A decade of assurances from The Star Entertainment Group (ASX: SGR) has come back to haunt the casino operator in a class action launched by Maurice Blackburn that has relied heavily on bombshell evidence given by senior executives during the Bell inquiry this year.
The class action specialist has filed a 263-page statement of claim in the Supreme Court of Victoria that includes a hit list of past and present board members that Maurice Blackburn alleges were ultimately responsible for the company engaging in misleading and deceptive conduct, breaching its continuous disclosure obligations and conducting its affairs contrary to the interests of shareholders.
The Star confirmed to the ASX this morning that it had been served by Maurice Blackburn with a statement of claim for a securities class action in the Supreme Court.
The claim alleges that between 29 March 2016 and 16 March 2022, The Star made misleading representations, including about its systems and processes for compliance with anti-money laundering and counter-terrorism financing obligations and that it failed to disclose relevant information it had about those matters to the market.
The latest claim comes on the heels of a separate class action filed by Slater & Gordon in March this year, both of which The Star plans to defend.
Australian casino operators have been feeling the heat since 2014 following a Four Corners investigation titled High Rollers: High Risk which revealed the infiltration of Macau casinos by organised criminals and the difficulties this posed for Australian casino operators to benefit from the junket industry and keep out criminals.
A subsequent Victorian Royal Commission into Melbourne casino operator Crown Resorts in 2021 led to the finding that the company was unsuitable to hold a casino licence. The commission heard that Crown had permitted people with links to organised crime to operate or participate in junkets without sufficient vetting or due diligence processes and that it engaged in business practices that allowed customers to make cash transactions that could have facilitated money laundering.
Maurice Blackburn’s statement of claim alleges that with Crown under scrutiny, The Star had over many years assured shareholders and regulators that it was ‘not like Crown’ and that it continued to do so during the relevant period detailed in the class action.
Crown’s failures to its responsible service of gambling obligations today resulted in the Victorian Gambling and Casino Control Commission slapping the company with two fines totalling $120 million. This followed the NSW Independent Casino Commission last month issuing a $100 million fine against The Star and the prospect of another $100 million fine looming for the casino group by Queensland authorities.
Maurice Blackburn's statement of claim details statements from The Star as far back as 2012 that assured shareholders that the company took its obligations seriously and that it was complying with regulators in relation to its responsibilities for anti-money laundering and terrorism finance activities within its casinos in Sydney, Brisbane and the Gold Coast.
However, the Bell review in NSW and the subsequent Gotterson review in Queensland this year found that The Star blew those claims out of the water, leading to a rout of senior managers and board members at the company in the wake of damning evidence. The Bell review came on the heels of a joint investigative report in 2021 by 60 Minutes, The Age and The Sydney Morning Herald that detailed concerns that The Star's casinos were being used by organised crime connections to potentially launder money.
Maurice Blackburn’s statement of claim also highlights former CEO Matt Bekier’s public statements in August 2019 following a report published by The Age newspaper that The Star planned to ‘stick with junket operator Suncity despite alleged criminal links’.
“Mr Bekier would not comment on the allegations against his competitor but said he felt his business was run in a ‘very clean and legal’ way,” says the statement of claim.
Bekier is quoted as saying he felt that ‘what we do is both lawful and is executed in a way that should give us and our investors confidence that we are doing right … we have a dedicated team of compliance officers who track everything...we are being audited, like the banks and everyone else, so I feel pretty comfortable that we are doing a good job’.
Less than three years later, Bekier resigned as The Star’s CEO ahead of the Bell review which revealed a culture of cover up among senior management at the casino which for years had painted itself as a ‘model casino operator’.
While the Bell report found that The Star’s board was kept in the dark about compliance issues within the company’s VIP business, the Maurice Blackburn class action is alleging that The Star ‘failed to put in place a system or process by which the board of Star could ensure it received or had access to information about money laundering (and) terrorism finance risk and compliance risks to Star’.
Among the directors named in the statement of claim are Bekier, former chairman John O’Neill and current chairman Ben Heap, as well as board members who have since resigned as part of a renewal process under way at the company.
The class action is seeking unspecified damages, although it has identified penalties that equate to the drop in value of The Star’s shares over the prescribed period as the market responded to the 60 Minutes investigation in October 2021 and the start of public hearings at the Bell inquiry on 17 March this year.
Meanwhile, the Victorian Gambling and Casino Control Commission's chair, Fran Thorn, in addressing the record $120 million fine imposed on Crown today, says the casino operator accepted disciplinary action should be taken and the need for it to continue working on reforms to address its failures in relation to its obligations in the responsible service of gambling.
“The record fines totalling $120 million that we have imposed on Crown today will send a powerful message to Crown that the commission will not tolerate misconduct that exposes our community to increased risks of gambling related harm," says Thorn.
“These were not isolated breaches.They were part of a pattern of extensive, sustained and systemic failures by Crown that spanned roughly 12 years.
“This disciplinary action also sounds a warning to all in the Victorian gambling industry that we expect them to do everything they can to minimise the harmful impacts of gambling."
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