for Coonan, who has been on the board for a decade, to also consider her position. Philip Crawford, chair of the Independent Liquor and Gaming Authority, said at some point Coonan should “probably” step down.

The Bergin report said an examination of a 2019 investigation by The Sydney Morning Herald, The Age and 60 Minutes into Crown, confirmed the company had “facilitated money laundering” through its bank accounts; “disregarded the welfare” of its staff in China before 19 were arrested there in 2016, and went into business with high-roller junket tour groups linked to Triads and other organised crime groups. This made Crown unsuitable to hold a casino licence, with its core problem being “poor corporate governance, deficient risk-management structures and processes and a poor corporate culture”.

One of the report’s recommendations is to ban junket tour operators. However, the revenues of those junket operators and high-rollers underpin the business model of Crown’s $2.2 billion Sydney casino and are key for Crown’s Melbourne and Perth casinos, and indirectly generate tax revenue for state governments.

“Governments everywhere are crying out for revenue. If you start taking the gambling revenue out, it’s another thing they have got to make up,” says Peter Morgan, a former head of equities at fund manager Perpetual.

Crawford said the regulator would ban junket operators operating in NSW, based on Bergin’s findings. This will affect not only Crown but also The Star casino, whose management he will meet next week.

Before Bergin’s report there had already been a decline in junket operators and high-rollers visiting Australia because of an anti-corruption drive out of China, deteriorating political relations between the two countries and the global pandemic, which shut Australia’s international borders to visitors.

Coonan has promised “root and branch” reform of Crown as it addresses the findings of Bergin’s report, which said Crown needed a management and boardroom overhaul if it ever wanted to hold a casino licence. “We do not underestimate the scale of the problem,” Coonan said in a statement. She has declined interview requests.

The Bergin report also said the Independent Liquor and Gaming Authority should reconsider Packer’s involvement. The report recommended an ownership cap be put in place for Crown Sydney, so any investor will need the NSW regulator’s approval to buy or own more than 10 per cent of a casino operator, opening up the possibility of it ordering Packer to sell down his 36.8 per cent stake in the company.

While Bergin found that Crown was not suitable to hold a casino licence, the report outlined steps that could make the group suitable again and avoid its licence being revoked. Under the deal signed by the NSW government and Crown to open Sydney’s second casino, the regulator was contractually bound to work with Crown to try and make it suitable.

However Crawford has warned Crown there’s no guarantee it will get that approval. It will be up to Coonan to make that happen and fast. “I’ve told her to get cracking and so far, things are starting to move pretty quickly,” he says.

The demands on Coonan will be enormous as the company faces reviews by Victoria’s gaming regulator and possibly also its counterpart in Western Australia.

“All of the behaviour that’s been referred to in Bergin has pretty much been conducted in other states. To that extent, we’re lucky. We got to it in time before they came in here and had similar problems,” says Crawford. He declined to comment on whether the regulators in other states had failed to address the problems at Crown.

The Bergin report also recommended the establishment of a dedicated casino regulator in NSW and a full forensic audit of Crown’s accounts. Crawford described the bad behaviour within Crown as “breathtaking”: “It’s a lot worse than we thought it would be.”

The NSW and Victorian regulators this week called for the removal of Crown’s chief executive Ken Barton and some board directors. Barton remains at the company, as does director Harold Mitchell. Director and former AFL boss Andrew Demetriou quit on Thursday. Directors Michael Johnston and Guy Jalland, who were appointed to the board by Packer, also stood down this week.

While the Bergin report calls for changes among the company’s senior ranks, this did not include Coonan, who became chairman in January 2020.

Crawford said at some point Coonan should “probably” step down from the board. “That’s something that [Crown] needs to consider in their corporate governance and as a board resolve. We need a couple of people there at the moment to deal with. Bergin certainly said [Coonan’s] somebody who has integrity after being examined pretty thoroughly by counsel at the inquiry. So that’s given me an enormous amount of comfort in going forward.”

Bergin wrote in her report that on reviewing Coonan’s evidence to the inquiry it had demonstrated “that her character, honesty and integrity had not been and could not be called into question”. But this hasn’t stopped debate about whether Coonan is the best person to drive Crown’s reform.

Businessman and company director Geoff Cousins, who has served on blue-chip boards including Telstra’s, says a new chair is needed. “I’m delighted to see that for once the board was held responsible. Because normally in these things directors see this game out, they fire the CEO or something, but the board doesn’t get any criticism, when boards are responsible for these matters. I find it remarkable that the chairman, however, got a clean bill of health. She’s been there a long time.”

Coonan joined Crown in 2011 after resigning from federal politics, where she had served for 15 years, including as a communications minister, a role in which she would have come to know James Packer. After her appointment to Crown, she gave an interview to The Australian where she spoke about him. “I have a lot of respect for James and so I was honoured when he interviewed me to see if I would be interested in this [role].”

In the same interview, Coonan said she joined Crown based on the strength of its board. “That’s part of your insurance, that the people around you are good,” she said.

Packer was equally enthusiastic about Coonan: “Helen is someone I’ve known for a very long time and she is an outstanding individual who was a first-class parliamentarian and minister. I have immense respect for her.”

Cousins questioned how Crown’s chairman could be considered independent if she was appointed with the blessing of Crown’s biggest shareholder. “She is effectively Packer-appointed and was well known to the Packers. That she will be a completely independent and brave and courageous chairman in changing all this, if James is still a shareholder, that’s a fragile assumption indeed.”

Dean Paatsch, co-founder of corporate governance adviser Ownership Matters, says Packer’s shareholding remains a problem for board renewal. “The regulator can decide who it doesn’t want on the board but it’s for shareholders to decide who the best and most competent people are. It makes it very difficult for the optimal composition of the board to be transacted without the Packer influence whilst he remains a shareholder.”

The Independent Liquor and Gaming Authority’s board met on Friday and will meet again next Wednesday as it reviews the Bergin recommendations. One of the matters it will be considering is whether Packer should be forced to reduce his shareholding in Crown.

Crawford stated that Packer’s influence has diminished with the removal of two directors this week. The regulator will also review if director John Poynton should continue on the board after the director terminated a consultancy agreement with Packer’s private company Consolidated Press Holdings.

The focus on Packer’s influence has raised several options for the regulator to consider, including his shareholding. Crawford says it’s possible that Packer might be able to retain his current shareholding but have his voting rights limited to 10 per cent. “Another possibility is that someone will want to buy those shares. And if that person stacked up on our probity basis I wouldn’t want to put any obstacles into a sale.”

Paatsch said a structure limiting Packer’s voting rights on board appointments would be an elegant solution. “It would be Packer agreeing, for his own benefit, not to vote on the election of directors, except for 10 per cent. And that would reallocate the influence to other shareholders. I don’t see any downside, so long as he still retains his 37 per cent, as he should, to vote on all other matters, including a [potential] takeover. It’s still his property.”

The risk of Packer being found unsuitable to be involved in the Sydney casino has generated speculation he could finally sell his $2.4 billion stake in Crown following several failed attempts to sell part of his holding in recent years.

For the past decade Packer’s gambling empire and personal life have lurched from one crisis to the next. He has been forced to shrink his ambitions to create a global casino business, selling out of investments in Macau and the Philippines and also shelving plans to build a casino in the US.

The jewel that remained amid that turmoil was the opening of Crown Sydney, the resort and casino complex. But that too is now in doubt. Business observers expect that Packer is more likely to exit Crown, but not in a fire sale. “Packer’s exhausted,” said one business executive, who asked not to be named. “He’s done. He wants out. You saw that with the multiple deals he’s been trying to do.” During the Bergin inquiry Packer disclosed he suffers from bipolar disorder.

In 2019 Packer tried to sell almost 20 per cent of his shareholding in Crown to Wynn Resorts but Wynn withdrew after details of the bid leaked. A deal was then struck with Melco but that ultimately fell apart too.

Crown was set to open its Sydney casino in late December but instead its gaming floors remain closed, while its six-star hotel, restaurants, bars and retail outlets operate. The chips are down on Crown but investors should not bet against Coonan.