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The former CEO of The Star Entertainment Group (ASX: SGR), who resigned following damming revelations of systemic risks created by the casino group’s VIP business, has singled out to an inquiry four key executives he claims withheld from him the extent of compliance problems surrounding the company's junket operations.
Matt Bekier, appearing at the review by the Independent Liquor and Gaming Authority (ILGA) of NSW to determine The Star’s suitability to hold a casino licence, said he felt ‘let down’ by chief legal and risk officer Paula Martin, corporate general counsel Oliver White, chief financial officer Harry Theodore and chief casino officer Greg Hawkins. All have previously appeared before the inquiry which began in March.
After Bekier was sworn in this afternoon (Monday), counsel assisting the review, Naomi Sharp, SC, immediately questioned him on the reasons for his resignation on March 27. The former CEO highlighted the evidence at the inquiry which unearthed a ‘sub-culture’ in the VIP business that did not reflect the standards of the broader company.
“As CEO I was responsible and accountable for all parts of the company,” he said.
The ILGA review has focused largely on the use of China Union Pay credit cards by Chinese high rollers to funnel about $900 million through the casino’s gaming tables over seven years until early 2020. In particular, the inquiry has revealed evidence of a cover-up culture at The Star in relation to the use of those funds, the terms and conditions of which explicitly banned any payments used for gambling.
Bekier conceded that when the CUP cards were first accepted by The Star in 2013, it was a common practice in the industry in Australia and overseas that they were used by customers to fund gambling activities.
However, he claimed the board was not aware of the cover-up that was taking place at The Star when questions were raised in recent years by National Australia Bank (ASX: NAB) on behalf of CUP seeking assurances that the funds were being applied in accordance with the terms of use. The Star was avoiding scrutiny by issuing ‘sham’ invoices to high rollers for hotel rooms and services to shield the gambling activity from CUP.
Bekier described the ‘misleading’ representations made by The Star to NAB and CUP as ‘problematic’ for the company.
“The fundamental problem is that we agreed to engage this process back in 2013 because everyone else was doing it, even though we probably knew that it was a very sharp practice,” he said. “It was very clear in 2013-14 that the money was to be used for gaming and I think it was also pretty clear to most of us that (under) the terms and conditions … the Chinese Government didn’t want the cards to be used for gaming and we did it regardless.”
Bekier said he only knows now that Crown Resorts (ASX: CWN) had ceased using CUP transactions in 2016.
Questioned on the private gaming room known as Salon 95 at The Star Sydney that was established exclusively for Macau-based junket operator Suncity Group, Bekier conceded the operation created an ‘unmitigated’ risk of money laundering activity. Earlier evidence at the review revealed Suncity was operating its own casino within a casino at The Star Sydney, where gamblers bypassed the casino’s main cage to buy and cash in gambling chips.
“At the time I felt comfortable and assured we were doing all due diligence on junket operators,” Bekier said in evidence. “What I have had to learn over the past few months was that there were significant gaps in our assessment.”
Bekier said he at all times was convinced The Star was behaving ‘appropriately, transparently as required’ by the regulator. However, he said he had since learned ‘a lot of things that are contrary to what I had been told’.
“Do you feel let down by your team?” Sharp asked Bekier.
“(By) some people, yes,” he responded, highlighting members of the risk and VIP teams.
Sharp individually described the extent of his feelings of betrayal by several key management personnel who had already given evidence to the review. Sharp asked Bekier to identify those who let him down, beginning with chief legal and risk officer Paula Martin.
“Paula is an extremely talented person with huge work ethic who assumed a lot of the problems of the company and tried to solve them herself instead of escalating them - and that unfortunately has led to subsequent problems for the company,” Bekier claimed.
“Do you feel let down by (corporate general counsel) Oliver White?” Sharp asked.
“I am very sad to learn about some of the things that Oliver talked about. I had a lot of confidence in Oliver. Early on in his career he did some phenomenal work for us in the refinancing the company and I trusted him; he would have had the currency to come to me and escalate any problem to me, and I would have listened.”
Sharp asked: "What about (CFO) Harry Theodore?"
“Harry has been my closest colleague and he showed a moment of really bad judgement in allowing that communication to the bank,” Bekier replied.
Bekier was referring to Theodore’s knowledge of The Star’s misleading representations to NAB that the CUP credit card payments were not being used for gambling. Theodore last week told the review that despite the representations made to NAB, he understood there was a ‘tacit acceptance’ that the CUP cards were used to fund gambling and that it was a ‘prevalent practice’ in the industry.
Sharp questioned Bekier’s reference to a ‘mere moment of bad communication’. She put it to the former CEO that this ‘extended for a considerable period of time rather than a mere moment’. “It’s a systemic failing, isn’t it?”
“When it comes to this matter, yes,” Bekier responded.
The former CEO said he also felt let down by The Star Sydney’s boss Greg Hawkins, particularly with the oversight of Salon 95.
“I thought the Salon 95 risks were identified; the risks were raised with me and beyond that I thought the issues had been resolved. I represented to the board and outside investors that the things we learned about Crown could never happen at Star on the back of his assurances.”
Bekier said while he believed the ‘culture of the company at large’ was not compromised, the sub-culture evident in the VIP business let the company down. He summed up the problems in the VIP business as a ‘dark art’ that wasn’t challenged like other parts of the business.
“The dark art of acquiring customers, to convince them to fly long range and gamble in our casinos and then finding a way to entertain them and then settle and collect the money - that is very different from the rest of our business.”
Asked about what responsibility the board bore in the matter, Bekier said: “If the board had known about any of these things, they would have supported me in shutting down that business a long time ago. I didn’t think the business was out of control and if I didn’t see those problems, I’m not sure the board could have seen them.”
Bekier said he had taken accountability for the problems at The Star by resigning.
“I picked the people and I established the processes, structures and policies (although) I don’t think I was personally engaged in anything that was happening under my leadership.”
Bekier offered his opinion on the future direction of The Star, calling for a full restructure of the business under ‘fresh leadership’ to reposition the company and its VIP business, which represents about 12 per cent of the group’s revenue.
“I think the company needs to bring somebody who has a fresh set of eyes and is unshackled by stoical traditions and ways of doing things to show how we want to operate in that business,” Bekier said.
Bekier revealed that The Star has since set on a path to refocusing the business away from high rollers to the premium mass business, which he said was the ‘right direction strategically’ for the group.
The review continues.
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