SYDNEY -- Crown Resorts' hopes of opening the casino in its $1.69 billion skyscraper hotel in Sydney have been thrown into doubt after an inquiry concluded the company is "not suitable" to hold a gaming license.
The finding by Patricia Bergin, former chief justice of the New South Wales Supreme Court, that Crown's casinos in Melbourne and Perth were used for money laundering for a number of years will now go to the state's Independent Liquor and Gaming Authority for further action.
"It's impossible to see Crown opening the (Sydney) casino within the foreseeable future," said Charles Livingstone, who studies gambling policy as an associate professor at Monash University and previously served as a government adviser.
"The culture of the company and the way it operates has to change dramatically and it is very hard to see how that can happen in a short period of time," he added.
Nongaming offerings in the Crown Sydney, including its hotel rooms, restaurants, bars and spa, opened on Dec. 28 with the casino shuttered pending the investigative report. The 75-story building is now the tallest building in Australia's biggest city.
Regulators in Victoria and Western Australia with oversight over Crown's existing casinos will also take up the report's findings which could cause complications for the company's continuing operations.
'It is now a broader Australia issue," said Vitaly Umansky, senior global gaming analyst for AB Bernstein in Hong Kong.
The New South Wales regulator said it will begin discussions on the 768-page report on Friday. Victoria's regulator earlier moved up the start of its periodic review of Crown's Melbourne license by two years and its counterpart in Western Australia has said it will be evaluating New South Wales' findings.
Bergin's report heavily criticized the company's management and board, particularly Chief Executive Ken Barton, previously Crown's finance head, for money laundering failures and sharing inside information with billionaire James Packer, Crown's largest shareholder.
It also said the regulator "would be justified in entertaining very serious doubts" in considering Crown as suitable for gaming in the state if Andrew Demetriou and Michael Johnston remain on its board. Both have close links to Packer.
Packer himself appeared to escape strong criticism after attributing his own "disgraceful" conduct to mental health problems during testimony by video from his yacht moored in the South Pacific.
Bergin said Packer had improperly influenced Crown's operations after leaving its board and management and that his actions, though well intentioned, had "rather disastrous consequences." She did not, however, specifically recommend that he be forced to reduce his ownership as some analyst had expected.
She also recommended a wide-ranging forensic audit of Crown's books to ensure its casino operations are free from criminal influence.
The inquiry started in 2019 after local news reports linked junket agencies bringing Chinese gamblers to Crown's casinos with Asian crime syndicates and money laundering. Current and former executives and board members testified on their awareness and negligence of money laundering and the risks born by company staff in China, where 16 were jailed for illegally promoting gambling.
Footage was played of loose bags of cash changing hands in a Crown room belonging to Macao junket group Suncity and the inquiry was told of bankers raising concerns about the apparent manipulation of transactions to avoid the triggering of reporting requirements.
Helen Coonan, who took over as chair of Crown's board last year, has apologized for the governance and risk management failings described at the inquiry and outlined reforms to strengthen the company's compliance and anti-money laundering practices. The company has halted dealings with junket agents and said it will only resume links when agents win endorsement from state regulators.
Fitch Ratings in November placed its credit scoring on Crown on "rating watch negative" awaiting the outcome of the Bergin inquiry while Moody's Investors Service cut its rating by one notch to "Baa3."
Crown shares were placed in a trading halt on Tuesday before the inquiry report's release. After its publication, the company said it would consider Bergin's findings and work with the state regulator in relation to her conclusions and recommendations.
While a sale of Crown Sydney or the company itself could be an option, observers note that any deal would take a while to arrange and secure regulatory approval, especially amid COVID-19, and thus be unlikely to offer near-term relief.
Crown's net profit declined 80.2% to 79.5 million Australian dollars ($61.07 million) in the year ended June 30, as revenues tumbled 25.7% to AU$2.21 billion.
Additional reporting by Zach Coleman.