Is Crown Melbourne suitable to continue operating a casino in the Australian state of Victoria? That’s the question former federal judge Ray Finkelstein answered in his recommendation to the Victorian government. But his advice will remain confidential for the time being.
Victoria earlier this year formed its Royal Commission into the Casino Operator and License of Crown Resorts in response to a similar inquiry being carried out in New South Wales (NSW). Helen Coonan, also a former federal judge, headed the NSW Royal Inquiry and determined that the casino company repeatedly failed to adhere to gaming regulations across Australia.
Finkelstein yesterday presented his suitability report to the Victorian government. That arrived after two months of review, which included testimony from present and former Crown executives, as well as independent state-sponsored probes into the financial and operational dealings of Crown Melbourne.
“An incredible amount of work has gone into the Royal Commission … and we thank Raymond Finkelstein for his report,” said Melissa Horne, Victoria’s minister for consumer affairs, gaming, and liquor regulation.
We’ll consider the findings and recommendations from the Royal Commission in detail and take whatever action is necessary to strengthen casino oversight in Victoria and ensure this never happens again,” Horne added.
The government says it will likely issue its final determination by November 1.
License Revocation Odds
The NSW inquiry determined that Crown Resorts was not suitable to receive a casino license for its new $1.6 billion Crown Sydney.
Crown opened the complex as a non-gaming hotel and high-end residential high-rise last December. Crown Resorts is working with NSW officials to satisfy the numerous concerns that arose during the review.
Many believe Finkelstein recommended to the Victorian government that Crown Resorts be found unsuitable in Melbourne, too. However, there’s a popular opinion that the Victorian state will allow Crown Melbourne to continue operating its casino, but under strict supervision from the government.
“The expectation is that they will be deemed unfit,” said John Ayoub, a portfolio manager at Wilson Asset Management, which is an investor in the Aussie casino operator. “The unknown is: what does that mean?”
Ayoub believes it means Victoria will work with Crown to resolve its many shortcomings. Those allegedly include allowing its casino cashiers to be used as money laundering machines by illicit criminal networks.
“There is a balance between jobs and tax revenues that the casinos do generate,” he continued in his comments to Reuters. “Tourism is going to be a big way we can get ourselves out of the state debt holes. It’s critical infrastructure.”
A full rescinding of Crown Melbourne’s casino license would be a most devastating outcome for Crown Resorts. The Victoria resort was responsible for 65 percent of Crown Resorts’ total revenue in 2019.
If Finkelstein and Victoria believe Crown Resorts is damaged beyond repair, the future of its Melbourne and Perth casinos, and Sydney resort, would be unclear. Private equity giant Blackstone expressed interest in acquiring Crown earlier this year. But its all-cash bid of $6.5 billion was rejected by the Crown board.
Oaktree Capital, another private equity group, offered $2.4 billion for Crown founder James Packer’s 37 percent stake in the organization. That proposal was rescinded by Oaktree without reason in August. Star Entertainment, Crown’s direct competitor in Australia, has expressed in merging with Crown before it faced its own regulatory shortcomings.