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Crown Resorts Limited (ASX: CWN) has finalised a $125 million settlement in the Federal Court today after years of battling displeased shareholders, who launched the class action lawsuit after the operator’s share price plummeted in late 2016 as a result of 19 employees being arrested in China.
The bust was initiated on the suspicion employees were illegally promoting VIP gaming services despite Beijing implementing a crackdown on gambling adverts from overseas.
Today’s ruling was the final tick of approval needed for Crown’s board, which announced the deal was “in the best interests of Crown and its shareholders” six months ago.
“Crown expects to recover a significant portion of the settlement amount from its insurers but cannot at this stage be certain about the outcome of negotiations with insurers, or the outcome of any necessary formal steps for recovery it may need to take,” Crown said in an October trading update.
The applicant’s case was led by Melbourne-based law firm Maurice Blackburn Lawyers, which has received $7.6 million for its work on the action.
International Litigation Funding Partners, which partly bankrolled the class action alongside Blackburn, will also be awarded $30.2 million – a figured described by Justice Jonathon Beach as the “lower end of the originally stipulated contractual rates in the funding agreements and well under the average contractual rate".
In his judgement, Justice Beach described the settlement as “very strong” and “favourable” for the aggrieved shareholders.
“I'm satisfied that the opinion of counsel has adequately addressed the complexity of the litigation,” Beach said.
“The returns reflected in the settlement are fair and reasonable between the parties.”
However, Crown remains in the thick of another legal battle launched by Maurice Blackburn Lawyers, which alleges the company “engaged in misleading or deceptive conduct from 11 December 2014 to 19 October 2020” after news emerged the gambling operator was being investigated by anti-money laundering agency AUSTRAC.
Maurice Blackburn principal Miranda Nagy said shareholders would expect Crown to have best-practice governance and to have complied with laws designed to combat money laundering.
“We believe these governance failures have caused real loss to shareholders who would have expected best-practice compliance with anti-money laundering obligations, especially given Crown’s repeated public statements that it took compliance with such laws seriously,” she said.
“Instead, it appears Crown’s systems left the company potentially exposed to criminal activity happening on its premises and through its bank accounts.”
The $125 million agreement comes a month after law firm Slater & Gordon (ASX: SGH) launched their own legal proceedings in the Victorian Supreme Court against The Star Entertainment Group (ASX: SGR) seeking compensation for shareholders who lost around $1 billion following media reports alleging corporate misconduct.
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