Star Casino Inquiry Alleges Massive Masking Of Gaming Funds

March 18, 2022
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A regulatory review of The Star Entertainment Group’s casino licence in Sydney has started dismally for the company, with the inquiry accusing it of masking hundreds of millions of dollars in gambling funds to avoid breaching bank agreements.

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A regulatory review of The Star Entertainment Group’s casino licence in Sydney has started dismally for the company, with the inquiry accusing it of masking hundreds of millions of dollars in gambling funds to avoid breaching bank agreements.

The first day of public hearings by New South Wales (NSW) state’s Independent Liquor & Gaming Authority on Thursday (March 17) heard that senior Star officials tagged up to A$900m ($670m) as hotel payments before deceiving China UnionPay and the National Australia Bank (NAB) about the nature of the transactions.

Counsel assisting Naomi Sharp told the inquiry that the arrangement exposed Star Entertainment to money laundering risk and violated both UnionPay’s no-gambling transaction rules and NAB’s agreement with Star, leading to warnings from the banks in March 2020 and eventual disuse of UnionPay cards.

The alleged fund-masking strategy is similar to one used over four years by Crown Resorts in its flagship Melbourne property, although a Royal Commission in Victoria state found that Crown’s intent was in part to reduce gaming tax exposure.

Sharp elicited an admission from Star assistant treasurer Paulinka Dudek that her response to queries in June 2019 from NAB and UnionPay on the use of large transactions for the hotel was “utterly misleading” given that cash was transferred to player accounts.

Dudek added that “senior management were involved in that correspondence”, while refusing to claim responsibility for the strategy.

“I didn’t feel I could challenge a process that had been in place for a very long time at The Star,” she said.

Company CFO Harry Theodore and general counsel Oliver White were both named on Thursday as being aware of the alleged masking strategy.

The inquiry continued on Friday with detailed questioning of Sarah Scopel, former Star group treasurer, and NAB division head Tanya Arthur, who testified that she was unaware of the use of the transactions for gambling.

The inquiry will continue for several weeks, with next week’s witnesses including eight Star managers covering audit, risk, finance and investigations, two KPMG partners and a former gaming customer.

The review is much more of a forensic investigation of Star’s compliance record than previous assessments, with public hearings conducted by Adam Bell, who served as counsel assisting for the Bergin Inquiry into Crown Resorts’ Sydney casino licence.

Sharp also served as counsel assisting for that inquiry, which eviscerated the credibility of several Crown directors and executives and triggered a clean-out of the company’s board that ended controlling shareholder James Packer’s influence over it.

The first two days of questioning of the Star inquiry have been a carbon copy of the method used by commissioner Patricia Bergin, with witnesses being grilled on documents and emails they wrote or received, zeroing in on possible company misbehaviour identified by the inquiry’s lawyers in advance of the hearings.

The Star inquiry promises to place substantial pressure on company management, with top executives likely to testify at the end of the hearings process.

That pressure has been augmented in the months leading to the hearings by media reports that Star encouraged VIP customers to pretend to live outside the state to ease tax payments, maintained relationships with questionable Asian junket operators and failed to respond to a KPMG report in 2018 that found fault with the company’s anti-money laundering protections.

Star Entertainment, which also runs casinos and hotels in neighbouring Queensland state, has denied the allegations.

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